TASHKENT BLOG: Wandering along the Silk Road

TASHKENT BLOG: Wandering along the Silk Road
Uzbekistan has made enormous progress and with a new reform-minded president in place the pace is accelerating, but there's still plenty to do.
By Ben Aris in Tashkent August 29, 2019

It’s been 10 years since I last visited Tashkent and it has changed beyond all recognition.

By an odd set of coincidences I began my career in journalism as the Central Asia correspondent for the EIU and I lived in the Uzbek capital for more than a year during 1994-95.

Then, like now, the country had just opened up and investors had flooded in with high hopes for the future of business in what is the most populous of the five ‘Stans’ and the only one of them that has a border with all of the others. Uzbekistan has a ready-made sizable domestic retail market (its fast-growing population, currently numbering around 32.8mn, will overtake Poland’s 38.4mn inhabitants not too long from now) and it is the natural production and distribution base for the region.

However, when former president Islam Karimov got the bill for all the consumer goods imports Uzbekistan was sucking in it stood at more than $1bn. In response, Karimov, who passed away in late 2016, stamped on the convertibility of the som, killing off all interest in investing in the country overnight. That was more than 20 years ago.

Pulling out the stops
Now the country is throwing open its doors to foreign investors once again. Karimov’s successor, President Shavkat Mirziyoyev, appears to have ordered his administration to pull out all possible stops to put Uzbekistan back on the map.

Last week I stood on legendary Registan square in Samarkand as Mirziyoyev gave a speech to assembled diplomats and dignitaries assembled for the last night of a giant party that had been going on for days on end.

I’d travelled to Uzbekistan as a guest of the government along with 150 archaeologists from over 50 countries to mark Uzbekistan’s cultural heritage week. We travelled from Tashkent to the Silk Road cites of Termez, Bukhara and Samarkand to visit the ruins and see the relics of Alexander the Great as well as attend a series of conferences profiling the country’s ancient history.

As a separate party, the government flew in over 100 prominent bloggers from Europe and America. They were also at the Samarkand celebration, but were moving on to the desert in Karakalpakstan on the shores of the Aral Sea (or what is left of it) for a techno music festival that was launched last year. Altogether the government must have spent millions on hosting  all these visitors. And there have already been two press trips to Uzbekistan this year, with another one scheduled for November—all expenses paid.

The deputy prime minister was assigned to my party and we feasted on lavish dinners each night of the week, hosted by the head of the local administration or mayor of the city in each place we stopped. We ate plov, Uzbekistan’s famous pilaf rice dish, and Uzbekistan’s succulent melons every single day without wanting any change of menu.

When I was first in Tashkent there was literally nothing in the shops other than the copious and delicious fruit and veg. We had to fly to Moscow to stock up on things like soap and toothpaste, and often the country would run out of jet fuel so on several occasions I drove 12 hours by taxi across the steppes to Almaty in neighbouring Kazakhstan where there were still planes coming in and out of the region.

Classic ‘post-Soviet’
Tashkent was classic ‘post-Soviet’ in those days, with rundown apartment blocks and potholed roads with a few kiosks selling vodka, cigarettes and the rank “Café Pele” ersatz coffee imported from South America. The people were living hand to mouth, selling the produce of their gardens or cooking shashlik on the street. One family I stayed with in Fergana existing entirely on cooking lavish cakes that they sold in the market. In Karakalpakstan the workers were paid in pasta.

The only product Uzbekistan produced of any value was cotton. It generated about $3bn a year in exports and the government jealously husbanded this meagre supplier of hard currency, although the elite, including Karimov’s daughter Gulnara, stole about a fifth of it each year according to my estimates. She’s in jail now.

Since those times, even under Karimov’s oppressive regime, the economy has grown and diversified. Today there is a vibrant consumer business and Tashkent is dotted with construction sites promising new posh retail outlets and modern residential blocks. Wendy’s burgers just moved in and their posters are everywhere. The government has put up dozens of big new gleaming white buildings to house institutes, government offices, state-of-the-art conference halls, museums and the like.

And the construction is not limited to Tashkent. The road that runs from the airport to Termez, a small regional city of about 80,000 that sits on the border with Afghanistan, is lined with brand new residential housing, complete with enclosed gardens (a must-have in Uzbekistan) and air conditioning units on the wall. Even in that out of the way regional city the roads are brand new and smell of fresh tarmac in the glaring dry heat of the summer days.

Those houses are still empty and the rundown apartment blocks are still home to most of the locals in Termez who pass their time in the local market that can’t have changed much in character since Alexander the Great passed through over 2,000 years ago. Not far from Termez is the site of Alexandria on the Oxus, the most far-flung city the conqueror founded on his epic journey, before he headed south across the Hindu Kush and into India.

Dying breed
Knots of money changers cluster on the corner of the main bazaar despite the liberalisation of the currency, although these street hawkers are a dying breed as the official and black market rates have rapidly converged. As with all the towns we passed through, the streets were, like in Minsk, spotless. The most popular hangout was MakBurger on the high street—a very blatant rip-off of McDonalds. Here a small crowd of families and children were eating ice cream and burgers.

The taxi driver who took me out to the Afghan border had no complaints. “Life is getting better. There is work. We have money enough. Karimov brought stability and prosperity. Now the new president is doing the same. The mood is lighter. Everything will be good.”

Karimov managed to diversify the economy, but he did not completely modernise it. One of the very few successful foreign investments he brokered brought in the UzDaewoo car plant in Andijan that was later taken over by the US carmaker GM after Daewoo went bust (leading to a factory visit by then US Secretary of State Hillary Clinton). A sign of just how far the economy has come is that in Tashkent the once ubiquitous Ladas and Volga saloon cars have entirely disappeared. A sign of how far the economy still has to go is the fact that almost every car on the road is one of three types of Chevrolet—and they are almost all white and brand new. Even in the regional cities you could count the number of AvtoVAZ Zhigulis on the road on one hand.

Terrible telecoms and internet
One of the more glaring holes in the nation’s economic development is seen in telecoms. The phone service is terrible and the internet was even worse. Mobile data didn't work at all. Moreover, the security services are sitting on the servers and monitoring all internet traffic. It slows the connection and the eavesdroppers are visible to anyone with a little computer savvy. Having said that, under Karimov the police presence was oppressive with three cops on every corner. I was challenged for my documents several times a day and was arrested once by policemen suspicious of an Englishman that could speak passable Russian. Those cops have disappeared and have been replaced by “tourist police”, although don't try and ask them directions unless you’re desperate. The ones I talked to were fairly clueless.

The rise of gold prices has been a major contributor to Uzbekistan’s transformation. When I was living in Tashkent in the 90s I travelled out into the Kyzylkum desert to the Zarafshan gold mine, the largest open pit mine in the world. But in those days gold prices were so low that most of the country’s gold deposits were only marginally profitable. Since then the price of gold has soared. Today Uzbekistan has some $20bn in hard currency reserves, three-quarters of it in solid gold.

Now that Mirziyoyev has taken over it looks like the country’s development is going to accelerate. The new government seeks continuity and has not rejected Karimov, but the people I talked to have no problem with that. They are still in the process of chasing prosperity and care more about getting a good job than democratic freedoms. Despite the obvious progress, the absolute incomes are still very low. A taxi ride anywhere in Tashkent costs less than $1 and a bed in one of the new second tier freshly renovated hotels is $35. They are extremely low prices, even for a post-Soviet country.

Rabbit loans”
In an effort to provide a social security net last year the president ordered the banks to make cheap “rabbit loans” available to the population—literally credits that enable people to buy rabbits cheaply. The idea was to provide a source of protein for poorer people and a way to earn some extra cash from selling the meat and fur. However, the scheme was a flop. The banks reported that “bunny NPLs” stood at 100% so the scheme was dropped.

The low pay is an issue and it will take years for the Uzbek economy to revalue to even regional and CIS levels. In the meantime, just under a million Uzbeks travel to Russia every year for work—the Uzbeks make up the largest ethnic group migrating to Russia. The wage levels they obtain are 10 times higher that what’s on offer back home.

But the mood has definitely lightened. The young “volunteers” assigned to take care of our party were optimistic about their future and were enjoying the more liberal regime. However, these young people were actually university students and were not given much choice when asked to work for a week looking after us, nor were they paid anything. Old habits die hard.