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Central Asia: The Progress And Problems Of Uzbekistan And Kyrgyzstan

Washington, 3 October 1996 (RFE/RL) -- Uzbekistan and the Kyrgyz Republic are making good progress in their economic reform and stabilization programs, but have unique problems which sometimes delay progress, says the head of the World Bank department which deals with Central Asian nations.

Yukon Huang, director of the bank's Russia, Azerbaijan and Central Asia Region department, says Uzbekistan has chosen its own "more gradual" path to a market-based economy and come up with its own "very special ideas on speed and details" which has markedly slowed its progress on reforms.

Huang spoke to a small group of international journalists during the annual meetings of the bank and the International Monetary Fund (IMF) in Washington.

Despite Uzbekistan's "more crooked path" to reform, he says, the bank is working closely with the government and hopes to have a number of development projects ready for consideration by the Board of Executive Directors in the coming months.

One is a proposed loan of around $175 million for an enterprise development program which may be considered by the board as early as November.

Early next year, says Huang, the bank may be ready to move on a loan of between $50 million and $80 million for a large water supply project for the ROC area, followed by a health sector reform project and an farm privatization project.

He said the last two projects are "less well advanced" but indicate the "kind of programs" the World Bank is developing with Uzbekistan.

As for the Kyrgyz Republic, Huang says it has been "performing better than the norm" among other similar countries in the bank's programs.

So, he says, the bank is moving ahead vigorously on six or seven projects for Kyrgyzstan. There are two major projects currently underway -- a financial sector reform program to help the country reform its banking system and a project to rehabilitate and expand Kyrgyzstan's electric power system.

Huang says recent discussions with Kyrgyz leaders led to a bank mission visiting the country this summer to intensify its efforts in the agricultural sector and rural development. He says the bank is also looking closely at future irrigation projects.

The republic's biggest problem, says the World Bank official, is that it has "weaknesses in many of the institutions needed to work with a market economy."

For example, he says, there is "no good way for credit to get to private enterprises or the new farming structures which are emerging."

He says the problem became really obvious when a large factory in Bishkek was being privatized and sold off in small portions. "However, new small scale owners could not find any investment resources" to operate their new businesses, says Huang. The same thing has been happening in rural areas.

The challenge for Kyrgyzstan is to "create sound financial institutions." Until they are created, he said, it is "not advisable" for the bank or outside investors to "make loans through previous channels because they so often go to the wrong person or are not repaid."

At the same time, says Huang, the bank and the government have been talking about programs to strengthen the country's employment centers, pension system and the social assistance funds.

"Most of the old operations were appropriate for the old economy, but are no longer sensible in a market economy and need to be changed," he said.

Some of that, he added, will require the reorganization of some government institutions and ministries, but in a way that can be worked out "sensibly" and not cause new problems in the process.

Huang says Kyrgyzstan has faced a particularly difficult situation in moving into the transformation because its industries, more than in any of the other former Soviet Republics, were so completely dependent on the other republics for raw materials and natural resources.

On the other hand, he noted, it has forced the Kyrgyz to move quickly to reform and stabilize their economy. Now, he says, the government recognizes that it has to "restructure the agricultural sector quickly and that is why bank programs are particularly strong in projects under preparation in this area."

He says the Kyrgyz government has also recognized that it must make "special efforts" to attract foreign investors.

The bank is sponsoring an investment conference for Kyrgyzstan in Tokyo late this year in an effort to assist it in drawing outside investment.

In addition, the bank's vice president for all the nations in transformation, Johannes Linn, is to visit Kyrgyzstan and Uzbekistan later this month to review progress in the bank's programs in Central Asia.

A bank-convened consultative conference on Uzbekistan is also being organized for sometime next summer.