Institute for War and Peace Reporting | Giving Voice, Driving Change

Life Gets Tougher for Uzbek Traders

After relaxing border trade rules in the wake of the Andijan violence, Uzbek officials are now enforcing customs rules with a vengeance.
By IWPR staff
One of the few ways of earning a living in Uzbekistan - bringing in goods across the border to sell on market stalls - has got much harder over the last two months, traders say.

Stringent import controls have been in place since 2002 when the government imposed high customs duties and other tariffs, but since last summer, the rules have apparently been at least partly ignored. That began changing in early November, and since then officials on the border are enforcing the rules with tough measures.

The cross-border trade is a sensitive matter for the authorities, in part because the authorities see it as disrupting an economy that is still largely state-controlled as in Soviet times.

Any move liable to cause widespread popular unrest will revive memories of Andijan, where independent observers say hundreds of people were mown down by Uzbek security forces after gathering for a protest rally last May.

But those involved in trading and in enforcing the rules say the change in policy has less to do with political considerations than with a recurring cash shortage, which means the government needs to extract every penny it can from these “businessmen” – a description which belies the hand-to-mouth existence of many of them.

Until recently, the customs and excise regulations were imposed with some leeway – especially if traders paid officers a bribe to evade official fees.

One Uzbek customs officer said he and his colleagues often turned a blind eye since they realised that trading was the lifeblood of many people who live in parts of the Fergana valley close to the Kyrgyz frontier. Many travel to the Karasuu market in southern Kyrgyzstan, the largest in Central Asia, and not far from Andijan.

“For residents of border regions who don’t have such a high income level, it’s important to buy goods over in Kyrgyzstan. So we leave local residents alone,” he said. “But if we have an inspection, which happens a lot, we have to detain them, even elderly women.”

A trader who travels regularly to the Karasuu market recalls the point at which things changed. “It became more difficult to import goods in December. Initially, they said that the tighter controls were meant to prevent imports of fireworks, which are in greater demand before the New Year,” he said.

“But it turned out that more rigorous controls were the result of instructions issued in [the capital] Tashkent to implement Decree No. 154.”

That decree, issued in May 2002, was intended to reduce imports by imposing such high tariffs that it was no longer profitable to buy a consignment of clothes or foodstuffs at a market over the border and sell it at home.

The decree was a move to stop large outflows of dollars, which the government is reluctant to let go of, and to prevent a huge trade gap opening up as booming imports outstrip relatively static exports. Making it harder to bring goods into the country also fits with the Uzbek government’s long-term strategy of protectionism.

The downside of these policies is that it becomes easier for government to curb imports through punitive taxation than to stimulate local manufacturers to become more competitive. The effect on the economy has also been the reverse of what was intended, as the squeeze on imports has led to shortages and thus price rises.

Many analysts have pointed out that regulation tends to hit the small-time traders already living on the margins much more than the big fish – often senior politicians - who hold effective monopolies over certain kinds of imports. Another new set of rules, including the requirement that every market stall has a cash register and files its accounts with a state-run bank, was so much resented that market traders in towns in Kokand and other cities rioted in November 2004.

Many independent observers believe the 2005 trouble in Andijan was driven not by radical Islam, as President Karimov claimed, but by similar concerns about economic rights and social justice. Local analysts say the customs rules were quietly relaxed after May 2005 to avoid sparking more protests, although this was also achieved through a massive political crackdown.

“After the events in Andijan, people were already embittered. So we were recommended not to get into conflict with local people and entrepreneurs bringing in imported goods,” said a customs officer in Andijan region.

However, the decision to reverse this policy seems to have been in part a last-minute effort by officials who wanted to show they were bringing in the right amount of revenue. The price of failure is high: when the Uzbek tax committee met in January to discuss year-end results, the chief tax inspector in Fergana city and his counterpart in Andijan region’s Asaka district lost their jobs.

As the Andijan customs officer explained, “In autumn it emerged that budget revenue had fallen drastically. Our superiors started asking us to increase the numbers.”

He said the customs service was forced to press on with the tougher measures even when it was apparent that these were causing friction, “We informed our superiors that these rates of duty really were unrealistic, and that because of them we were running into conflict not just with entrepreneurs but also with the local population.

“Then we received instructions to arrest people who made a scene and hand them over to the police to face criminal proceedings. Thus, in December we had several cases where we arrested people for making a scene.”

A local trader confirmed there had been confrontations with the authorities, “In November there were cases when large buses carrying entrepreneurs from Kokand were stopped. All their goods were confiscated. The women poured petrol over themselves and threatened to set themselves on fire if their goods were not returned. So the bus was allowed to go.”

On the ground, stiffer regulation will not necessarily translate into more efficient revenue collection. Seasoned traders say the bribes they have to pay just get higher.

One woman involved in the trade explained, “Whereas drivers used to be able to buy their way out of a [vehicle] inspection for 500 or 1,000 sums, the police and customs officers won’t accept that any more, demanding more. The explanation they give they are supposed to be conducting more rigorous checks.”

A man from the city of Kokand said the result was more and more smuggling. “I import expensive items, so I prefer not to take the risk but register them officially,” he said. “But many others are now bringing in goods without paying duties. They pay bribes along the way, which works out cheaper than registering officially goods.

“Their goods are cheaper than mine as a result, and it’s become difficult for me to compete. The choice I face is to close down my business and end this source of family income, or to smuggle goods.”

The smugglers who work for the traders have long since established an efficient system for bringing in goods. “In the period that the decree has been in force [since 2002], whole groups engaged in smuggling have emerged. Some specialise in delivering goods to cities in the Fergana valley itself, and others to the rest of Uzbekistan,” said a driver who knows the route well. “The cost of such a high-risk delivery starts at 100 US dollars per car. Every day, hundreds of cars bring in smuggled goods according to a pre-set scheme. Staff manning checkpoints along the entire route are involved - they all get their slice. Each checkpoint sets its own rate.”

Those individuals still trying to trade without the help of smugglers remain at the mercy of border officials and police.

A woman from Tashkent recalled, “The last time that I went to buy goods we were held at a checkpoint at the entrance to the Kamchik pass [between the Fergana valley and the rest of Uzbekistan]. In the past, the driver would had paid a bribe of 10,000 sums [currently less than nine dollars] here, but this time the customs officers said there were rigorous checks in place, so the bribe would need to be higher. When I asked how much they wanted, I was horrified – we were to pay 200 dollars. [If not], the customs officer threatened that he’d confiscate our goods and that I’d be fined and also face conviction for smuggling.

“I started crying and pleading with the customs officer, saying I had children I needed to feed. But he just laughed and said, ‘Sister, why tell me about your children? Did I promise to feed them? I’ve got kids to feed too.”

Names in this story have been withheld out of concern for the security of interviewees.