Uzbekistan's Stagnant Economy

By: D. Pandian

Corruption is a common problem in the Central Asian states.¹ Monetary regulation is an opaque issue and economic forecasts issued by these states are considered with much skepticism. Of all Central Asian states, Uzbekistan is particularly notorious for corruption in the economy. The Uzbeki economy is heavily reliant on the export of cotton, gold and natural gases, all commodities controlled by the government and allies of the government. Controlling parties derive considerable profits from their involvement, while the population at large faces serious hardship. In July 2007, the government of Uzbekistan said that it would raise the national minimum monthly wage to 15,525 soms (roughly USD $12). State employees, such as doctors, had their salaries raised to just over $100 per month; teachers received around $90 a month. These small wage increases did not match the sharp increases in prices for basic commodities such as bread, meat and oil.

Actions by the government convey an insecurity towards permitting the growth of private sector industries. The events surrounding the Andijon rebellion of 2005 are particularly revealing of this problem. In 2004, the government arrested 23 prominent Muslim business men in the town of Andijon.² While the government accused the men of being involved with extremist Islamic groups, no evidence corroborated the claim. The young men were involved with funding schools, orphanages and aiding the poor in their communities, providing social services that local government was not providing. As trials for these men commenced, thousands of locals (at peak 3,000 persons) gathered outside of the courthouse in silent protest to the arrests. By May of 2005, tensions culminated into a violent uprising in which the crowds seized weapons and freed hundreds from the local prison. In response, the government sent troops who fired indiscriminately into crowds of men, women and children. While exact casualties for this incident are not known, eyewitnesses put the death toll in the hundreds.

Government actions inhibit foreign investment, especially as powerful state actors intervene in all spheres of the state’s economic life.³ The president of Uzbekistan’s daughter, Gulnora Karimova, is especially notorious for this. Ms. Karimova is reputed to be a major participant in a foreign corporation that owns much of Uzbekistan’s oil and gas interest. When a Texas tea company attempted to increase its presence in Uzbekistan, Ms. Karimova and other rival tea distributors concocted false charges against the company ranging from drug trafficking to funding the Andijon uprising.

Due to the weak economy and restricted employment opportunities, many Uzbekis derive income from selling goods in bazaars or otherwise search for job opportunities outside of the country. However, the government has shown reluctance to allow even merchant activities, instituting fees out of the means of most Uzbekis that have the effect of discouraging the population for taking part in trading activities. Traders have been very vocal in their displeasure with these activities.⁴

Though the regional actors such as Russia and China have backed the Uzbeki government’s policies which are usually framed in terms of containing the threat of Islamic extremism and terrorism, these actors ignore the fact that the Uzbeki government’s actions more have the effect of fueling serious Islamic opposition in the state. ⁵

1.  International Crisis Group: "Uzbekistan: Stagnation and Uncertainty," (22 August 2007), available at http://www.crisisgroup.org/home/index.cfm?id=5027.

2. International Crisis Group: "Uzbekistan: The Andijon Uprising,"(25 May 2005), available at http://www.crisisgroup.org/home/index.cfm?id=3469&l=1.

3. International Crisis Group: "Uzbekistan: Stagnation and Uncertainty," (22 August 2007), available at http://www.crisisgroup.org/home/index.cfm?id=5027.

4. Id.

5. Id.