EBRD to stay

The European Bank for Reconstruction and Development (EBRD), one of the largest foreign investors in Uzbekistan, has refuted claims it was considering closing down its operations as a result of deteriorating political circumstances inside the country. "Our country strategy hasn't changed," Vanora Bennett, an EBRD spokeswoman, said from London on Tuesday, citing a two-year strategy for Uzbekistan outlined in July 2005. Her comments follow a Reuters report one day earlier that bank officials were debating closing down their operations inside the country, an assertion Bennett was quick to deny. "No, that's not correct," she maintained. Earlier this year, the bank threatened to stop funding public-sector projects in the country, citing events in the southern Uzbek city of Andijan in May, in which Uzbek forces reportedly opened fire on demonstrators, the report maintained. Upwards of 1,000 people may have been killed in Andijan on 13 May in what human rights activists have described as one of the first open demonstrations against the authoritarian regime of Uzbek president Islam Karimov, who has ruled the landlocked nation since it gained independence following the collapse of the former Soviet Union in 1991. Although Tashkent maintains the death toll was 187 and has repeatedly denied calls for an independent international inquiry, the incident served only to spotlight the country's deteriorating human rights record and lack of reform. Uzbekistan has long been cited for innumerable human rights abuses, including the use of torture, and a recent court ruling finding 15 Andijan trial suspects guilty of terrorism and sentencing them up to 20 years in jail has only added to the country's problems. "For the time being, the EBRD's status is to invest only in the private sector in Uzbekistan," Bruno Balvanera, head of business development for the bank, reportedly said. "But there is pressure from our shareholders to pull out completely and not engage in Uzbekistan at all," he added. "We would like to stay in Tashkent but the political situation there is not good," Reuters reported him as saying on the sidelines of an investment conference in London. "There is an ongoing debate about this." Balvanera reportedly said that the EBRD's involvement in the former Soviet republic had been shrinking in past years as the political situation weighed and economic reforms stalled. Just US $40 million was likely to be invested in 2005, similar to last year's levels, he added. "In practical terms, our operations in Uzbekistan are already much reduced - there is not much difference between doing $40 million and doing nothing at all," Reuters reported him as saying. But while Bennett maintains the bank has not changed its country strategy, its recent less than harmonious relationship with the government suggests otherwise. In 2003, during the annual meeting held in the Uzbek capital, Tashkent, the EBRD issued a report highlighting seven benchmarks that needed to be improved, calling for progress to be seen within a year. The benchmarks included greater political openness and freedom of the media, registration and free functioning of independent civil society groups, and implementation of the recommendations issued by the United Nations Special Rapporteur on the question of torture and other cruel, inhuman or degrading treatment or punishment. Those benchmarks were not met, however, and in 2004, Uzbek officials cancelled their country presentation during another EBRD annual meeting in London, following criticism from the intergovernmental bank for not making sufficient improvements to the political and economic situation in the country. According to the EBRD's current strategy, while some economic progress had been made since its last strategy published in 2003, there had been no comparable political liberalisation. The previous strategy described Uzbekistan's political and economic progress as slow and characterised by setbacks, and emphasised the importance of the Uzbek authorities taking a number of critical steps to put the country on a path of sustained progress towards multi-party democracy and a market economy. In 2004, the bank restricted its activity to private-sector projects as well as public-sector operations that either linked Uzbekistan economically to other countries in the region or clearly benefitted ordinary citizens, such as by improving a town’s water supply. "The bank’s new strategy notes that economic progress has been achieved in two areas since 2003 – current-account convertibility and adjustment of tariffs in public utilities – but says there has been no progress in Uzbekistan’s political environment," the statement read. According to the 29 July statement, the EBRD had decided not to initiate any new projects in the public sector during the new country strategy period. It would focus on supporting private-sector development and entrepreneurship, particularly small and medium-sized enterprises (SMEs) and micro-business, provided that there was no direct or indirect link to the government or government officials. For example, the bank was considering the possibility of establishing a microfinance bank and expanding its leasing operation. The bank would also continue to support trade through its Trade Facilitation Programme. Equally, the EBRD would continue its efforts to engage in policy dialogue with the authorities, to work for improvement in the investment climate and support reform efforts. Only reforms could unlock Uzbekistan's significant economic potential and allow the bank to operate on a fully fledged basis. Events in Andijan, resulting in the indiscriminate use of force against civilians, as documented in various reports, including July's report by the UN High Commissioner for Human Rights, were a cause of serious concern for the bank, the statement added.