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Central Asia: Authorities Cite Uzbek, Turkmen Economic Growth, But Living Standards Still Low

In his New Year's speech, President Saparmurat Niyazov said Turkmenistan's gross domestic product (GDP) grew 21 percent in 2004. As for Uzbekistan, the International Monetary Fund (IMF) announced estimates in December that its economy grew by 7 percent in 2004. These are high rates for what are considered to be the most closed economies of the former Soviet bloc. Are the data credible and if so, how do they translate into living standards for ordinary people?

Prague, 14 January 2005 (RFE/RL) -- Turkmenistan was the first country in Central Asia to announce its 2004 economic results. It is also the only post-Soviet country to claim economic growth of more than 20 percent in 2004.

But independent experts said Turkmenistan's economic statistics are not entirely credible.

"The [Turkmen] government has long claimed growth well above 20 percent," said Anne Walker, a Central Asian analyst for London's Economist Intelligence Unit (EIU). "But all the evidence in various sectors suggests that the growth is much smaller than that. For example, gas production pretty much stagnated in 2004. And gas contributes at least for about 60 percent of the economy. So, it seems implausible that the overall growth would be so high."

Walker added that the EIU's estimate for Turkmen GDP growth is about 7 percent.

That's still quite high for a post-Soviet country. In the Commonwealth of Independent States (CIS), Kazakhstan is one of the most successful economies with 9.3 percent growth in 2004. Russia, meanwhile, is expected to have approached 7 percent economic growth.
Both the Turkmen and Uzbek governments are reluctant to share economic statistics with international observers. They claim many data are state secrets. There is also a difference between local and international accounting systems and methodology that leads to different conclusions.

It is little surprise that there is a discrepancy between Turkmen official statistics and the data of international experts. Both the Turkmen and Uzbek governments are reluctant to share economic statistics with international observers. They claim many data are state secrets. There is also a difference between local and international accounting systems and methodology that leads to different conclusions.

Meanwhile, Uzbekistan has yet to announce its economic results for 2004. But in mid-December, the IMF released its preliminary data for Uzbekistan, suggesting that Uzbek GDP grew by 7 percent in the past year.

Walker told RFE/RL that the EIU's estimate for Uzbekistan is about 3 percent. She said this figure might be reconsidered in light of the IMF data.

"Certainly, the industrial sector seems to pick up possibly due to exchange rate trends," Walker said. "And exports benefited from high gold prices and high energy prices. So, the Uzbek figures are slightly more realistic than the Turkmen ones, which we consider completely unrealistic."

Otabek Bakirov, an independent economist from Tashkent, told RFE/RL that the Uzbek government is set to announce economic statistics for 2004 in the first week of February. He predicted that the official data will be similar to those of the IMF.

Both Walker and Bakirov sauid Uzbek growth was due to further industrialization. Bakirov was critical of the government's attention to industry.

"The policy of selective privileges continues," Bakirov said. "What we see in Uzbekistan is not a practice of creating favorable conditions for all participants of economy, but only for those chosen by the government. There is artificial industrialization similar to that carried out by [former Soviet leader Josef] Stalin in 1930s, when his government capitalized industry at the expense of agriculture. We have the same situation. Officials do not care if it is effective or not."

Bakirov said both Uzbekistan and Turkmenistan still have command economies with presidents controlling key resources and setting production targets for all sectors.

This month, the U.S.-based Heritage Foundation policy institute and "The Wall Street Journal" published the Index of Economic Freedom. Uzbekistan and Turkmenistan were ranked among the 10 most repressive economies in the world.

Walker said that despite the economic potential and natural resources in both Turkmenistan and Uzbekistan, their overall volume of foreign direct investment (FDI) remains low compared to neighboring Kazakhstan and Kyrgyzstan.

In terms of FDI, Turkmenistan saw stagnation in 2003 and a slight decrease in 2004. Uzbekistan, on the other hand, attracted more investment.

Walker said this trend was particularly due to contracts signed with Russia's Gazprom to import Uzbek gas and that it is likely to continue in the coming years.

However, experts said increased growth and investment have not translated into improved living standards for most Uzbeks and Turkmens.

At the beginning of independence period, the Turkmen government introduced free gas, electricity, and salt to its citizens.

Khudaiberdy Orazov, a former chairman of the Turkmen Central Bank, lives in exile and leads the Watan (Fatherland) opposition movement. He told RFE/RL that introducing those privileges was a populist decision that has not alleviated economic hardship.

"There is no economic mechanism of distributing these products to people," Orazov said. "Neither is it clear how [suppliers'] expenses must be covered. Therefore, these privileges are privileges in name only. For example, energy plants supply energy to people free of charge, but the government doesn't cover those expenses. In order to compensate expenditure, plants have to set higher prices for other -- corporate -- consumers."

Orazov said introducing genuine market mechanisms could lead to an improvement of economic and social conditions for ordinary Turkmens.

Walker said a reluctance to liberalize the economy is a key reason for the hard economic situation in Uzbekistan.

"A lot of [difficulties are] due to restrictions on trade that the Uzbek government keeps introducing, [although] many Uzbek people made a living from [it]. That's why living standards of ordinary citizens are getting worse."

Bakirov agreed, but added that economic favoritism is also a key problem.

"Only if the government sticks to liberalization in 2005 can this pace [7 percent GDP growth] be sustained and even sped up," Bakirov said. "But if the government stops privatization and continues creating obstacles for medium- and small-sized business, this growth will also stop. The biggest mistake of the authorities is that they don't create the same conditions for all players of the game. Without this, they cannot have a healthy competitive economy."

Only then, Bakirov said, will ordinary people "feel" the benefits of economic growth.