After what must have been three very long years, the International Monetary Fund’s representative has left Uzbekistan on reassignment. He will not be replaced. The Fund’s role is shrinking throughout the post-Soviet world (see Russia’s Week, March 7), and the retreat from Tashkent is no surprise. Foreign involvement in Uzbekistan’s economy is minimal. Foreign equity investment in 1999 and 2000 was less than $100 million. That is under $4 per capita, according to The Wall Street Journal the lowest ratio in any former Soviet state.
Corruption and distortion keep investors away. Exchange-rate policy, for example, directs windfall profits to the connected: favored parties may buy dollars at an official rate that is one-third the street price. Eventually, experts say, the system must crash.
The IMF may not be the last to leave. Korea’s Daewoo conglomerate built a car plant in Uzbekistan in 1996, in a 50-50 joint venture with the government. The UzDaewoo plant, in the Ferghana valley, builds cars and trucks primarily for export to Russia. It has already soaked up $1 billion in investment, according to Uzbek officials. Korea is supposed to sink another $29 million in this year. But the Russian market is hard to crack without massive subsidies to offset the overvalued currency. And Daewoo in Korea is bankrupt, a victim of the Asian crisis of 1997-1998. Daewoo may follow the IMF out the door.