Uzbekistan Threatens Regional Growth

Monday, 21 February, 2005

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Galima Bukharbaeva

Central Asia is missing out on all the benefits of regional trade because of Uzbekistan’s increasingly isolationist stance, the World Bank has claimed.

The bank, which has recently developed a strategy for cooperation in the region, said Tashkent’s recent policies were having an adverse effect on the economy of the region.

David Pearce, who heads the World Bank mission in Uzbekistan, told a press conference in the Uzbek capital this week that various measures taken by Tashkent – such as the imposition of draconian customs duties and the subsequent closure of its borders – had damaged trade with Kazakstan, Kyrgyzstan and Tajikistan.

Currently, trade between the countries is almost solely based on the sale of energy resources to one another. There is virtually no import and export of manufactured goods and foodstuffs.

In many ways, Uzbekistan is the pivotal country in Central Asia as it has the largest population – around 25 million people – and is in the centre of the region.

As Uzbekistan is the main consumer of water from the mountains of Kyrgyzstan and Tajikistan, it is in its interests to maintain good relations with its neighbours. But analysts and businessmen claim that, in practise, the opposite is true.

In addition to the publicly stated steps that Tashkent has taken to control trade, it has imposed a number of other unannounced measures.

One Kazak businessman, speaking on condition of anonymity, told IWPR that his plans to launch a company to export foodstuffs to Uzbekistan, were scuppered after Uzbek banks refused to register the necessary contracts.

He later discovered that a private protocol introduced by the Uzbek cabinet in April 1999 bans local banks from registering contracts signed by Kazak or Kyrgyz nationals.

An employee of the National Bank of Uzbekistan confirmed this, saying, “A ban on trade contracts with Kazaks and Kyrgyz really does exist - we have never registered any.”

The businessman told IWPR that his investigations later uncovered a second cabinet decree dating from January 7, 2003, when Uzbekistan closed its border with Kazakstan.

Since then, there has been a 50 US dollar limit on the value of goods being brought in from Kazakstan and Krygyzstan. Any excess is liable for customs duty, or the items will be confiscated.

The Kazak foreign ministry told IWPR that Astana had not been given any official notification of these Uzbek decrees. It reports that around 190 million dollars worth of trade is conducted with Uzbekistan every year – but notes that this is from reciprocal deliveries of gas, electricity and other services, as virtually no goods are traded.

But Kazak national bank chief Grigory Marchenko recently announced that, in his opinion, the two nations could turn over as much as two billion dollars a year if their trade arrangements were expanded to include other products.

One official from the Kazak foreign ministry, who did not want to be named, said that Tashkent’s attitude made this target unfeasible. “How can we do business if Uzbekistan does not even want to register cross-border contracts?” he asked.

“We propose to open water, transport and trade consortiums, which will solve disputed issues. We also want to increase customs control in full collaboration with Uzbekistan, but Tashkent rejects this.”

Tajikistan has also experienced difficulties with Uzbekistan. According to the advisor to the Tajik ambassador in Tashkent, Abdurakhim Juraev, trade between the two countries is worth around 300 million dollars a year - also mainly from delivery of energy resources. “But it could be double that if there was free trade.

“Closing borders never leads to an open market or healthy economic development. However, we are ready to cooperate when they are.”

The press secretary at the Kyrgyz embassy in Uzbekistan, Nurlan Alymbekov, said his country was also keen on regional cooperation, and noted a drop in trade volumes after Uzbekistan closed its borders.

“The trade turnover with Uzbekistan was more than 25 million dollars for the first half year, which is of course very low,” he said. “We have almost no trade of consumer goods between the countries, we do not make use of the enormous potential of the Central Asian market.”

Tashkent is due to host a ministerial conference on Central Asian economic cooperation on November 12, featuring representatives from Kazakstan, Kyrgyzstan and Tajikistan as well as Azerbaijan, China and Mongolia.

But a Kazak foreign ministry source was dismissive of the conference. “There will only be rhetoric about friendship and brotherhood which means nothing,” he said. “I don’t believe in these meetings - there have been plenty already.”

However, the World Bank’s Pearce remains optimistic, and sees it as a sign that Uzbekistan is willing to engage in regional cooperation.

Galima Bukharbaeva is IWPR project director in Uzbekistan.