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Effectiveness of Aid as Leverage for Transforming a Country Kae Yanagisawa UNDP Tajikistan After independence 1991 1992 1994 1997 2000 Independence Break out of the Civil War Placement of UNMOT Peace agreement General election Replacement of UNMOT by UNTOP Relations with donors 1. CG meetings 1996 and 2001 in Tokyo, 1998 in Paris 2003 and 2004 in Dushanbe 2. PRSP and NDS 2002 First PRSP 2004 Millennium Development Project 2005 Second PRSP Presentation of MDG based NDS Moving Mountains: The UN Appeal for Tajikistan Uzbekistan After independence 1991 1996 Independence Restrictive trade and forex policy Off-track with IMF Staff Monitored Program of IMF 2003 Acceptance of Article 8 of IMF 2004 General election: bicameral parliament and multiple party system 2002 Behind the Scene Liberalization of foreign exchange accompanied by tight monetary policy and administrative barrier to trade Multiple party system approved/created by the President, denial of registration of opposition parties Relations with Donors: IFI IMF 2001 Withdrawal of international staff Monitoring according to Article 4 WB 2005 Interim “Welfare Improvement Strategy Paper” 2006 No new loans will be provided, stay engaged Relations with Donors: IFI EBRD 2003 Annual meeting in Tashkent Monitoring of 7 benchmarks 2004 Limited provision of loans 2005 Stay engaged ADB The largest provider of finance Relations with Donors: US Swing between “strategic partnership” and human right concern 2002 Sharp increase in assistance 2003 The Congress prohibited direct support to government 2005 Withdrawal of Peace Corps ( Withdrawal of AF base) Relations with Donors: UN 2005 Security officer was ousted 2006 UNHCR will be expelled soon HDR/2005: Most accommodating among donors(?) Underlying motivations: unmet expectations Donors Transformation from communist regime and centrally-planned economy to democratic and market-oriented ones through SA approach FSU Republics Compensation for the loss of transfer from the central government What makes differences? Uzbekistan Tajikistan 26 million 6 million Natural Oil, gas, nonresources ferrous metals Major exports Cotton, gold Unexplored water Cotton, labor Population SelfSelf-sufficient in sufficiency food and energy GDP in 2003 107 (1989=100) 62 Economic reform of Uzbekistan Share of administered prices Private sector share in GDP Asset share of state owned banks FDI flows per capita Uzbekistan Kazakhstan 53% (26/27) 45% (25/27) 96% (26/27) $3 (27/27) 0% (1/27) 65% (12/27) 5% (11/27) $152 (7/27) Economic factors impeding reform in Uzbekistan 1. Trust in state control/distrust in private sector 2. Flow as LDC vs. Stock as MIC 3. Lack of “development” perspective Political system of Uzbekistan President Presidential office Government Court Industries Parliament Analogy CCP State Council Court Ministries Industries People’s Congress State-People relations State Authoritarian Dictatorship Oppressive Order Obedience Services Passiveness People Paternalistic Against Trust, expectations Private Public Services Risks of authoritarian states Abuse of power over people Monopoly of power and wealth within a limited elite group: “Marriage between unchecked power and illicit wealth” Unwillingness of changing status quo as far as it serves the interests of the elites Possible risks of Uzbekistan Economic poverty and political oppression - people are living at a subsistence level - no legal way of expressing opposition violence, insurgence of Moslem power Andijon Incident Lagging behind globalization, loss of opportunities Degradation of Soviet legacy - infrastructure - human resources Options 1. Overthrow the government? 2. Empowerment of civil society? democracy vs. reform Japanese approach Emotional, based on personal relations Silent and stable donor Counterbalance to Western approach? Personal interest Keep status quo Governmen Rent t officials seeking Business Rent people seeking Farmers Rent seeking People Informal economy Conservati ve Reformist Elite group Stick to National Soviet way interest Maximizing profit Maximizing profit State protection Conclusion Step-by-step but steady transformation through Working with motivated people Without good governance but effective public administration that eventually serve the interest of the people Removal of state interference in private sector activities (taxation, legal system) Thank you
