"Uzbekistan's future looks bleak unless serious economic and political reforms are implemented," said the report, released by the Brussels-based International Crisis Group on February 18. "Economic growth hardly keeps pace with the population, unemployment is rife and poverty is deepening."
The report stressed that in 2002 Uzbekistan enjoyed "a favorable international environment," fostered mainly by Tashkent's close strategic cooperation with the United States, that created optimal conditions for reform. Karimov's administration, however, failed to take advantage of the opening. Instead, the Uzbek leader maintained tight control over freedom of speech and association, making only a few token efforts to improve the country's human rights climate. [For background see the Eurasia Insight archives].
In the economic sphere, Karimov clung tenaciously to his vision for development, which he terms the "Uzbek model," in which the country gradually introduces market economic principles in order to avoid social dislocation. The ICG report asserted that the Uzbek model, which relies on rising government subsidies to buttress the industrial production and the social welfare network, is unsustainable. "Since 1996, the economic system has been gradually collapsing under its own weight of subsidies and controls," the report said.
Expectations in the international community for Uzbek liberalization peaked in January 2002, when the International Monetary Fund concluded a deal with Tashkent on the implementation of structural reforms. Under a so-called Staff Monitored Program (SMP), Uzbek officials agreed to make 25 structural and technical changes in the country's economic system. The most prominent SMP point was a commitment by Tashkent to introduce currency convertibility. [For additional information see the Eurasia Insight archives].
Since then, Uzbekistan's implementation of the SMP has lagged, with virtually no progress towards convertibility. "The government has been promising convertibility since at least 1999, and each promise has been broken," the ICG report states.
The ICG suggested that government steps to restrict trade in 2002, including the introduction of punitive tariffs on imports, caused Uzbekistan's economy to regress. [For additional information see the Eurasia Insight archives]. The ill-conceived administrative measures served to "push trade out of the country into Kazakhstan and Kyrgyzstan," the report said. "Even conservative estimates suggested that total cross-border outflow of hard currency was reaching US $100 million per month."
The Uzbek government ultimately repealed punitive tariffs. Nevertheless, Uzbekistan appears to be continuing on its downward spiral. The hard currency drain prompted Tashkent to virtually seal its borders in late December, heightening tension with all of its Central Asian neighbors. [For additional information see the Eurasia Insight archives].
In a February 17 television address, Karimov lashed out at what he characterized as a "well-organized, corrupt criminal system," that was working to undermine the Uzbek economy by smuggling consumer goods into the country. "It [smuggling] inflicts enormous damage on our country's economy," Karimov said. At the same time, the president provided no indication that the government would take steps to reduce demand for smuggled goods. "We will not be second to anyone," he thundered.
The ICG report attempts to explain why the Uzbek government has shunned reform, noting that the reasons are "complex, but mostly relate to a political system dominated by vested interests at all levels that have a considerable investment in retaining the status quo."
Political leaders are preoccupied with the ongoing power struggles within the system, and thus pay little attention to economic reform, the ICG report contends. In addition, "society has not pushed hard for change from below, and, according to some views, is not ready for radical economic and political restructuring," the report says.
Since the September 11 terrorist attacks, Western governments, especially the United States, have engaged in quiet diplomacy with Uzbekistan, maintaining pressure for liberalization in closed-door discussions, while expressing support for Tashkent in public statements. The ICG report says hopes for "reform through positive engagement" is "unlikely to work in Uzbekistan," mainly because Tashkent does not have a genuine desire to change, but rather is only grudgingly willing to "implement measures to provide the basis for a new flow of external funds."
The report urges the international community to adopt a harder line on the implementation of reform in Uzbekistan. It notes that as attentions shifts from Afghanistan, the strategic importance of the US military base at Khanabad fades. [For background see the Eurasia Insight archive]. "The West has little to lose from a tougher, more critical stance with the [Karimov] regime, and arguably much to gain," the report says.
The ICG report suggests that a social "catastrophe" may be in the offing unless authorities take immediate steps to change current political and economic policies. Already there is "little sense of commitment" among many young people to Uzbekistan's future, the report says. Uzbekistan's vast security forces may be able to keep the lid on discontent for years, but the continuation of the status quo will ultimately culminate in upheaval.
One administration critic, quoted in the ICG report, portrayed the existing situation as "a powder keg ready to explode at any time."
"Many officials far removed from the opposition can see the situation getting much worse," the report added.