Sunday, September 14, 2008

AFP: Convertability in Uzbekistan

TASHKENT, Oct 26 (AFP) - Dilshod revs up his battered Soviet-era car, confident that that there is still life in his underground currency business despite recent reforms aimed at rescuing Uzbekistan's economy.
"I won't lose my job," said Dilshod, who some years ago exchanged his university teaching post for more lucrative work buying and selling dollars in this Central Asian republic's popular Chorsu market.
Twelve years after Soviet rule ended in Uzbekistan critics of authoritarian President Islam Karimov accuse him of squandering advantages such as relatively good infrastructure, high educational levels and major mineral resources while protecting inefficient, environmentally harmful enterprises.
These favoured enterprises have accumulated huge state-guaranteed debts making questionable purchases while wages have fallen below 40 dollars per month on average and often go unpaid. Particularly badly off are those toiling in the cotton fields -- a crucial foreign-currency-earning sector -- who often include children.
Under increasing pressure the government earlier this month announced it was lifting currency exchange restrictions seen by many as symbolising the economic mismanagement of this country of 24 million people.
The reforms effective from October 15 officially end a system whereby members of government-controlled "enterprise associations" had access to cheap subsidised currency while others waited indefinitely to exchange the local currency, the soum, at inflated prices.
They also end a ban on intermediate trading companies obtaining foreign currency and a 2,000-dollar-limit on purchases of foreign currency in cash.
The move is likely to be popular with foreign investors bitten in the past, such as British American Tobacco and a General Motors-owned factory that assembles Daewoo cars in the eastern city of Andizhan, said by the World Bank to have operated at just 20-percent-capacity last year.
The head of a visiting International Monetary Fund team Eric De Vrijer praised the reforms, judging that the government and central bank had "demonstrated their ownership and commitment to currency convertibility."
But De Vrijer urged further liberalisation, particularly of rigid barriers to trade with worse-off neighbours such as Tajikistan and Kyrgyzstan, which are hindered from reaching traditional markets such as Russia by slithers of Uzbek territory guarded in many places by landmines.
There was widespread anger earlier this year when the Uzbek military demolished a cross-border bridge close to a popular Kyrgyz market and more recently traders voiced their frustration during protests against a new system of permits and a requirement that they use expensive cash machines.
More must be done to ease conditions for millions of people who have ended up in the "parallel economy," as economists call the world of shifting roadside stalls, protection rackets and smuggling seen across Central Asia, David Lewis, regional head of the Brussels-based International Crisis Group, argues.
"They've got to liberalise foreign trade otherwise it's going to be convertibility only for large businesses," Lewis said. "If you sell cigarettes and you've been building up soums for years and years it's obviously going to make a big difference, but at the lower end of the scale it's quite hard to see how it's going to benefit people."
So far there has been little sign of enthusiasm for using official exchanges, many of which continue to lack dollars, while many people are concerned about what happens to the personal details they are obliged to hand over when using them.
"Either these exchanges don't have any cash or they make you wait for hours -- just for a few dollars," muttered one customer queuing at an official booth. "Nothing's changed here, nor will it."