Foreign governments and international financial organizations are making fresh assistance commitments to Central Asian states. Officials say that if such aid is to achieve the goal of promoting greater regional stability, Central Asian governments must reciprocate by taking more steps to liberalize their economies. So far, some prominent analysts are encouraged by the early indicators. But others are wary about a lack of regional cooperation.
Economic assistance efforts in Central Asia are viewed as an important component of the anti-terrorism campaign. The general consensus in the anti-terrorism alliance holds that fostering prosperity in Central Asia will discourage the region's large number of impoverished residents from turning to radical causes, such as the Islamic Movement of Uzbekistan, which has waged an insurgency campaign to oust Uzbek President Islam Karimov.
The European Bank for Reconstruction and Development, which had financed $1.61 billion worth of deals in the five Central Asian states since 1991, has moved energetically on new regional aid initiatives. President Jean Lemierre toured Uzbekistan, Kyrgysztan and Tajikistan the week of November 12. He suggested that while the anti-terrorism campaign in Afghanistan exposed Central Asia to significant risk, the war also created a unique opportunity for change.
"Central Asian countries have been catapulted into the global spotlight," Lemierre said, "and the region must take this opportunity to open its doors by making significant reforms."
On November 12, the bank announced new loans to Uzbekistan, committing roughly $77 million for infrastructure improvements in the country's passenger and freight railway sector. It also made a $17.5 million loan available for construction of a more efficient and environmentally sound heating and hot water system in the Ferghana Valley city of Andijan.
Anders Aslund, who studies post-Soviet economies at the Carnegie Endowment for International Peace, sees the EBRD's commitment as a possible harbinger of more openness in Uzbekistan. "Potentially the EBRD can do a lot to clean up corporate governance," says Aslund. "The EBRD is very sensitive about these things; they can't make a loan if they don't get sufficient guarantees" of corporate openness.
In another encouraging sign, Uzbekistan agreed with EBRD on November 14 to collect short-term credits for its national bank to stimulate exports. The credits will let the bank finance the import of raw materials, which companies would manufacture and then export.
The Asian Development Bank has also been active in the region. So far in November, the ADB approved $3.6 million in credits for the repair of the Yoron water system in southern Tajikistan, and pledged $40 million for repairs to the Bishkek-Osh highway in Kyrgyzstan.
Both the EBRD and the ADB have stressed the importance of interstate coordination in helping to promote Central Asian economic growth. To this end, Gert van der Linden, the ADB's regional program director, announced plans to lend up to $400 million by 2005 for projects that help states coordinate their financial markets, water resources and trade. However, some experts say that greater regional cooperation could prove elusive.
In recent years, Uzbekistan and Turkmenistan have shown themselves to be difficult negotiating partners in multilateral economic discussions, including water usage and management. At the same time, Kazakhstan appears willing to pursue an independent course, emboldened in part by continued strong international interest in the development of the country's natural resources. Since September 11, Kazakhstan has exhibited protectionist tendencies by tightening border controls and deporting illegal immigrants. [For additional information see EurasiaNet's economics archives]. "With its huge oil income, Kazakhstan has a strong Dutch disease," says Aslund. Economists describe a country as having "Dutch disease" if it operates on the assumption that a bumper crop of some resource or another will never be extinguished.
The largest international lenders, including the World Bank and International Monetary Fund (IMF), are taking a more cautious approach. Bill Murray, a spokesman for the IMF in Washington, says regional coordination of trade and labor is "not a big issue" for his agency, which makes short-term loans to countries that need to restructure. Tajikistan and Kyrgysztan are big debtors to the IMF, which hinders their ability to collect taxes and expand employment. But Murray says the fund worries about evidence of "appropriate economic policies" when it considers relieving Central Asian debt. The World Bank, which makes longer-term loans for large projects, is hosting an interagency meeting on the region in Islamabad at the end of November.
Central Asian states also stand to receive large amounts of bilateral aid. The United States is expected to make hundreds of millions of dollars worth of aid available to Tajikistan and Uzbekistan. Japan - which committed itself for up to $120 million to aid Afghan refugees -- has pledged around $400,000 in Tajikistan, mostly for a United Nations program to create jobs for civil war veterans. Tokyo is also likely to support infrastructure growth in Uzbekistan, where many Japanese companies and foundations are active.
Overall, Tajik officials reportedly expect $70 million in foreign investments to support its 2002 budget. Such an amount would equal nearly half of Tajikistan's 2000 revenues, according to CIA estimates. Whether Tajikistan and other Central Asian states can attract that kind of support may well depend on their ability to manage the international assistance. The government bureaucracies in the region are notoriously corrupt. Greater transparency and accountability on the part of Central Asian governments will be needed to attract aid on a sustained basis, some officials indicate. "You want to coordinate aid so it won't be frittered away," says the IMF's Murray.
Alec Appelbaum is a contributing editor to EurasiaNet.
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