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 1997 FY 1988 FY 1999 Actuals Estimate Request FREEDOM Support Act............... $21,500,000 $19,100,000 32,050,000 Introduction
U.S. national interests in Uzbekistan reflect a combination of commercial and strategic concerns. As the single largest market in Central Asia, Uzbekistan offers trade and investment opportunities through a diverse economic base which includes agricultural, industrial and energy resources. Extensive oil and gas reserves provide opportunities for U.S. investors, and an option for diversifying U.S. energy sources. A prosperous Uzbekistan could also serve as a launching point for commercial expansion in the region. Thus Uzbekistan has the potential to contribute to U.S. economic prosperity. Uzbekistan aspires to regional leadership, and is increasingly seen as a key player in maintaining stability in Central Asia. It has played a role in the crises in Afghanistan and is a guarantor in the Tajik peace plan. The U.S. has a national security interest in ensuring that the region remains stable.
The Development Challenge
USAID's main goal in Uzbekistan is to promote sustainable economic growth. However, the reluctance of the Government of Uzbekistan (GOU) to introduce broad-based market reforms in the privatization and financial sector liberalization areas has stifled economic recovery. After significant movement in 1995-96 toward free market reforms through pricing and trade liberalization measures and tightened short-term fiscal and monetary management policies, the government retreated in late 1996 by restricting convertibility and access to foreign currency. This resulted in suspension of its IMF Standby Arrangement, a situation still in effect. These restrictive actions and inadequate monetary management policies resulted in a partial resurgence of inflationary pressures in 1997. The GOU's tentative start at privatization, through an investment-fund based auction program for 200 medium and large-scale enterprises initiated in 1996, has yet to gain momentum. The investment climate continues to suffer from onerous bureaucratic obstacles in the registration, licensing, and inspection areas which increase the cost and unpredictability of private business operations in Uzbekistan.
USAID's economic growth strategy addresses three key policy reform areas, all of which are crucial to the successful transition to a market-based economic system: fiscal policy and management; a stable market-based financial intermediation system; and a policy, legal and regulatory environment conducive to private enterprise. USAID has initiated support programs in each of these areas. In the fiscal reform area, USAID has supported development and passage of a comprehensive western-style tax code; and promoted tax administration procedural and automation reforms which have helped strengthen revenue inflows. USAID has also supported development of budget and treasury laws, slated for adoption in 1998, which should provide the legal basis for development of a more rational and better targeted budget planning system and a more effective budget tracking and reporting system. In addition, USAID has provided strong analytical and training support in pension reform. It has helped the Ministry of Social Protection to develop a comprehensive pension reform program which is expected to come to fruition with the development of new pension legislation in 1998.
In the financial sector, USAID is providing intensive support to improve bank supervision, thereby upgrading the regulatory capability of the Central Bank to enforce tightened financial performance and reporting requirements for commercial banks. More recently, USAID has extended this support to bank accounting, with the goal of improving the quality of bank financial information available to both commercial bank managers and regulatory officials and thereby significantly improving the efficiency of banking services. Assuming that overarching controls on foreign exchange and credit allocation policies and inter-bank transactions are reduced over the near to medium-term, it will be important that
the basic regulatory and accounting infrastructure for the effective operation of a genuinely commercial banking sector be in place. USAID has concentrated its efforts on supporting the organization and acceleration of GOU efforts toward World Trade Organization (WTO) accession, with the ultimate goal of using this as a prism through which to focus key decision-makers on the importance and benefits of adopting reforms in trade and investment policy and regulation. With USAID support, the GOU has virtually finalized its Memorandum of Foreign Trade Regime, which is expected to be submitted to the WTO in Geneva in early 1998.
Citizen participation in economic and political life is limited and ill-informed. Political opposition to the regime is not tolerated, and free and fair elections have yet to be held. While opportunities to advance government transparency and responsiveness are restricted, there are opportunities to increase civic participation by strengthening Non-Governmental Organizations' (NGOs) capabilities in management, civic education, media relations, community issues, and advocacy. Though the media is closely watched by the GOU, some 48 small TV stations have received USAID assistance and 16 contribute to a biweekly news magazine. Openings also exist to promote rule of law concepts and improve electoral processes. The GOU accepted the results of a USAID-supported survey of citizens' attitudes, and has indicated that the 1999 parliamentary and presidential elections will be free and open. Associations of advocates and judges have been formed and the latter formally registered as an NGO, reflecting high-level GOU support for establishing an independent judiciary. Legislative assistance by USAID resulted in an improved public health law, a law on advocacy, and a law on notaries legalizing the private practice of law and independent notarial services. An NGO law library, recently established with USAID assistance, receives an average of 40 visitors per day.
Government-supplied social services critical to maintaining public support for the reform process are financially unsustainable. Through a new objective, USAID will assist with the reform of the health care system, focusing on new management and payment systems for improved services and the development of alternative forms of health care delivery and financing. USAID interventions have made various contributions to improved health of the Uzbek populace -- polio has essentially been eradicated; abortions have been reduced by about 50%; and more than 1,000 health care providers have received training in family planning.
Despite the challenges of working in Uzbekistan, U.S. interests suggest the importance of staying the course and promoting economic and democratic reform in concert with other donors.
Other Donors
USAID closely coordinates with other donors. The IMF continues to closely monitor the macroeconomic policies of the GOU, although its Standby Arrangement has lapsed because of GOU exchange rate mismanagement. The World Bank is working on privatization and health. The EU has the largest country program after the World Bank, focusing on technical assistance in agriculture, private business development, and energy. USAID is the lead donor in fiscal policy/management reforms, commercial law, social marketing of contraceptives, and strengthening NGOs and the media. The Soros Foundation recently began operations but is still defining its role. The UN, the Adenauer Foundation, and the Organization for Security and Cooperation in Europe (OSCE) fund training in civic society. The European Bank for Reconstruction and Development (EBRD) has made loans for textile plants, energy, and small enterprise development. The UN Fund for Population Activities supports family planning training work.
FY 1999 Program
USAID's focus will gradually shift from fiscal reform (where significant improvements are being carried out), to financial sector and trade/investment regulatory reforms. Within the fiscal area, USAID's FY 1999 program will shift its priority focus from tax policy to tax administration; and will also focus on strong technical support in the budget planning area. Reform of the pension policy regime andrationalization of the pension administration system will also be a major focus. Reform efforts in the banking supervision and accounting areas will be accelerated; and a securities market development program will be launched if the GOU agrees to key regulatory reforms (including establishment of an independent securities market regulatory body) required to ensure the development of a competitive and vibrant securities market. Intensive advisory and training support designed to strengthen Uzbekistan's trade and investment regime will be provided, which should help the GOU accelerate the WTO accession process and provide a springboard for more far-reaching reforms on commercial law.
Involving Uzbekistan citizens in public affairs through an active, effective NGO community represents the most viable means of promoting a more participatory political process, closely complemented by a strong, independent media. USAID assistance will focus on civic education, NGO management training, and grassroots community issues, followed by work for more mature NGOs on policy advocacy skills and coalition building. Allied assistance to commercial TV stations will help address equipment, finance, and management deficiencies, then progressively improve programming quality. In collaboration with the OSCE, USAID's electoral assistance will emphasize strengthening election laws and the independent electoral commission, training election officials, and voter education.
USAID will demonstrate cost-effective systems for health care delivery in a selected district, develop targeted service programs for vulnerable populations, and leverage World Bank support to replicate successful pilot efforts. These efforts will contribute to the establishment of sustainable social services critical to overall reform.
Under cross-cutting and special initiatives, the human capacity development program will continue, with increased in-country training. To date, more than 700 Uzbeks have enhanced their technical knowledge and skills through the program, either in the U.S., Uzbekistan or neighboring countries. As needed, USAID will provide vaccines, medicines, and equipment to combat infectious diseases, including tuberculosis. Partnership For Freedom (PFF) activities will be introduced in FY 1999, as appropriate.
UZBEKISTAN
FY 1999 PROGRAM SUMMARY*
(in Thousands of Dollars)
Strategic ObjectivesEconomic Restructuring Democratic
TransitionSocial Stabilization Cross-cutting / Special Initiatives Total Privatization -- -- -- -- -- Fiscal Reform 1,500 -- -- -- 1,500 Private Enterprise 10,950 -- -- -- 9,950 Financial Reform 1,500 -- -- -- 1,500 Energy -- -- -- -- -- Environmental Management -- -- -- -- -- Citizens' Participation -- 3,280 -- -- 3,280 Legal Systems -- -- -- -- -- Local Government -- -- -- -- -- Crises -- -- -- -- -- Social Benefits -- -- 1,500 -- 1,500 Environmental Health -- -- -- -- -- Cross-cutting / Special Initiatives -- -- -- 13,320 13,320 TOTAL 13,950 3,280 1,500 13,320 32,050
*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 1999: $1,500,000 FREEDOM Support Act
INITIAL OBLIGATION: FY 1993; ESTIMATED COMPLETION DATE: FY 2000
Purpose: Increased soundness of fiscal policies and fiscal management practices.
USAID Role and Achievements to Date: A USAID-funded advisory team is providing significant support to the Ministry of Finance and the State Tax Committee in formulating improved fiscal policies. As a result of reductions in government subsidies, and better short-term cash management by the GOU, the budget deficit was notably reduced to 3.6% of GDP in 1996, down from 18% in 1992. USAID advisors also played a lead role in drafting a new tax code which was passed by the Oliy Majlis in 1997, with implementation beginning in January, 1998. Additional support is helping to modernize both the indirect and direct tax administration system. The GOU has issued a decree implementing USAID recommendations for pension reform, and the Cabinet of Ministers approved a concept paper outlining the key principles which will be applied in drafting new public and private pension laws. The average volume of all types of government securities was $100 million in 1996, exceeding the USAID target by $30 million, a sign of a more robust secondary market for securities.
Description: Although the new tax law has been passed, it has a few significant deficiencies; USAID advisors are trying to effect corrections through implementing regulations. The new State Finance Law and companion Treasury Law, drafted with USAID assistance, are expected to go to Parliament by spring 1998. Progress is being made in installing a budget classification system developed with USAID assistance. The Ministry of Finance has formed a policy analysis unit which is receiving USAID-sponsored training, and now appears committed to the development of an improved budgetary planning framework which would improve the targeting and cost-efficiency of major social expenditure programs.
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 further stretch scarce aid resources. For example, the British provide training for Uzbek tax officials in the United Kingdom. Also, USAID and IMF advisors continue work in assisting the development of treasury operations.
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 Target Govt. deficit as % of GDP (accrued and cash basis) 5.9% (1995) 3.2% (1999) Local govt. revenue as % of total 15% (1995) 30% (1999) GOU maintains compliance with IFI conditions Yes (1995) Yes (1999) Effective legal framework established No (1995) Yes (1999) Avg. volume of all types of govt. $30m (1995) $180m (1999) securities during year
ACTIVITY DATA SHEET
PROGRAM: UZBEKISTAN
TITLE: Private Enterprise, 110-S001.3
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1999: $10,950,000 FREEDOM Support Act
INITIAL OBLIGATION: FY 1998; ESTIMATED COMPLETION DATE: FY 2000
Purpose: Improved, more sustainable private business operations.
USAID Role and Achievements to Date: New opportunities to promote private sector expansion include launching work in the legal and regulatory environment and providing an advisor to the petroleum sector. At the August 1997 session of the Oliy Majlis, a new Tariff Law and Customs Code prepared with USAID assistance were enacted. The former has been signed into law, and the latter is awaiting the President's signature. The Government is finalizing its draft Memorandum of Foreign Trade Regime (prepared with USAID assistance) for submission to the WTO. The Memorandum should be sent to Geneva in early 1998.
Description: USAID briefly supported the Uzbekistan privatization program in 1994-95. 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. USAID intends to continue offering technical advice in the legal and regulatory reform area, especially as it relates to Uzbekistan's potential accession to the WTO; simplification of the legal/regulatory regime related to business formation and operation; and development of the oil and gas sector. This work will draw on largely-successful reform initiatives in these areas already being carried out in neighboring Kazakstan and Kyrgyzstan. In-country, third-country and U.S. based training will also be undertaken to support these efforts.
Host Country and Other Donors: The World Bank, EBRD, and EU 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 is coordinated closely with 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, lowers 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 Target No. of economic sectors showing 3 (1995) 12 (1999) increase in private market share GOU maintains compliance with IFI conditionality Yes (1995) Yes(1999) Market-friendly foreign investment No(1995) Yes(1999) legislation in place Market-friendly business registration and No(1995) Yes(1999) licensing regime in place
ACTIVITY DATA SHEET
PROGRAM: UZBEKISTAN
TITLE: Financial Reform, 110-S001.4
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1999: $1,500,000 FREEDOM Support Act
INITIAL OBLIGATION: FY 1993; ESTIMATED COMPLETION DATE: FY 2000
Purpose: A more competitive and market-responsive private financial sector.
USAID Role and Achievements to Date: USAID activities in this area were modest until mid-1997, and included 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. However, in less then six months, a USAID banking advisor has developed an outstanding working relationship with his counterpart and begun conducting practical training of bank supervisors and on-site bank inspections. The Central Bank was assessed to have partially achieved a regulatory capacity in 1996 to ensure the enforcement of pertinent legislation. An additional financial intermediation service was made available in 1996, bringing the number of such services to six.
Description: As a result of successes so far, the Central Bank has requested an expansion of USAID assistance. Another Bank Supervision Advisor will focus on off-site supervision, leaving the first to focus on on-site inspection. Two additional advisors will assist the Bank to install and train staff to use the new IMF-provided chart of accounts; and facilitate accounting conversion within major commercial banks. Training for Uzbek counterparts is also included as part of this initiative. USAID has provided substantial technical assistance in the area of pension reform and it is anticipated that legislation for a comprehensive pension reform program will be passed by parliament in 1998. Technical support to jumpstart the development of the regulatory, technical, and organizational infrastructure of the nascent securities market may also be provided; assuming the GOU agrees to enact key regulatory reforms required for the operation of a stable and competitive securities market.
Host Country and Other Donors: USAID work in this area is closely coordinated with that of other donors. The EU 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. New 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 implemented through U.S. commercial contractors who work closely with local counterparts at the Central Bank, the Ministry of Finance, and the Ministry of Social Maintenance and Protection .
Major Results Indicators: Baseline Target Private bank deposits as % of GDP 4% (1995) 6% (1999) No. of financial services available 5 (1995) 14 (1999) % of banks using new accounting standards 0% (1995) 50 % (1999) Independent securities market regulatory No (1995) Yes (1999) body in place No. of private pension funds 0 (1997) 5 (1999)
ACTIVITY DATA SHEET
PROGRAM: UZBEKISTAN
TITLE: Citizens' Participation, 110-S002.1
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1999 $3,280,000 FREEDOM Support Act
INITIAL OBLIGATION: FY 1993; ESTIMATED COMPLETION DATE: FY 2006
Purpose: Increased citizens' participation in political and economic decision-making.
USAID Role and Achievements to Date: In July, 1997, the International Foundation for Electoral Systems disseminated the results of a public opinion poll analyzing the country's electoral laws and electoral system; the activity was well-received by a wide range of government officials. More then 340 grassroots NGOs have received training in such basic subjects as strategic planning, proposal writing and media relations. As a measure of advocacy work by NGOs, 52% of the NGOs in a database maintained by the Counterpart Consortium reported that they made efforts to influence the GOU on issues in 1996. With the support and assistance received from the USAID-funded American Bar Association/CEELI program; judges in Uzbekistan formed a judicial association which has been formally registered as an NGO and has approved an ethics code for judges. Lawyers have also formed a similar organization. The number of commercial TV and radio stations increased from 2 in 1995 to 6 in 1996, thus making domestic news more widely available to the public. A major potential advance toward a stronger media was the passage in late 1996 of a law protecting journalists from harassment and defining citizens' rights to access of government information.
Description: USAID's current program focuses on introducing concepts of civil society and democratization to Uzbekistan. Technical advisors, training and grants to local organizations help disseminate information and educate 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. The Eurasia Foundation has provided grants to organizations which conduct information and education activities and encourage engagement in broader policy issues. Another USAID grantee works with local TV and radio broadcasters to improve the professionalism and viability of independent media, but editorial independence is limited in the current environment. Assistance in preparing for the 1999 elections will be offered, in conjunction with the OSCE, if the GOU appears to be committed to holding elections that represent a significant step toward being free and fair.
Host Country and Other Donors: The United States is the major foreign donor working in the area of democratization in Uzbekistan. Programs supported by various U.S. Government agencies, including USIA, are closely coordinated with those of USAID. The Adenaur Foundation, The Soros Foundation, OSCE, and the UN Development Program (UNDP) also provide assistance in this area.
Beneficiaries: Immediate beneficiaries include individuals directly associated with the Uzbekistan NGO sector and the legal profession, as well as those at independent TV and radio stations and their audiences. Many more Uzbeks should benefit through the public interest advocacy and social services provided as the NGO sector 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: Several USAID-funded American NGOs such as the American Bar Association/CEELI, Internews, and the International Foundation for Electoral Systems (IFES), have played a role in promoting democracy in Uzbekistan. The Counterpart Foundation, Aid to Artisans, and the International Center for Not-for-Profit Law, which together form the Counterpart Consortium, also participate in local NGO development in Uzbekistan.
Major Results Indicators: Baseline Target No. of NGOs engaged in advocacy 0 (1992) 45(1999) Cumulative # of open hearings or consultative 0 (1992) 2 (1999) procedures addressing legislative/policy issues Average length in minutes of daily independent 2 (1994) 12(1999) TV news broadcasts
ACTIVITY DATA SHEET
PROGRAM: UZBEKISTAN
TITLE: Improve the sustainability of social benefits and services, 110-S003.2
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1999: $1,500,000 FREEDOM Support Act
INITIAL OBLIGATION: FY 1998; ESTIMATED COMPLETION DATE: FY 2003
Purpose: Improved sustainability of social benefits and services.
USAID Role and Achievements to Date: USAID is collaborating with the World Bank in assisting the GOU to restructure the rural primary health system of Uzbekistan. USAID will focus on developing financial and management systems which will support the delivery of quality health care in a financially-sustainable manner. This will be achieved by implementing restructuring and installing new financial and management systems in three rayons of Ferghana Obliast as a replicable model. A Memorandum of Understanding between the GOU and the Government of the United States has been signed to initiate activities. Working groups at the local and national level have been formed to develop and implement health reforms. Community-based NGOs have been created to increase community participation in health services. Incentive-based payment systems are being designed. In-country and U. S. training have been provided to counterparts.
Description: USAID is providing the technical assistance to assist the GOU in developing a program for reforming its health system. The program will build on the lessons learned from the health reform demonstration activities in both Kazakstan and Kyrgyzstan. With USAID's assistance, the GOU will develop a new rural primary health care model staffed with retrained family physicians. The rural clinics will introduce new, market-based payment systems to increase efficiency. USAID-supported activities have been designed to fit within the framework of a World Bank loan which will finance the construction/renovation and re-equipping of reformed rural primary health care facilities. The World Bank and GOU will replicate successfully-tested financial and management systems from the USAID demonstration site.
Host Country and Other Donors: The Ministry of Health at the national level, and local health officials in the demonstration area, are the primary counterparts. However, various other GOU entities, such as the Ministries of Finance and Justice, the Cabinet of Ministers, and the Presidential Apparat, are also involved. In addition to the close, collaborative relations with the World Bank, USAID work will also be closely coordinated with other donors, such as the British Know How Fund and EU, which are interested in providing training within the overall health reform framework.
Beneficiaries: Beneficiaries: The immediate beneficiaries include health care providers in the newly restructured primary health care centers and their clients in the demonstration area, especially those in the vulnerable segment of the population, e.g. elderly pensioners, women, and children.
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 Number of independent primary care practices 0 (1998) 40 (2000) % of health care providers reimbursed by incentive-based provider methodology in demonstration sites 0% (1997) 100% (2001) Demonstration sites developed and rolled out 0 Oblasts (1997) 3 Oblasts (2001)
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