Is there a future for reform in the Caspian basin?

By Joseph Hulings

Joseph Hulings is a former US Ambassador to Turkmenistan where he is worked extensively on political and economic reform issues. He also traveled widely throughout Central Asia during the course of three assignment at the U.S. Embassy in Moscow. He is presently an independent consultant with a special interest in the Caspian region.

Around the Caspian basin in the early nineties independence was viewed as an opportunity to employ the vast natural resources of the region to improve significantly local living, working and
health conditions. To capitalize on this newfound authority, most governments in the region issued proclamations of support for the introduction of market economies and the formation of democratic   political institutions.

In retrospect, these proclamations appear disingenuous to some and naive to others. Now, half a decade later, even cursory review discloses that meaningful reforms have been marginally implemented at best. Instead, the reform process has largely been discredited as government officials have become disillusioned with the lack of direct positive results from the very limited reforms which have been attempted. Highly publicized negative effects of reform, as illustrated by confusion and inequity in Russia, have strengthened the resolve of many in Central Asia to avoid the "mistake" of adopting "destabilizing elements" of democracy and market economies in their purest forms.   No state in the region can be said to have truly embraced a reformist path. On the contrary, strong roles for governments in both the economy and politics have become the pattern despite repeated espousals of reformist principles.

Does this imply that hopes for the emergence of democratic, market-based nations are doomed to failure? Does the lack of economic progress over the past six years demonstrate that market
economies, with their pressures for corresponding relaxation of political controls, cannot find fertile soil in Central Asia and the Caspian? Is it true that only strong central direction and
political control can provide the stability necessary to fulfill the economic potential of the region? Are the political and economic reforms frequently cited as the cause of Russia's morass inappropriate for the Caspian region? These and related questions bear consideration as the governments of the region wrestle with their desires to consolidate political authority while obtaining
the benefits of decentralized economic development.

Some observers argue that regional traditions overlaid with a neo-communist veneer consign attempts at reform to an early death. They contend reforms are inconsistent with the overwhelming
priority of the region for stability at all costs. They cite the "failure" of reforms in Russia which has increased the resistance of government officials at all levels throughout the NIS to the
adoption of economic and political modernization. They reject introduction of reforms which do not provide local officials with the tools necessary to achieve the predictable outcomes for which
they are held responsible.   And their apprehensions reverberate throughout a general population which wants improvements in standards of living with a minimum of personal disruption and
effort. Given these formidable obstacles, they ask how local governments and donor states should target efforts to strengthen economic and political reform?

For those in the West, contemporary events offer a striking rationale for pressing ahead with political reform. Democracy has proven to offer the best scenario for political stability, i.e.,
peaceful turnover of political authority from one group to another. Likewise, market forces, when coordinated with social protection, have been shown to confer real advances in standard of
living.

With the demise of colonialism in the mid-century, states which originally adopted single party systems to perpetuate strong central control have experienced disastrous results. Even those
states such as Nigeria and Zaire which have resource bases similar in richness to those of the Caspian basin have suffered through mismanagement and economic decline. Other "rich" states such   as Saudi Arabia, Kuwait, and Syria have not achieved economic growth which meets the expectations of their populations in sharing the wealth of the country. Without a mechanism for
offering political expression to their populations, all   these states and others as well face potentially destabilizing futures. But around the Caspian these arguments have so far failed to attract significant support in terms of modifying behavior patterns developed over years of dependence upon central
authority for responses to economic, political and social questions.

One of the most disturbing elements of the political structure of one-party or non-democratic states is that change, while inevitable, cannot be managed by political elites which are
focused almost exclusively on preserving their own privileges. Consequently, repressed pressures for change have been and continue to offer the potential for deep and violent upheaval. The
stability touted by one party states tends to be temporary and is frequently followed by stark changes which are socially disruptive and more severe than would be experienced with the gradual
introduction of political reform.

From the perspective of the United States, which developed democratic and market systems in the course of 200 plus fitful years, it is simple to declare that only a democratic form of
government with political plurality will adequately address the needs of the populations of the Caspian. It is similarly simplistic to praise the benefits of a market system. It is a
task of a different order to prescribe the mechanisms necessary to achieve the full potential of the states of the region without fragmenting local society in the course of implementation. And
ignoring the natural impulses of any political entity to protect and solidify its own power base is naive in the extreme.   Reform in Eastern Europe has been difficult enough despite the East
Europeans' relative familiarity with European market mechanisms and possession of common cultures, values and traditions. But the mechanisms which worked moderately well in eastern Europe have fared poorly when introduced into a region which has been almost
totally insulated from Western experiences.

Reform efforts in Russia have demonstrated that the introduction of democracy and a market economy demands implementation of procedures which are seen to benefit more than a small segment of society. Protection against the abuses of political and economic power which accrue to individuals or governments implementing selective reform must also be provided. At the same time reform must offer sufficient incentive to engage the support of officials tasked with carrying them out. Where this has not happened, political and economic reforms have been castigated. What is
called for is a new effort to develop programs which acknowledge the special characteristics of each of the states in the region while offering incentive for acceptance by governments and
populations alike.

First and foremost, the states themselves must commit their own human and financial resources to assure follow-through on common efforts; this commitment must be sustained over most of the
generation it will take to accomplish national objectives. To date reform in Central Asia has generally been left to outside sponsors with only limited identification of local national
resources and energies. This approach is doomed to failure. To be successful, new direction and new emphasis must be applied by the states themselves, especially as sources of outside assistance
funding dry up.

What then should key elements of a reform package encompass?   Reform in most countries of the former Soviet Union has been characterized by the accumulation of benefits in the hands of a
privileged few, scant effective emphasis for the protection of social rights and self-interest on the part of political and economic elites. These three unintended consequences must be
reversed for a reform program in the Caspian basin to have any real chance of success.

First, the reforms must be genuine, that is they must lead to psychological and physical changes which prepare the populations, governments and businesses to thrive in a new environment of
competition. Second, the reforms must offer some prospects for success without concentrating benefits in the hands of a few   while many experience significant loss of earning or political
power. Third, they must offer incentive for those who presently hold political or economic dominion to support implementation of new policies. Most importantly, efforts at reform must be seen to originate with and be funded by local national governments.

For the states of the Caspian basin these objectives may appear rational but mutually exclusive. Is it possible to identify incentives for the power elites to adopt the decentralized mechanisms of a market economy and democracy in the face of possible loss of control and eventual demise of their own positions? How can one obtain the economic benefits of the market without the eruption of class conflict?

The answers lie in the adoption of a sustained program of education, assistance and will. Rather than a quick application of large amounts of financial assistance and handouts, a durable,
coordinated approach over a longer time frame is needed. Political leaders in the states of the region must be convinced that ultimate success depends more upon their own commitment to the
future than to the will of foreigners to extend financial aid for projects which reward local short term objectives but do not support the goal of moving reform ahead. On their side donor
organizations must commit to support long term projects which lack the appeal and justification of immediate return.

Many regional leaders recognize that education is the key to success. But it is not the one or two year programs currently in favor with donors. These efforts whet the appetite of participants for the benefits of reform but do not provide   the technical expertise to implement reform in countries which have had no exposure to or experience in market democracy. As a consequence, many participants opt to stay abroad or become dissatisfied with the lack of opportunity to implement reforms upon their return because they are not in position politically or technically to implement change. Moreover, their numbers are so few that they effectively are marginalized as an influential
force. To correct this, programs to develop functional expertise in economics and government should be funded by the sending states with modest organizational and financial support from donor
organizations. In return for two-four years of graduate study abroad, students should commit to work at national, regional or   local government positions where they could advance those reforms
most appropriate to local conditions. Given the current dearth of qualified market experts in the Caspian basin, the role of economic advisor currently played by the International Monetary
Fund and World Bank should be expanded to mentor these returning technicians. Adoption of a formal commitment to prepare for the   future by using the resources of the sending governments would send a powerful message that the states are sincere in their commitment to eventual reform and will utilize the education and skills acquired by their students.

Contrary to the fears of existing political elites, establishment of legal safeguards in Central Asia is unlikely to encourage local populations to turn out current political leaders. Rather it is
apt to enhance the prestige of those leaders in the short term as even modest reform will bring economic benefit to a greater share of the populace. But if privatization and moves
toward democratic practices are adopted without the establishment of corresponding legal mechanisms, the result will parallel those in Russia with financial and political abuses and concomitant disrepute for the process of reform. Thus, adoption of fully democratic procedures and introduction of an open economy (which at its early stages could not support open competition) must   await implementation of the safeguards in commercial law. The adoption of rule of law procedures is the most crucial element in the establishment of viable modern political and economic
systems.

The third priority in a reform package must be improvements in the health and social conditions which affect each and every individual in the region. Programs which educate and encourage
adoption of improved health, education and other social and infrastuctural services should be encouraged. Aside from the   obvious benefit of improving living conditions, programs in
maternal and child health care, water and sewage treatment and rural education promote political stability by demonstrating positive achievements which can be linked directly to independence
and, hence, to the building of national identification. The   benefits obtained under such programs would also work to the benefit of current political elites provided that the programs
were viewed as just, fair and relatively free of corrupt practices.

Where the money for ambitious assistance programs in the Caspian basin is to come from? The answer is that the amount of funds to be expended need not be great if projects are coordinated and directed. It may also be possible to attract private Western donors once viable programs are established. Would not oil firms be willing to contribute to the training of legal experts if they
understood adoption of new local laws (with teeth) would protect their investments from arbitrary expropriation or legal wrangling?

Couldn't private educational institutions establish reciprocal training programs with local universities for less than full market price? And shouldn't these states make a firm and direct commitment to the future well-being of their peoples by contributing state investment to social and educational improvement instead of frittering away revenues on corrupt and senseless projects?

Each state around the Caspian is unique, with its own priorities, culture and orientation. Each will have its own peculiar views and solutions. But none is likely to move rapidly ahead with
meaningful reform until better coordination is achieved between donors and recipients and until each state undertakes to commit some of its available resources for self help. It is the job of Western experts to encourage and even insist upon this commitment and to provide a framework for coordination.

After six years of independence, progress toward real reform has been more oral than actual. Assistance programs have in some cases benefited those who are not interested in reform, feel
impotent to implement reform, or, like many students and other participants one sees in the United States, are so disillusioned with their personal prospects that they search for any possible
way to extend their stay abroad indefinitely. To correct this, donor and recipient countries alike must rethink the objectives of assistance projects. In a period of declining resources, the
primary aims of establishing democratic practices and introducing a functioning market economy remain valid. And they can yet be achieved through self help and directed guidance.

What I have proposed will not yield immediate benefits to the governments of the region but they have little to show for six years of assistance anyway. And it may not satisfy demands on the
part of donor organizations for visible progress toward program objectives. But it offers a predictable path with enough movement toward its stated goals to encourage its continuation and
fulfillment.

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