Uzbeks Gear up to Combat Financial Crisis
Uzbeks Gear up to Combat Financial Crisis
Uzbekistan’s economy may be more isolated than most, but it is not going to escape the fallout from the international financial crisis, say NBCentralAsia observers. However, there are steps they can take to mitigate the worst effects of the crisis.
The Rapid Reaction group, a coalition of Uzbek human rights groups, issued a statement on October 9 listing some of the threats created by a crisis which has hit Uzbekistan’s neighbours as well as countries further afield.
Uzbek migrant workers might send less money home, and some could be forced to return themselves as a result of economic downturn in host countries like Russia and Kazakstan. In addition, the statement warned of higher prices, falling foreign investment, and a drop in the value of the Uzbek som caused by the decline in migrant remittances.
There are currently between three and five million migrants from Uzbekistan working in Russia and Kazakstan, mainly working in the construction industry.
The Rapid Reaction Group cites experts in Russia as saying tighter lending policies could curtail construction work as early as this month, forcing many laid-off workers to return home. These returning workers will add to a domestic employment problem made worse by a reduction in foreign investment into areas like the oil and gas industry. This, the coalition says, could lead to unrest in various parts of Uzbekistan.
The Rapid Reaction Group statement urged the Uzbek government to work with human rights groups to develop a national programme that would assist the returning migrants.
Other analysts interviewed by NBCentralAsia agree that Uzbekistan cannot avoid the indirect consequences of the global crisis.
Tashkent professor Ilhom Mamasaliev says Uzbek banks system should escape the kind of losses suffered by their Russian and Kazak counterparts simply because they do not have a large deposit base.
But he stresses that there will be other effects. “The government’s isolationist policies have led to a situation where Uzbekistan is, to a significant degree, economically dependent on other states that currently find themselves in a fragile situation,” he explained.
Jazgul Ismailova, an economist who covers the whole of Central Asia, says falling remittances and returning migrants may be “the most visible consequences of crisis”, but adds that “the biggest problem for the Uzbek authorities will be inflation; a sharp rise in food prices”.
She believes the Uzbek government could address some of these threats by adopting more flexible economic policies. In fact, for this closed economy, the crisis could provide a stimulus to launch reforms. The authorities could, for example, create jobs for the returning workforce, encourage small businesses to start up, make the business climate more liberal, and reduce the barriers that currently obstruct private enterprise.
Ismailova noted that the authorities possess the advantage of having a steady revenue flow from exports of gold, gas and cotton. “Used sensibly, Uzbekistan’s foreign currency reserves could soften the shock of the crisis and maintain wages in real terms,” she said.
There is one obstacle here, according to Ismailova – the boycott of Uzbek cotton announced by western firms in response to the use of child labour in agriculture.
The Rapid Reaction Group was set up last year by eight local organisations to defend human rights.
(NBCentralAsia is an IWPR-funded project to create a multilingual news analysis and comment service for Central Asia, drawing on the expertise of a broad range of political observers across the region. The project ran from August 2006 to September 2007, covering all five regional states. With new funding, the service is resuming, covering Uzbekistan and Turkmenistan.)
The Rapid Reaction group, a coalition of Uzbek human rights groups, issued a statement on October 9 listing some of the threats created by a crisis which has hit Uzbekistan’s neighbours as well as countries further afield.
Uzbek migrant workers might send less money home, and some could be forced to return themselves as a result of economic downturn in host countries like Russia and Kazakstan. In addition, the statement warned of higher prices, falling foreign investment, and a drop in the value of the Uzbek som caused by the decline in migrant remittances.
There are currently between three and five million migrants from Uzbekistan working in Russia and Kazakstan, mainly working in the construction industry.
The Rapid Reaction Group cites experts in Russia as saying tighter lending policies could curtail construction work as early as this month, forcing many laid-off workers to return home. These returning workers will add to a domestic employment problem made worse by a reduction in foreign investment into areas like the oil and gas industry. This, the coalition says, could lead to unrest in various parts of Uzbekistan.
The Rapid Reaction Group statement urged the Uzbek government to work with human rights groups to develop a national programme that would assist the returning migrants.
Other analysts interviewed by NBCentralAsia agree that Uzbekistan cannot avoid the indirect consequences of the global crisis.
Tashkent professor Ilhom Mamasaliev says Uzbek banks system should escape the kind of losses suffered by their Russian and Kazak counterparts simply because they do not have a large deposit base.
But he stresses that there will be other effects. “The government’s isolationist policies have led to a situation where Uzbekistan is, to a significant degree, economically dependent on other states that currently find themselves in a fragile situation,” he explained.
Jazgul Ismailova, an economist who covers the whole of Central Asia, says falling remittances and returning migrants may be “the most visible consequences of crisis”, but adds that “the biggest problem for the Uzbek authorities will be inflation; a sharp rise in food prices”.
She believes the Uzbek government could address some of these threats by adopting more flexible economic policies. In fact, for this closed economy, the crisis could provide a stimulus to launch reforms. The authorities could, for example, create jobs for the returning workforce, encourage small businesses to start up, make the business climate more liberal, and reduce the barriers that currently obstruct private enterprise.
Ismailova noted that the authorities possess the advantage of having a steady revenue flow from exports of gold, gas and cotton. “Used sensibly, Uzbekistan’s foreign currency reserves could soften the shock of the crisis and maintain wages in real terms,” she said.
There is one obstacle here, according to Ismailova – the boycott of Uzbek cotton announced by western firms in response to the use of child labour in agriculture.
The Rapid Reaction Group was set up last year by eight local organisations to defend human rights.
(NBCentralAsia is an IWPR-funded project to create a multilingual news analysis and comment service for Central Asia, drawing on the expertise of a broad range of political observers across the region. The project ran from August 2006 to September 2007, covering all five regional states. With new funding, the service is resuming, covering Uzbekistan and Turkmenistan.)
