Reuters
October 15
.S. troops arriving in Uzbekistan as they prepare for action against neighboring Afghanistan will find themselves in a depressingly common post-Soviet paradox.
This is a land of enormous economic potential but pitiful underachievement.
But by helping the United States in its drive to kick Saudi-born militant Osama bin Laden out of Afghanistan -- President Islam Karimov has offered the United States an airbase and allowed it to base troops there -- it may see a change in its fortunes.
``When the dust settles and this is over, the countries which have cooperated with the West will get their piece of candy,'' says Alexander Lesser, a U.S. lawyer based in neighboring Kazakhstan and working with Western companies in the region.
Uzbekistan could use it, whether the candy takes the form of direct government aid, encouragement to bodies like the International Monetary Fund to step up activities there, or support for private investment.
U.S. and other media have already reported the arrival of 1,000 troops, but the secretive Tashkent government has refused to confirm even that, let alone where they are deployed.
Their arrival could allow for the rescue of Uzbekistan -- if the United States shows its appreciation in concrete form.
A LAND OF PLENTY
At first glance Uzbekistan appears to have everything.
Like Kazakhstan, where the economy is booming and gross domestic product growth is set for around 10 percent this year, the country has enormous reserves of oil and gas.
Unlike Kazakhstan, it also has an 81-ton-a-year gold mining industry, the fifth-largest cotton production in the world, an aircraft plant and a car industry.
With fabled cities like Samarkand, Bukhara and Khiva on the ancient silk route to Asia, it has the potential for tourism to take off.
The country has a population of 25 million, easily the largest in former Soviet Central Asia, and enough to make it an attractive market. Tashkent, the capital, is the region's largest city, and by rights Central Asia's natural business hub.
But far from booming, Uzbekistan has seen investors leave in droves over the last two years as reforms, urgently needed to kick-start the economy, are repeatedly put off.
Even the IMF, weary of such delays, effectively closed its mission in Tashkent this year.
Reforms have meant Kazakhstan is taking off while Uzbekistan languishes, says one Western banker in Tashkent who asked to remain anonymous.
``Kazakhstan embarked, after much hesitation and soul searching, and some mistakes, on the liberalization of its economy,'' he said. ``The government still interferes in oil and gas, but the rest of the economy has been liberalized
``Here it's a different picture. The government is still the economic motor of everything. The state sector is still very important and the government still interferes, directly and indirectly, in the private sector.''
NON-CONVERTIBLE CURRENCY A PROBLEM
The main problem, says Lesser, is Uzbekistan's refusal to allow free convertibility of its currency, the som.
The official rate is 429.19 som to the U.S. dollar. The free rate, easily obtainable on the streets, is around 1,200.
A tiny number of well-connected businesses can buy dollars at the official rate, and consequently do a handsome trade importing goods for roughly a third of their true value.
But most cannot. And foreign firms find it all but impossible to convert soms into dollars at any price -- hence their withdrawal from the country.
As a result, while some of the world's largest oil and gas companies have made huge investments in Kazakhstan, virtually none are in Uzbekistan.
The same picture is true in most other sectors. An exception is the car industry, where South Korea's Daewoo has set up a joint venture, UzDaewoo -- but the parent company is bankrupt.
Tourism, which could bring in millions as Westerners look for ever more exotic destinations, has barely taken off.
A visit to the magnificent Registan, the main square of Samarkand and one of the great sights of Asia, reveals just a sprinkling of foreign tourists, mainly elderly people on expensive tours bought through a state firm.
Independent travel is virtually non-existent, and the government does little to support it. One senior Western diplomat in Tashkent recently described the tourism ministry as ''the ministry for the prevention of tourism.''
SOME SIGN OF IMPROVEMENT?
Peter Darjes, Tashkent representative of the Asia Development Bank, says there are signs of improvement.
He points out that an IMF mission is due in November to look at ways of developing a relationship again after announcing in March that it would cut its presence to a minimum.
``The international financial community has more confidence now than it did a year ago,'' he said, adding that many in the government accepted the need for reform but remained cautious.
``My view and the view of many in the government is that the economy could be better. I don't think the need for reform is in question, it's the pace of reform which is.''
This year, said the anonymous Western banker, cotton prices are low, and the whole region is scarred by drought.
This is likely to cut the harvest and so reduce a vital inflow of dollars, making it ever harder for the cash-strapped country to raise foreign credits.
Unless economic reforms take place soon, a generous, grateful U.S. candyman looks like the best hope for the immediate future.
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