FEATURE-Uzbek growth fanfare masks poverty, disquiet

TASHKENT, May 14 (BestGrowthStock) – 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.”

Investment Advice

FEATURE-Uzbek growth fanfare masks poverty, disquiet