Uzbekistan Moves Slowly Toward Economic Reform

LIKE most large Central Asian cities, Tashkent, the Uzbek capital, has a modern yet drab look - a legacy of the Soviet era. Broad, tree-lined avenues are largely devoid of traffic; the city center comprises mostly concrete, low-rise buildings with a dusty coating.

But the city's appearance is starting to change as Uzbekistan slowly asserts its independence following the breakup of the Soviet Union. Evidence of the transformation is tucked away on a sleepy street, where the glitzy Rank Xerox copy center stands.

One of the first Western companies to set up shop in Tashkent, Rank Xerox opened the store in late October after signing a $500,000 joint-venture deal with a government agency.

"This is going to be a big indicator for other Western investors," says Shukhrat Nasyrov, general director of the joint venture. "If Rank Xerox makes money, then others will follow."

Although Mr. Nasyrov and other Uzbek businessmen talk in animated tones about the transition to a market economy, the government of President Islam Karimov seems in no hurry to shed the centralized economic system imposed during Soviet rule.

Since many government economists say the top priority is maintaining political stability, wide-scale market reforms - including the introduction of an Uzbek currency to replace the Russian ruble - are not about to be introduced soon. State subsidies, particularly on staple food items, remain in place.

"We're working to achieve a market, but it will take time," says Akhat Agzamov, chief of the Uzbek Foreign Ministry's International Economic Section. "When the people have lived for 73 years under the Communist system, you can't change things in one year. The people must be protected from social earthquakes."

Attracting foreign investment is a big component of Uzbekistan's development strategy. In July the Uzbek parliament passed a law providing guarantees against nationalization of foreign investment. It also granted a two-year tax exemption for imports and exports of industrial equipment.

"Without foreign investment and credit it will be almost impossible to develop," Mr. Agzamov said.

Officials want to use foreign assistance to transform Uzbekistan from an exporter of raw materials into a provider of finished products. But these days, finding the necessary local capital for the hoped-for economic reorientation is tough.

Compounding the difficulties is this year's poor harvest of cotton, the main cash crop. Uzbekistan's economy is largely agricultural, with cotton accounting for 80 percent of hard currency earnings. But projections for 1992 put harvest figures below 1991's output of 1.46 million tons. Officials estimate about 400,000 tons of cotton will be sold on world markets this year, compared with about 500,000 tons the previous year.

Perhaps the biggest challenge for government officials is land management. Most of the republic's arable land is found in the Fergana Valley, where much of the republic's 18 million population lives.

With feeding the people a growing concern, government officials say they would like to reduce the acreage under cotton cultivation and grow food instead. Such a shift would also free more scarce water resources, officials add.

The privatization of farm land, meanwhile, presents officials with a dilemma.

"The government wants to keep property in its hands for several reasons," says Farkhod Ruziev, President Karimov's leading economic adviser. "One, preserving government authority over water resources could prevent conflicts. Two, the private farmer could never afford the price of equipment and thus the effectiveness of the land would fall."