Alfa
03-01-2003, 06:37 AM
Uzbekistan: Collision Course
Tashkent is promising to reform its economy with the help of the IMF, but some say its recent attempts to shield itself from the effects of those reforms smack of protectionism.
TASHKENT, Uzbekistan--Under increasing pressure from the International Monetary Fund (IMF) to hasten economic reforms, Uzbekistan is trying to insulate its economy from the possible shocks that may result. But some of Tashkent’s actions--including unilaterally closing its border with Kazakhstan--have prompted criticism at home and abroad and have further damaged relations with neighboring Kazakhstan.
On 12 February, an IMF mission headed by Erik de Vrijer arrived in Uzbekistan to review the country’s economic performance and discuss the issue of introducing a unified exchange rate. Negotiations also included talk of a resumption of standby IMF credit lines to Uzbekistan. Those credits were suspended in 1996, when Tashkent introduced tight restrictions on the convertibility of its national currency, the som.
The IMF mission stopped giving loans to Uzbekistan the same year and has given only technical advice on financial management since then. In 2001, the IMF left Uzbekistan after the country failed to introduce a unified exchange rate or engage in other IMF-recommended economic reforms.
However, early last year, the Uzbek government sent a letter of intent and a memorandum of economic policies, promising to undertake the IMF’s program. Since then, analysts have noted Tashkent’s increasingly protectionist stance in the run-up to the promised reforms.
In the most recent action, Uzbekistan unexpectedly closed its borders with Kazakhstan on 28 December 2002 and has tightened border crossings with its other neighbors. Uzbek officials initially blamed massive food poisoning from goods brought in from neighboring countries. However, officials from the Uzbek Health Ministry denied that they had detected any outbreaks of infectious disease and indicated that the borders had been closed to stop the outflow of hard currency from the country.
Independent analysts insist that the border closing is most closely tied to Tashkent's preparations for making the som fully convertible. Fearing that the swift introduction of currency convertibility before the stabilization of the exchange rate could to a flood of money and goods out of Uzbekistan, Uzbek authorities are trying to limit the market as much as possible in the initial stages, and limiting transit with Kazakhstan represents an effective first response.
According to Kazakh customs officials, almost 30,000 to 40,000 people were traveling to Kazakhstan and spending an average of $4 million total each day before the border closing.
In June 2002, Uzbek authorities increased customs duties for imports by 50 percent for foodstuffs and 90 percent for nonfood products. Later, after protests among ordinary citizens and pressure from the IMF, the Uzbek government decreased duties to 40 percent for foodstuffs and 70 percent for nonfood items. But the prices in Uzbek markets skyrocketed anyway, and thousands of shuttle traders and ordinary citizens rushed to the southern Kazakh markets to buy cheaper products.
In Tashkent and beyond, all markets were eventually closed after a government decree last summer required all traders have customs certificates for goods delivered to market. The small-scale shuttle traders could not produce the certificates, so authorities forcibly closed down the markets and confiscated the traders’ products. Since prices in stores are higher than those in markets and local goods are perceived to be of lower quality, Uzbek shops were abandoned in favor of markets across the border in Kazakhstan.
But following the border closures, the influx of Uzbek citizens to Kazakhstan has ended. Kazakh citizens who need to visit Uzbekistan are also feeling the pinch. Illegal border-crossing services are flourishing.
ETERNAL FRIENDSHIP STRAINED
Kazakh President Nursultan Nazarbaev and Uzbek President Islam Karimov discussed the issues of regulating border passages between the two countries in a telephone conference in early January. Both sides agreed to set up a working group to resolve the border issues.
The Kazakh and Uzbek deputy prime ministers, Karim Masimov and Rustam Azimov, met in Tashkent on 7 January. No results were released following the meeting.
But according to the Kazakh newspaper Vremya, Kazakh Deputy Interior Minister Ivan Otto told the Kazakh parliament on 9 January that during the bilateral talks on reopening the border, Uzbekistan had demanded that Kazakhstan close its markets and stop converting Uzbek currency.
"We cannot agree to such conditions,” Otto said. “We should not have to and unequivocally we shall not coordinate with Uzbeks the issue of what markets to open and where,” adding that a 1998 eternal friendship treaty signed between the two countries is not a guarantee of warm relations.
Uzbekistan’s relations with another neighbor, Turkmenistan, have also soured in recent months. Turkmen special forces stormed the Uzbek Embassy in Ashgabat in December to investigate reports that embassy officials were giving sanctuary to a suspect in the alleged assassination attempt against Turkmen President Sapurmurat Niyazov. Mutual accusations between Ashgabat and Tashkent in the wake of the assassination attempt have led to open confrontation, and the armed forces of the two countries are being deployed on the Turkmen-Uzbek border.
--by Faruk Turaev
Tashkent is promising to reform its economy with the help of the IMF, but some say its recent attempts to shield itself from the effects of those reforms smack of protectionism.
TASHKENT, Uzbekistan--Under increasing pressure from the International Monetary Fund (IMF) to hasten economic reforms, Uzbekistan is trying to insulate its economy from the possible shocks that may result. But some of Tashkent’s actions--including unilaterally closing its border with Kazakhstan--have prompted criticism at home and abroad and have further damaged relations with neighboring Kazakhstan.
On 12 February, an IMF mission headed by Erik de Vrijer arrived in Uzbekistan to review the country’s economic performance and discuss the issue of introducing a unified exchange rate. Negotiations also included talk of a resumption of standby IMF credit lines to Uzbekistan. Those credits were suspended in 1996, when Tashkent introduced tight restrictions on the convertibility of its national currency, the som.
The IMF mission stopped giving loans to Uzbekistan the same year and has given only technical advice on financial management since then. In 2001, the IMF left Uzbekistan after the country failed to introduce a unified exchange rate or engage in other IMF-recommended economic reforms.
However, early last year, the Uzbek government sent a letter of intent and a memorandum of economic policies, promising to undertake the IMF’s program. Since then, analysts have noted Tashkent’s increasingly protectionist stance in the run-up to the promised reforms.
In the most recent action, Uzbekistan unexpectedly closed its borders with Kazakhstan on 28 December 2002 and has tightened border crossings with its other neighbors. Uzbek officials initially blamed massive food poisoning from goods brought in from neighboring countries. However, officials from the Uzbek Health Ministry denied that they had detected any outbreaks of infectious disease and indicated that the borders had been closed to stop the outflow of hard currency from the country.
Independent analysts insist that the border closing is most closely tied to Tashkent's preparations for making the som fully convertible. Fearing that the swift introduction of currency convertibility before the stabilization of the exchange rate could to a flood of money and goods out of Uzbekistan, Uzbek authorities are trying to limit the market as much as possible in the initial stages, and limiting transit with Kazakhstan represents an effective first response.
According to Kazakh customs officials, almost 30,000 to 40,000 people were traveling to Kazakhstan and spending an average of $4 million total each day before the border closing.
In June 2002, Uzbek authorities increased customs duties for imports by 50 percent for foodstuffs and 90 percent for nonfood products. Later, after protests among ordinary citizens and pressure from the IMF, the Uzbek government decreased duties to 40 percent for foodstuffs and 70 percent for nonfood items. But the prices in Uzbek markets skyrocketed anyway, and thousands of shuttle traders and ordinary citizens rushed to the southern Kazakh markets to buy cheaper products.
In Tashkent and beyond, all markets were eventually closed after a government decree last summer required all traders have customs certificates for goods delivered to market. The small-scale shuttle traders could not produce the certificates, so authorities forcibly closed down the markets and confiscated the traders’ products. Since prices in stores are higher than those in markets and local goods are perceived to be of lower quality, Uzbek shops were abandoned in favor of markets across the border in Kazakhstan.
But following the border closures, the influx of Uzbek citizens to Kazakhstan has ended. Kazakh citizens who need to visit Uzbekistan are also feeling the pinch. Illegal border-crossing services are flourishing.
ETERNAL FRIENDSHIP STRAINED
Kazakh President Nursultan Nazarbaev and Uzbek President Islam Karimov discussed the issues of regulating border passages between the two countries in a telephone conference in early January. Both sides agreed to set up a working group to resolve the border issues.
The Kazakh and Uzbek deputy prime ministers, Karim Masimov and Rustam Azimov, met in Tashkent on 7 January. No results were released following the meeting.
But according to the Kazakh newspaper Vremya, Kazakh Deputy Interior Minister Ivan Otto told the Kazakh parliament on 9 January that during the bilateral talks on reopening the border, Uzbekistan had demanded that Kazakhstan close its markets and stop converting Uzbek currency.
"We cannot agree to such conditions,” Otto said. “We should not have to and unequivocally we shall not coordinate with Uzbeks the issue of what markets to open and where,” adding that a 1998 eternal friendship treaty signed between the two countries is not a guarantee of warm relations.
Uzbekistan’s relations with another neighbor, Turkmenistan, have also soured in recent months. Turkmen special forces stormed the Uzbek Embassy in Ashgabat in December to investigate reports that embassy officials were giving sanctuary to a suspect in the alleged assassination attempt against Turkmen President Sapurmurat Niyazov. Mutual accusations between Ashgabat and Tashkent in the wake of the assassination attempt have led to open confrontation, and the armed forces of the two countries are being deployed on the Turkmen-Uzbek border.
--by Faruk Turaev