Uzbekistan’s President Hopes a Decree Will Spur Green Economic Growth

In November last year, during the parliamentary meeting of the Oliy Majlis, Uzbekistan’s legislature, Uzbek President Shavkat Mirziyoyev proposed that 2025 would be the “Year of Environmental Protection and the Green Economy.” He emphasised that the strategic goal of “New Uzbekistan” is to achieve environmental sustainability and economic growth by transitioning to a resource-efficient, green development model.

Each year since gaining independence, the Uzbek president has issued a decree on the eve of Constitution Day, observed on 8 December, setting the strategic priority for his administration for the coming year. These decrees generally reflect development priorities, as reflected in the Year of Support for Youth and Business (2024), Year of Development of Science, Education and the Digital Economy (2020), Year of Active Investments and Social Development (2019), and so on. While not all goals are fully achieved within a given year, these decrees provide a foundation for advancing the country’s socioeconomic development by setting out a framework for further legislation and policy formation at various levels of government.

As the most populous country in Central Asia with 37 million inhabitants, Uzbekistan faces pressing environmental challenges, including water shortages, soil erosion, desertification, and air pollution. The ongoing Aral Sea crisis, for instance, remains the country’s most significant ecological disaster, affecting not only Uzbekistan but also its neighbouring countries. While Uzbekistan has made strides in economic modernisation in recent years, environmental policy has often lagged behind. 

Declaring 2025 as the Year of Environmental Protection and the Green Economy signals a shift toward making sustainability a central development priority. A successful implementation of this year's decree will determine whether the country can transition to a low-carbon economy, improve resource efficiency, and enhance climate resilience—aligning with global commitments such as the UN Sustainable Development Goals and the Paris Agreement.

The 2025 programme aims to improve the country's environmental situation by focusing on several areas of intervention. The main objectives of the decree are community-level initiatives, such as creating green spaces, encouraging technical assistance to reduce emissions, and attracting financing for large projects. 

In terms of community-level initiatives, the decree emphasizes public engagement by linking health and lifestyle improvements to its environmental vision. For example, the programme promotes a national movement for “green families,” encouraging environmental stewardship alongside healthy eating, daily physical activity, and the use of eco-friendly transportation. This holistic approach aims to cultivate an eco-conscious culture, ensuring that residents actively participate in and benefit from the country’s environmental transformation efforts.

Equally important is technical assistance to reduce emissions, which is critical given Uzbekistan’s current reliance on fossil fuels and outdated industrial practices; these factors exacerbate air and water pollution, undermine public health and economic productivity.

Complementing these efforts, securing funding for large-scale projects is essential for modernising infrastructure and expanding renewable energy technologies. This, in turn, supports sustainable economic growth, generates new job opportunities, and reduces vulnerability to environmental shocks. Together, these initiatives form a comprehensive strategy that balances immediate community-level improvements with the broader systemic changes necessary for a resilient and sustainable future.

Small projects have also been underway, spurring forward the goals outlined in the state programme. This has included a tree-planting campaign organised by the Ministry of Ecology, Environmental Protection, and Climate Change in cooperation with the Zamin International Public Foundation, held on 19 March 2025. The Oxygen Park Project was developed as part of the national Yashil Makon ("Green Space") initiative to enhance Tashkent’s greenery, create a favourable environmental setting, and improve recreational spaces for residents and visitors. Projects like this one demonstrate how the decree seeks to mobilise support for grassroots projects while also securing investment for wide-reaching impacts, such as advancements in renewable energy.

If administered successfully, the initiative will not only continue to expand urban green spaces but also enhance the overall ecological aesthetic of neighbourhoods through improved street landscaping and the development of “shaded walking streets” where trees and greenery are strategically planted. These measures aim to provide residents with accessible recreational areas, reduce urban heat, and improve air quality.

In recent years, Uzbekistan has already been actively working to reduce its carbon footprint by developing green energy and implementing energy-saving technologies in cooperation with companies such as Masdar and ACWA Power. As part of the state programme, the share of renewable energy sources out of total electricity generated is set to increase significantly to 26 percent. To achieve this, 16 new green power plants with a total capacity of 3.5 GW will be launched, alongside the construction of hydroelectric power stations with a combined capacity of 160 MW.

Additionally, the programme plans to install small solar panels in 35,000 households and 27,000 private and social facilities. By the end of 2026, 3,000 small hydropower plants with a combined capacity of 164 MW are set to be constructed. A key step in advancing the ‘green’ economy will be the introduction of special tariffs for electricity generated from solar and wind power, as well as waste utilisation, starting from 1 April 2025.

To support these efforts, significant investments are expected, with the state programme explaining how the government plans to take measures from 2025 to attract concessional loans and grant funds to support green and low-carbon development projects from international financial institutions and investment banks. Up to EUR 200 million will be gradually attracted from the European Bank for Reconstruction and Development, while the World Bank will provide USD 10 million to help reduce methane emissions in the energy sector. Additionally, the Korea International Cooperation Agency, through the Global Green Growth Institute, will contribute USD 6.5 million in technical assistance to enhance green cooperation between Uzbekistan and Korea. Under the World Bank’s iCRAFT project, USD 7.5 million will be secured to support the reduction of 500,000 tons of greenhouse gas emissions. Furthermore, the German Society for International Cooperation will invest EUR 20 million to promote industrial greening and reduce harmful gas emissions from nitric acid production facilities.

Beyond the year-long government scheme, Uzbekistan is already taking noteworthy steps to position Central Asia as a key hub for the development of a green economy and clean energy, particularly in solar and wind power. Each year, Uzbekistan commissions about 2 GW of new solar and wind generation capacity, contributing to the region’s efforts to develop sustainable energy infrastructure. Though, additionally, one major initiative is the revival of the Great Silk Road through regional energy interconnectivity, linking Central Asia, the Caucasus, and Europe via a unified energy corridor. A recently signed multilateral agreement with Kazakhstan and Azerbaijan at COP29 will enable the export of renewable electricity through the Middle Corridor, with Azerbaijan constructing an undersea cable along the Black Sea to connect to Europe. This initiative will establish reliable transmission routes for environmentally friendly energy, further strengthening Uzbekistan’s role in the global energy transition. 

Another major initiative is a large-scale environmental restoration project designed to mitigate the effects of climate change. This includes establishing 100,000 hectares of green zones on the dried seabed of the Aral Sea and expanding forested areas in the Aral region to 2.1 million hectares. Given the profound environmental and socio-economic impacts of the Aral Sea crisis on its littoral states, this initiative is a crucial step towards regional ecological recovery and long-term sustainability.

Yet, for a country rich in natural resources, significant challenges remain. This includes resistance from traditional energy sectors reliant on fossil fuels and concerns over the financial burden of large-scale green investments. Uzbekistan ranks 11th globally in natural gas production and 14th in reserves, making it crucial to balance fossil fuel export interests with energy transition efforts. The challenge lies in balancing the energy transition and green economy measures with its interests in the fossil fuel trade, where a strategic approach is needed to leverage existing energy assets while investing in renewable alternatives 

Promisingly, previous decrees, such as the Year of Active Investments and Social Development, which took place in 2019, appear to have delivered tangible results. That year, the value of foreign direct investment reached  $4.2 billion, more than tripling the previous year’s total. The share of investment in GDP rose to 37 percent, also reflecting substantial growth. Additionally, Uzbekistan secured its first international credit rating and successfully placed $1 billion in bonds on the global market. While the decree may not have been solely responsible for these economic outcomes, it nonetheless helped direct the focus of relevant government ministries and agencies.

Translating the 2025 ambitions into tangible results will require sustained political will and transparency, particularly from government agencies responsible for policy execution. President Mirziyoyev has been a key advocate for the green transition, backed by institutions such as the Ministry of Ecology, Environmental Protection, and Climate Change. 

In this regard, the declaration of 2025 as the Year of Environmental Protection and the Green Economy may build a foundation for energy transition and sustainable development. By institutionalising environmental priorities, the government is signalling its intent to balance economic growth with sustainable development.

Photo: Uzbekistan Presidential Administration

Ageing Energy Infrastructure is Holding Central Asia Back

Blackouts and "rationalisation" of energy consumption (a euphemism for coordinated blackouts) are all too frequent in Central Asia. Energy shortages arising from limited generation, insufficient energy imports, or the poor state of the transmission network mean that blackouts recur. This winter, however, the situation grew significantly worse. Amid exceptional cold weather, many households, businesses, and schools remained without heating and electricity for days on end. Unusually, the blackouts not only afflicted communities in remote regions but also capital cities.

Most of the region’s inefficient power generation and transmission infrastructure dates to the Soviet era. Central Asia faces rising demand for energy, spurred by population growth and climate change. Steadily rising energy consumption has strained power grids. Demand from new types of consumers, such as cryptocurrencies miners, has also exacerbated recent crises.

At the same time that they face chronic energy shortages, Central Asian states must also significantly cut carbon emissions and accelerate the transition to clean energy—a challenging path, especially for Kazakhstan, Uzbekistan, and Turkmenistan, where domestic production of hydrocarbons secures the majority of domestic energy consumption.

Besides generation capacity, natural gas supplies and distribution present their own technical and political problems. Kazakhstan is the world’s ninth-largest exporter of coal and crude oil and twelfth largest exporter of natural gas; its total energy production covers more than twice its energy demand. Yet, it has not been able to reliably supply electricity within its own territory. In mid-January, Turkmenistan, despite sitting on one of the world's ten largest natural gas reserves, disrupted gas supplies to Uzbekistan for over a week due to technical problems. Last year, several regions of Uzbekistan, Kazakhstan, and Kyrgyzstan were hit by blackouts caused by a technical incident in the so-called “energy ring,” a Soviet-era grid connecting border regions of these three countries, including the Kyrgyz and Uzbek capitals and Kazakhstan’s largest city, Almaty.

Central Asian authorities and international stakeholders have acknowledged the urgent situation facing the energy sector. The existing infrastructure is being operated “well beyond its shelf-life,” and loses caused by inefficiency may reach around 20% in the electricity sector.

But addressing all these demand-side and supply-side challenges simultaneously is impossible; governments in the region will have to prioritize specific sub-areas of their energy sectors. In the meantime, they will need to grapple with new economic challenges arising in part from Russia’s invasion of Ukraine.

The recent blackouts sparked considerable public anger given the financial impact, health risks, and general discomfort. Protests took place in several cities across Kazakhstan, Kyrgyzstan, and Uzbekistan. While these recent protests were small, the “Bloody January” protests in Kazakhstan and the Karakalpakstan protests in Uzbekistan point to the possibility that social and economic grievances can give rise to more significant unrest. Furthermore, many families relied on stoves to keep their homes warm, adding to the already high levels of pollution in Central Asia cities, resulting in further complains.

These extensive blackouts are also of concern to potential international investors. Without stable supplies of such basic utilities, investors will be deterred from Central Asia, leading to further economic stagnation. The ongoing crisis is a big test for Kazakhstan and Uzbekistan, and to a lesser extent Kyrgyzstan, three countries whose presidents have linked their political legitimacy with improving the economic and social conditions inside their country. To create jobs for their growing populations, these countries must grow their economies. But to grow their economies, the countries must boost energy production and significantly improve the distribution network. Securing the necessary financial resources for the extensive renovation of energy infrastructure is they key step for solving the energy shortages in the region. But securing new financing has become even harder because of the Russian invasion of Ukraine, which has significantly added to the already significant risks of investing in Central Asia, resulting from power struggles and corruption within the ruling regimes.

This has not stopped Central Asian leaders from promising new injections of investment in energy generation and improvement of the existing grid. President Shavkat Mirziyoyev of Uzbekistan announced a package of $1 billion to be invested in energy generation in the Tashkent region. But Mirziyoyev’s promise of new investment was clearly a political ploy, an effort to respond to public anger. The details of the investment and the expected economic, social, and political impact remain unclear. Governments in the region are luring new investors in the renewable energy sectors by setting ambitious targets. Kazakhstan aims to introduce new projects totaling 6.5 GW by 2035 and Uzbekistan plans to launch 7 GW of new capacity by 2030. However, many of these projections include nuclear power projects involving Russia’s Rosatom, which are now very unlikely to break ground.

Successful renovation of the energy sector at the national level also requires stronger political partnerships between countries given knock-on effects in the broader region. Tajikistan and Uzbekistan deliver electricity to Afghanistan, but domestic power outages in Uzbekistan briefly halted the export last month. Such disruptions in the national or regional grids are bound to reoccur and will add to the hardships faced by Afghans.

ADB predicts that demand will rise 30 percent across the entire CAREC region (which includes Central Asia, the Caucasus, Mongolia, and Pakistan). This means that no country has significant excess capacity it can share with its neighbors. The bank’s estimates put the cost of energy infrastructure modernisation for the region at between $136 billion to $339 billion by 2030. Upgrading transmission and distribution infrastructure alone is estimated to cost between $25 billion to $49 billion.

There are also other hidden costs. For example, the state usually subsidises electricity, gas, and coal, and any price increase brings a high risk of public dissatisfaction. Furthermore, there is a vast discrepancy in consumption between the winter seasons and the summer, which both generation and transmission infrastructure needs to reflect. The revenue potential of energy exports is deeply intertwined with the global economic situation. Hence, current estimates and political promises are bound to be revised sooner or later.  

The recurring blackouts and subsequent deep freeze in Central Asia were caused by three decades of neglect, corruption, and poor planning. Any significant improvement in the situation would require years of persistent effort to overcome economic and political challenges. After the disruptions of the pandemic and the Russian invasion of Ukraine, valuable time has been lost to begin the urgently needed modernisations of power plants and grids. For ordinary people in Kazakhstan, Kyrgyzstan, Uzbekistan, Tajikistan, and Turkmenistan, the countdown to the next winter has already begun.

Photo: David Trilling

What Role Do Economic Conferences Play in Uzbekistan’s Development?

Back in November, I travelled to Samarkand to attend the Uzbekistan Economic Forum. I had been to the ancient city nearly a dozen times, but this was my first professional event there. The Uzbekistan Economic Forum did not suddenly convince everyone that Uzbekistan is a special country. But it did show that Uzbekistan was becoming a more normal one.

Not everyone in Uzbekistan was happy with the conference. Some journalists and bloggers questioned why Uzbekistan’s government needed to convene yet another major and costly event. Others wondered if the return on investment would be worth it. Concerningly, the costs of the forum were not disclosed. Clearly, the organisers could have done a better job in publicly communicating the rationale for such a large event and why such conferences matter. To me, there are three reasons why they do.

First, Uzbekistan needs to foster regular dialogue with businesses partners, investors, and lenders who are independent from the government. Such actors are accountable to their shareholders, are subject to intense international media scrutiny, and must follow varied regulations around governance and sustainibility. Therefore, they can audit Uzbekistan’s achievements and shortcomings more honestly, generating important information for local media and civil society.

A country whose debt burden is equal to 40 percent of its economic output must be open to scrutiny of its economic policies and institutions. The forum’s thoughtful programme presented the opportunity for such scrutiny, with topics ranging from political reforms to economic inclusivity. The organizers brought in people who could ask tough questions (including former CNN and Bloomberg journalists) as chairpersons for the panel discussions. Senior representatives from the IMF, IFC, World Bank, European Bank for Reconstruction and Development (EBRD), Asian Development Bank, Asian Infrastructure and Investments Bank, regional central bankers, financiers, investors, and many consultants featured on these panels.

There was a time when frankness came at a cost. In May 2003, panelists from the EBRD, which was leading Uzbekistan through its protracted post-communist transition, spoke truthfully about the country’s economic and political shortcomings at the Annual Meeting in Tashkent. By 2005, EBRD war hardly making any loans in Uzbekistan and by 2007 it had exited the country altogether, unable to operate in an environment in which the authorities demanded deference. It was not until a decade later that EBRD returned to Uzbekistan. Today, the bank has 65 active projects with over EUR 2 billion in total portfolio value. With that much at stake, it is reasonable to expect that the EBRD and peer institutions will continue to speak up, especially as its activists continue to push the bank to live-up to its pro-democracy mandate.

Second, Uzbekistan needs a platform to prove its bureaucratic capacity, as it seeks to stay the course of increasingly difficult structural reforms. In contrast to heavily protocolled political events with predetermined outcomes such as the Shanghai Cooperation Organization or Inter-Parliamentary Assembly, participants of economic forums in Uzbekistan are more demanding, represent diverse stakeholders, and care about performance dynamics. The newly formed Ministry of Economy and Finance, the Ministry of Labor and Poverty Reduction, and the Ministry of Justice—which oversee social policy—face new challenges every day. The nominally independent Central Bank and the judiciary are undergoing significant changes with unclear outcomes. They will all need to prove that they can uphold Uzbekistan’s domestic and international commitments and pay the bills.

At the same time, reform-minded public administrators themselves need businesses, civil society groups, and international professionals to get their president's attention in the highly centralized system. In Uzbekistan, the presidential administration can be reactive, prioritizing issues in response to media coverage, expert commentary, formal reports, and face-to-face meetings. It is no secret that certain business leaders may enjoy better access to the president that many ministers do not have. So, it is good when investors are both long-term thinkers and legally bound to seek clean deals. These investors and reform-minded public administrators can form coalitions as part of two-level game through which domestic reformers in transition economies find the means with which to amplify their voices.  

Alongside many countries “stuck in transition,” the Uzbek government continues to face challenges outlined by the IMF in its 2014 review marking 25 years after the end of communism in Europe. Uzbekistan needs to reign in its exorbitant public expenditures, improve the business climate, enable market competition, enforce state divestment, and ensure rule of law. It was reassuring that almost all keynote speakers in Samarkand said the same. By the end of the first day (most discussions can be watched freely online), it was clear that there was broad consensus about what needs to happen to enable prosperity.

The Uzbek ministers and senior officials speaking at the conference shared this consensus and acknowledged problems. Some even joked, earning sincere laughter from the diverse audience. Importantly, the conference was held in Uzbek and English — this was more than political symbolism. Russia’s war on Ukraine has had varied effects on the Uzbek economy. These have been mostly negative (e.g. reduced financial inflows and increased social policy burden), though there have been a few silver linings (e.g. capital relocation, higher commodity prices, and parallel exports). After independence, Uzbekistan, like other post-Soviet states, pursued legislative and regulatory harmonisation with Moscow. But the country’s bureaucracy is starting to look beyond Russia. The use of the Uzbek language helps the central government connect to a wider swath of society. The use of English, meanwhile, represents a search for a wider cooperation with foreign countries.

Finally, these conferences help set expectations—and there are many expectations being set. That Uzbekistan will privatise the promised 1,000 more state-owned enterprises. That utility and energy prices will be liberalized. That the economic growth will be increasingly supported by foreign direct investment rather than direct borrowing. That more will be done to empower and separate the judiciary from the executive branches. That the Oliy Majlis, Uzbekistan’s legislature, will pass new competition law and that it will be signed. That Uzbek GDP will rise to USD 100 billion by 2026 and USD 160 billion by 2030. That the country embraces a free market economy, trusting that its people can achieve more with less state intervention. Whether Uzbekistan meets these high expectations is something that can be assessed when it is time to gather for another forum.

Uzbekistan is seeking a dialogue with the world. We can quibble about the optics of such conferences, but they do serve to build trust and generate credibility. There was a time when economic conferences in Uzbekistan had long titles, glorified the present, and discussed the future in only abstract terms. Back then, the desired outcome was applause—those conferences played no role in the country’s economic development. In Samarkand, a different kind of conference took place.

Photo: Uzbekistan Economic Forum

Participatory Budgeting Opens Path for Democratic Reform in Uzbekistan

Since his inauguration in 2016, President Shavkat Mirziyoyev has paved the way for many policy reforms in Uzbekistan. Four of these reforms stand out as truly consequential.

The first two reforms are economic. The move to a mostly market-based foreign currency regime and the implementation of tax reforms delivered significant positive stimuli for economic growth and helped to open the Uzbek economy to foreign investment.

The third reform put an end to the abhorrent practice of state-sponsored forced and child labor. Possibly more than any other, this reform has earned Uzbekistan international praise. The Economist named Uzbekistan “country of the year” in 2019, describing it as a country “that abolished slavery.” Although labour rights and state intervention issues persist in cotton production clusters, the reform effort still successfully stigmatised forced labor among top officials, improved many labour conditions, and opened the Uzbek cotton and textile industry to international trade.  

The fourth reform has garnered less international attention but is no less significant. The Citizens’ Initiative Budget is a participatory budgeting platform that lets the public decide where they think it is best to spend public money. The policy aims at better redistribution through decentralization of budget planning.

The initial outcomes are exciting: 7.8 million votes were cast in support of 61,500 spending projects in 2022. The votes determined the allocation of USD 100 million across 98 percent of all micro-districts (mahallas) in Uzbekistan. Compare this to 2021, when 6.72 million votes were collected on 69,700 projects. This year voter turnout increased, while the collective action improved with fewer—and likely more realistic—nominated projects.  It is estimated that 33 percent of Uzbek adults participated in the voting process in 2022.  A prominent blogger suggested that the participatory budgeting process was the country’s most competitive election. While tongue in cheek, this reaction to participatory budgeting points to its significance—people mobilise and vote for the option that best represents their needs.

Without true electoral accountability in the country, Uzbekistan’s central government often receives distorted signals from its people. That is why reforms that leverage the tools of participatory democracy are so crucial. Arguably the most significant recent example of distorted signals was when in July of this year Karakalpakstan’s legislature and government unanimously supported the constitutional amendments to dissolve its semi-autonomous status. Mass civil unrest erupted leading to deaths, injuries, and property damage. President Mirziyoyev later berated the Karakalpak lawmakers for failing to communicate the people’s concerns and wishes to the central government.

Alongside the participatory budget, another valuable source of signals is Uzbekistan’s media environment, which has become more free since 2016 as outspoken bloggers and probing journalists write for a range of independent digital media outlets. Even though the state-owned national television, radio, and print media have little impact on policymaking and there remains censorship, the Presidential Administration now regularly cites Telegram messages and local reports when demoting bureaucrats and municipality heads—a sign that the media is supporting accountability. Investigative reporting also sometimes forces municipal or regional authorities to abandon or adjust unpopular decisions before public anger escalates.

As promising such anecdotal occurrences of accountability may be, they do not and cannot accurately represent or equitably empower all the people of Uzbekistan. For one, there is a clear digital divide in how many people own smartphones and can afford or access the internet. Richer urban areas with better education, more infrastructure, higher incomes, and more active civil society enjoy a greater capacity to mobilise and take advantage of initiatives like participatory budgeting. These divides can be self-reinforcing. Therefore, as a rule, central governments try to keep urban residents more content.

Another reality is that such feedback channels mostly enable short term policy interventions, and do not necessarily help in gauging long term sustainable development priorities and population needs. While participatory approaches and media attention can help citizens respond when, for example, a green space is endangered, other important decisions about where to build roads and schools or when hire doctors and buy vaccines have much steeper collective action costs. Without regular bottom-up elections, in which politicians are asked to define their policy agendas and are held accountable to those agendas, it is difficult to collect informational signals on what the population wants even if everyone agrees on the essentials.

The Citizens’ Initiative Budget may prove a vital step forward in Uzbekistan’s political development if it opens the path to wider democratic reforms. Such reforms may be necessary if Uzbekistan wants to build on five years of strong economic growth—social scientists agree that the quality of political institutions determines economic outcomes.

Encouragingly, Uzbekistan is set to substantially expand its participatory budgeting platform. In 2022, the government will increase funding to nearly USD 250 million and has pledged at least USD 700 million to be disbursed in 2023. Moreover, the government has proposed that all infrastructure projects in micro-districts will be funded through participatory budgeting. A recently circulated draft white paper from the Presidential Administration suggests granting 28 districts expanded local governance authority, giving local legislators full-time paid employment, and empowering local residents with the ability to recall underperforming lawmakers and officials.

Ultimately, the essential condition for good governance at any level is enabling free and fair elections. Free and fair elections will optimise distribution of economic resources, enable growth, reduce corruption, and advance inclusion and happiness. As the success of the Citizens’ Initiative Budget shows, the Uzbek people are ready to take charge of their shared political future.

Photo: AXP Photography

Long-Awaited Uzbek-Kyrgyz Border Deal Sparks Unrest

In October, the final demarcation of the Uzbek-Kyrgyz border was expected to be successfully concluded after three decades of negotiations. The agreement was supposed to be a tremendous political victory for Kyrgyzstan, especially for President Sadyr Japarov. But instead of celebration, the agreement has spurred domestic unrest and intensified repression.

Most visibly, the unrest is due to the Kempir-Abad water reservoir in the Uzgen district. The local population in Uzgen believes that the government and president’s close ally Kamchybek Tashiev's negotiating team failed to fully address state borders, land ownership, and water management in the area and did not adequately explain the deal to the public. Concerns about ceding the important reservoir to another country and abandoning Kyrgyz land were frequently voiced, but the government downplayed concerns. Some members of a parliamentary committee responsible for the preliminary approval of the new border also complained about the secrecy of the agreement. The exact full wording of the deal was not published, which led to uncertainty about what they were actually voting for, and some parliamentarians refused to vote at all.

Japarov faced opposition to the announced border agreement both in media and in the streets. On October 22, a committee for the protection of Kempir-Abad reservoir was formed. Activists also organised a demonstration denouncing the deal and demanding transparent public discussions. However, Japarov labeled the protests as the product of the "evil intentions” of a few opponents.

To succeed, the regime has resorted to silencing the opposition voices until the deal is officially signed. On October 23, there was a mass detention of two dozen vocal opposition activists in Bishkek and elsewhere around the country. The Kyrgyz government also decided to take action against the local operations of Radio Free Europe and blocked the broadcaster’s website for two months over the alleged spreading of disinformation. Later, the National Security Committee—headed by Tashiev—ordered Demir Bank to close RFE’s local account.

The crisis over Kempir-Abad and the entire border demarcation process illustrates one of the core problems of the current Kyrgyz government: an authoritarian approach to sensitive domestic issues. On the agreement with Uzbekistan, Japarov and Tashiev decided to push the deal through the opposition using their political influence and power. There is no exact date of the official signature announced, and under the current circumstances, neither the official implementation nor peaceful acceptance of the deal by the Kyrgyz society is certain. 

Since his ascendence to power after large public protests in October 2020, Japarov has relied on his image as a strong national leader. Issues regarding territory, national interests, mineral resources, and economic prosperity have formed the core aspects of his political agenda. In recent months, however, he has faced mounting challenges in every domain. Moreover, attempts by Kyrgyzstan to present a border agreement regarding Kempir-Abad failed last year. Experiencing the same failure again would be a huge blow to Japarov’s political career.

Aside from its border issues with Uzbekistan, Kyrgyzstan also lacks fully demarcated borders with Tajikistan. Various factors have delayed the demarcation process since the dissolution of the former Soviet Union. These include complicated physical geography, mixed ethnic populations, and domestic political stakes. Tensions between Kyrgyzstan and Tajikistan have been rising in the past few years and there is little hope that the situation will improve in the foreseeable future.

The government’s nationalist rhetoric has not helped. This rhetoric has been accompanied by armed clashes and unprecedented levels of violence earlier this year. Neither Bishkek nor Dushanbe are interested in launching a full-scale war against one another, and destabilisation of the wider region is against the interests of their neighbours too. Even so, neither side has shown the willingness to engage in negotiations. For the time being, leaders in Kyrgyzstan and Tajikistan are using to justify consolidation of power at home.

While condemnable, Japarov and Tashiev’s attempts to secure the regime's position by silencing critics are hardly surprising. But the scale of the repression is concerning. Despite domestic turmoil, Kyrgyzstan still enjoys a reputation as a country with a more vibrant civil society and greater democratic mechanisms than its neighbours in Central Asia. However, researchers, activists, and civil society members interviewed by the author in recent months unanimously pointed to a worsening outlook and cited the disappearance of previously understood “red lines” and the unpredictability of authorities’ punitive actions.

Tashiev’s participation at a meeting with Vladimir Putin in Moscow last week under the auspices of the Commonwealth of Independent States illustrates Kyrgyzstan's slide towards more oppression. During the meeting in Moscow, non-governmental organisations and international bodies were labeled as threats and destructive forces.

The unrest and regime instability in Kyrgyzstan may have a negative impact also on other international projects, including the China-Kyrgyzstan-Uzbek railway, which has been on the table for two decades with no traction until last month when it was finally put forward. If the unrest persists, the parties to the rail deal may run out of patience. Moreover, Uzbekistan may either delay the ratification of the border agreement or demand more favourable conditions at Bishkek’s expense.

But even if the border deal materialises and both Kyrgyzstan and Uzbekistan implement the agreement, issues on the ground will likely persist. The newly demarcated border requires effective border management, trust, and mutual endorsement by the locals on both sides. Without a proper arrangement, even a minor skirmish might escalate to a major border conflict. Moreover, the contested future of the Kempir-Abad water reservoir further adds to the complexity to an already fragile situation at the Kyrgyz-Uzbek border.

Photo: Press Service of the President of Uzbekistan

Russia’s Economic Crisis Threatens Uzbekistan from Within

This article was originally published by the East Asia Forum.

Russia’s invasion of Ukraine is devastating the lives of Ukrainian civilians and impacting the global economy. Low-income economies that were hit hardest by the COVID-19 pandemic, such as Uzbekistan, are the most vulnerable to supply chain disruptions and potential political unrest caused by the invasion.

Significant attention has been paid to the impact of the Ukraine crisis and Russia’s economic contraction on Uzbekistan. But this analysis is somewhat incomplete—Uzbekistan’s exposure to the crisis does not just stem from the contraction of remittances coming from Russia.

The greatest danger for Central Asian economies emanates from weak political institutions. The economic shock rippling from Russia to Uzbekistan is compounding the economic effects of the COVID-19 pandemic, which had already spurred protectionist economic policy and threatened the reform agenda in Uzbekistan. This new crisis might convince policymakers to impose trade restrictions, price controls and rollback reforms.

Since 2016, bold market reforms have enabled Uzbekistan to unlock higher rates of economic growth. But public sector entities will likely seek further subsidies and preferential schemes from the state, attributing their inefficiency to yet another economic shock. This could further entrench rentierism in an economy that has been taking important strides towards fiscal discipline, privatisation and the targeting of fiscal spending towards private sector businesses and households.

To emerge from the new economic crisis, Uzbekistan must double down on its reform agenda. Policy interventions might be necessary to support businesses given the scale of the economic crisis. But these interventions should be targeted and limited to avoid hobbling reforms. Instead of providing carte blanche support for inefficient businesses—raising the government debt burden—Uzbekistan should condition state aid in ways that support reforms, especially those reforms seeking to reduce state dominance of the economy.

The Uzbek government continues to provide preferential loans, subsidies for economic operators and preferential tax regimes in ways that favour state-owned enterprises and politically-connected firms. Economic resources flow from taxpayers to these firms, while households and small and medium-sized enterprises remain vulnerable to economic headwinds. The country’s privatisation plan, a largely untapped source of government revenue, risks being further delayed as state-owned enterprises cite the crisis as a reason to slow critical reforms. The speed and transparency of privatisation auctions should be increased.

The stalled land reform must also be advanced. Agriculture accounts for 28 per cent of the Uzbek economy and employs the same proportion of the labour force. The government should expand property rights reform cover to all types of land, including agricultural land, which would boost private investment and production of food staples now subject to rising prices. This reform could also soften the blow of lower remittances, as repatriated labour migrants could earn their livelihoods as smallholder farmers or agricultural labourers.

In the case of Uzbekistan, a country in which expansive price controls have historically distorted incentives, the temptation to introduce price ceilings should be avoided. Higher prices will encourage producers to increase supply—increased investment by private producers will boost employment and eventually stabilise prices.

The government should continue to prioritise inclusive development by focusing on poverty reduction. Uzbekistan has made progress in measuring poverty. Uzbek President Shavkat Mirziyoyev has acknowledged that 12–15 per cent of the population is living below the poverty line and created specialised registries to capture unemployed youth, vulnerable women and people with disabilities.

Such approaches have also underpinned the rollout of programs targeted at the community level. Some initiatives, such as the free school meals and conditional cash transfers for the purchase of agricultural equipment or livestock, will likely produce mixed results due to distorted incentives. Other community-based initiatives, such as cash transfers for families dependent on labour migrants, record educational subsidies, incentives to hire women and mass health screenings, are more promising.

But citizens are not merely a target for support during periods of economic crisis—they are also a source of economic resilience. The government should continue to engage communities to better target fiscal interventions during the crisis. Uzbekistan’s timely Open Budget initiative gathered 6.7 million votes and offers a powerful platform for local communities to voice their needs in the pursuit of a more efficient allocation of state resources.

Easing the registration and operation of NGOs will result in the broader empowerment of vulnerable populations and better distribution of state aid. This may improve trust in the state institutions by ensuring that a larger portion of aid reaches the intended audiences.

The government needs to carefully delimit policy interventions so as not to derail the broader reform agenda that requires Uzbekistan to move away from excessive state intervention in the banking sector. For a short period, the Central Bank of Uzbekistan instituted recommended exchange rates for the Russian rouble that were effectively compulsory and below market rates. Over 80 per cent of Uzbekistan’s banking sector being state-owned is especially concerning at a time when policymakers are under pressure to expand financial support to banks.

Given the new economic reality, Uzbekistan should prioritise its talks on WTO membership and actively pursue new trade partnerships. To incentivise both local producers and foreign suppliers to continue to meet the needs of Uzbek consumers, fostering free markets is vital. Uzbek policymakers should resist the temptation to revert to the orthodoxies of the planned economy as they devise their crisis response—the best way out of the crisis is to look forward, not back.

Photo: Kremlin.ru

As Putin Invades Ukraine, Uzbekistan Feels Vindication and Fear

Vladimir Putin has begun his invasion of Ukraine, sending troops across the border to “defend” the Luhansk and Donetsk People’s Republics, which Russia has now recognized as independent states. The unfolding crisis in Ukraine offers the latest evidence of Putin’s irredentist obsessions and the ways in which those obsessions threaten the political and economic integrity of Russia’s neighbours.

Last week, Uzbekistan marked Ukraine’s “Day of Unity,” a Ukrainian national holiday. The façade of the historic Hotel Uzbekistan, overlooking Tashkent’s main square, was lit in the colors of the Ukrainian flag. Beyond shared affinities, Uzbekistan and Ukraine are both confronted by the challenge that is Putin. For Uzbekistan, the events unfolding in Ukraine validate a decades-long effort to hedge relations with Russia. But they also raise the spectre that Putin will no longer tolerate divided loyalties among the former Soviet republics.

As Maximillian Hess has written, Uzbek president Shavkat Mirziyoyev has sought to rebuild relations with Russia since coming to power in 2016. Mirziyoyev‘s predecessor, Islam Karimov, who led Uzbekistan from 1989 until his death in 2016, believed that “Moscow’s vision for Central Asia was to keep it as a colonial backwater.” In both security and economic spheres, Karimov challenged Russia’s regional dominance. Uzbekistan was an on-again, off-again member of the Collective Security Treaty Organization (CSTO), a military alliance of post-Soviet countries. Uzbekistan served as a staging ground for NATO operations in Afghanistan from 2001 to 2005. Karimov also delayed joining the customs union that preceded the founding of the Eurasian Economic Union (EEAU), Putin’s grand vision for an economic bloc.

Mirziyoyev’s ascendence to the presidency required horse-trading. Developing more constructive ties with Putin was an important aspect of his attempts to consolidate his authority after a power struggle with Rustam Inoyatov, the chief of Uzbekistan’s intelligence services. Inoyatov was eventually sacked in January 2018. In October of that year, Putin visited Uzbekistan bringing with him a large delegation of Russian companies. The visit saw the signing of contracts totalling $9 billion, including provisional agreements for the construction of a nuclear plant that would help Uzbekistan free its natural gas production for export.

But Mirziyoyev has also sought to limit Russian political and economic influence in Uzbekistan by pursuing a multilateral foreign policy and economic liberalisation. While Uzbekistan is expected to join the EEAU, Mirziyoyev has slow-rolled accession, meanwhile pursuing formalised ties with the European Union, including preferential trade terms under the EU’s  Generalized Scheme of Preferences. Uzbek officials have continued to engage with counterparts in the United States, building on a state visit by Mirziyoyev to Washington in May 2018. Since the outset of his term, Mirziyoyev has also sought to develop better relations with neighbours. At the heart of this strategy is a series of “consultative meetings” among Central Asian leaders that exclude the presence of either Russia or China, the two states that typically wield convening power.

In this way, Uzbekistan has hedged in its relations with Russia. While developing more constructive bilateral relations, it has also ensured that parallel developments in its foreign policy and economic agenda serve to circumscribe Russian influence. Recent events have shown the prudence of such an approach.  

In January, as protests accelerated into a full-blown political crisis in Kazakhstan, the Uzbek government reacted cautiously. But Putin’s deployment to Kazakhstan of a “peacekeeping” mission comprised of CSTO forces raised concerns over Russia’s respect for the sovereignty of its neighbours. Likely commenting on the circumspection of Uzbek leaders, Belarussian president Alexander Lukashenko issued a veiled threat to Uzbekistan, suggesting that the country’s failure to join CSTO would leave it vulnerable to “terrorists.”

For many Uzbek political commentators, the threat underscored the risks of posed by the increasingly irredentist Russia. Xushnudbek Xudoyberdiyev, deputy director of state news agency UzA and a prominent blogger, criticized Lukashenko, calling the CSTO a “trojan horse.” In a lengthy interview published two days after the threat, political analysts Farhod Tolipov and Kamoliddin Rabbimov questioned the wisdom of joining the EEAU.

Similar dynamics can be seen in the response to the Russian aggression against Ukraine. While Uzbek officials have yet to issue statements on the crisis, Uzbek editors and bloggers have been quick to label Putin a “savage,” a “criminal,” and a “bandit,” who has “lost his mind” and “spit on international law.” Political commentators have questioned the slow response to the new crisis from the Uzbek Ministry of Foreign Affairs and have also wondered about the risk posed by deepening economic ties with Russia.

Uzbekistan does not share a border with Russia—perhaps a silver lining of being one of just two double landlocked countries in the world. But the Ukraine crisis does have a bearing on Uzbekistan’s place in the political and economic order in West Asia. As Putin takes a more confrontational approach with the West, he may begin to see Mirziyoyev’s hedging of its relations with Russia as an afront, putting Uzbek elites with strong ties to Russia in a difficult position.  

Moreover, if Western countries place Russia under significant sanctions as is expected, the consequences for the Uzbek economy could be profound. Russia hosts 3 million migrant workers from Uzbekistan, whose remittances shore Uzbek household consumption. As the rouble comes under pressure and as the economy falters, these workers, already struggling due to Russia’s general economic malaise, will see their employment prospects diminish and the value of their earnings erode. The devaluation of the rouble would also hit Uzbekistan’s economic elite who maintain assets in Russian banks. Moreover, financial sanctions placed on those banks could see a significant portion of Uzbek wealth effectively frozen.   

Over the last five years, Uzbekistan has been one of the few former Soviet republics to enjoy political stability and economic prosperity. That alone sets Uzbekistan apart. But the country’s political and economic agenda is also unique given the ways in which it has sought to modulate Russian influence. Putin’s invasion of Ukraine vindicates that agenda, but it will also stoke fear. Among Putin’s complaints about Ukraine is that its leadership “preferred to act in such a way that in relations with Russia they had all the rights and advantages, but did not bear any obligations.” One can imagine a similar charge being made against Uzbekistan.

Photo: Kremlin.ru