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Uzbekistan: Western Companies Finding It Difficult To Do Business

A high-level Uzbek government delegation was told in London yesterday that the Central Asian country must tackle corruption and cut bureaucracy if it is to win more foreign investment. RFE/RL's London correspondent Ben Partridge reports on that and other comments made at a two-day conference on investment in Uzbekistan.

London, 4 November 1999 (RFE/RL) -- Rich in uranium and gas reserves, Uzbekistan has the raw materials to create wealth, but it lacks capital. The former Soviet republic is seeking foreign investment to modernize and reform its sickly domestic industry.

To attract foreign investment, however, Uzbekistan will have to persuade investors that their money will not be embezzled or wasted. British diplomats told an Uzbek delegation yesterday that Uzbekistan needs to reform its business practices to foster an attractive investment climate.

The Uzbek delegation, headed by Deputy Prime Minister Bakhtiar Khamidov, is attending a two-day conference aimed at boosting business between Uzbekistan and Britain. Britain is Uzbekistan's third-largest trading partner after Russia and the United States.

The delegation was welcomed by Lord Waverley, vice chairman of the British parliamentary group that deals with Central Asia. Waverley said Uzbekistan is potentially one of the most important of the independent states that emerged after the 1991 break-up of the Soviet Union.

But he said that the nation of 24 million people -- with its rich resources of gas, uranium, gold and cotton -- should do more to accommodate the concerns of Western companies in the region.

Many Western companies have found it more difficult than they anticipated to manage businesses in Uzbekistan. Some have pulled out after meeting many obstacles, including government-imposed currency and import controls. Waverley urged the government of President Islam Karimov to tackle these grievances.

"Beyond these issues, I would like to say a word about UK official concerns. These concerns are shared by many in the business community, I have touched on [the need for] currency convertibility, but cutting bureaucracy, transparency in decision-making, and addressing endemic corruption [are] paramount." A 1997 survey by the European Bank for Reconstruction and Development found that Uzbekistan was one of the worst offenders in corruption among public officials. It was on a list of the "bottom" five countries, along with Azerbaijan, Kazakhstan, Russia and Ukraine.

In his remarks, Waverley also said Uzbekistan should commit itself to what he called "shared European values," including the observation of international human rights standards.

The country has been run since 1989 by Islam Karimov, who served first as head of the local Soviet Communist Party, then as the first post-independence president. Western human rights groups describe Uzbekistan as an authoritarian state with limited civil rights, censorship, curbs on the opposition, and arbitrary arrests.

But the leader of the Uzbek delegation, Deputy Prime Minister Khamidov, said the government is committed to deepening its reforms. He said that over the past four years Uzbekistan has seen economic growth in almost all areas.

Khamidov acknowledged the problems of bureaucracy and corruption, saying the first is a legacy from the Soviet era, while the second is linked to the region-wide problem of drug trafficking.

He said that over the past year the Karimov government has introduced new measures aimed at halting bureaucratic obstruction to foreign investment. For example, the government has set up several telephone hotlines staffed by experts to help foreign companies resolve problems stemming from alleged corruption.

The conference chairman, Nabil Khodadad, a British lawyer, said Uzbekistan appeals to investors because of its prime "Silk Road" location at the heart of a potential market of 50 million consumers.

"We think this region has tremendous potential. We believe that Central Asia will once again act as a very important bridge between East and West, between Europe and Asia."

Another Uzbek deputy prime minister, Victor Chzen, said privatization is now at the center of the government drive to deepen reforms. He said the private sector is now responsible for almost two-thirds of Uzbekistan's gross domestic product.

Chzen also announced his government's commitment to Uzbekistan's largest-ever privatization program. With the backing of $28 million from the World Bank, the program aims to attract foreign investors for Uzbekistan's 30 biggest industrial companies. He said there will be no limit on the size of foreign investment and investors could even obtain management control.

Chzen pledged that the privatization process will be "transparent" and follow internationally accepted rules and standards.