May 14, 2010 / 8:56 AM / 10 years ago

FEATURE-Uzbek growth fanfare masks poverty, disquiet

TASHKENT, May 14 (Reuters) - Uzbekistan powered through the global economic crisis, kept inflation in check and is enticing foreign companies with a $50 billion investment bonanza.

But Said, like many in Tashkent, places no faith in this government data.

He says the only way he can make a living since the state stole his thriving retail business is to drive a taxi along the capital’s leafy boulevards, past stores selling Western fashions he cannot afford.

“This looks like heaven,” he says. “But it feels like hell.”

The economy of Central Asia’s most populous nation is wilting behind the facade. Banks are often empty when pensioners try to withdraw cash. Factories have closed and doctors at one Tashkent hospital say they haven’t been paid for five months. President Islam Karimov tolerates no dissent in Uzbekistan, a landlocked ex-Soviet country lying on gas reserves coveted by Asia’s powerhouse economies and a transit route crucial to U.S. military operations in neighbouring Afghanistan.

Karimov, 72, has ruled Uzbekistan for nearly two decades. There is no opposition party and the absence of any obvious successor breeds rumour and fear among the 28 million population.

“His frame of reference is the Soviet Union and he doesn’t want to become another Gorbachev,” said one foreign diplomat, referring to reforms introduced in the 1980s by Kremlin chief Mikhail Gorbachev that preceded the Soviet Union’s collapse.

The government argues its command-style economy has shielded Uzbekistan from the global financial crisis. Gross domestic product grew by 8.1 percent last year and is set to expand by 8.5 percent in 2010, while inflation has hovered between 6 percent and 8 percent in each of the last five years.

Uzbekistan’s economy operates on at least two levels, however. The layman’s formula for calculating economic progress is to double the official inflation rate and halve GDP growth.

A quarter of the population lives below the poverty line. The Asian Development Bank estimates almost 60 percent of those employed live on less than $1.25 a day, a rate surpassed among the bank’s members by only Nepal and East Timor.

Furtive, black market trades in Tashkent’s bazaars value the Uzbek sum at nearly 50 percent below the official rate of 1,560 to the dollar. Locals say the state even regulates the black market and that secret police are watching every transaction. In a country where the largest banknote, 1,000 sum, is officially worth 65 cents, carrying cash can be unwieldy. Local residents, who almost always decline to be identified for fear of reprisals, say there is a physical shortage of banknotes.

ECONOMIC SHOWCASE

Uzbekistan, which ranks among the world’s top 10 producers of gold and uranium, had a rare opportunity to showcase its economy this month when it became the first Central Asian country to host the Asian Development Bank’s annual meeting.

First Deputy Economy Minister Galina Saidova told a packed room of investors about a $55 billion investment plan between 2009 and 2014. The state budget has been in surplus since 2005 and forex reserves have grown sixfold in the last five years, she said.

Several large international companies have already arrived. Chevrolet cars from the General Motors [GM.UL] Uzbekistan joint venture are ubiquitous on Tashkent’s eight-lane boulevards.

German truck maker MAN (MANG.DE) is assembling trucks in the city of Samarkand and Malaysian state oil and gas firm Petronas [PETR.UL] is leading a project worth between $2 billion and $3 billion to convert Uzbek gas into diesel and other liquid fuel.

Foreign investors like stability, and Karimov shows no sign of relinquishing control. Asked on a recent trip to Moscow about the repercussions of the April uprising in Kyrgyzstan, he said:

“Take it from me: in Uzbekistan, no-one is delightedly following the actions of the ‘freedom-loving’ Kyrgyz people.”

The overthrow of Kyrgyzstan’s president has stirred tensions in Central Asia. Months after the previous Kyrgyz revolution in 2005, Uzbek troops fired on protesters in the eastern city of Andizhan, killing hundreds and drawing international rebuke.

Few in Tashkent expect a repeat. A human rights worker who recently visited Andizhan said wounds there are still too raw. Others say the country — with a population more than five times that of Kyrgyzstan — is too large and too disparate to attempt any sort of revolution.

“They have a higher threshold for abuse,” a diplomat said.

THE SUCCESSION QUESTION

Karimov has said strict measures are needed to prevent the spread of Islamist militancy. Police with explosive detectors and sniffer dogs have patrolled Tashkent’s metro since the suicide bombings at two Moscow underground stations in March.

Suicide bombers have targeted Tashkent before, including the U.S. embassy in 2004. But rights groups say Karimov has used this threat as a pretext to eliminate dissent and religious freedom in the mainly Muslim country.

Surat Ikramov, who describes himself as a human rights defender, painstakingly records the abuses related by growing numbers of visitors to his office in a low-rise Soviet apartment block. He flicks through a dossier of the worst cases.

“Beaten. Beaten. Dead,” says the 65-year-old former teacher, pointing at photographs of the victims. “This one was a taekwondo champion. This one was too religious. This one,” he said, picking out a bruised, bandaged face, “is me.”

Ikramov says he was beaten and poisoned by masked agents for opposing the government. He says people still live in fear of a state where crimes can quickly be invented to quash a threat or expropriate a successful business.

“We have everything here to live well: gas, oil, our own food products — you name it, we have it,” he said. “So why do we live like this?”

The financial elite is not exempt. Tashkent was abuzz with rumour after the arrest two months ago of several prominent businessmen. Though all were released, locals say the gesture was a timely reminder of the president’s absolute rule. “The arrest of the ‘oligarchs’ shows that the government does not want any group to become too powerful,” said one.

Opponents do not expect change anytime soon.

The president’s civic power is growing in the grand buildings of Tashkent, such as the ice-white convention centre constructed beside the square honouring 14th-century Turkic warlord and national symbol Amir Timur.

“The West wants three things: support for Afghanistan; transit for oil and gas; and crushing the terrorists of whom the West is so afraid,” a Tashkent resident said. “Karimov provides all three.”

But Karimov’s age — at 72, he is Central Asia’s oldest incumbent leader — raises questions about the eventual transfer of power. With no clear succession, the spectre of a turbulent upheaval lingers.

“Some believe Karimov’s death will bring about the apocalypse,” said another Tashkent resident. “But you could just as easily argue this is an illusion he himself has created.”

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