South-south cooperation: Is it time for Uzbekistan to become a donor?

18 Sep 2013

South-south cooperation: Is it time for Uzbekistan to become a donor? Tashkent - A city on the rise

by Ildus Kamilov -

South‒south cooperation has the potential to not only invigorate Uzbekistan’s economy but also stimulate economic growth across the region.

How? South‒south cooperation is the exchange of resources, technology, and knowledge between developing countries, known as the global south.

Through this cooperation, Uzbekistan can decrease its dependence on foreign aid and even create a shift in the international balance of power, strengthening economic ties among the countries of Central Asia.

And now is the time for Uzbekistan to step up and become an emerging donor. (Developing world reshaping the future, says global Human Development Report)

Transforming from a recipient of assistance into a donor country can bolster a country’s economic and political status, and the Uzbek development model makes the country ripe for just such a move.

Uzbekistan could also enjoy political and economic dividends from supporting research by foreign experts through the support of grants and other tools for the promotion of scientific exchange.

Liberal economists usually complain about the strict interventionist policies of the Uzbek Government. However, even the most orthodox liberal cannot contest the seven to eight percent annual GDP growth (pdf) Uzbekistan experienced during the global financial crisis of 2008.

According to official reports, the Uzbekistan Fund for Reconstruction and Development reached $10 billion in 2012 and is expected to grow to $15 billion by 2016. The Fund is supported by revenue windfalls from the export of raw materials.

Allocating some of this money for programmes to provide technical assistance to neighbouring countries as export credits would increase the demand for the goods and services of Uzbek enterprises and bring money back into the economy as export revenue for non‒raw material sectors.

Uzbekistan has both the necessary experience with transition and the financial resources to contribute to south‒south cooperation. What is lacking, though, is an institutional platform to support this new economic venture, including a legal framework and administrative capacity.

So how can an institutional platform be established?

1. Develop relationships on a bilateral or trilateral basis with major international financial institutions, such as the Asian Development Bank and the World Bank. In the initial stages, this approach will make it possible to launch projects at lower organizational costs in the simplest areas, including export credits and long-term loans for joint projects.

International financial institutions have an existing organizational network and portfolio of projects both in Central Asia and in other regions that Uzbekistan can build from. In addition, they already have well-established administrative systems capable of implementing large-scale technical assistance projects.

2. Establish an Uzbek agency of international cooperation and an export‒import bank, which would help finance the sale of exports to international buyers. Already in 2007, the Uzbekistan Center for Economic Research had voiced the idea of creating an export-import bank as a part of an export promotion policy.

Just recently, the Center produced a pre-final draft of a Development Focus issue, which assesses the rationale and opportunities for Uzbekistan to engage in south‒south cooperation. The final report,to be released shortly, is one step closer to Uzbekistan achieving economic independence.