Though he remains critical of Uzbekistan's economic history, World Bank President James Wolfensohn expressed hope during his recent visit to the country that Uzbek leaders might be looking afresh at the need for financial reform. The World Bank, which makes and manages loans and grants to developing nations, has often expressed disappointment in Uzbekistan's failure to diversify its economy and convert its currency. Since Uzbekistan joined the US-led antiterrorism coalition, though, the World Bank has offered to enter partnerships with all Central Asian governments for the sake of reform and institutional stability. Wolfensohn said his meetings left him "with a feeling that people are fully understanding of the problems, and in the beginning of the process."
After visiting the region from April 5 to April 13 with other international lenders, Wolfensohn professed those partnerships to be healthy - but warned that they would involve strong medicine. "I get a sense from leadership that they recognize what I believe which is that for the next two to three years, Central Asia will be on everybody's agenda," Wolfensohn said. "And if they're going to take advantage of this opportunity for funding for aid for support, then change will be necessary." In a statement, Wolfensohn warned Uzbekistan of "slowing economic growth, stagnant foreign investment and declining living standards" unless it speeds up the pace of financial reform. In the past, Uzbekistan has defined its slow dismantling of corrupt banking and industrial systems as a "gradualist approach" necessary for stability. But Wolfensohn explicitly debunked that idea. He urged Karimov try to wipe out corruption in the judiciary, promote freer trade, and work toward a convertible currency - linchpins of a Country Assistance Strategy for Uzbekistan that the Bank announced on March 19.
Wolfensohn walked a fine line. He insisted that international organizations like his are maintaining strict demands for reform agendas from regional governments in Central Asia. But he acknowledged that pressure alone would not necessarily bring about these reforms. "I also think the leadership in the region is not a leadership you can beat up or be insistent on," he said. "I think it's a very proud leadership."
Like many of the countries that participated in the bank's March International Conference on Financing for Development, in Monterrey, Mexico, Wolfensohn noted, Uzbek politicians use rhetoric about sovereignty to protect their own approaches to economic reform. "It's very clear in this area that you have strong leadership and strong national feelings," Wolfensohn said. But, he added, Uzbek officials are focused on strengthening capacity in government, improving their legal and judicial systems, developing their financial systems and fighting corruption. "The interesting thing to me," Wolfensohn said, "is that the framework of the discussions in each country allows you to talk about those subjects, in fact, the government officials introduce those subjects," before addressing more basic issues like education, health, infrastructure, agriculture and social services.
Reform bears directly on public welfare, because Uzbekistan cannot earn or borrow money in international markets without an open financial system and a convertible currency. (The World Bank committed $40 million in debt in March for a water-management project in Bukhara and Samarkand.) According to Wolfensohn, both the World Bank and the International Monetary Fund (which makes loans to help developing countries build capitalist financial systems) still view Uzbekistan's reform pace as too slow. But, he added, "I think that this is a conclusion that the government is reaching itself." Wolfensohn stressed the crucial role of public commitment to reform. "If they move, it's not because we're policemen and we're forcing them to do it," he said. "When they move it's going to be their decision, because they want to do it."
Some movement has become evident in the IMF's stormy relationship with the country. In April 2001, IMF officer Christoph Rosenberg vacated his Tashkent post in frustration with the government's failure to introduce a unified exchange rate. Uzbekistan's various exchange rates have created a large black market for currency in the country and, according to Rosenberg, made it impossible for Uzbekistan to determine which goods it could profitably export. In January, Uzbekistan promised the IMF that it would achieve "the gradual removal of all restrictions on access to foreign exchange for current account transactions and the unification of exchange rates by end-June, 2002." The letter also obliges the government to IMF supervision.
Wolfensohn, whose agency makes loans for capital projects, seeks changes on a broader scale. He told a questioner at an April 13 press conference that the World Bank would help intensify efforts to save the irrigated Aral Sea from disappearing. The agency has also pledged to support poverty reduction plans tailored to local needs. Wolfensohn called Uzbekistan's high poverty rate a blot on its record and urged Karimov to allocate human rights more freely. "I don't think that anywhere you can address the question of poverty without letting poor people be part of the solution. Poor people should not be perceived as the object of charity, they should be perceived as the people on whose work you can get out of poverty." Wolfensohn said that he sensed that the president may be ready to "work with that objective in mind." He added that the agency cannot force reconciliation between Karimov and Uzbek civil society advocates.
But Wolfensohn's investors would reward reform. The World Bank has loaned Uzbekistan $539.1 million, of which $307.6 had been disbursed by March 31, 2002. The Bank is currently preparing loans for four additional projects for irrigation infrastructure rehabilitation, public finance management, drainage and public health. These plans arise from a Country Assistance Strategy that World Bank directors authorized in March. The far-flung strategy commits $150 million in loans over three years - but holds out the possibility of an additional $200 million if reforms accelerate.
In the end, Wolfensohn reminded Uzbekistan that the world had started watching. Some observers continue to doubt Uzbek authorities' commitment to reform, which they have voiced in the past with little tangible follow-up. According to Wolfensohn, he visited Uzbekistan precisely to gage that genuineness. "I get the impression that there's movement and that this might be given a push, because the region is now so much center stage," Wolfensohn said. "The leaders are now going all over the world. And they're getting a different reception that they would have got on September the 10th, so I sense movement, and I hope I'm right."
Josh Machleder is the country director of Internews Uzbekistan.
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