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Central Asia Report: November 15, 2001


15 November 2001, Volume 1, Number 17

EBRD CHIEF IN TASHKENT, LINKS LOANS TO DEMOCRATIC PROGRESS... The president of the European Bank for Reconstruction and Development (EBRD), Jean Lemierre, arrived in the Uzbek capital Tashkent on 12 November, on the first stop of a week-long trip to three Central Asian nations that was planned many months ago, but which has assumed new significance since the region came to global attention after 11 September.

In addition to signing loan agreements that amounted to a new EBRD economic reform program for the region, Lemierre's mission was to pressure Central Asian leaders to improve the investment climate in their countries and to stress that market reforms must proceed in tandem with political liberalization, AFP and ITAR-TASS reported on 12 November. "Market reforms and democracy go hand in hand, and this is crucial for growth. We are committed to the region, but we alone cannot make the difference -- we must work as partners, and as partners we must work to attract foreign investment," the bank president said in an EBRD statement released on 9 November.

Lemierre's promise to push for democratic reforms may have reflected widespread speculation that Uzbekistan is expecting to be rewarded indiscriminately for its cooperation with the U.S.-led campaign in Afghanistan with soft loans, debt relief, closer integration with international organizations, and more Western tolerance for its abysmal human rights record. In fact, on 8 November Uzbek participants were admitted for the first time to a NATO Council meeting in Brussels where Uzbekistan's role in the anti-Taliban operation was highly praised, RIA-Novosti reported. On the same day, the agency also said that the Asian Development Bank had loaned Uzbekistan $400 million, and given it $18 million, to improve the water infrastructure in the country's northwest near the Aral Sea. Furthermore, the IMF will reportedly dispatch a delegation to Tashkent in December to reopen lending talks, despite pulling out of the country in April out of frustration with Uzbek reluctance to implement reforms.

Uzbek media did not mention democratic progress as a component of cooperation with the EBRD in reporting Lemierre's signing credit agreements with Uzbekistan worth 110 million euros ($96.7 million) on 12 November or his meeting with President Islam Karimov the following day. The largest loan (77 million euros, or $67.7 million) was for the Uzbek state railway company to upgrade its rolling stock and repair facilities, Uzbek TV and Interfax reported. Two further agreements financed the modernization of the heating system in the eastern Andijon Region and opened short-term credit lines to the National Bank of Uzbekistan to fund trading operations. The loans to both the railways and the bank continue projects that the EBRD began financing a couple of years before, Interfax noted, adding that it has put a total of 570 million euros ($501.2 million) into 15 projects in Uzbekistan. President Karimov, in remarks following his meeting with Lemierre, pointed out that the EBRD was supporting projects in all of Uzbekistan's major state industries and in the private sector, and said that this proved the European bank was wholeheartedly in favor of his economic reform policies, Uzbek TV reported. Moreover, during the next two years the EBRD is promising to expand its involvement in developing the state power sector, cotton processing, and small and medium-sized businesses, the Uzreport.com website reported on 13 November. Overall the EBRD is planning to invest $300 million in the five Central Asia states, up from $220 million in 2001.

Following the news that the EBRD will hold its annual board-of-directors meeting in Tashkent in May 2003 -- reported on 7 November in the Uzbek newspaper "Pravda vostoka" -- the government-controlled media has seized on the announcement as further evidence that Uzbekistan is regarded positively by the international financial community and is attractive to investors. Meanwhile Lemierre commented that the dual exchange rate operating in Uzbekistan "isn't a help to attract private investment," Dow Jones news agency reported on 12 November. Before this month, the Uzbek government had imposed radically different exchange rates for when businesses paid taxes and when they bought foreign currency. Those two rates were unified on 1 November at 680 som to one U.S. dollar. Nevertheless, there are still two separate, artificial rates in the country: a free off-exchange rate and a cash rate for individuals exchanging hard currency at the state banks, according to a EurasiaNet report on 8 November. Both rates greatly overvalue the Uzbek som, judging by the going rate on the black market, which is hovering around 1,300 som to a dollar. In a press conference after meeting Karimov, Lemierre said that Uzbekistan should remove the existing obstacles to foreign investment, by which he meant the limitations on the convertibility of the som (see "RFE/RL Newsline," 14 November 2001). As "The Wall Street Journal Asia" remarked on 6 November, Uzbekistan may have gotten more attention from American businesses after 11 September, but "the country's economy will need overhauling before any investment can be successful in the long term."

�WHILE KYRGYZ PONDER HOW TO ATTRACT INVESTORS. EBRD chief Jean Lemierre continued on to the Kyrgyz capital Bishkek on 14 November for meetings with President Askar Akaev and Prime Minister Kurmanbek Bakiev, RFE/RL's Kyrgyz bureau reported. Discussions focused on privatization of the telecommunications and energy sectors, Asia-Plus said. The bank already funds 16 projects in Kyrgyzstan, worth a total of 175 million euros ($153.9 million). Later in the week Lemierre was scheduled to travel to Tajikistan, where the EBRD has invested about 37 million euros to date ($32.5 million).

Kyrgyzstan, no less than its neighbors, has shown itself anxious to benefit from the international spotlight now being shone on Central Asia by attracting investors -- especially Russians, as the chairman of the Kyrgyz state committee assigned that task, Sadirddin Dzhyenbekov, told Interfax on 11 November. Nevertheless, he admitted that Russians have shown little interest in buying state enterprises, save for the Chokan network of eight state-owned hydroelectric power stations in the north of the country, due to be auctioned off on 15 November. President Akaev has been noticeably wooing Russia for months. His recent statements include, "We were given Russia by God and history," reported by Kyrgyz-Press on 8 November, and, "During all the years of my presidency, I have held firmly to the position that friendship with Russia is eternal," while assuring readers of the Russian newspaper "Nezavisimaya gazeta" that the new American military and political presence in Central Asia would not undermine Moscow's influence in the region, the AKIpress website reported on 12 November.

Nonetheless foreign investors, Russian or otherwise, have not been biting, and Kyrgyz government circles have been debating why not. The prime minister opined that the nation's closeness to a war zone in Afghanistan was giving potential investors the jitters and consequently that Kyrgyzstan needed to improve its image, AKIpress reported on 7 November. Dzhyenbekov was probably closer to the mark when he argued that businesspeople have minimal confidence in the republic's banking system, according to Interfax on 11 November. On the following day, the presidential adviser on attracting foreign investment, Dzhoomart Otorbaev, proposed that some parts of state enterprises being privatized should be given away for free, with the provision that buyers then take the money they save and pump it back into the enterprise to make improvements, Kabar news agency reported on 12 November. Annoying visa regimes and legislation that discriminates against foreign partners in joint enterprises were other obstacles mentioned by Kyrgyz officials in their week-long public musings on how to improve the country's investment climate.

Meanwhile, a report by the Asian Development Bank (ABD) forecast an economic recession across Central Asia next year -- including in Kyrgyzstan, which can expect 5.5 percent growth in 2002, down from 7.7 percent this year, AKIpress said on 13 November. Consequently Kyrgyzstan can anticipate trouble with its foreign trade balance and settling foreign debts, the agency noted. A World Bank report released on 2 November predicted that Central Asian countries would post an average of 4 percent growth for 2001.

TAJIKS, KAZAKHS HEDGE OVER REPORTS OF NEW U.S. MILITARY DEPLOYMENTS. Presumably to help consolidate the recent territorial gains made by the Northern Alliance against the Taliban with the help of U.S. air power, the Pentagon is initiating a forward deployment of military planes to at least one air base in Tajikistan, Reuters reported on 12 November, citing an anonymous Pentagon official. In a surprising reversal last week, Tajik President Imomali Rakhmonov agreed to make his country's territory available for stationing U.S. troops after saying for two months that it was out of the question. American assessment teams have reportedly been looking at three Tajik bases: at Khojand in the north of the country and at Kulyab and Turgan-Tyube in the south. U.S. aircraft have been conducting test landings and take-offs on the runways at Khojand, Kulyab, and the Tajik capital Dushanbe, Asia-Plus reported on 14 November. The news agency also said that a Hercules transport plane had arrived in Dushanbe bringing Pentagon experts, U.S. airport ground personnel, and rescue specialists.

While Western news sources were reporting that it had not been revealed which of the airfields the Pentagon had decided to use, or whether the aircraft to be relocated to Tajikistan were attack jets or cargo planes, the Russian Interfax-Military news agency said on 13 November that 10 to 15 American bombers would be stationed at Kulyab airport, citing an anonymous military source in Dushanbe. Kulyab airport, which is a large, sprawling facility, was a key platform for the Soviet invasion of Afghanistan beginning in 1979. According to the AVN Military news agency website on 13 November, Kulyab base is run-down, lacks navigation equipment, and will need some modernization to be suitable for American purposes, but is still the best option Tajikistan has to offer. Dushanbe airport would be acceptable, but it is fully occupied with Russian aircraft delivering humanitarian cargo, military materiel, and weapons to the Northern Alliance, the AVN site reported.

Yet on the same day, Tajik Defense Minister Colonel General Sherali Khairulloev seemed to throw cold water on the idea that Washington could use Kulyab either, Interfax reported on 13 November. Khairulloev denigrated the airport as "technically unfit" to accommodate large military aircraft, admitted the air-control equipment was poor, and said that, even if it were excellent, the mountainous terrain would make take-offs and landings perilous. Khairulloev's puzzling statement could be variously ascribed to genuine contrition at the dilapidated state of Tajikistan's infrastructure; a wish to backtrack from President Rakhmonov's promise of an air base to the U.S. air force; or an attempt to draw public attention away from an American military build-up at Kulyab. On 13 November, a Tajik Foreign Ministry official even denied that there was any agreement between Washington and Dushanbe on the use of Tajik air bases at all, Reuters reported.

There was comparable confusion last week about whether the Pentagon was planning to make use of an aerodrome in Kazakhstan, and whether the Kazakh government was offering one (see "RFE/RL Weekly Magazine," 8 and 9 November 2001). While President Nursultan Nazarbaev indicated in September that his country would be willing to host American troops, Defense Minister Lieutenant General Sat Toqpaqbaev said on 8 November that his government would not make its air bases available and that Washington had not asked for one anyway. Meanwhile Kazakh Commercial TV said on 6 November that, according to the Ministry of Foreign Affairs, a base in the eastern town of Semei (previously Semipalatinsk) was available if the Pentagon requested basing rights in the country and reported on the following day that Washington had indeed made such a request. A top Kazakh security official confirmed to Reuters on 8 November that American military experts were in Kazakhstan discussing an upgrade in "military and technical cooperation."

HUMANITARIAN AID EFFORTS INTENSIFY IN WAKE OF NORTHERN ALLIANCE ADVANCE. The capture of the Afghan town of Mazar-i Sharif by the Northern Alliance on 9 November cleared the way for fresh deliveries of humanitarian aid to northern Afghanistan, with the first UN convoys setting off the very next day from the southern Kyrgyz city of Osh for the Afghan town of Faizabad, Interfax and AP reported. The 30-truck convoy, carrying 150 metric tons of flour and vegetable oil, were expected to make the 1,000-kilometer journey in five days. A second convoy of 28 trucks left Osh on 12 November, Asia-Plus said. The aid operation out of Osh is scheduled to rise to 60 trucks departing daily, and the goal is to deliver 9,000 tons of food to Faizabad by mid-January 2002.

Russian troops are partially responsible for the security of the aid convoys, especially for the portion of their journey that crosses Tajikistan, and to that end two Russian IL-76 planes arrived in Osh on 9 November carrying vehicles to accompany the convoys, ITAR-TASS reported. The vehicles will be driven by groups from the Russian Emergencies Ministry, which operationally is a wing of the Russian military.

In Tajikistan, the first emergency assistance from Japan, consisting of tents, blankets, and sleeping bags, was delivered on 8 November to the estimated 15,000 Afghan refugees who are camped near the Tajik border, Kyodo news agency reported. Japan has pledged aid worth 240 million yen ($2 million) to Tajikistan to deal with the refugee crisis.

In Uzbekistan, the news of the Taliban retreat from Mazar-i Sharif spurred the refugee agency UNHCR to initiate an emergency airlift of thousands of tents and plastic sheets into Tashkent, destined for northern Afghanistan, Voice of America reported on 11 November. The first UN humanitarian cargoes delivered from Uzbek territory arrived in Afghanistan by boat and truck on 13 November, Russian news agencies reported. The first two barges to cross the Amu-Darya River from the Uzbek river port of Termez to the Afghan town of Hayraton carried flour, protein-enriched biscuits, powdered milk, and winter clothes, Interfax said, noting that over 160 metric tons of supplies have already been stockpiled in warehouses in Termez. The Uzbek government agreed only last month to open its border with Afghanistan, which had been sealed since the Taliban took Mazar-i Sharif in 1998. However Tashkent has indicated that, although it is allowing barge traffic across the border, the Friendship Bridge spanning the Amu-Darya will remain closed out of security concerns for the foreseeable future, Reuters reported on 11 November. Meanwhile truck fleets were setting off from Tashkent for Termez, RFE/RL reported on 13 November, carrying tons of medicine and food that the humanitarian agency UNICEF had bought locally in Uzbekistan. Purchasing locally was a more efficient procedure than transporting cargo from UNICEF's main warehouse in Copenhagen, and would be continued, an agency official said.

Yet until the Friendship Bridge at Termez is opened, the single most important transit country for aid shipments to Afghanistan will be Turkmenistan, the director of the U.S. Agency for International Development (USAID), Andrew Natsios, said on 12 November (see "RFE/RL Newsline," 13 November 2001). Natsios arrived in Uzbekistan on 11 November and was scheduled to spend four days in the country and visit Termez, according to the U.S. Embassy in Tashkent's press release. But he apparently changed his plans suddenly, since he was in the Turkmen capital Ashgabat on 12 November for a brief visit to discuss extending the humanitarian aid operation with Turkmen law-enforcement and national security officials, Interfax reported. Three days previously U.S. Deputy Assistant Secretary of State Lynn Pascoe had been in Ashgabat to confer with Turkmen Foreign Minister Rashid Meredov on counterterrorist cooperation and facilitating humanitarian shipments to Afghanistan, the news agency said. According to Natsios, 7,000 tons of aid had already crossed into Afghanistan from Turkmen territory, and 100,000 tons of Kazakh and American wheat was expected to arrive soon, Reuters reported on 12 November. The scale of Turkmenistan's contribution to humanitarian aid efforts has not garnered the same international attention as its neighbors' due to its low-profile cooperation and official policy of neutrality in the Afghan conflict, Reuters noted. But in the course of a single week nine planes of humanitarian cargo landed in Ashgabat, ITAR-TASS said on 13 November. On that same day a jet belonging to the Turkmen national airline took a consignment of construction materials, cars, and medicines sent by Medecins sans Frontieres from Denmark to the town of Turkmenabat (previously Charjew) near the Afghan border. And on 10 November, the International Committee of the Red Cross opened a humanitarian aid center for Afghan refugees in Turkmenistan, as well as in Iran, RIA-Novosti reported. The Red Cross has estimated that there are as many as 1 million displaced persons in Afghanistan, while the UN World Food Program has expressed fears that 7.5 million Afghans are threatened by starvation this winter.

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