EurasiaNet Business & Economics - US to Aid Uzbekistan to Greatly Expand Under Economic Cooperation Agreement

BUSINESS & ECONOMICS

US TO AID UZBEKISTAN TO GREATLY EXPAND UNDER ECONOMIC COOPERATION AGREEMENT
Farida Harba 12/10/01

Details of the quid pro quo governing US-Uzbek relations are emerging. In return for Uzbekistan’s strategic support in the anti-terrorism offensive in Afghanistan, the United States stands to provide Tashkent with comprehensive economic support, according to a memorandum signed by the two countries in Washington. The United States hopes the aid will foster economic reforms in Uzbekistan. But some observers question whether the Uzbek government has the political will to implement reforms, and whether the US government has the determination to see the deal through.

The Uzbek government’s announcement that it would open the Friendship Bridge connecting Uzbekistan and Afghanistan dominated the headlines during US Secretary of State Colin Powell’s visit to Tashkent on December 8. The bridge opening will help speed deliveries of humanitarian assistance to hungry Afghans.

Powell also reportedly passed along a diplomatic letter from President George W. Bush to his Uzbek counterpart, Islam Karimov, in which the United States expressed an intention to greatly increase assistance to Uzbekistan. The letter also suggested Washington would provide strong backing for Uzbek attempts to develop an "independent" foreign policy, essentially helping Tashkent break out of Russia’s sphere of influence.

The secretary of state told a news conference that his country’s interests in the region were permanent. "As regards our interests, unconditionally, they are long-term and President Karimov and I have exchanged views on this. Our interests in this region should be permanent and these relations will continue after the [Afghan] crisis," Powell said.

Prior to Powell’s arrival, official Uzbek newspapers December 6 published the text of an economic cooperation agreement, negotiated during talks in Washington at the end of November. More than any other official statement or document, the economic cooperation agreement answers long-asked questions about what Uzbekistan receives in return for its decision to permit US armed forces to use its military installations. Before the publication of the text, Uzbek officials had been tight-lipped about the nature of US-Uzbek cooperation. Karimov avoided questions about the existence of a trade-off with the United States.

According to Uzbek accounts, the agreement expresses a joint desire to establish "qualitatively new long-term relations" between Uzbekistan and the United States, "based on the similarity of aims in fighting international terrorism and� maintaining peace and stability and strengthening security in Central Asia" and the understanding of "the necessity to provide real assistance to the Republic of Uzbekistan in its intention to liberalize economy."

The Uzbek government commits itself to introducing free convertibility of the national currency, improving the investment climate, allowing broader foreign involvement in developing the country’s natural resources, and also to easing trade barriers.

Even before the end of this year, Uzbekistan could receive a $100 million USD grant as "additional economic and humanitarian aid and assistance in the sphere of security," the document says. In addition, the US Export-Import Bank will make a $50 million USD credit available for the Uzbek National Bank to support small and medium-sized business.

The US government also promises to help Uzbekistan restore good relations with the International Monetary Fund, which closed its mission in the country in April because of a lack of cooperation from Karimov’s government. American officials will additionally try to attract assistance commitments from other foreign financial institutions. The Uzbek side, in its turn, pledges to cooperate with these organizations, in other words, to comply with their demands.

The document envisages a growth of direct US investment in Uzbekistan, as well as US involvement in the privatization of Uzbek enterprises and in the development of the country’s tourism industry.

Ten years after gaining independence following the collapse of the Soviet Union, Uzbekistan has yet to carry out large-scale privatization, liberalization of currency operations and trade, banking reform and measures to develop and protect the private sector. The US-Uzbek cooperation agreement could go a long way towards helping Uzbekistan to smooth out the inevitable negative consequences of reforms.

According to one expert from the Tashkent-based Economic Research Center, the deal is good news for Uzbekistan, given the country’s dire economic situation. But the expert added that the Uzbek government remains reluctant to press forward with reforms in earnest. "The most dangerous thing is that this may be a political rather than economic agreement. The government is maybe forced to commit itself to carrying out reforms and there is still no real understanding of the necessity to get down to reforms," he said.

Another question, he said, is how serious the Americans are in their intention to boost the Uzbek economy. "This [promised economic assistance] may be payment for the support [of the anti-terrorism campaign] and they will turn a blind eye to the implementation of the conditions of the deal. To make it work they will have to ensure strict monitoring of how the money they give is spent," he said.

Editor�s Note: Farida Harba is a freelance journalist based in Central Asia.

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