Uzbekistan: the silk road to nowhere?

MARTIN C. SPECHLER [*] The Central Asian country of Uzbekistan has adopted a unique transition strategy of gradual, state-guided development in which stability and equality are principal objectives and in which growth is sought for now by exporting staple raw materials and importing capital equipment to assure energy independence and to invest in backward-linkages into cotton fabricating chemicals, and other manufacturing branches. Sharp criticisms of the "Uzbek Road" by multinational agencies unfairly neglect positive aspects of the transition record to date in comparison with other post-Soviet states of the area. (JEL P2, O2, O5) Among the Central Asian successor states of the former Soviet Union, Uzbekistan has taken the most unusual and highly criticized approach to economic transition. The "Uzbek Road" is sui generis--neither the liberal "shock therapy" recommended by the Washington consensus nor the gradualism practiced by China and, to a degree, by Hungary. Rather than proclaiming growth as its main goal, Uzbekistan has emphasized "stability at any cost." The authoritarian regime will assure stability by subsidizing employment, controlling prices on essential goods and services, privatizing the largest state-owned enterprises only gradually and partially, and pursuing self-sufficiency in energy and food supplies. Rather than devolving authority through early privatization by relying on whichever investors can be found, the state figures as "chief reformer." All outside ideologies--Communism, political Islam, or neoliberalism--are rejected. Insofar as any outside country is to be emulated, the model would be South Korea, Malaysia , Japan, or Turkey--not the USA (Abazov, 1998). Not surprisingly, then, Uzbekistan's economic policy has been viewed with suspicion and hostility in the West. There are several reasons for the country's bad reputation. (1) Uzbekistan has rejected Western advice, particularly that of the IMF, and has been somewhat restrained in accommodating European and American investors, preferring South Korean Daewoo over Ford, Samsung over Phillips. The government has frequently defaulted on obligations to foreign companies. [1] (2) Because of its seemingly strict economic laws, Uzbekistan is rated 146th out of 154 countries on "economic freedom," as defined by the conservative Heritage Foundation (Johnson et al., 1998)--Just above Congo/Zaire and Libya! [2] (3) But paradoxically, it is also criticized for the absence of a rule of law, as in Soviet times. The European Union index of institutional development was a mere 1.5--below Russia and Kazakstan--with political development rated extremely low. (4) Uzbekistan has built up expensive prestige projects, such as Uzbekistan Airlines' nearly empty transatlantic service. [3] (5) Uzbekistan's official statistics are highly questionable: foreign direct investment is always overstated, gas production exaggerated, and inflation understated--hence, some imply, all Uzbek statistics are suspect. Without explanation, the European Bank for Reconstruction and Development (EBRD) and the IMF halve official GDP growth figures for 1996--1998. (6) Most Western visitors agree that Uzbek officials are unusually closed and suspicious of outsiders, as compared with Kyrgyz and Kazak personages in similar positions. Altogether, Uzbekistan is not a place Americans love at first sight! The conventional view of Uzbekistan is that it remains unreformed from its Communist past and that it has no transition strategy. For example, the distinguished economist Philip Hanson has written: The countries that have done the most in orthodox reform--Poland, Estonia, Hungary, the Czech Republic, Slovenia--are in better shape than those that have done the least--Romania, Belarus, Ukraine, Uzbekistan, Turkmenistan....Orthodox free-market reform does pay off in ex-communist countries--even if it has worked more slowly and painfully than many expected at the start. …