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Russia conquered Uzbekistan in the late 19th century. Stiff resistance to the Red Army after World War I was eventually suppressed and a socialist republic set up in 1925. During the Soviet era, intensive production of "white gold" (cotton) and grain led to overuse of agrochemicals and the depletion of water supplies, which have left the land poisoned and the Aral Sea and certain rivers half dry. Independent since 1991, the country seeks to gradually lessen its dependence on agriculture while developing its mineral and petroleum reserves. Current concerns include insurgency by Islamic militants based in Tajikistan and Afghanistan, a non-convertible currency, and the curtailment of human rights and democratisation.
Update No: 261 - (26/09/02)
The Uzbek economy is faring rather better, which is not to say that is doing really well. That is not true of any economy in Central Asia. The partial exception is Kazakstan next door, which has loads of oil and other mineral resources.
President the key ally
President Islam Karimov wants to ally his country as closely as possible to Kazakstan, convinced that there is great scope to boost mutual trade with an economy where GDP is clipping along at around 10% rate of growth per annum. But that is not what is yet happening. On the contrary mutual trade was down by 6.3% in the first half of the year.
He has the enthusiastic support of President Nursultan Nazarbayev, who feels an affinity with Karimov. They head the two central Asian giants and have Islamic fundamentalists in opposition to contend with, while, as former communist rulers of their countries, they have known each other for a long time. The leaders of four of the five 'stans' (Turkmenistan is stand-offish) feel that they stand or fall together. A whole series of measures are needed to boost trade, but also to enable the Uzbeks to trade across Kazakstan with Russia beyond. The geographical situation of Uzbekistan is in one sense a great advantage, placing it astride the fertile Fergana Valley, the heart of Central Asia. But in another way it is unfortunate, given that it is shut off by its neighbours from the markets of its really big neighbours, China, Russia, Iran and India.
One project under debate is for the construction of a highway between Kungrad (West Uzbekistan) and the Aktar seaport (in the Caspian Sea, west Kazakstan). "The two governments are quickly building the road in order to give Uzbek commodities access to the Russian market via the Aktar port and Astrakhan," Nazarbayev has said.
But improvements in banking and customs regimes are required, while growing water shortages are a problem for the whole region.
Links with those further afield are also vital if Uzbekistan is to escape its Central Asian remoteness. The EBRD and Japan are agreeing to fund small-to-medium business projects in Uzbekistan. They occupy a median space between the microlevel economy of the villages and the massive projects of large-scale, still mostly state-owned industry. The sum involved so far is small, some US$20m. But this goes a longer way in Central Asia than elsewhere; and the EBRD and Japan are doubtless testing the ground to see how the scheme fares.
The US to the resume
The most exciting prospect of all is that the US is promising help. There is no country with which Uzbekistan is more fascinated. Karimov visited the US recently and rates his relationship with Bush as high as ever.
The Republicans do not go in for berating Third World countries for having dictatorships with scant respect for human rights, unless it is Iran or Iraq that is. The Uzbeks are now allies in the region against terrorism. 'Regime change' is not on the agenda when it comes to Uzbekistan. This does not mean that down the road it might not materialise. But not for a good while yet.
Uzbeks find gas condensate
A gas condensate field has been discovered by the national oil and gas company of Uzbekistan, Caspian News Agency has reported last. The field is situated in the dried-up sector of the Aral Sea. Production is to start over the winter. No details were given in terms of reserve volumes.
Agricultural crisis prompts Uzbek officials to revive interest in plan to divert Siberian rivers
As Central Asian states continue to haggle over the use of water resources, the Uzbek government is reviving the possibility of diverting Siberian rivers with the aim of bolstering the region's agricultural infrastructure, Elena Dubrovskaya wrote. Proponents see the project as necessary to prevent an economic disaster, while adversaries warn that diverting Siberian rivers could cause new ecological damage in a region already ravaged by environmental catastrophes, Eurasianet.org has reported.
Tashkent strikes financing agreement with EBRD, Japan
Building on a pilot scheme that has already directed nearly 1,000 loans to micro and small enterprises across Uzbekistan, the European Bank for Reconstruction and Development and the Japanese government are jointly investing in a US$20m full-scale programme that will make small-business finance even more widely available.
The EBRD Japan-Uzbekistan Small Business Programme will extend loans to local commercial banks, which will then on-lend funds to private Uzbek micro and small enterprises - especially those without a prior banking relationship or credit history. The first credit lines extended under the programme are to Hamkor Bank and Pakhta Bank, both of which successfully participated in the pilot phase launched last year.
The Japan-Europe Cooperation Fund will provide US$5m in technical assistance for training and institution building, as a key aspect of the programme is to continue developing the necessary structures in the Uzbek banking sector. LFS Financial System GmbH, a German consulting company, will advise and train partner banks and its personnel to establish streamlined MSE lending operations in the partner banks.
EBRD First Vice President, Noreen Doyle, who was recently in Tashkent to sign the project agreements, said the support of micro and small companies in Uzbekistan is at the core of the EBRD's strategy for the country. The new Uzbek programme is designed to provide entrepreneurs with access to finance that is traditionally scarce. More broadly, she added, such finance is one of the best ways to support economic development and social stability in Uzbekistan.
The EBRD has been expanding and intensifying its support to the development of micro and small business.
The bank now operates long-term MSE financing programmes in 15 countries - in Central Asia as well as Russia, Ukraine, the Caucasus and southeastern Europe. All told, more than 200,000 companies have received a combined US$1.5bn in financing. These programmes highlight the commitment not only of the EBRD but also of other international investors, such as the International Finance Corporation and the US, Japanese and Swiss governments, especially to the Central Asia region.
In Uzbekistan, the pilot programme involved the establishment of 10 specialised MSE Credit departments in five regions and the training of 30 loan officers. Nearly 1,000 MSEs have received a combined US$3m so far.
The full-scale programme will expand to additional banks, branches and regions with two further participating banks expected to join by the end of the year.
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