Note: This document may not always reflect the actual appropriations determined by Congress. Final budget allocations for USAID's programs are not determined until after passage of an appropriations bill and preparation of the Operating Year Budget (OYB).
UZBEKISTAN
FY 1998 Assistance to the NIS Request . . . . . . . . . . . . . . . . . $32,500,000 Introduction
Uzbekistan is situated in the geographical heart of Central Asia, and is the only country that borders on all four other Central Asian republics. It boasts a proud history and lays claim to representing the historical, cultural, and even political core of post-Soviet Central Asia. It has 22 million inhabitants and is the largest of the Central Asian republics (and the third most populous of the former Soviet republics). Over the last five years, the Uzbek leadership has actively sought to assert and strengthen its sovereignty and independence. It also clearly aspires to play a regional leadership role. As for the economic reform process, Uzbekistan has adopted a program of gradual, step-by-step reform in which the state remains dominant. Political power rests almost exclusively with the president and an active opposition is not tolerated. At the same time, the government is sensitive to international perceptions about human rights and other issues and, with growing frequency, responds positively to outside pressures for improvements.United States interests reflect a combination of commercial and strategic concerns. Uzbekistan remains the largest single market in Central Asia. Its economic base is relatively diverse, reflecting a combination of agricultural, industrial and energy resources. Uzbekistan has emerged as the world's fifth largest producer of cotton (it is also the world's second largest exporter of cotton, trailing only the U.S.). It ranks seventh internationally in terms of gold production, attracting the attention of foreign investors. It is already a significant regional gas exporter, and hopes to become self sufficient in crude oil. It has an extensive, if outmoded industrial sector, based chiefly on the processing of minerals and agricultural commodities. Improving and expanding domestic processing of these commodities, particularly cotton, is a key to economic prosperity. Uzbekistan's regional importance and strategic location will also play an important role in determining regional stability in the years ahead. It has significant interests of its own, has played a role in shaping events and in responding to crises in both Afghanistan and Tajikistan, and has an obvious interest in what happens in Iran to the south and Russia to the north. From a U.S. perspective, a democratic and economically sound Uzbekistan that plays a positive and constructive role in regional and world affairs is desirable, both for the well-being of the people of Uzbekistan and for maintaining stability in Central Asia.
The Development Challenge
Higher cotton prices combined with growth in the oil and gas industry have to some extent cushioned Uzbekistan from the most severe impacts of the breakup of the Soviet Union and the economic dislocations that followed. The country was slow to undertake economic reform in 1992-1994, but the pace has quickened since mid-1994, particularly on the macroeconomic policy front. Inflation, the budget deficit, and consumer subsidies have been cut sharply. The government signed a Transformation Facility with the IMF in January 1995 and a Standby Agreement in December 1995. Progress in privatization has been slower. Small retail shops were almost completely privatized in 1993-1994, but true medium and large-scale privatization has barely begun.As for the country's debt, Uzbekistan has benefitted from the "zero option" agreement whereby Russia assumes both the debt liabilities and certain assets of the former Soviet Union. Uzbekistan's debt service burden is expected to rise modestly over the medium term because of the short-term nature of its initial financing.
Agriculture accounts for about 35% of Uzbekistan's GDP, employs 40% of the labor force, and accounts for nearly 75% of its foreign exchange earnings, mainly from cotton. Scarce water and land resources make further expansion in cropping acreage difficult, but market-based approaches to pricing and marketing would go a long way toward increasing productivity. Nineteen ninety-five was anexceptional year in terms of both wheat and cotton harvests. Cotton production has stabilized at around 3.9-4.0 million metric tons a year and remains an important source of foreign exchange. Wheat production has increased sharply in recent years, as Uzbekistan shifted irrigated land out of other crops in a drive to reach self-sufficiency by 1997. However, 1996 will probably not be as good, especially for cotton, due to poor weather conditions.
Energy represents a second significant sector for future growth. Natural gas provides two-thirds of the country's primary energy supply, and Uzbekistan is the third largest producer of natural gas in the former Soviet Union after Russia and Turkmenistan. Oil reserves are also believed to be considerable. At this point, energy production is geared mainly toward making Uzbekistan self-sufficient. Regional gas sales within Central Asia represent a potential source for energy export growth, but are stymied to some extent by the inability of Uzbekistan's regional customers (Tajikistan, Kazakstan, and Kyrgyzstan) to meet market prices or pay in hard currency. The decision in 1995 to sell off 158 state-owned petrol stations had a positive impact, at least in terms of enhancing efficiency and introducing the concept of private marketing and distribution channels within the energy sector. In April-May 1996, the Government of Uzbekistan verbally requested U.S. technical assistance in the area of legal and regulatory reform for the petroleum sector. The government's primary interest is to establish a policy environment conducive to attracting additional foreign investment in the petroleum sector.
Social policies developed during the Soviet era are unsustainable and increase the need for a more targeted social safety net and an expansion of market-based approaches to social service delivery. Currently, social expenditures account for around 40% of government expenditure. The health system is inefficient and highly centralized. The tightening of monetary and fiscal policy means that wage rates have not kept pace with inflation, while progress in economic restructuring is bound to increase unemployment rates, at least over the short term. The Aral Sea and related environmental disasters such as the excessive use of pesticides in cotton production have a large and adverse effect on Uzbekistan. There is a serious lack of potable water in some regions and health indicators point to serious health problems in some of the worst affected areas.
Uzbekistan's relatively large domestic market, combined with its potential in the agricultural and energy sectors, offers a number of attractive opportunities to potential foreign investors. Turkey, South Korea, Germany, Japan and the U.S., along with Russia, are the largest foreign economic players. The South Korea firm DAEWOO has invested several hundred million dollars in an automobile production plant in the Fergana valley and an electronics plant in Tashkent. Total direct foreign investment is probably on the order of $1.5-$2 billion. U.S. direct investment is estimated at $150-$200 million, with the Newmont Mining Joint Venture ($120 million invested) representing the single biggest investment so far. Other U.S. companies are negotiating joint ventures in such areas as oil and gas, agricultural machinery, and aerospace. The U.S. has also been a major seller of wheat, agricultural machinery and aircraft to Uzbekistan.
From a USAID perspective, the main goal is to engage reform-minded elements in the Uzbekistan government and assist where possible in putting in place the basic building blocks of a market-oriented economic system. Establishment of these basic structures should in turn facilitate the private trade and investment needed for Uzbekistan to reach its considerable economic potential. Engagement at an international level also means adherence to internationally accepted norms and practices in key areas related to human rights and a civil society. Here too, USAID can play an important role in exposing Uzbek policymakers to a wider world and in suggesting alternative approaches as they shape their own economic and political future.
Other Donors
The IMF and the World Bank are both heavily engaged in Uzbekistan on key reform issues. As noted, as a result of progress on the reform front the IMF signed a Standby Agreement with Uzbekistan in December 1995. The World Bank signed a rehabilitation loan agreement with Uzbekistan in March1995 and its board is expected to approve a follow-on enterprise reform credit in December 1996. It has also signed a cotton sector project loan and a technical assistance loan, and is considering further loans for the agriculture and banking sectors. In addition, the World Bank is developing a health restructuring loan. EU-TACIS has the largest country program after the World Bank, focusing on technical assistance in agriculture, private business development, and energy. The European Bank for Reconstruction and Development (EBRD) portfolio includes loans for textile plants and energy, as well as a small enterprise credit loan.FY 1998 Program
.USAID programs in Uzbekistan have concentrated in several areas, including the Aral Sea initiative; technical training in the United States; health and family planning; and a low-key but important democratization effort emphasizing the importance of non-governmental organizations (NGOs) in building and sustaining a civil society. The 1998 program will likely include a special emphasis on fiscal reform, financial sector restructuring, energy sector legal and regulatory reform, and training. Continued modest programs in electoral reform, democratization and social sector transition are also envisaged. Cooperative activities under the Partnership for Freedom will complement technical assistance efforts and specifically focus on developing links between Uzbekistanis and Americans in support of trade and investment and civil society objectives.
Strategic Goal: Economic Restructuring
Although the government's own economic assessment is relatively upbeat, Uzbekistan has still not taken some of the most decisive measures needed to open up the economy and allow a strong private sector to flourish. The IMF and the World Bank have taken a major role in acquainting Uzbek officials with some of the main elements required for such change to take place. While USAID has engaged with counterparts on these same issues, it has been reluctant to invest resources in privatization without indications from them of a clear commitment to transparency and meaningful reform. In some areas, such as fiscal reform, Uzbek counterparts have expressed a strong interest in using technical advisors to effect needed change. Most recently, the November 1996 foreign exchange crisis in Uzbekistan underscored both the importance of macroeconomic stability and the fact that Uzbek policymakers still have a ways to go in understanding and maintaining an effective foreign exchange regime.Fiscal policy is one area in which Uzbek policymakers have demonstrated a commitment to reform. In particular, tight budgetary controls have reduced deficits and helped meet IMF targets. Revenue generation represents the other side of the fiscal coin, and in this area USAID worked closely with counterparts in the Ministry of Finance and the State Tax Committee to draft a new tax code which was sent to parliament in November 1996. Efforts are also underway to put into place a more modern tax administration system. Additional technical advice is being provided to draft a new budget law, reorganize budgetary classification systems and to strengthen the budgetary planning and execution process. As new policies are adopted, further hands-on training is needed to ensure that the policies are properly implemented. Work on pension reform represents another part of the USAID effort to address fiscal concerns. Sound fiscal management should in turn help maintain macroeconomic stability, an essential precondition for sustained economic growth.
New banking decrees have been issued, but real banking and broader financial sector reform continues to lag. Although Uzbekistan recently established a stock exchange, it lacks transparency and offers few attractive opportunities to potential investors. The development of an effective securities market still seems a long way off. The government tendency to stifle private sector initiative when it appears to undermine or conflict with a state-owned enterprise causes special concern. USAID will offer technical advice and training in bank supervision to encourage the development of an efficient private financial sector.
Uzbekistan offers important opportunities for potential private investors, both local and foreign. Uzbekistan's interest in joining the World Trade Organization (WTO) provides a possible lead-in to technical assistance aimed at improving the legal and regulatory environment for business and for promoting trade and investment. As in neighboring Kazakstan and Kyrgyzstan, the WTO accession process provides many opportunities to dialogue with counterparts on ways to meet international trading standards and continue the reform process. Legal and regulatory reform is also needed to promote private sector growth, encourage transparency and minimize possibilities for corruption. Finally, the Central Asian American Enterprise Fund (CAAEF), headquartered in Tashkent, provides loan and equity capital aimed at promoting private sector development.
Given that a significant part of Uzbekistan's future growth will be energy-sector led, work will be conducted in legal and regulatory reform in the energy sector with particular emphasis on the petroleum industry. Specifically, support will be provided for establishing a legal and environmental framework conducive to production sharing agreements; a simplified and rational licensing regime; and environmentally sustainable rules and regulations governing petroleum exploration, processing, and transport. In the electricity sector, as the regional dispatch center for the Central Asian electricity grid, Uzbekistan will play a key role in facilitating regional energy trade among the five republics. Sound pricing based on cost of service is needed to put the grid on a financially sustainable footing and to further integrate the economies of Central Asia.
Strategic Objective: Increased soundness of fiscal policies and fiscal management practices
Strategic Objective: Accelerated development and growth of private enterprise
Strategic Objective: A more competitive and market-responsive private financial sector
Strategic Objective: A more economically sustainable and environmentally sound energy sector (CAR Regional) Strategic Goal: Democratic Transition
Political control in Uzbekistan rests almost exclusively with the President. Media outlets are controlled by the government and open dissent is forbidden. Nonetheless, the government has shown itself more open to dialogue in the past year. Significant opportunities exist to address human rights concerns, to engage NGOs to promote grassroots organizational skills, to promote new views about what it means to adhere to the rule of law, and to expose a potential future generation of Uzbek policymakers to more democratic modes of governance. Recent approval for a survey of voter attitudes, similar to ones conducted earlier in Kazakstan and Kyrgyzstan, represent a step forward and also suggest a greater degree of receptivity to USAID programming in the democratization arena.Activities aimed at introducing new notions of civil society and democratization will continue in a low key but unmistakable way. For example, the program of grants and technical support to local NGOs will continue, as part of an effort to enhance their management capacity and make their own programs more sustainable. Similarly, USAID work with local lawyers and judges provides an opportunity to enhance legal independence, while presenting models of democratic governance. An increase in requests for legislative commentary from the parliament, and assistance with parliamentary procedures, presents an opportunity for increased participation in the decision-making process and hints at a new level of openness within the legislature. As Uzbekistan begins to think about elections in 1999, USAID is also assisting the government in preparing a new election law.
Strategic Objective: Increased, better-informed citizens' participation in political and economic decision-making
Strategic Goal: Social Stabilization
The political environment in Uzbekistan limits the scope and opportunity for market-based reforms in the social sector. The view that the government must play a central role in all aspects of national life is still widely held. Progress has nonetheless been made in the health arena using earmark funds in medical partnerships and family planning. These achievements are discussed in the next section. USAID, in cooperation with the World Bank, has been working to create the setting for advancing the health reform agenda. Recent overtures from the Government of Uzbekistan indicate that it is ready to pursue a health reform agenda more consistent with a market-based economy, including addressing issues related to financing health care services. The World Bank has indicated interest in supporting nation-wide roll out of a model to be developed and tested with USAID support. USAID also plans to continue to strengthen and develop NGOs engaged in social services.Remaining activities under the Aral Sea initiative will focus on the negotiation and preparation of draft laws, decrees and long-term agreements concerning regional water use and sharing.
Strategic Objective: Improved sustainability of social benefits and services
Strategic Objective: Reduced environmental risks to public health (CAR Regional)
Cross-cutting and Special Initiatives
Special Initiatives related to medical partnerships and reproductive health will continue to be shaped to introduce market-based approaches that increase individual choice and rely on the private sector. As the result of the medical partnership program, the Ministry of Health regards the Tashkent State Medical Institute as a demonstration site for new management approaches for providing health care. As a result of this successful partnership, an American private pharmaceutical company has donated insulin and will provide technical assistance to the partnership hospital.Other reforms have been supported through the FY 1996 and 1997 reproductive health earmarks. Under contraceptive social marketing initiatives, advertising programs for the commercial sale of contraceptives were developed and more than 1,000 pharmacists have been trained in modern contraceptive technology and customer service techniques. Because of the successful training of pharmacists and marketing by the social marketing project, 90% of the pharmacies in the two project areas are now selling quality brand contraceptives.
USAID is also supporting the 1996 Uzbekistan Demographic and Health Survey. Through this process, the Ministry of Health is being exposed to modern survey methodology as well open dissemination of health data. Once complete, government, NGOs, and the donor community should all have reliable data for formulating health policy and directing health interventions where most needed.
As part of the reproductive health program, three model training sites (one each in Tashkent, Samarkand, and Andizhan) are now established. UNFPA will continue work started by USAID in strengthening the capacity of service providers in modern clinical practices.
USAID-supported technical advisors worked with the Ministry of Health to develop national capacity to conduct more effective immunization procedures. Also, USAID-funded technical assistance through a PASA with the Centers for Disease Control and Prevention (CDC) has helped establish an improved disease surveillance and reporting system thus contributing to a more modern epidemiologic capacity. In conjunction with Operation MECACAR, directed toward eradication of polio, USAID funds are supporting the upgrade of a polio laboratory in Tashkent to serve as a sub-regional reference laboratory for polio eradication activities.
Participant training is another cross-cutting activity used across all areas of the project portfolio. It offers important opportunities to strengthen ongoing technical assistance programs and allow Uzbek counterparts to directly observe the situation and experience of other countries. These programs must continue, though they will be reshaped over time to respond to the changing situation in Uzbekistan.
The NIS Exchanges and Training program provided U.S. short-term training for more than 300 counterparts during the 1994-1996 period. Training slots for another 150 Uzbeks are anticipated for 1997 as a result of a new training initiative that also increases opportunities for third country and in-country training. Training participants have been instrumental in bringing about changes in tax policy and administration, national budgeting, pension reform, and health reform. This effort benefits Uzbeks at all levels by providing training for qualified public officials who are able to establish laws and regulations that are transparent and foster the growth of markets and democratic governance.
The training program covers U.S. short-term training as well as in-country seminars, workshops and conferences. In-country programs have been strengthened by the establishment of a resource center where returning participants can utilize e-mail and fax facilities to keep in touch with U.S. trainers and contacts, as well as duplicating equipment to reproduce reports and other materials.
The USAID-funded training initiative has been instrumental in assisting the Government of Uzbekistan in moving ahead in areas related to the reform process. Programs are coordinated closely with those of other donors to ensure complementarity and avoid duplication.
The special initiatives category also includes other U.S. agency activities that do not directly support USAID's strategic objectives.
UZBEKISTAN
FY 1998 PROGRAM SUMMARY*
Strategic Objectives
Economic Restructuring Democratic Transition
Social Stabilization Cross-cutting / Special Initiatives Total Privatization -- -- -- -- -- Fiscal Reform 1,500,000 -- -- -- 1,500,000 Private Enterprise 14,000,000 -- -- -- 14,000,000 Financial Reform 1,500,000 -- -- -- 1,500,000 Energy 200,000 -- -- -- 200,000 Citizens' Participation -- 5,000,000 -- -- 5,000,000 Legal Systems -- -- -- -- -- Local Government -- -- -- -- -- Crises -- -- -- -- -- Social Benefits -- -- 2,000,000 -- 2,000,000 Environmental Health -- -- 800,000 -- 800,000 Cross-cutting / Special Initiatives -- -- -- 7,500,000 7,500,000 TOTAL 17,200,000 5,000,000 2,800,000 7,500,000 32,500,000 *FREEDOM Support Act (FSA) Funds
USAID Mission Director: Patricia K. Buckles
ACTIVITY DATA SHEET
PROGRAM: UZBEKISTAN
TITLE: Fiscal Reform, 110-S001.2
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1998: $1,500,000 FREEDOM Support Act
INITIAL OBLIGATION: FY 1993; ESTIMATED COMPLETION DATE: FY 1999
Purpose: Increased soundness of fiscal policies and fiscal management practices.
Background: As in all former Soviet republics, Uzbekistan upon independence lacked the systems, procedures and technical know-how needed to formulate and manage a coherent national budget and tax collection policy. However, considerable progress has been achieved. As a result of dramatic reductions in production and consumption subsidies and effective short-term cash management measures, the budget deficit has been reduced to around three percent of GDP. Similarly, inflation was reduced from over 1,300% in 1994 to approximately 117% in 1995, and is expected to decrease to less than 40% in 1996. Also, Uzbekistan has been flexible in considering fiscal policy and administrative reforms designed to bring social safety net expenditures under firmer control.
USAID Role and Achievements to Date: A USAID-funded advisory team is providing significant support to the Ministry of Justice and the State Tax Committee in formulating improved fiscal policies. USAID advisors also played a lead role in drafting a new tax code which was recently submitted to parliament and should significantly improve the current highly distorted and inequitable tax system. Additional support is helping to modernize both the indirect and direct tax administration system as well as to introduce pension reform. Counterparts welcome this assistance, and the Ministry of Finance has proven to be one of the most reform-minded segments of the Uzbek government.
Description: USAID advisors are working with Uzbek counterparts to prepare a new tax code and implement administrative measures to ensure its effectiveness. Additional technical guidance is being provided to help draft a new budget law, modernize the budgetary classification system and strengthen the budgetary planning and execution process. Both overseas and in-country training supports this effort.
Host Country and Other Donors: Ongoing work in the fiscal area is closely coordinated with other donors as part of an effort to amplify impact and stretch scarce aid resources further. For example, the British provide training for Uzbek tax officials in the United Kingdom. Also, USAID advisors are working closely with an IMF advisor who is assisting the Ministry to establish a treasury operation within the Ministry.
Beneficiaries: This effort seeks to benefit tax-paying Uzbeks at all levels by ensuring greater transparency and a more rational revenue collection and budgetary expenditure process. Potential entrepreneurs and foreign investors will benefit as more comprehensible and transparent fiscal systems are adopted. Increased government revenues and a more rational system for allocating their use should also lead to more effective governance and greater macro-economic stability.
Principal Contractors, Grantees, or Agencies: USAID activities are implemented through KPMG Barents, a contractor working closely with the Ministry of Finance and State Tax Committee.
Major Results Indicators: Baseline TargetGovt. deficit as % of GDP 5.9% (1995) 3.8% (1998) (accrued and cash basis)
Tax revenues as $ of GDP 11.5% (1995) 17.2% (1997)
Local govt. revenue as % of total 15% (1995) 25% (1998)
GOK maintains compliance with Yes (1995) Yes (1998) IFI conditions
Effective legal framework established No (1995) Yes (1998)
Avg. volume of all types of govt. $30m (1995) $110m (1997) securities during year
ACTIVITY DATA SHEET
PROGRAM: UZBEKISTAN
TITLE: Private Enterprise, 110-S001.3
STATUS: New
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1998: $14,000,000 FREEDOM Support Act
INITIAL OBLIGATION: FY 1998; ESTIMATED COMPLETION DATE: FY 2000
Purpose: Improved, more sustainable private business operations
Background: Foreign firms have made successful investments in Uzbekistan and there is also a nascent local private sector. The Central Asian American Enterprise Fund (CAAEF), headquartered in Tashkent, has also made a number of successful loans aimed at promoting private business in the country. Despite these positive steps, Uzbekistan has yet to launch a serious mass privatization program and a number of obstacles, including legal and regulatory ones, hamper private sector growth.
USAID Role and Achievements to Date: USAID briefly supported the Uzbekistan privatization program two years ago. However, a seeming lack of commitment on Uzbekistan's part to serious, wide-ranging and transparent privatization resulted in a USAID decision to curtail this involvement. More recently, new opportunities to promote private sector expansion have emerged, mainly in connection with more modest work in the legal and regulatory environment. In particular, Uzbekistan's interest in joining the World Trade Organization (WTO) increases the prospects for serious dialogue and economic reform in a number of areas related to trade and investment. USAID intends to use this opening to launch a modest legal and regulatory effort in FY1997, with particular focus on the petroleum sector, based in part on ongoing experience gained through similar work in Kazakstan and Kyrgyzstan.
Description: USAID intends to offer limited technical advice in the legal and regulatory reform area, especially as it relates to Uzbekistan's potential accession to the WTO and development of the oil and gas sector. Work would be based partly on similar activity that has already taken place in neighboring Kazakstan and Kyrgyzstan. In-country, third-country and U.S. based training is also available to support these efforts.
Host Country and Other Donors: The World Bank, EBRD, and EU-TACIS are all engaged in activity aimed at improving the business climate and promoting private sector growth in Uzbekistan. USAID's own modest technical assistance and training in this area would be coordinated closely with those of these other organizations.
Beneficiaries: Aspiring entrepreneurs stand to benefit from a more comprehensible and transparent business environment, including one that promotes greater trade and investment. The entire population stands to gain from a market-based economic system which supports employment, increases incomes, lower prices, and expands individual choice.
Principal Contractors, Grantees, or Agencies: To be determined. Mission plans to buy into existing assistance mechanisms or to competitively procure services depending on which will provide the best benefit to the U.S. Government, cost and other factors considered.
Major Results Indicators: Baseline TargetNo. of economic sectors showing 3 (1995) 10 (1998) increase in private market share
GOU maintains compliance with IFI Yes (1995) Yes (1998) conditionality
ACTIVITY DATA SHEET
PROGRAM: UZBEKISTAN
TITLE: Financial Reform, 110-S001.4
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1998: $1,500,000 FREEDOM Support Act
INITIAL OBLIGATION: FY 1993; ESTIMATED COMPLETION DATE: FY 1999
Purpose: A more competitive and market-responsive private financial sector.
Background: Banking systems in Uzbekistan are extremely weak, limiting opportunities for entrepreneurs to borrow capital to finance their investments. Potential foreign firms interested in expanding trade and investment relationships with Uzbekistan also have great difficulty conducting transactions using existing financial networks. The country lags behind its neighbors in establishing a basic legal and institutional framework for market-based capital market development and considerable work is needed to modernize the banking infrastructure. In the absence of such activity, investment opportunities will be limited and prospects for future economic growth will be severely constrained.
USAID Role and Achievements to Date: USAID activities in this area have been modest thus far, including some U.S.-based, short-term training programs for Uzbek bankers and other financial sector officials as well as technical assistance through the International Executive Service Corps and farmer-to-farmer volunteers. Some bankers from Uzbekistan have also participated in regional training programs within Central Asia.
Description: FY1998 funding would be used to continue a modest technical assistance effort aimed at improving the banking infrastructure and developing new laws, guidelines and procedures for ensuring more effective financial market development. Limited training for Uzbek counterparts is also included as part of this initiative. Banking supervision and possibly accounting infrastructure is also anticipated, building in part on work previously conducted in Kazakstan and Kyrgyzstan.
Host Country and Other Donors: USAID work in this area is closely coordinated with that of other donors. EU-TACIS has developed a banking training facility in Tashkent, an activity with which EBRD and the Turkish government are also involved. The World Bank has identified the financial sector as a key area and has provided some technical assistance to both the Central Bank and commercial banks.
Beneficiaries: Immediate beneficiaries include professionals involved in financial development, including private bankers and government officials. Newly emerging entrepreneurs as well as a broad range of Uzbek citizens should benefit from a more effective and efficient banking system.
Principal Contractors, Grantees, or Agencies: USAID activities are typically implemented through a U.S. commercial contractor working closely with local counterparts at the National Bank and the Ministry of Finance.
Major Results Indicators: Baseline Target Private bank deposits as % of GDP 4.0% (1995) 12.0% (1998) No. of financial services available 5 (1995) 13 (1998) % of firms using new accounting 0 (1995) 10% (1998) standards
ACTIVITY DATA SHEET
PROGRAM: UZBEKISTAN
TITLE: Energy, 110-S001.5 (CAR Regional)
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1998: $200,000 FREEDOM Support Act
INITIAL OBLIGATION: FY 1996; ESTIMATED COMPLETION DATE: FY 1999
Purpose: A more economically sound and environmentally sustainable energy system.
Background: Central Asia is rich in all major energy resources including oil, gas, coal and hydropower. The U.S. has a strong interest in the political and economic stability of this resource rich and strategically located region. The challenge is to develop a policy framework conducive to private investment and a market economy that will promote efficient, safe and environmentally sound resource recovery including the development of new transportation routes, thereby, assisting the region in realizing its potential as a significant contributor to world petroleum supply. Furthermore, energy has the potential to serve as the engine for future economic growth for the entire region.
USAID Role and Achievements to Date: USAID has provided advice in the preparation of an international oil and gas consortium for the Aral Sea Basin and has aided the Kazakstan state entity charged with development of Kazakstan's interests in the Caspian Sea, Kazakcaspishelf. In Kazakstan, consultants have also assisted in drafting rules and regulations for licensing and environmental safeguards, and preparation of a pipeline tariff methodology, critical in removing policy impediments for investment in and development of oil and gas. Monthly round tables between industry and the U.S. Government within a consultative framework developed jointly by the U.S. Embassy and USAID/Central Asia have been of great value.
USAID's continued work in the power sector of Kazakstan and Kyrgyzstan has contributed to policy reforms leading to the sale of over 50% of the Kazakstani electric power system to private investors including a U.S. corporation, and establishment of the first NIS independent regulatory commission in Kyrgyzstan. In Kyrgyzstan, assistance has been critical in passing energy and electricity laws, conditions for the World Bank and Asian Development Bank's $90 million loan for Kyrgyzstan power and district heating rehabilitation and modernization.
Description: USAID assistance is within the context of a U.S./Central Asian Republic Regional Energy Initiative focusing on (a) improving the legal and regulatory framework for oil and gas exploration, production and transportation; (b) identifying future markets for natural gas and defining investment opportunities for expanded and more efficient use of natural gas; and © further restructuring and regulatory reform in electric power and strengthening of regional electricity cooperation.
Building on work which has already begun in Kazakstan, oil and gas sector policy assistance is expected to begin in early 1997 in Turkmenistan and Uzbekistan. This assistance will develop a legal and regulatory framework promoting market competition, transparency, and accountability. Ongoing power sector work in the region is designed to further strengthen national and regional power markets, and facilitate intra-regional trade in electricity by introducing internationally acceptable commercial contracts and pricing practices. This is based on USAID's success in developing a regional power grid in the Baltic countries. This assistance will integrate the Central Asian power markets into larger and more viable markets for investment in new hydro and gas-fired generation, as well as transmission projects within and outside the region - - which may include markets in China and Pakistan.
Host Country and Other Donors: USAID works with counterpart ministries in the governments of Kazakstan, Kyrgyzstan, Uzbekistan, Turkmenistan, and to a limited extent in Tajikistan. The other bilateral and multilateral agencies include the World Bank, the European Bank for Reconstruction and Development, the Asian Development Bank, and EU/TACIS.
Beneficiaries: This assistance will benefit local industrial and residential consumers in ensuring reliable and efficient energy resources and in expanding the diversity of their energy supply.
Principal Contractors, Grantees, or Agencies: Hagler-Bailly is the principal implementor, but assistance is also being provided by Burns and Roe, the U.S. Energy Association, and the U.S. Department of Energy.
Major Results Indicators: Baseline TargetNumber of independent regulatory agencies established 0 (1994) 3 (1999)
Private investment in power systems increased 0 (1994) 2 (1999)
Legal and regulatory framework established for oil and gas exploration and development 0 (1994) 2 (1999)
ACTIVITY DATA SHEET
PROGRAM: UZBEKISTAN
TITLE: Citizens' Participation, 110-S002.1
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1998: $5,000,000 FREEDOM Support Act
INITIAL OBLIGATION: FY 1993; ESTIMATED COMPLETION DATE: FY 1999
Purpose: Increased citizens' participation in political and economic decision-making.
Background: Government control in Uzbekistan remains very much centered in the office of the president. Meaningful opposition is not tolerated, the press is closely controlled, and completely free and fair elections have yet to be held. President Karimov was confirmed in office through 2000 following a referendum. A new parliament was elected in a process that allowed voters to choose among officially sanctioned candidates. Despite these developments, the government appears to welcome the emergence of a non-governmental sector as well as input from foreign legal experts in developing and analyzing potential new laws and legislation.
USAID Role and Achievements to Date: Several USAID-funded small grants programs are available to directly fund the NGO sector in Uzbekistan. Through October 1996, 47 such grants were provided, covering areas including human rights, environmental issues, women's rights, agricultural development, civic education, rule of law and market transition. This support has also invigorated the formation of NGOs and prompted them to seek ways to improve the legal environment in which they operate. As a result of USAID activity, local NGOs have advocated for legal change and a new association of NGOs is in its first stages of formation. The presence of American Bar Association (ABA) advisors in Tashkent has also proven to be very effective. The advisor works closely with local lawyers and judges, gives them updates on developments elsewhere, and has been requested by the government to comment on and in some cases help shape future laws and legislation. Finally, modest election assistance in 1994 provided some measure of voter education and ensured that foreign observers were informed about specific laws and procedures so that they could provide a more accurate and useful assessment of electoral deficiencies; similar assistance is planned in anticipation of future elections. In the latter part of FY 1996, a survey of electorate attitudes was initiated.
Description: USAID's current program focuses on introducing rudimentary concepts of civil society and democratization to Uzbekistan. Technical advisors, training, and grants to local organizations are all used in this effort to disseminate information and energize local counterparts about the role and potential of non-governmental players in contributing to the economic, political and social development of the country. The Counterpart Consortium focuses on NGO training and provides small support grants to local NGOs. The Eurasia Foundation, whose regional office is located in Tashkent, has also been very active. Although not all their grants are targeted at NGOs, many do involve information and education activities which help inform the public and provide opportunities to engage in broader policy issues. Another USAID grantee has begun working with local broadcasters to improve the professionalism and viability of independent media outlets, although financial independence will not be sufficient to produce editorial independence in the current environment.
Host Country and Other Donors: The United States is the major foreign donor in the area of democratization in Uzbekistan. Other donors have sponsored parliamentary exchanges and the Adenauer Foundation from Germany is especially active. The EU signed a partnership and cooperation agreement with Uzbekistan in 1996 and has an interest in maintaining human rights. NGO activity has also received support from several donors, including the United Nations agencies. USAID coordinates with these groups in carrying out its own activities.
Beneficiaries: Immediate beneficiaries include individuals directly associated with the Uzbekistan NGO sector and legal profession. Many more should benefit through the public interest advocacy and social services provided as the NGO sector grows and expands. More broadly, all citizens stand to benefit from strengthened civil society and the introduction of more democratic norms and practices.
Principal Contractors, Grantees, or Agencies: USAID activity in democratization in Uzbekistan is largely carried out through the work of various American PVOs. Those involved include ABA/CEELI, Internews and the International Foundation for Election Systems (IFES). American groups such as Goodwill Industries, Aid to Artisans, and the Citizens Network for Foreign Affairs all participate in local NGO development as part of the Counterpart Consortium.
Major Results Indicators: Baseline TargetsNo. of Advocacy NGOs 0 (1992) 200 (1999)
Cumulative #. of open hearings 0 (1992) 5 (1999) or consultative processes addressing legislative/policy issues
No. of independent stations 0 (1992) 30 (1999)
ACTIVITY DATA SHEET
PROGRAM: UZBEKISTAN
TITLE: Improve the sustainability of social benefits and services 110-S003.2
STATUS: New
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1998: $2,000,000 FREEDOM Support Act
INITIAL OBLIGATION: FY 1998; ESTIMATED COMPLETION DATE: FY 2001
Purpose: Improved sustainability of social benefits and services.
Background: The Government in Uzbekistan has used the social sector hardships as an explanation as to why it has been slow in implementing economic reforms. Unfortunately this commitment to the social sector has not resulted in improved social services. Given this situation, Uzbekistan needs to implement a combination of fee-based social services (for those able to afford it) to ensure sustainability, combined with targeted assistance to vulnerable populations. An area of focus in the social sector for USAID has been the health sector.
Over the past several years USAID together with the World Bank has maintained a dialogue with Government of Uzbekistan officials on a full scale health reform demonstration. Given the hesitancy of the Uzbek government, USAID utilized "earmark" funds to support various interventions to pave the way for more concerted attention to the needed health financing reforms. USAID-funded activities have played a valuable low key role in demonstrating that quality health services can be made available to the people at low cost if managed efficiently.
Government of Uzbekistan officials have indicated increased receptivity to technical assistance in the area of health reform including the financing of health care services. The World Bank has indicated it would support a roll out of a successful USAID model.
USAID Role and Achievements to Date: USAID has collaborated with the World Bank in project identification and project design work for restructuring the health system of Uzbekistan. USAID has, to the extent possible, programmed earmarks in medical partnerships and reproductive health to introduce to the health sector market-based approaches that increase individual choice and rely on the private sector. An annual savings of approximately $700,000 from expenditures on vaccine procurement and commodities has been observed as a result of USAID funded assistance in revising immunization schedules to modern standards. As a result of the medical partnership, the Ministry of Health regards the Tashkent State Medical Institute as a demonstration site for new management approaches for providing health care. As a result of the advertising and training provided under the Contraceptive Social Marketing Program (known as the "Red Apple" program), 90% of pharmacies in the two market test sites are selling modern contraceptives.
Description: Based on the expressed interest of the Government of Uzbekistan to move forward with health reform, USAID plans to provide the training and technical assistance necessary for a demonstration of health reform in one oblast using lessons learned from the health reform demonstrations in both Kazakstan and Kyrgyzstan and to apply them with full consideration of the Uzbek context. USAID plans to work both at the national and local levels in the legal and regulatory, administrative, and technical spheres. Assistance will be provided to both the government and nongovernmental sectors. Results of the model will be the basis for roll out under a World Bank project.
Assuming positive results from this focused attention to the health sector USAID anticipates that it can begin to provide more generalized training and technical assistance to the social sector. This move would be determined in close collaboration with advisors working in the market transition and democratic transition areas.
Host Country and Other Donors: Various Government of Uzbekistan ministries, Presidential apparat, local level government officials and government employees will cooperate in the implementation of this program. USAID work will also be closely coordinated with that of other donors in order to ensure that successful pilot activities are extended. As noted, the World Bank anticipates replicating a USAID funded model to other regions of the country.
Beneficiaries: Immediate beneficiaries will include the population of oblasts participating in one or more demonstration sites. Funding from other donors should allow these benefits to be spread to other regions of the country.
Principal Contractors, Grantees, or Agencies: To be determined. Mission plans to "buy in" to existing assistance mechanisms or to competitively procure services depending on which will provide the best benefit to the U.S. Government, cost and other factors considered. To the extent possible the Mission will use mechanisms in place for similar work in Kazakstan and Kyrgyzstan to maximize efficiency and effectiveness.
Major Results Indicators: Baseline Targets % of central budget allocated 30% (1994) 50% (1999) to primary health care Number of independent primary care 0 (1994) 40 (1998) practices% market share of private pharmacies 12% (1994) 60% (1998)
ACTIVITY DATA SHEET
PROGRAM: UZBEKISTAN
TITLE: Environmental Health, 110-S003.3 (CAR Regional)
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1998: $800,000 FREEDOM Support Act
INITIAL OBLIGATION: FY 1993; ESTIMATED COMPLETION DATE: FY 1998
Purpose: Reduced environmental risks to public health.
Background: Following the period of Soviet central planning, a legacy of problems related to industrial pollution and environmental degradation remained. A prime illustration of such environmental degradation is the Aral Sea disaster zone, where several million people have been deprived of access to safe water and have experienced abnormally high rates of morbidity, non-specific diarrheas, and viral hepatitis. While much of USAID's early environmental efforts were focused on humanitarian assistance to the impacted Central Asian population, the challenge now is to focus on reform measures that will reduce levels of urban and industrial pollution in the region and to establish the policy and institutional framework to manage precious natural resources, including water.
USAID Role and Achievements to Date: USAID's Aral Sea program has provided safe drinking water for 1.1 million persons, improved the health/sanitation practices of 1.5 million persons, and already promoted significant policy changes needed for more efficient water use. The turnover to local officials of water treatment/transmission equipment combined with related training in Kazakstan, Turkmenistan and Uzbekistan are graphic demonstrations that USAID is one of the few donors delivering concrete results in the Aral Sea disaster zone.
In an effort to prevent the poor planning and resource utilization that lead up to issues like the Aral Sea disaster, all five republics have participated in seminars for regional water cooperation; are conducting analyses required for the introduction of water pricing; and have established short-term regional water sharing agreements. In Kazakstan, draft legislation is being prepared for establishing water user associations, a new national environmental law, and a pilot air pollution emissions program. While the first phase in developing a national environmental action plan in Kazakstan is now underway, legislation is now being prepared for establishing air pollution standards in Uzbekistan.
Description: USAID assistance appears critical for the Central Asians to maintain the needed focus on policy reform, including the introduction of rational water pricing schemes and regional agreements on water sharing and quality control among all the affected states in the Aral Sea basin. Additional emphasis is also being placed on the passage of reform legislation which would establish water user associations, waste management guidelines/requirements, and a pollution fines system. Strong coordination with other donors is essential as the Agency begins to phase down its own direct involvement. This coordination offers important opportunities for USAID to use its own field experience to leverage substantial resources and help shape the programs and policy agendas offered by other donors.
Host Country and Other Donors: The World Bank, United Nations Development Program, and EU-TACIS have been involved in these efforts. Major host country counterparts include the Interstate Council for the Aral Sea - Sustainable Development Commission, heads of state water agencies from each of the various republics, and various other ministries of each republic. In addition, there has been substantial collaboration with a wide range of other officials at the local and national levels.
Beneficiaries: This assistance seeks to benefit all Central Asia citizens by reducing serious environmental hazards which they encounter in their daily life.
Principal Contractors, Grantees, or Agencies: These organizations include CH2M-Hill Consortium, Harvard Institute for International Development, World Environmental Center, Moscow State University and ISAR Cooperative Agreement.
Major Results Indicators: Baseline Target**Target data will be developed during the next planning period.National water pricing strategies support policy changes at the local 0 (1994) TBD and national levels
Critical watersheds subject to effective management and control policies/international treaties 0 (1994) TBD
Agricultural water management investments leveraged by other donors (bilateral and multilateral) $0 (1995) TBD
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