Dushanbe’s Potemkin Hotel: Nepotism and Public Integrity in Tajikistan
For over a decade, the empty shell of a multistory hotel has sat vacant on Rudaki Avenue, the central thoroughfare of Dushanbe. Fourteen years ago, the president’s office contracted a newly-established private construction firm, Ismoili Somoni – XXI Century, to build the 350-room, five-star hotel.
At the ground-laying ceremony, President Emomali Rahmon stated that the hotel would “be completed within a fixed time-frame (18 months)” with a budget of $30 million. A representative of Kaynak Holding, the Turkish company charged with building the hotel in partnership with the Tajik company, said it would be the “gate through which foreign investments would flow into Tajikistan.” This was over a decade ago. And while the façade of the Ismoili Somoni Hotel is finally complete, it is still very much a work in progress with no end in sight.
There have been many setbacks. In 2019, the building caught fire after the builder failed to take proper safety precautions. But no-one was charged for the incident.
What Rahmon failed to mention was that the owners of the hotel, Ismoili Somoni – XXI Century, were linked to his family, who have come to dominate the political and economic life of the country. Members of the president’s extensive inner circle have used their control of the state to secure lucrative contracts and tax breaks for their businesses, and to force competitors out of the market.
Founded in 2002 by Orien Bank, which itself is a subsidiary of the Ismoili Somoni Financial and Industrial Group founded in 1997, Ismoili Somoni – XXI Century is owned by the president of Tajikistan’s brother-in-law, Hasan Assadullozoda. The Ismoil Somoni Financial and Industrial Group, which manages two dozen companies across a range of business sectors from cement and construction, to cotton, is co-managed by Assadullozoda’s brother, Rakhmatullo Sadulloev.
The Ismoili Somoni Hotel is being built with state funds – though the procurement process has been murky. The Law on Procurement states that the supplier should not have a marital or direct family relationship with the institution offering the contract. Suppliers must possess sufficient professional and technical competence, financial resources, and equipment to fulfill its obligations under the contract.
The estimated budget for construction of the hotel in 2006 was $30 million. But official spending figures to date remain shrouded in mystery. Local media has reported that the bidding process was murky too, with construction at the time initiated as an entirely private enterprise and the hotel only received public financing when private financing ran out in 2006.
Since 2006, the Ismoili Somoni XXI construction company has been one of only a handful of small companies exempt from paying VAT and customs duties. The government has not tolerated public criticism of this arrangement. After independent media outlet Asia Plus published an article about the tax breaks for the Ismoili Somoni Hotel in November 2018, the government responded by blocking the newspaper’s website and social media sites.
The investment potential of the hotel is also dubious, taking into consideration that plans were already in place for an additional three 5-star hotel chains, which are already open in Dushanbe – the Hyatt Hotel, Sheraton (Hilton) Hotel and Serena Hotel – and the average occupancy of these was below 60%, even before the Covid-19 pandemic. There is currently no market for a new luxury hotel according to local experts.
Why bother to build a potemkin hotel then? Ismoili Somoni – XXI Century has received millions of dollars of public money to fund construction. As long as the construction lags, the final owner of the building, the Executive Office of the President Tajikistan, cannot take ownership. Tax breaks allow it to import materials for other projects without paying.
The hotel epitomizes Tajikistan’s nepotistic form of kleptocracy, which Kathleen Collins called “clan politics.” Family and kinship networks are key sources of mutual support in Tajikistan, as in other parts of Central Asia. Many people in Tajikistan believe that a person has access to a source of revenue, they are morally obliged and have the responsibility to support members of their network, either by giving them money, doing them favors, or providing employment through means of nepotism. Within this context, integrity is understood within the framework of the family structure. A civil servant who earns an official income of $100 per month (as is often the case in Tajikistan) is obliged to look for additional means to provide income or employment support to his or her family members. One who fails to do so is perceived as a burden on society, and, more importantly, a burden on the family.
The meaning of public interest therefore becomes less about serving the whole public and more about addressing the interests of a narrower family network. This has important effects on the politics and economics of the country. According to Collins, clan networks undermine good governance elements such as the constitutional separation of powers, diminishes the independence of parliament and courts, the transparency and accountability of the public sector, and places elected officials before their constituencies. Economically, corrupt practices reduce private sector trust, increase hurdles to receiving international financing from international financial institutions and foreign investors, and erodes the public legitimacy of the regime in general. Yet they remain persistent in Tajikistan as in many other parts of the world.
While the taxpayer is paying for the construction of a hotel that will probably never be built, the ruling family is lining its pockets. As long as this state of affairs persists, Tajikistan’s development will remain limited.
Umedjon Majidi is a media consultant working for InterNews in Sarajevo, Bosnia.