SUN6500
03-31-2001, 10:18 AM
Investors Quit Uzbekistan As Government Dithers on Reform
Uzbekistan, March 30, 2001 [ 11:24 ]
, TCA
TASHKENT. (Reuters) -- Many investors and lenders are pulling out of the Central Asian state of Uzbekistan in protest at the slowness of economic reforms, and some still there say they doubt that policy changes are imminent.
The International Monetary Fund, frustrated by the authorities' unwillingness to introduce a unified currency exchange rate and liberalize the economy, announced earlier this week it was cutting its presence in Uzbekistan to a minimum.
No official data are available on the outflow of investors from the former Soviet state, where widespread poverty among the Muslim population of 24 million is creating fertile ground for the possible spread of Islamic fundamentalism.
However, a Tashkent removals firm that serves diplomats and businessmen said last year it saw only one investor settling in the country, while 93 left.
South Korean industrial conglomerate Samsung <00830.KS> announced this month it was winding up its activities in Uzbekistan, while British American Tobacco complained that its market share in the country shrank last year due to tight restrictions on the convertibility of the sum currency.
Even a joint car venture with South Korea's Daewoo Motor , the official showcase of investor success in Uzbekistan, is having problems converting local currency revenues into hard cash due to the complicated system of multiple rates.
Reforms May Stay on Hold for Long Time
"Unfortunately, economic reforms may remain on hold for a long time," a Western banker told Reuters. "Uzbekistan is a resource-rich nation, and so it can afford the luxury of continuing current policies for a very long period."
"As long as they continue suppressing imports of consumer goods and paying local producers of cotton and gold just a fraction of international prices for their produce, this so-called self-sufficiency may last for years," a Western economist said.
Exports, primarily of cotton, gold and energy, bring in around $3 billion per year, allowing Uzbekistan to spend some $1 billion a year servicing foreign debts.
But with a shortage of investors, the government has had to guarantee most foreign loans for ambitious industrial projects, and may soon face difficulties servicing external debt.
The European Bank for Reconstruction and Development (EBRD) [EBRD.UL] said in its 2000 annual report Uzbekistan's foreign debt had approached a worrying 70 percent of GDP last year.
"If the current strategy is not altered, debt service payments will rise further, raising the likelihood of a liquidity crisis," the EBRD said.
Uzbek officials say gross domestic product grew four percent last year, down from 4.4 percent in 1999.
However, the EBRD said industrial output calculated at constant prices fell by more than 10 percent over the last two years. It said that of all ex-Soviet states, only Turkmenistan and Uzbekistan continued to backtrack on reform last year.
"These reversals reflect growing economic distortions, involving the channelling of cheap bank credits and preferential access to foreign exchange to inefficient domestic producers at the expense of the rest of the economy," the EBRD said.
Patience Has Its Limits
In the capital Tashkent, many cafes and restaurants that once served foreigners or the local middle class have either closed or cut their hours due to a lack of clients. Residents of the historic Old Town tend sheep and goats to survive.
Poverty in rural areas is much more striking. Uzbekistan still operates as in the Soviet era, telling farmers what to grow, and at what price to sell their produce to the state.
Often working for virtually nothing, many farmers seek solace in Islam, while officials fear religious extremism.
These fears are shared by investors and lenders.
"Extremists of all kinds have fertile ground to foment discontent among the population," the Western economist said.
The densely inhabited Fergana valley in northeastern Uzbekistan, home to more than a third of the country's population, has been a target of Islamist extremists making incursions in nearby Tajikistan and Kyrgyzstan in recent years.
"These (official) policies have contributed to increased civil unrest, specifically in the Fergana valley, and have contributed substantially to the rising popularity of Islamic groups in the country," the EBRD said.
Uzbekistan, March 30, 2001 [ 11:24 ]
, TCA
TASHKENT. (Reuters) -- Many investors and lenders are pulling out of the Central Asian state of Uzbekistan in protest at the slowness of economic reforms, and some still there say they doubt that policy changes are imminent.
The International Monetary Fund, frustrated by the authorities' unwillingness to introduce a unified currency exchange rate and liberalize the economy, announced earlier this week it was cutting its presence in Uzbekistan to a minimum.
No official data are available on the outflow of investors from the former Soviet state, where widespread poverty among the Muslim population of 24 million is creating fertile ground for the possible spread of Islamic fundamentalism.
However, a Tashkent removals firm that serves diplomats and businessmen said last year it saw only one investor settling in the country, while 93 left.
South Korean industrial conglomerate Samsung <00830.KS> announced this month it was winding up its activities in Uzbekistan, while British American Tobacco complained that its market share in the country shrank last year due to tight restrictions on the convertibility of the sum currency.
Even a joint car venture with South Korea's Daewoo Motor , the official showcase of investor success in Uzbekistan, is having problems converting local currency revenues into hard cash due to the complicated system of multiple rates.
Reforms May Stay on Hold for Long Time
"Unfortunately, economic reforms may remain on hold for a long time," a Western banker told Reuters. "Uzbekistan is a resource-rich nation, and so it can afford the luxury of continuing current policies for a very long period."
"As long as they continue suppressing imports of consumer goods and paying local producers of cotton and gold just a fraction of international prices for their produce, this so-called self-sufficiency may last for years," a Western economist said.
Exports, primarily of cotton, gold and energy, bring in around $3 billion per year, allowing Uzbekistan to spend some $1 billion a year servicing foreign debts.
But with a shortage of investors, the government has had to guarantee most foreign loans for ambitious industrial projects, and may soon face difficulties servicing external debt.
The European Bank for Reconstruction and Development (EBRD) [EBRD.UL] said in its 2000 annual report Uzbekistan's foreign debt had approached a worrying 70 percent of GDP last year.
"If the current strategy is not altered, debt service payments will rise further, raising the likelihood of a liquidity crisis," the EBRD said.
Uzbek officials say gross domestic product grew four percent last year, down from 4.4 percent in 1999.
However, the EBRD said industrial output calculated at constant prices fell by more than 10 percent over the last two years. It said that of all ex-Soviet states, only Turkmenistan and Uzbekistan continued to backtrack on reform last year.
"These reversals reflect growing economic distortions, involving the channelling of cheap bank credits and preferential access to foreign exchange to inefficient domestic producers at the expense of the rest of the economy," the EBRD said.
Patience Has Its Limits
In the capital Tashkent, many cafes and restaurants that once served foreigners or the local middle class have either closed or cut their hours due to a lack of clients. Residents of the historic Old Town tend sheep and goats to survive.
Poverty in rural areas is much more striking. Uzbekistan still operates as in the Soviet era, telling farmers what to grow, and at what price to sell their produce to the state.
Often working for virtually nothing, many farmers seek solace in Islam, while officials fear religious extremism.
These fears are shared by investors and lenders.
"Extremists of all kinds have fertile ground to foment discontent among the population," the Western economist said.
The densely inhabited Fergana valley in northeastern Uzbekistan, home to more than a third of the country's population, has been a target of Islamist extremists making incursions in nearby Tajikistan and Kyrgyzstan in recent years.
"These (official) policies have contributed to increased civil unrest, specifically in the Fergana valley, and have contributed substantially to the rising popularity of Islamic groups in the country," the EBRD said.