Open for Business: After Years of Isolation, Uzbekistan May Finally be Embracing Reform

An Uncomfortable Compromise

However, given the Uzbek leadership’s penchant for Soviet style intrigue and secrecy, no official heir had been named at the time of Karimov’s death. Consequently, political infighting ensued between the leadership’s pro-reform wing, represented by the then-prime minister Shavkat Mirziyoyev, and Rustam Inoyatov, the notoriously ruthless conservative veteran security chief, who has been accused, among other things, of boiling prisoners alive. 

While Mirziyoyev would come to officially replace Karimov, the lack of sufficient political capital on either side resulted in an uncomfortable power-sharing arrangement between Mirziyoyev, Inoyatov and finance minister Rustam Azimov, who is understood to be Mirziyoyev’s ally. 

Despite the division of power, and the inevitable tension between the opposing wings, which even led to rumours of a potential assassination attempt on Mirziyoyev, a general pro-reform consensus appears to have been maintained across the Uzbek leadership. With this broad agreement in place, Mirziyoyev has seized the opportunity to enact some genuinely positive changes in Uzbekistan.

Winds of Change 

Since his accession to the presidency in December 2016, Mirziyoyev has launched a charm offensive, setting about improving the country’s tarnished image and living conditions for many ordinary Uzbeks. He has released several prominent political prisoners, and has been on several state trips to the neighbouring Kazakhstan, Turkmenistan and Kyrgyzstan, countries with which Karimov maintained frosty relationships characterised by political scheming and competition over influence in the region.   Mirziyoyev has also made it easier for Uzbeks to travel at home and abroad, notably scrapping the exit visa, under which Uzbeks were required to obtain permission of the interior ministry prior to leaving the country. Finally, in an unprecedented development, Uzbek media have begun publishing direct criticism of some government policies, the best indication yet of a general thaw within the country. 

Most strikingly, Mirziyoyev’s government has also embarked on a programme of tangible economic reform. In particular, the current administration has liberalised the national currency, the Som, by removing its peg to the US dollar, allowing it to float according to market demand. This move, long recommended by the International Monetary Fund, is a part of the government’s attempt to crack down on the currency black market, as well as to remove barriers to foreign investment by easing the currency’s convertibility. In addition to this, while it has so far not provided any details, the government has also announced its intention to streamline the Uzbek tax system, further increasing the ease of doing business in the country. 

Lagging Behind

This reform is desperately needed if Uzbekistan is to realise its own economic potential. While the country is not as resource-rich as Kazakhstan or Turkmenistan, it remains a large producer of several lucrative resources, including gold, natural gas and cotton. It also makes up a half of the overall population of Central Asia, and its armed forces are generally thought to be the region’s strongest.   However, despite this undeniably promising base, Uzbekistan remains an isolated country with a poorly-performing economy. The country’s disappointing economic position is all the more apparent given the relative success of neighbouring Kazakhstan since both became independent in 1991. Despite Kazakhstan’s superior oil and gas reserves, both countries had similar prospects for regional primacy following the collapse of the Soviet Union; however, as the table below shows, their respective fortunes have since dramatically diverged. 

The difference in foreign direct invest investment (FDI) is even more startling, with Kazakhstan attracting over 130 times more foreign capital in 2016 than Uzbekistan.    

The Economics of Pragmatism

Given the example of Kazakhstan, and Uzbekistan’s potential, it is not surprising that foreign investment has become the Uzbek government’s priority. This strategy is already beginning to bear fruit. For instance, having not approved a loan for a project in Uzbekistan since 2007, at a recent board meeting, the European Bank for Reconstruction and Development reportedly signalled that it is ready to restart cooperation with the country. 

The Chinese One Belt One Road project, under which the Chinese government is planning to invest billions of dollars into infrastructure programmes to link China with Western Europe, is an even greater opportunity for Uzbekistan. This has been a particular area of focus for Mirziyoyev, who visited China last May and is reported to have signed USD 20 billion worth of construction projects. 

However, it would be a mistake to think that Mirziyoyev, a firm insider of the Uzbek political establishment who served as Karimov’s prime minister for 13 years, has spontaneously transformed into a liberal reformer. His is a policy driven by ruthless economic pragmatism – and that explains why many social issues are being ignored and Uzbekistan’s human rights record continues to be questionable at best. 

Tashkent is under pressure to free the country’s remaining political prisoners and cancel its notorious forced cotton picking programme, under which much of its population – including children – is annually forced to harvest cotton and which has been described as a form of modern slavery. Analysts have also begun to suspect that in his drive to attract foreign investment, Mirziyoyev will seek to align more closely with Russia and China, allowing him to further neglect social reform. 

A False Dawn?

However, while it is naïve to assume that Mirziyoyev’s intention has been to start Uzbekistan on a path to genuine, western-style democratic liberalism, at this early it is perhaps not the time to be overly critical. 

In a country like Uzbekistan, where the bar for progress is so low, any reformist action reform needs to be encouraged and applauded. After all, should the Uzbek government should stay its current reformist course (which surely it must), it will doubtlessly provide foreign investors with more incentive to take the country seriously. This could be critical for Uzbekistan’s future, with any possible foreign investment helping alleviate the burden of poverty on its struggling population. 

In the end, even if economics does take precedence over human rights, as far from ideal as that might be, a new dawn may at least be breaking over what has long been one of Central Asia’s more repugnant dictatorships.