The Times of Central Asia - update of April 16, 2010

In this issue:

4. Arabs see Uzbekistan as good investment opportunity

1. POINT OF VIEW: Ousted president leaves the country (Kyrgyzstan, April 16, 2010-issue 612) By Giorgio Fiacconi TCA publisher BISHKEK (TCA) — In a statement made yesterday, April 15, the OSCE Chairman in Office and Kazakh Foreign Minister Kanat Saudabayev has announced that the President of the Kyrgyz Republic Kurmanbek Bakiyev has left Kyrgyzstan.

It has been said that the peaceful departure from Jalal-Abad at 19.20 on board of a military plane bound for Kazakhstan was due to joint efforts of Kazakh President Nazarbayev, Russian President Medvedev, US President Obama, the European Union and OSCE. Whoever contributed to Bakiyev’s departure and his resignation should certainly be praised since this may open a new dialogue and move the country toward a new legitimization and hopefully a new stability. While still at his village of Teyit in the Jalal-Abad oblast, before his departure, Bakiyev announced to his supporters that “President Nursultan Nazarbayev has personally invited me to Kazakhstan”. Reportedly, he left the country alone and was not accompanied by any of his brothers. We should not forget that at this stage unrest in any Central Asia country will jeopardise stability of the entire region and may endanger the Afghan war as well as hopes of a new governance under the rule of law and the necessary support to various developing economies. It is well known that all neighbouring countries have within themselves seeds of protest that for one reason or another are waiting an occasion to emerge. While many were talking of civil war and the fear of further bloodshed was clearly everywhere, the international diplomacy has achieved an unexpected result proving that dialogue still remains the best solution to any extreme action that advocates the use of arms. Now Kyrgyzstan should move to the next step of this dramatic experience and the provisional government should prove with deeds that the country intends to go back to the much needed legitimacy and appropriate governance. Whatever system the country will choose, be it a pure parliamentarian or a presidential republic with elected parliament, this is up to the people of Kyrgyzstan, but in any case the country must be able to stop the rule of a single family, or the division between the North and South, or a witch hunt of honest entrepreneurs. The method used in the past by SNB (national security) and Financial Police with the support of the Tax Department and fabricated cases, politically or business motivated, cannot be accepted in a democratic country. Criminals should be prosecuted under the existing law, but the State cannot use its authorities to create new riches under a well know re-distribution of properties. Already in the country there are criminal elements that have taken advantage of the disorders. This happened in the first few days of the unrest: While some people were losing their lives, others were looting and burning properties (including the tax department and general prosecutor’s offices). The same criminal elements are now kidnapping or asking for “protection money” in the name of the provisional government. All this should stop. We should not miss this point; the provisional government should not give room to those that want revenge and are moved out of personal reason to take advantage of the situation. Past cases that may have been object of abuses should be quietly investigated without demagogic fanfare and populist approach. Only when documentation and evidence prove wrongdoings, the issue should be brought to court. Some of the present announcements do not augur well; the country needs to go back to work without fears and false expectations. Kyrgyzstan has a difficult time ahead and not only needs support of the international community and donor countries (which certainly will not miss) but also needs to prove that this new provisional government or whatever government elected in forthcoming elections has serious intention to work under the rule of law and solve once and forever the chronic problem of Kyrgyzstan, that is unemployment. Although the economic crisis is still there and may require austerity in the management of the public finance, Kyrgyzstan is still well placed to attract investment, developing a good investment climate and sizable and profitable business with other Central Asian countries from Kazakhstan to Russia and China. The recent events may derail the tourist season, but the country can do well with trade and start developing a completely new approach and a new acquired credibility. Kyrgyzstan needs experience and support, and the way such elements will be developed may very much depend on the new political leaders and their approach.

The development of the Free Economic Zone with its potential to export is something that should not be omitted, but all this requires stability and avoidance of internal competition between the various leaders of the provisional government. It will not take much time until differences will emerge and a new equilibrium will be created. Our frank comment may not be well accepted by various people but the fact remains that those that are now forming the government and have ousted President Bakiyev are exactly the same people that five years ago brought him to power. We should not forget that the methods used in the last five years are very similar to those that have been used previously. The Tulip Revolution has simply replaced one family with another, and it is hoped that such mistake will not be repeated this time and that after a few months of probation and a new election, the country will proceed toward normalization.

2. EU efforts for the rule of law in Kyrgyzstan (Kyrgyzstan, April 16, 2010-issue 612) By Giorgio Fiacconi and Bahtiyar Kurambayev BISHKEK (TCA) — In an interview held this week with EU Special Representative for Central Asia, Mr. Pierre Morel, The Times of Central Asia has been able to appreciate the efforts that the EU is making to restore democracy and the rule of law in Kyrgyzstan, while respecting the will of its people.

Below are excerpts from the conversation with Mr. Morel, who visited Kyrgyzstan for talks with its interim government earlier this week. “We are here for a fact-finding mission,” said Mr. Morel. “We are here not as mediators between various parties. We want to see the return to public order, the implementation of the rule of law and certainly for the restoration of democracy; democracy is a choice of the people of Kyrgyzstan from the very beginning.” During his visit Mr. Morel took time to visit Hospital No. 4 in Bishkek where many wounded people are being treated. Mr. Morel said he was favourably impressed by the competence of the medical staff and their commitment to the patients. They want help and this was certainly in line with the desires of the EU. The ICRC (Red Cross) and other similar organizations are the partners of the EU, through which they identify the needs and try to provide help. “I wanted to know what we could do. The emergencies have been tackled by now. We stand ready to provide further help upon request. The farming season is about to start. Again, we want to find the facts, the details about Kyrgyzstan and get the country back to public order and usual rhythm of life,” added Mr. Morel. The visit was very intensely focused on meeting and realizing the priorities that should be addressed as soon as possible in a joint effort with other institutions and organizations. “In my meetings with representatives of the new government they spoke of legitimizing themselves. Kyrgyzstan is a member of the OSCE and has taken full commitment to democracy. The UN, OSCE and EU cooperate in establishing priorities and support for the needs of the country. “We are talking to all sides, considering the opinions and ideas of different experts, members of non-governmental and international organizations. We want to have a comprehensive view. We want to see the full circle. The role of the OSCE and/or EU is to find ways to improve Kyrgyzstan’s democracy. We hope lessons have been learned. It is up to the people and authorities of Kyrgyzstan to decide exactly what to do, and to do it. Certainly, in all this unrest, there is a lesson to be learned. The OSCE, EU and UN can help and coordinate with the new government, but we cannot take the decisions for you; we can train judges, suggest reforms to codes and legislation,” Morel continued. Regarding the Manas Transit Center, Mr. Morel was very diplomatic, stating, “We have received a positive gesture from the Kyrgyz government that they support the transit center, its mission in supporting the coalition forces in Afghanistan.” Indeed, the EU considers that we face the same common threats with the countries in Central Asia: extremism, terrorism, as well as trafficking, including drugs, people and weapons. The tragic events that have resulted in so many deaths and injuries are still very fresh and contradictory news create tension and a sort of confusion that does not help in the stabilization of the overall situation. Mr. Morel is cautiously optimistic, but when we asked him how long is it going to take to see the country back to normal, he stated, “It is in the hands of key actors of Kyrgyzstan how long the stabilization will take. I think it can take six months to stabilize and return to real democracy. But there is a need for a clear program and statement of how to get back to stability.”

3. Tajikistan extends area under cotton (Tajikistan, April 16, 2010-issue 612) By Rakhim Nazarov DUSHANBE (TCA) — According to Tajikistan’s Ministry of Agriculture, some areas of the Khatlon and Sughd regions began their cotton planting campaign as early as late March. According to preliminary estimates, this year cotton will be sown on 183,400 hectares, 14,500 hectares more than in 2009.

According to the National Statistics Agency (NSA), last year raw cotton production totaled 296,000 tons while they forecasted for 350,000 tons.

Agronomists noted that this year the area under cotton and the cotton yield may decrease in comparison with last year. This is mainly due to the fact that not all the cotton growing farms stocked enough fuel and spare parts for their agricultural machinery. Fuel deliveries have been delayed because of problems with transit through Uzbekistan. This shortage is especially essential for the Khatlon region. According to the NSA, agricultural enterprises and farms have over 14,200 tractors, of which 9,155 (64 percent of the national total) are in good condition. The Ministry of Agriculture noted that if fuel and fertilizer will be delivered in a timely manner, the area under cotton might be expanded this year. This is due to the fact that in the beginning of this year, the price for cotton on world markets increased significantly, making cotton-growing more advantageous to farmers. Moreover, considering the increase in cotton prices, domestic banks are more willing to issue loans to farmers. The demand for cotton is also growing inside Tajikistan. Several new textile factories have been launched, which will increase cotton processing. According to Gulchekhra Sanginova, head of the Light Industry Department within the Energy and Industry Ministry, preliminary estimates state that cotton production in Tajikistan will make up 20 percent of all production this year. Currently, the country has twenty textile mills, which can process over 60,000 tons of cotton fiber. According to the NSA, in the first two months of this year, exports of cotton fiber in the total exports of goods totaled 17.2 percent. 21,400 tons of cotton worth $33.6 million was sold abroad, a 7,400 ton increase over the same period in 2009, and an increase in price totaling $18.6 million. The main buyers of Tajik cotton are Turkey, Russia and Iran.

4. Arabs see Uzbekistan as good investment opportunity (Uzbekistan, April 16, 2010-issue 612) By Dilshod Ashurmatov TASHKENT (TCA) — This year Uzbekistan will intensify business cooperation with Arab countries. However, some experts believe that there are almost no new technologies in the Middle East’s investment structure.

Money from oil to gas

Visits by the Uzbek President Islam Karimov to the United Arab Emirates (UAE) in March 2008 and Oman in October 2009 played an important role in boosting Uzbek-Arab economic cooperation. In response, economic emissaries of the two countries began visiting Tashkent. The Uzbek government, inspired by such activity, has adopted a resolution to establish close ties with other Arab countries including Saudi Arabia, Qatar, Kuwait, and in the future, Algeria and Morocco.

During his visit to Tashkent in March, Maqbul bin Ali Bin Sultan, Oman’s Trade and Industry Minister, said that Oman will enhance not only its investment in Uzbekistan, but also assist in drawing investment from other Arab countries, promising essential investment inflows. In particular, UAE companies will implement 21 projects worth $3.5 billion in Uzbekistan by the end of 2012. Companies from Oman will participate in 15 projects and invest $1.5 billion. The International Petroleum Investment Co. (IPIC) will invest $1.1 billion in the production of synthetic fuels at Uzbekistan’s Ustyurt Gas Chemical Complex, which is currently under construction. The complex will be able to process 3.4 billion cubic meters of natural gas and produce 1.7 million tons of synthetic diesel fuel and gasoline per year. The Mubadala Development Co. will invest $200 million to explore two oil and gas investment blocks located in northwest Uzbekistan.

The Oman Investment Fund and Uzbekistan’s national oil and gas company Uzbekneftegaz have signed an agreement to establish a joint venture to build a cement plant in the Surkhandarya region. The project is estimated at $200 million.

In March, the IPIC and Uzkhimprom (Uzbek Chemical Industry) National Joint Stock Company signed an agreement to build a chemical complex in the Navoi region. That project is worth $1.34 billion. Another new facility which will produce 900,000 tons of ammonia and one million tons of urea is to be built by the end of 2013. There are also two other projects that could help the Uzbek economy cope with their lack of liquidity. In October 2008, the Uzbek government and the UAE signed an agreement to establish the UzEmiratHolding Investment Company with $1.25 billion in charter capital. A year later, Oman’s National Reserve Fund and Uzbekistan’s Reconstruction and Development Fund established a joint investment fund with $500 million in charter capital.

Both institutions, where controlling stakes are owned by Arab partners, will invest through entering the charter capital as a major shareholder or a portfolio investor, as well as drawing loans along with other financing instruments to implement joint projects. According to Shavkat Tulyaganov, Uzbek Deputy Minister of Foreign Economic Relations, Investment and Trade, the funds will boost their activities in late 2010. There is only one question though: Will the funds allocated by investors from the Middle East and Persian Gulf countries consolidate Uzbekistan’s current economic structure, which is now undiversified, oriented at commodity industries and the construction sector? Prior to the onset of the global economic crisis, investors from Arab countries were not investing much in Uzbekistan’s economy. On the one hand, the Uzbek government first relied on loans from the West, South Korea, and then switched over to China and Russia. On the other hand, Arab investors preferred to keep money in American banks, and if they decided to invest elsewhere, they were more likely to choose European options. "The West turned out to be too politicized, China has shown that it will participate only in the projects advantageous to its own economy, Korea still has an unstable financial situation, and Russia has experienced the strongest blow to its financial market. All this makes Tashkent think about new sources of investment,” explained analyst Anvar Jumayev. In the same way, Arab investors, not seeing optimistic signs from Western markets, began looking for other markets, including Uzbekistan.

According to experts, it is difficult to estimate the total potential capacity of Arab investments in Uzbekistan. This is due to the fact that the projects are under discussion and the specific amounts of investment have not yet been agreed upon. However, today it is possible to talk about the benefits that investment will bring to Uzbekistan. “Arab investment will enable Uzbekistan to pass through the period when Western financial markets are waiting for positive news from the world’s exchanges,” said Ilkhat Tushev, analyst at Central Asia Investments.

Tushev believes that Uzbekistan attracts Arab investors with its inherent economic structure dominated by the fuel and energy complex, mining and construction sectors. Dilmurad Kholmatov, an expert, believes that a specific decision-making mechanism is also important. The Arab capital is characterized by close interrelations between money, state and the ruling families. Uzbekistan has preserved the same structure. On the other hand, Kholmatov believes that such a scheme of relationships may cut both ways: this “narrow circle” is regularly changing, and each time it is necessary to negotiate with different people. Another factor that may affect the prospects of Arab investments in the Uzbek economy is the absence of new technologies and innovations in the structure of Arab money. "Uzbekistan gets only cash from the Arab East,” explains Anvar Jumayev. “That is why it is very important to attract Western technologies in order to implement the projects. At the same time, it would be preferable if foreign investment would help develop different economic sectors, which are not connected to pumping the resources,” said Jumayev.

For further information: The Times of Central Asia