Mir-i Arab Madrasah in Bukhara, Uzbekistan. Photo: Asian Development Bank via CC BY-NC-ND 2.0 https://flic.kr/p/eLwt7i
Uzbekistan has performed a shock about-face on its tourist visa policy by cancelling plans to allow citizens of 27 countries to travel to the country visa-free as of April.
A document posted on the government legislation portal Lex.uz on January 9 stated that the visa-free regime will only come into force in 2021. Nations eligible for visa-free travel under the now-cancelled initiative had included the United Kingdom, Germany, Italy, South Korea and Canada. Citizens of 12 countries, which included the United States, were also to be granted visa-free travel provided they were 55 years and over.
It is not wholly clear what has motivated this sudden change of heart on a policy, unveiled in early December, that appeared to indicate Uzbekistan was bracing to pursue a line of greater openness to the outside world. The decree making the announcement claimed it was motivated by a desire to pursue a "sustainable and balanced development of tourist activity” and create conditions to “ensure the safety of life and health of foreign tourists.”
The zig-zagging in decision-making suggests, however, that even with the increasing consolidation of freshly elected President Shavkat Mirziyoyev, tensions within the ruling elite remain in place.
News of this reversal will be greeted with dismay by the country’s tourist operators, who were heartened by Mirziyoyev’s stated intent to overhaul the leisure sector.
As part of an agenda of economic liberalization, Mirziyoyev’s government is looking to diversify the economy, attract greater foreign investment and, perhaps most importantly, transform Uzbekistan’s image as an isolated and inward-looking hermit nation.
The yawning, decades-long divide between Uzbekistan and Tajikistan will get that little bit narrower next week when a senior Uzbek delegation travels to Dushanbe for talks on trade and economic cooperation.
The delegation will travel to Tajikistan on December 26 and be led by Uzbek deputy prime minister Rustam Azimov, whose recent removal as finance minister appears for now to signal his transition to a role as the lead on development of Uzbekistan’s external economic ties.
Talks will focus on reopening railway and road links that have now been closed for several years. At the heart of the historic disaccord is Tajikistan’s plan to build a giant hydropower dam that Uzbekistan could threaten its access to vital irrigation water. Tashkent has tried by multiple means — mainly by imposing a de facto transit embargo — to hinder progress on that dam and force Dushanbe to back down.
Dushanbe-based news website Asia Plus reported that the Uzbek-Tajik intergovernmental commission convening in Dushanbe will agree on the reopening of specific railway and road links, suggesting the talks may go beyond an rhetoric exchange of goodwill messages. The website cited unnamed Tajik government sources as saying the two sides will agree on the opening on new border crossings.
This comes on the heels of an announcement in November that flights are set to resume between the two countries in January for the first time in 24 years.
The game of pass the parcel with one of Tajikistan’s rare industrial success stories has now led to a promising fertilizer plant being taken over by Chinese investors.
The lower house of parliament on December 14 ratified a deal between Tajikistan and China for Henan Zhong-Ya holding group to assume control of OAO Azot in a deal that will require the company to invest $360 million over the coming three years.
All in all, the deal is a sweet one for Henan Zhong-Ya. Azot will enjoy a tax holiday for a six-year period as it gradually ramps up production. The plant specializing in the production of carbamide, or urea, an organic compound used in fertilizer.
The plant has been standing idle since it was nationalized at the expense of Ukrainian tycoon Dmytro Firtash in 2014.
For the first 10 years of resumed operations, the plant will be 51 percent owned by the Chinese, while the remainder will be held by the Tajik government. The general director of the company will be Chinese.
Annual demand for carbamide in Tajikistan is around 360,000 tons, an amount it now imports at a cost of $50 million. The plant, which is situated in the southern Khatlon region, is slated to reach annual output of 200,000 tons of carbamide within the first two years.
Under the bilateral agreement, 30 percent of profits will go to the Tajik state and the rest to the Chinese partner.
There is a requirement, however, that half the employees must be Tajik nationals at the start to operations, and that this number must increase to 90 percent within 18 months.
A deeply troubled bank in Tajikistan is promising its customers that there is light at the end of the tunnel, although it is a mystery how it is pulling off the trick.
Tojiksodirotbank, the country’s second-largest lender, told some account-holders on December 13 that it will soon be in a position to pay out savings, ending months of worry for clients unable to get their hands on their money.
Signs that some things have begun to revert to a semblance of normality came earlier in the day with news that the bank’s former chairman and part owner, Tojidin Pirzoda, was being reinstated. Pirzoda was reportedly squeezed out of the bank in May along with six top executives as the lender was bing taken into administration by the National Bank of Tajikistan. Only Pirzoda is back so far, according to EurasiaNet.org sources.
An official announcement about the payment of deposits has not yet been made, but it is reportedly imminent.
The riddle is who or what is stumping up the cash. Tojiksodirotbank has been badly hit by its exposure to bad loans and collapse in the value of migrant remittances. It has previously announced it was in talks of a buyout by the European Bank for Reconstruction and Development (EBRD), but that has yet to materialise.
RFE/RL’s Tajik service, Radio Ozodi, cited Pirzoda as saying the money came in the form of a rescue package from the government. It is this money that will be pass on to account-holders, he said.
Asia-Plus news website reported, citing its own sources, that the bailout package was for 2 billion somoni ($250 million at the official rate) and that the government now owns an 80 percent stake in Tojiksodirotbank.
Uzbekistan’s upper house of parliament, the Senate, on December 13 adopted the 2017 budget with a deficit equivalent to 1 percent of gross domestic product — a rare if marginal acknowledgement of the country’s economic struggles.
That deficit amounts to 2.4 trillion sum, or around $750 million.
The budget was initially presented to lower house of parliament by deputy prime minister Rustam Azimov, who also fulfils the position of finance minister.
Last year’s budget was also adopted with 1 percent to GDP deficit, then around $650 million.
The scale of the reported deficit is eminently manageable by the standards of Western economies, but it is the gesture of transparency that it noteworthy in this instance. The government tentative efforts at privatisation programs and drumming up foreign investment are sorely constrained by common perceptions that Uzbekistan’s is mired in corruption and hampered by opaque bureaucratic practices.
It is likely that authorities understand that it is misguided to continue talking up claims of unalloyed success when everything around screams economic malaise.
Azimov provided no details about how the deficit is to be covered.
Uzbek economist Yuliy Yusupov sugested it would be done through a combination of loans and cash emissions.
“Considering that in Uzbekistan the real rate of inflation is far higher than what is officially declared, we run a significant deficit that we cover by printing money. What the real situation is, it is impossible to say, since all the relevant information about the budget and cash emissions is kept secret,” Yusupov told EurasiaNet.org.
According to official figures from 2015, Uzbekistan’s debt-to-GDP is 18.5 percent, which is extremely low by Western standards.
A team of International Monetary Fund specialists have concluded their latest visit to Turkmenistan and returned with some sobering observations on the state of the energy-dependent nation’s economy.
One key takeaway from a statement issued on December 6 is that the government will have to adopt greater measures to compensate for the expected persistence of low prices for oil and gas.
“Hydrocarbon prices remain low and trading partner growth is muted. As a result of these external factors, Turkmenistan’s overall economic growth has slowed down,” the IMF mission said in a post-visit statement.
These confluence of developments means that Turkmenistan is spending beyond its means, and that this trend is worsening.
“The current account deficit is expected to widen significantly in 2016 as a result of lower energy revenues, and in spite of an active policy effort to substitute imports with domestic production, promote exports, and reduce public investment expenditures,” the IMF mission said.
President Gurbanguly Berdymukhamedov has advanced import substitution as a cure-all panacea to his country’s troubles. Not that any officials have admitted there is anything wrong with the economy, which may be part of the problem, as the IMF mission implies.
“Amid multiple external policy challenges and a number of domestic reforms, stepped-up communication efforts to explain policy plans, their benefits as well as the possible side effects, would be helpful,” the fund delegation said.
Areas for improvement highlighted by the IMF mission included “increasing the efficiency of public spending,” improvement to banking regulations and taking more steps toward creating a more market-based economy and financial sector.
A draft presidential decree in Uzbekistan posted on a government portal on November 28 has laid out plans to liberalize the currency market, an apparent fresh step in acting President Shavkat Mirziyoyev’s mission to improve investment conditions and kick-start the moribund economy.
The draft has been posted online and internet users are being invited to offer suggestions and modifications before December 14.
In its current form, the decree proposes major financial reforms to “further liberalize and improve monetary policy, develop and increase the efficiency of the domestic foreign exchange market and improve conditions for the foreign transactions of enterprises.”
The US Department of Commerce details the plight endured by companies forced to navigate Uzbekistan’s onerous foreign currency rules.
“All legal entities, including those with foreign investments, must receive special permission from the Central Bank to access foreign currency. Officially, it is a routine procedure, but in reality an applicant must go through many layers of bureaucracy, which entails extensive time and effort. Moreover, the government regularly issues classified instructions telling banks which transactions requiring currency exchange are allowed, and which are not,” the website export.gov explains.
The government says it will level the playing field for companies operating in foreign currency and halt the practice of providing loans and preferential conditions to some companies over others.
Authorities also propose to allow the exchange rate to float in line with market mechanisms, while preventing legislation that could negatively affect the stability of the national currency, the Uzbek sum.
Uzbekistan’s state-run Channel One aired a sensational segment during a show called Business Club on November 5 that featured the frustrated observations of an indignant entrepreneur.
In a unusual televised outburst, Olim Sulaimanov explained how employees with a branch of the anti-finance crime department of the Prosecutor General’s Office in Tashkent had tried to extort money from him. Sulaimanov named names and figures in his description of how tax officials have been targeting his company.
“An employee with the department, Dilshod Hazratkulov, intimidates businessmen with money on their [bank] account and extorts money from them,” Sulaimanov said.
In Sulaimanov’s telling, Hazratkulov dropped in on his office in April and demanded that he transfer 48 million sum (around $7,500 at the current black market rate) onto the account of some other unknown company. The businessman said that when he refused, he had his assets frozen. Sulaimanov said that as a result he lost a $1 million contract to deliver fruit and vegetables to Russia.
The appearance on Business Club came about after Sulaimanov posted a video on YouTube directly appealing to acting president Shavkat Mirziyoyev for assistance. In the video, Sulaimanov asks that he be allowed to make his case during a television broadcast.
Sulaimanov, 61, founded and runs a company called Atlant Business Optima, which has been in operation since 2011 and deals primarily in exporting fruit and vegetables.
Now, whether this sequence of events is for real or otherwise is up for debate -- it is always possible it was a bit of theater for the viewers -- but what is clear is that Mirziyoyev is endeavoring to demonstrate that the rules of the game have changed for Uzbekistan’s long-suffering business community.
Intriguing figures on China’s natural gas purchases reported by Russian state news agency TASS and relayed by website Eurasia Daily has shed some light on Turkmenistan’s current economic woes.
In the first nine months of 2016, China reportedly increased its overall imports of gas by 26.5 percent on the previous year, up to 71.6 billion cubic meters. The average price it paid for the fuel was $228 per 1,000 cubic meters, according to data reportedly collated by China’s General Administration of Customs. That was apparently $100 less than Beijing was paying last year.
The cheapest gas of all, however, is coming from Turkmenistan, which reportedly sells its exports to China at a giveaway rate of $185 per 1,000 cubic meters. Turkmenistan sold China 23 billion cubic meters of gas over the reported period, accounting for 13 percent of what Beijing imported.
Australia was a far second to Turkmenistan as a gas supplier — 11.6 billion cubic meters shipped to China in liquified form at $220 per 1,000 cubic meters.
The takeaway here is that Turkmenistan is being badly pinched on its only serious export commodity.
And as the Chronicles of Turkmenistan points out, Ashgabat’s sale of gas to China is serving primarily to service multibillion loans issued by Beijing.
This might explain Turkmenistan routine but lackluster attempts to restore diversity among its buyers.
In the long-term there is the trans-Afghan TAPI pipeline — the prospects of which are subject of much skeptical analysis.
Uzbekistan’s currency has taken a severe battering on the black market over the past week.
Back on October 22, unofficial currency traders in the capital, Tashkent, were buying dollars at around 6,400 sum. The rate as of the start of the week was just shy of 7,000 sum — although as a testament to the volatility of the currency, rates have been regaining their positions toward the end of each working day. By the close of business on October 25, the rate was 6,600 sum.
“Because of the spike in dollar rates, people have stopped selling their foreign currency and almost nobody buys it,” one black market trader called Bahrom told EurasiaNet.org. Bahrom said the sudden downward pressure on the sum was the result of the price increase for automobile gas announced by the authorities over the weekend.
Transactions in the gasoline market are largely carried out in dollars. State energy company Uzbekbeftegaz buys large amounts of fuel in Kazakhstan and Russia and pays for it in dollars. Private owners of gas stations in Uzbekistan also use the US currency to purchase their supplies.
The official exchange rate has also been registered some fluctuations, albeit only minute ones since the government is typically reluctant to admit to weaknesses in the economy. The rate last week was 3,065 sum to the dollar, but that has gone up to 3,084 sum.
Black market currency trader Rasul told EurasiaNet.org that he believes the street value of the sum could possibly break through the 7,000 psychological barrier by the end of the year, which would result in a fresh round of price increases for groceries. Other traders remain confident the sum could stay around the 6,700 figure, however.