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LONDON (TCA) — In Uzbekistan, the economy is currently growing thanks to the state’s continuing clout, the country may be at “crossroads” but that is where it can be expected to remain for some time to come.

Each “newly independent state” of Central Asia had its own approach to the question which elements of the “old system” should be preserved and which ones abandoned in the face of increased exposure of its economy to global monetary trends. In the post Soviet period Uzbekistan has chosen its own path trying to preserve socioeconomic basics (education, health care, care for the elderly) alongside the still fledgling emergence of an entrepreneurial class.

For Azerbaijan, it was oil. For Turkmenistan, it was gas. For Kyrgyzstan, it was gold. For Uzbekistan, it was cotton which has been grown in the country for more than two thousand years – but not without the absence of oil, gas, gold, uranium, cotton and what else. Moreover, the availability of sedentary populations meant cheap labour on the spot. It made Uzbekistan a prize for Russia not to be overlooked.  But it also made resentment against the Kremlin’s overlords stronger in Uzbekistan than in most other Soviet domains.

It was cotton that offered an outlet for that resentment. During the second half of the 1970s and the first half of the 1980s, each year billions of roubles (at the time, there were almost 2 US dollars in one rouble) worth in cotton harvests were reported to Moscow that never existed. Since subsidies were linked to performance, astronomic amounts were thus cashed in by Uzbekistan’s local leadership until as late as 1986 the whole scam was exposed by all-Union prosecutors. “National investigators said cotton magnates and politicians had stolen billions of rubles over the years through padding cotton harvest figures,” The New York Times wrote in a review of the case published end-1988.

‘Kremlin interference’

In the crackdown that followed, thousands of Uzbek officials were sacked, hundreds of them jailed, and in some cases executed while tens of others committed suicide. The guilty party included almost the entire cabinet and the presidium including secretary-general Sharof Rashidov who had been at the helm of Uzbekistan’s government since 1953. He was succeeded by Inomjon Usmonkhoddzhayev, under whose supervision the purges were carried out. After that, he left his place in 1989 to Islam Karimov, who immediately started to work out a way to put an end to “Kremlin interference” once and for all.

As a result, Uzbekistan declared its independence and President Karimov stepped forward as interim head of state on June 25 1990. The coup attempt in Moscow prevented it all from happening, and on August 31 1991, only days after the event, Uzbekistan declared its full sovereignty – the same day Kyrgyzstan made the same move. In the process, all who had been jailed because of the cotton scandal were set free, and the memories of those who had perished in the purges rehabilitated – Rashidov was declared “hero of the Uzbek Republic”.

Absence of an ‘economic engine’

In January 1992, Islam Karimov was elected president of independent Uzbekistan, accounting for 86% of the votes against the independent and only candidate Mohammed Salikh. The old Supreme Soviet of Uzbekistan remained in place until January 1995, more than a year after a new constitution had been passed through a referendum, followed by general elections with many familiar faces on the posters and a predictable outcome.

In the meantime, the Uzbek economy, though officially declared a market economy, amply showed the extent to which “easy money” from the Kremlin had preserved the overall image of prosperity which had now vanished overnight. Initially, things did not look bad at all: in 1992, the country’s gross national product stood at 330 billion sum, the new currency introduced after a vain attempt to preserve the Soviet rouble zone. At the time, the sum stood at par with the US dollar. In 1995, GDP stood at 302.8 billion sum – but now its exchange rate to the greenback stood at 36. The inflation index (2000 = 0) had risen from 0.07 per cent in 1992 to 20 per cent in 1995.

But in contrast to most other republics where things started looking slightly better, Uzbekistan continued its free fall. In 2006, GDP came close to half a trillion sum with the exchange rate at 1,240 sum per dollar and the inflation index soaring to 226 per cent.

Against international institutional doctrines

On the positive side, free education, health care and allowances remained available for everyone, and families were allowed to earn some extra income through petty trade, but endemic racketeering, both by public officials and private gangs, prevented micro-entrepreneurial structures to develop. Private enterprise, e.g. in the construction, real estate, financial and leisure sectors, did develop, but like in most ex-Soviet states it remained, and still remains, closely associated with higher political echelons.

It all goes against international institutional doctrines. “Substantial structural reform is needed, particularly in these areas: improving the investment climate for foreign investors, strengthening the banking system, and freeing the agricultural sector from state control,” one IMF text reads. Restrictions on currency conversion and import also restricted foreign investment and internal development.

Islamic extremism and changes

Today fearing “Islamic” and radical extremism lurking from the south, the government is little inclined to let its grip on the economy at large go, and public support for that policy remains strong. Attempts to turn over derelict industrial assets to private investors have been disappointing so far. In all: who thinks economy in Uzbekistan, thinks state.

For the bulk of the population, it means surviving on narrow means, meaning low salaries and some extra earnings on petty trade. Rampant cronyism and nepotism may have secured the regime’s survival even after the “transition” generation dies. Cash shortage leading to continuing labour migration (also in the face of improving relations with Russia) can only be expected to remain on the agenda as long as the Uzbek economy does not generate capital by itself. So-called regime changes cannot make this happen and may be senseless and fruitless.

For those who look for changes — and even a possible “revolution”, we can only observe that even this will not change any fundamentals as long as there is no fundamental public support for change. This is the situation now, unless the unforeseeable happens which cannot be foreseen since it is unforeseeable.

This is the second article of a series reviewing the post-Soviet period in Central Asian republics. The first article can be read here

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