Banking Decree Hurting Uzbek NGOS

With the stated intention of combating money laundering by local NGOs, the government of Uzbekistan is hobbling dozens of efforts by international organizations and foreign governments to stimulate civil society in the country. New regulations are making it difficult for foreign donors to assist small businesses, libraries, women's groups and other non-state entities in Uzbekistan.

In recent weeks, the Uzbek government rejected the Open Society Institute's registration and warned other foreign non-governmental organizations, specifically the National Democratic Institute, International Republican Institute and Freedom House that they could be next. [For background see the Eurasia Insight archive].

These challenges to international NGOs rightly attract attention, so it is easy to overlook the damage done to Uzbek NGOs, universities, libraries and other institutions. OSI takes with it a $2.5 million annual program, including $900,000 for education, $400,000 for internet and library programs, and $200,000 for small business assistance.

For those donors who remain, providing assistance is increasingly difficult, largely due to Cabinet of Ministers Resolution 56. The resolution, which President Islam Karimov signed in February, is aimed at increasing the financial accountability of local organizations receiving international support, and combating money laundering.

The Eurasia Foundation has, from its inception 10 years ago, taken the approach that it, and its grantees, must obey the laws of the countries where we work and follow transparent financial practices. As with all legitimate international organizations, the foundation opposes money laundering. Therefore, it finds nothing wrong with the goals of the resolution.

The problem arises in the resolution's implementation: responsibility for reviewing all grant money has been entrusted to a newly created centralized commission. The commission has clearly been unable to cope with the number of grants it is required to review, leading to delays of weeks and months in grant payments. This is causing collateral damage to local organizations that are working to further goals laid out by the government in dozens of prior laws, resolutions and public statements, using international donor assistance.

How the commission makes its determinations is a bit of a mystery. Not only has the commission never contacted the Eurasia Foundation to ask about our grants, it has refused our offers to provide information and does not provide contact information. Uzbek NGOs are overwhelmingly reliant on international assistance, given the lack of support from both the country's government and business sector. Universities, libraries, medical institutions also benefit from foreign assistance.

The Eurasia Foundation grants about $700,000 a year in Uzbekistan to local NGOs, universities and other institutions, to promote civil society, private enterprise and public administration. The foundation gets its core funding from the US Agency for International Development and project funding from donors such as the Netherlands, Canada, Switzerland and the Organization for Security and Cooperation in Europe.

Grants support projects such as a partnership between the University of Michigan and Kelajak Ilmi, the country's sole local, private business school; training apartment owners' associations to better manage their property; and supporting finance mechanisms for farmers, such as leasing and credit unions.

To date, the commission has rejected outright just one Eurasia Foundation grant, a favorable average compared to some other donors. It is a project by the Surkhandarya Library Association to set up farmers' resource centers in six rural libraries in an economically depressed region. The commission apparently determined that providing information for farmers does not fit the mandate of rural libraries.

Several other local NGOs that Eurasia supports have suffered from the delays created by this commission. Selen is training unemployed mothers of many children in rug-making and other home-based income-generating activities in the economically depressed city of Urgench. It waited nine weeks for its latest grant payment, during which neither Selen nor the Eurasia Foundation received interest.

As the commission continues its work, I urge it to report instances in which it uncovers money laundering by local NGOs. Donors without exception oppose trans-boundary crime and terrorism, and would certainly like to know which NGOs are violating their trust. If, on the other hand, the commission does not find any nefarious activities, it needs to disband and allow NGOs and other grant recipients to again focus on the important role they play in the economic and civic development of Uzbekistan.