Turkmenistan Big Beneficiary Of Pentagon Money, While Uzbekistan Lags
The U.S. spent about $1.3 billion in Central Asia on supplies for its troops in Afghanistan over the most recent fiscal year, including $820 million in Turkmenistan alone. The $1.3 billion represents a sevenfold increase from the previous year, according to figures provided to The Bug Pit by the Defense Logistics Agency, the Pentagon agency in charge of supplying forces. The totals for fiscal year 2012, broken down by country, were:
Kazakhstan: $137.3 million
Kyrgyzstan: $218.1 million
Tajikistan: $11.7 million
Turkmenistan: $820.5 million
Uzbekistan: $105.9 million
DLA was unable to provide any detailed numbers about what was bought in each country, but that eye-popping $820 million in Turkmenistan was certainly almost entirely fuel. In general, the money went to "bottled water, sodas, juices, pasta, bakery items, lumber, plywood, cement, concertina wire, generators, rebar, fuel drums, corrugated steel, galvanized steel coils, and feeder cable. We also support the region by purchasing fuel and paying associated transportation costs," the DLA said in a statement.
The agency has made efforts to boost its Central Asia buying:
"DLA has conducted market research extensively in Kazakhstan, Uzbekistan, and Kyrgyzstan for a wide range of products... DLA has consistently increased procurement in the region since FY08. DLA increased local procurement in the five Central Asian States by over 700% when compared to FY11 figures. In January 2012, DLA placed a liaison officer in the U.S. Embassy in Uzbekistan and one in the U.S. Embassy in Kazakhstan to help foster increased local procurement efforts."
The goal for the upcoming fiscal year is slightly more than this year, $1.31 billion.
This all, of course, dwarfs the roughly $40 million the U.S. has spent in Central Asia through the General Services Administration, the U.S. government agency that buys office supplies, cleaning supplies, and so on.
Other than Turkmenistan's huge number, maybe the most striking result in that chart is the relatively small amount that the DLA buys in Uzbekistan. Uzbekistan would seem to be the best source of goods in Central Asia, given that it is the largest country in the region, inherited Soviet Central Asia's largest economy, and is now the key hub of the U.S.'s Northern Distribution Network. But Uzbekistan's business climate is notoriously poor. In the most recent "ease of doing business" rankings, the World Bank put Uzbekistan 154th in the world, the worst in the former Soviet Union and ahead of only seven non-African countries in the entire world. The case of Russian cell phone giant MTS, which Uzbekistan's government unceremoniously shut down earlier this year, is only the best publicized of many stories of foreign businesses coming to grief there. (EurasiaNet's Joanna Lillis had an excellent rundown of the situation in August.)
But the State Department has been doing what it can to send business Uzbekistan's way, including by sponsoring* a much-ballyhooed business delegation from the U.S. in August. Assistant Secretary of State Robert Blake addressed the American-Uzbekistan Chamber of Commerce during the delegation's visit:
Uzbekistan has great potential for further economic development, including greater U.S. investment. The number of representatives of world-class American companies here today shows the high level of interest in doing business here in Uzbekistan.
Blake did gently refer to Uzbekistan's poor investment climate:
In my position as Assistant Secretary, I regularly meet with U.S. investors looking for opportunities in the region, and I hear a consistent message that Uzbekistan has great potential as an investment destination; however, to reach its full economic potential, it should address persistent challenges in the business and investment climate.
We discussed yesterday that delays in currency conversion prevent manufacturers from importing the supplies they need to produce their finished goods, and the problem can be compounded by complex and uncertain customs procedures. Businesses face these issues while navigating a somewhat opaque regulatory environment.
Increased dialogue between the state, private businesses, and foreign investors would be a first step towards identifying challenges and developing and enacting reforms that allow entrepreneurs to succeed while still meeting the needs of the government. Our friends in the government of Uzbekistan welcome such a dialogue. Uzbekistan must also continue reforms to strengthen the rule of law, including IPR protection, and reduce corruption so that all businesses can operate under one transparent set of rules.
And when asked about the MTS case in an interview with the Voice of America, Blake also trod lightly:
I don’t want to speculate about the MTS case. It is just starting, and we will just have to see. Again, each of these companies make their own judgments about where they see the opportunities. Our job is to open those opportunities and to help resolve problems as they come up.
Of course, Blake is a diplomat; he shouldn't be browbeating the Uzbeks. But why is he focusing on sending U.S. business to such a business-unfriendly climate? Some Uzbek sources (who asked to remain anonymous) told me they speculated that it's President Islam Karimov who is pressing the Americans to try to bring more business, as a condition of allowing the Northern Distribution Network. U.S. diplomats are well aware of the grim business situation in Uzbekistan, as Wikileaked cables in Lillis's story showed. So are they just perpetrating this face for Karimov's sake, so that he can frame the burgeoning cooperation with the U.S. as something that will help Uzbekistan's economy? Uzbekistan's media almost never mentions the military cooperation between their country and the U.S., whereas the business delegation was well publicized. (By contrast, see this story about NATO transit through Central Asia -- it doesn't mention Uzbekistan at all, and the commenters don't seem to understand that Uzbekistan is key to this whole enterprise: "Through Kyrgyzstan? How is that possible by land? Kyrgyzstan doesn't border Afghanistan?" asks one. "Agreed. Most likely by air," said another.)
So why the focus on Uzbekistan? Asked which other Central Asian countries Blake had led business delegations, a State Department spokesperson said they were unable to say precisely, but provided this statement to The Bug Pit:
As part of our Economic Statecraft agenda to use economics to strengthen our diplomacy abroad and our economy at home, the United States supports our businesses exploring opportunities in Central Asia. In Washington and in the region we regularly bring together government and business representatives to discuss those opportunities and ways to improve the investment climate in Central Asia. In the summer of 2012 alone we helped welcome 25 U.S. businesses to Tashkent in for the U.S.-Uzbekistan Business Forum, and also co-hosted the second U.S. Business Exhibition in Turkmenistan with over 100 companies participating.
Anyway, as DLA's figures showed, even the Pentagon is having trouble doing business in Uzbekistan. The GSA, too: only nine percent of its Central Asia-bought goods come from there, and the agency's regional director placed some of the blame on the country's difficult business environment. So we probably shouldn't expect anything very different for private American companies, no matter what Karimov may want.
*UPDATE: The American-Uzbekistan Chamber of Commerce contacted The Bug Pit on December 7, below is their comment:
This is in regard to your article of December 3, 2012 on “Turkmenistan Big Beneficiary of Pentagon Money, While Uzbekistan Lags”. The article incorrectly referred to the AUCC business delegation to Uzbekistan in August 2012 as “sponsored” and “led” by the State Department.
Please note that AUCC is a private organization funded by membership dues with no grants or funds received from the US Government. The business event in August, organized by the chamber and led by our Chairperson Carolyn Lamm and President Tim McGraw, coincided with the Annual Bilateral Consultations held between the governments of the US and Uzbekistan. The delegation included 50 representatives of the US private sector.
AUCC highly appreciates the support that the State Department and other US government agencies render to US businesses and welcomes the economic dialogue between the governments of the US and Uzbekistan.