ASSESSMENT OF INTERGOVERNMENTAL RELATIONS AND...

ASSESSMENT OF INTERGOVERNMENTAL RELATIONS AND LOCAL

GOVERNANCE IN THE REPUBLIC OF UZBEKISTAN

Prepared for

Central Asian Republics Local Government Initiative Phase II United States Agency for International Development Contract No. EEU-I-00-99-00015-00, Task Order No. 811

Prepared by

Peter Epstein Matthew Winter

With

Munira Aminova

Andrei Makarikhin Clare Romanik

The Urban Institute

THE URBAN INSTITUTE 2100 M Street, NW Washington, DC 20037 (202) 833-7200 www.urban.org

February 2004 UI Project 06901-017

ACKNOWLEDGEMENTS

Preparation of this report has drawn on a variety of primary and secondary sources. It could not have been completed without the patient, often surprisingly frank assistance of many experienced Uzbekistanis working both inside and outside of government to whom we are most grateful for their time, information, and insights. Indeed, most information provided in this assessment has been gleaned from interviews with these local observers, though in most cases the authors endeavored to verify each fact at more than one interview. In the body of the assessment, the authors have indicated where specific information is based on interviews with a small number of people. In respect to secondary sources, the chapter on Uzbekistan written by Kuatbay Bektemirov and Eduard Rahimov as a contribution to the Open Society Institute’s Local Governments in Eastern Europe, in the Caucasus and Central Asia: Developing New Rules in the Old Environment served as a valuable point of departure for understanding the complexities of local government in Uzbekistan, which we have sought to elaborate further in this assessment. The present authors’ understanding of the structure of intergovernmental finance in the country benefits from Alex MacNevin’s July and October 2003 reports for Bearing Point on building oblast level revenue capacity and a draft works in progress by the Center for Economic Research in Tashkent. A complete list of secondary sources consulted is appended as Annex A to this report.

TABLE OF CONTENTS ACKNOWLEDGEMENTS ..............................................................................................................i NOTE ON TERMINOLOGY..........................................................................................................v ABBREVIATIONS ........................................................................................................................vi I. INTRODUCTION AND SUMMARY ................................................................................... 1

Assessment Scope and Purpose .................................................................................................. 1 Uzbekistan Local Governance in a CAR Perspective................................................................. 2 Some Distinctive Features of Local Governance in Uzbekistan ................................................ 4 Implications for USAID and Other International Donor Assistance .......................................... 8

II. A VIEW THROUGH THE PRISM OF THE EUROPEAN CHARTER ........................ 11

III. LEGAL FRAMEWORK: COMPOSITION AND STATUS ........................................... 29

IV. TERRITORIAL STRUCTURE AND STATE ADMINISTRATION ............................. 34

Territoria l Administration: Three Tiers Plus One ..................................................................... 34 Dual Subordination and Functional Assignments..................................................................... 35 Other Examples Of Dual Subordination In The State Government Structure .......................... 39 The Court System and Judicial Oversight of Local Government Administrative Practices..... 40 The Status of Karakalpakstan ................................................................................................... 41 Tashkent City............................................................................................................................ 42 Conclusions ............................................................................................................................... 43

V. LOCAL GOVERNMENT COUNCILS, CITIZEN’S SELF-GOVERNMENT BODIES, AND RELATED GOVERNMENT-NGO HYBRIDS ................................................................. 47

Local Councils of People’s Deputies and State Executive Encroachment ............................... 47 Local Council Elections ............................................................................................................ 49 Legislating the Mahalla: Modernization of an Indigenous Institution or State Cooptation? ... 51 Town and Village Mahalla Coordination Councils .................................................................. 53 The Modern Day Mahalla as an Instrument of State Administration ...................................... 55 Mahalla Finances ...................................................................................................................... 57 The Problematic Relationship between Mahallas and Housing Association (TSJs)................ 59 The Mahalla Foundation and Hierarchy of Mahalla Coordinating Councils........................... 59 The Shirkat in Modern Uzbekistan........................................................................................... 61 Conclusions Regarding Local Councils of Deputies ................................................................ 62 Conclusions Regarding Mahallas ............................................................................................. 63 Implications for Technical Assistance ...................................................................................... 63

VI. INTERGOVERNMENTAL FINANCE ........................................................................... 69

Macroeconomic Context for Local Government ...................................................................... 69 Transfers And Mutual Settlements ........................................................................................... 70 Shared National Taxes and “Local” Taxes ............................................................................... 70 Revenue Structure Of Provinces, Districts And Cities ............................................................. 73 Own revenues............................................................................................................................ 74 Reform Efforts in the Tax System............................................................................................ 75 Expenditure Responsibilities .................................................................................................... 76

Conclusions ................................................................................................................................ 77 VII. LOCAL BUDGETS AND FINANCIAL MANAGEMENT............................................ 79

The Budget Process................................................................................................................... 79 Budget Implementation............................................................................................................. 82 Discretionary Spending by Local Executives: The Reserve Fund, Privatization Proceeds and Extra Resources......................................................................................................................... 84 Budgetary Entities’ Development Funds .................................................................................. 85 Treasury Functions .................................................................................................................... 86 Audits and Monitoring .............................................................................................................. 87 Conclusions ............................................................................................................................... 87

VIII. URBAN SERVICE DELIVERY AND RELATED FUNCTIONS.................................. 89

Reorganization of the Communal Service Sectors ................................................................... 89 Rate-Setting In The Communal Service Sector ........................................................................ 90

Billing, Collections, and Financial Reporting........................................................................... 94 An Additional Note on the Water Sector.................................................................................. 95 An Additional Note on Solid Waste Management ................................................................... 96 An Additional Note on District Heating / Hot Water ............................................................... 97 An Additional Note on Housing Management and Maintenance ............................................. 98 Recap of Organizational and Budgetary Status of Communal Service Companies ................. 99 The Urban Transportation Sector.............................................................................................. 99 Local Governments and Social Protection.............................................................................. 101 Urban Property, Development Permitting, and Cadastral Records ........................................ 103 Conclusions ............................................................................................................................. 104

IX. RELATED PUBLIC ADMINISTRATION TRAINING CAPACITY .......................... 108

The Presidential Academy ...................................................................................................... 108 Other Training Organizations ................................................................................................. 109 A Note on the Absence of Municipal Associations ................................................................ 109

X. RELATED INTERNATIONAL DONOR INITIATIVES ................................................. 111 Exhibit 1. Characteristics for Effective Decentralization and Local Self-Government………….12 Exhibit 2. Summary Listing of Key Documents Shaping the Legal Framework for Intergovernmental Relations and Local Governance in Uzbekistan……………………………..30 Exhibit 3. Central Asian Republics: Number and Size of Second-Tier Jurisdictions…………...34

Exhibit 4. Uzbekistan Structure of Territorial Administration…………………………………..36 Exhibit 5. The Demographics of Territorial Structure in Uzbekistan……………………………45 Exhibit 6. Macroeconomic Context for Local Government (mln. so’ms)……………………….69 Exhibit 7. Local Government Revenue Sources…………………………………………………72 Exhibit 8. Distribution of VAT and PIT Tax Shares Among Provinces, District and Cities ....... 74 Exhibit 9. Revenue Structure of Provinces, Districts and Cities (% share of actual 2002 revenues)…………………………………………………………………………………………74 Exhibit 10. Local Government Expenditures by Sectors (percentage) ......................................... 76 Exhibit 11. Expenditure Structure by Type of Administrative-territorial Subnational Jurisdiction (% share of actual 2002 expenditures)…………………………………………………………...77 Exhibit 12. Cost and Rates for Communal Services to Residential Customers, Tashkent City…94

ANNEXES A. Bibliography of Relevant Articles and Reports B. Legal Log of Legislation, Decrees, and Resolutions : Selected Acts, By Date C. Abstracts of Selected Laws and Legal Documents: Related to Local Governance in

Uzbekistan, Prepared by Andrei Makarikhin D. Summary of Related International Donor Programs E. Legal Authority For Urban Transport Management In The Republic Of Uzbekistan (two

charts, one on law; one on functions) F. Excepts from The Principle of Separation of Powers in the Organization of the Activities

of Local Government Institutions by Dr. X.I. Ruzmetov, G. Communal Service Tariffs: Tashkent City, January 2004 H. Organizational Structures for Communal Services I. Tashkent City and Tashkent Province Local Councils: Late February, 2004

NOTE ON TERMINOLOGY In the interests of clarity and political correctness, the authors of this report decided to refrain from using Russian-language names for administrative units, though these are still common in oral usage in Uzbekistan. The Russian oblast, thus, is translated as “province” or rendered using its official Uzbek term, viloyat. The Russian administrative unit, rayon, has two translations in Uzbek, nohiya and tuman; the authors have translated it as “district”. Terminology for self-government organs also deserves attention. Citizens’ assemblies, the basic unit of self-government, can exist in mahallas (neighborhoods), villages, or even towns. Often, where a village is made up of more than one mahalla, residents will belong to more than one citizens’ assembly. (Alternatively, there may be no citizens’ assembly for the village level, just a mahalla coordination council; or a village may not be formally divided into mahallas at all). The terms [local] self-government and citizens’ assembly, therefore, are interchangeable. Additionally, mahalla is commonly used in local parlance, even at the official level, to refer to citizens’ assemblies in general, rather than citizens’ assemblies only of the mahalla type; the authors have also adopted this convention (except where otherwise specified). Similarly, the mahalla committee and the kengash of the citizens’ assembly are one and the same, as are the oqsoqol and the chairman (kengash) of the citizens’ assembly. Hokims exist at the second- and third-tiers of administration; where clarification is needed, provincial (second-tier) or district/city (third-tier) hokim is specified. Local councils of people’s deputies, or simply local councils, are also referred to as kengash, but the authors have endeavored to avoid using the Uzbek term here, so as to avoid confusion with kengashes of citizens’ assemblies. They exist on both the provincial and the district/city level.

ABBREVIATIONS Abbreviations used in the text of report:

ABA/CEELI American Bar Association/Central European and Eurasian Law Initiative ADB Asian Development Bank () BTI Bureau of Technical Inventory CAIP USAID Community Action Investment Program CAR Central Asian Republics CASP Civic Advocacy Support Program CEE Central and Eastern Europe CIP Capital Improvement Plan CoM Cabinet of Ministers CoP ? EBRD European Bank for Reconstruction and Development FSU Former Soviet Union GAK State Stock Company (Russian- language acronym) HITS Partnership for Provision of Heating Services (Uzbek- language acronym) IRI International Republican Institute KEU Communal Services Operation Administration (Russian- language

acronym) KRAVS Local Maintenance Enterprise (Russian- language acronym) LGI Local Government Initiative LGU Local Governmental Unit MoF Ministry of Finance MoJ Ministry of Justice NDI National Democratic Institute NGO Non-Governmental Organization NIS Newly Independent States of the FSU OSCE Organization for Security and Cooperation in Europe OSI Open Society Institute PIT Personal Income Tax PO Producers’ Union (Russian- language acronym) RK Republic of Karakalpakstan RUz Republic of Uzbekistan SME Small and Medium Enterprises TA Training Activity TKEO Territorial Communal Services Operation Union (Russian- language

acronym) TSJ Housing Association (Russian- language acronym) UI Urban Institute UNDP United Nations Development Program USAID US Agency for International Development VAT Value-Added Tax ZhEK Housing Maintenance Office (Russian- language acronym)

GLOSSARY: INTERGOVERNMENTAL ORGANIZATION IN UZBEKISTAN Note on Transliterations and Pronunciation: In this assessment, the Urban Institute has used official Uzbek latinization for all proper nouns, place names and other transliterated terms, in accordance with the 1993 law “On introduction of an Uzbek alphabet, based on Latin characters.” Only three place names, O’zbekiston, Toshkent, and Farg’ona, were rendered according to more widely recognizable transliterations of the Russian, as Uzbekistan, Tashkent, and Fergana. Several Uzbek Latin characters are pronounced differently than the corresponding English letters. Notably, x is pronounced as a hard, fricative h and is rendered as kh in transliterations from Russian; likewise, the q is spoken as a thicker, more fricative k. O’ is pronounced approximately in the same way as the Turkish or German o with an umlaut. The g’, or “soft g,” is considerably harder than its Turkish equivalent; treating it as a standard g will produce a pronunciation that is understandable. In other transliterations, g’ is sometimes rendered as gh.

Aul ??????? (? ????????????????) village (Karakalpak) Guzar ????????, ?????????? ????? ?????? ??? ???????????? ?????? meeting house (where food is also served) Hokim ???; ?????????? governor, mayor Hokimiyat ?????; ???? ??????????? governor's office, mayor's office Kengash ????? council Kotib ????????? ????????????? ????? secretary of mahalla assembly Mahalla ???????; ????? ?????????? ????????? ? ????????? mahalla; neighborhood Mahalla kengashi ???????????? ??????? mahalla committee Nohiya ????? district Oliy Majlis ????????? ????? parliament Oqsoqol ???????????? ????????????? ????? chairman of mahalla assembly O’zkommunxizmat Uzbekistani Agency for Communal Services O’zuyjoyjamg’armabank ????????????? Uzbek Real Estate Savings Bank O’zsanoatqurilishbank ??????????????? Uzbek Industrial Construction Bank Posbon ??????; ???????????? ????? posbon; neighborhood guardian Qishloq ???????, ?????? village Rais ???????????? ??????? Collective farm chairman Shirkat xo'jaligi (shirkat) ?????? collective farm Tarbiyachi; tarbiya ishlar bo'yicha maslahatchi ???????-??????????? education advisor TIF Milliy Bank ???????????? ???? ??????????? National Bank of Uzbekistan Tuman ????? district Uy-joy mulkdorlari shirkati (shirkat) ???????????? ????????????? ????? (??? ) housing association (TSJ) Viloyat ??????? province Xalq Banki ???????? ???? The People's Bank

Assessment of Intergovernmental Relations and Local Governance in the Republic of Uzbekistan

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I. INTRODUCTION AND SUMMARY Assessment Scope and Purpose This assessment addresses the basic legal institutional framework for subnational government in Uzbekistan. It also describes how the central and respective local government tiers interact in practice and, how, at the municipal level, government is organized and operates, most importantly in respect to budgeting and the delivery of basic urban services. The assessment has been prepared as part of USAID’s Local Government Initiative-Phase II (LGI-II), which operates in four of the five Central Asian Republics, or CAR (Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan), and which is now in the second year of its two-year term. In the other three republics, LGI-II addresses a relatively broad agenda aimed at advancing a legal framework for decentralization and at municipal capacity building. In Uzbekistan, the program focuses more narrowly on the strengthening of housing associations (TSJs), which USAID identified as the most promising initial window for demonstrating concepts of community-based governance and transparency in this highly centralized political culture. The scope of work for LGI-II called for this assessment during the second program year, “in order to prepare for the possible expansion of the program activities into the area of local government training and technical assistance…” The study’s primary purpose is to provide background and analysis on existing realities in Uzbekistan as input into USAID’s thinking in respect to the timeliness of such assistance, not to contribute directly to the design of any such assistance itself. The authors hope that the report will also serve as an informational resource for other parties interested in improving the effectiveness and responsiveness of local government in Uzbekistan. Although the assessment does contain findings on specific weaknesses in the current legal framework, institutional arrangements, and governmental practices, it does not aspire to develop comprehensive and detailed recommendations for reform. For the purposes of researching local government organization and operations in practice, members of the study team met with informed national level observers (both inside and outside government) and, in the field, with counterparts in the city of Olmaliq (Tashkent Province) and in three LGUs in Andijon Province: the city of Andijon, the district of Xo’jaobod, and the district of Buloqbashi. Interviews were also administered in Qirg’uli (Fergana Province) and Samarqand City. Budgetary and financial information was collected during these field trips to provide illustrative, city-specific data in more detail than was available from central government sources in comparative form for all localities. The choice of LGUs for fieldwork was made, in part, to include at least one from a poorer province (Andijon) heavily dependent on transfers from the center and one from a province (Tashkent) that serves as a net donor of tax revenues to other provinces. Given the limited number of jurisdictions visited, this assessment may not capture variations that may occur in practice from one region of the country to another.

Central Asian Republics Local Government Initiative Phase II

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Uzbekistan Local Governance in a CAR Perspective Uzbekistan, in respect to both its governmental institutions and political culture, shares many features that reflect their common legacy from years of Soviet rule in common with its Central Asian neighbors. That said, in Uzbekistan, now well over a decade since independence, these features still persist in a more unreconstructed form than in the adjoining republics. Freedom House, in its most recent Nations in Transit annual compilations, places Uzbekistan behind Kazakhstan, Kyrgyzstan, and Tajikistan in its numerical ratings for progress in respect to Democratization, Rule of Law, and Economic Liberalization. It groups Uzbekistan alone with Belarus and Turkmenistan as Consolidated Autocracies/Statist Economies, in contrast to the other Central and Eastern Europe (CEE) and former Soviet Union (FSU) republics (including the other CAR countries), which it characterizes as Transitional Governments and Economies and selected CEE nations which it qualifies as Consolidated Democracies and Economies.1 As will be apparent from this assessment, a ranking on decentralization and movement towards more accountable, democratic local governance would, by most measures, place Uzbekistan in the same position relative to other CAR nations. Some major features of intergovernmental arrangements and local governance in Uzbekistan that would be familiar to students of other political systems in the region include the following:

• Virtually all governmental authority resides in a highly centralized state administration, which operates through several tiers of subnational executives (known as hokims). Hokims are appointed from above, based on loyalty to the president, and are judged, in large part, on their compliance with policy directives handed down from Tashkent. As such, they operate, in practice, with no direct accountability to local constituencies or their elected representatives.

• The legislative and judicial branches within this territorial system remain passive and

largely irrelevant to the day-to-day functioning of local government. Local councils, though freely elected in theory, rarely, if ever, exercise what limited independent discretion they have been granted in law. For example, no one interviewed for this assessment could recall a council refusing to ratify the appointment of a hokim. Councils convene infrequently for brief sessions (as a rule, only those legislatively mandated, twice a year)—too seldom to exercise any real oversight over the executive or to act as true deliberative or even consultative bodies.

• Despite some progress in delimiting functional responsibilities, the ambiguous and

pervasive dual subordination of functions between central ministries and local administrations persists in a variety of forms, some legislated and some de facto. Distinct centralized hierarchies, such as the territorial administrations (hokimiyats), the Tax Inspectorate, the Ministry of the Interior and the Office of the Procurator, both compete and collaborate for influence in crucial local sectors.

1 Karatnycky, Adrian. Nations in Transit 2002 and Nations in Transit 2003, Freedom House


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• At the local level, the boundary between public and private remains murky. (For

example, the major responsibility of hokims in many cotton-growing regions is mobilizing labor for the annual harvest.) Moreover, as in most former Soviet republics, basic urban services (water, gas, and solid waste removal) have been entrusted to public enterprises—but without the clear delineation of regulatory, operational, and investment responsibilities among enterprise itself, local government, and national line ministries that would allow these services to be delivered on a businesslike and accountable basis.

The Semantics of “Local Self-Government”: Some Distinctions among the CAR In the legal and political parlance of Central Asia, “local government” refers to all subnational levels of government. Counterparts in each of the CAR perceive “local self-government” or “citizens’ self-government” as operative legal concepts and institutional realities in their respective countries—and distinguish it from “state administration or power”. As detailed in Chapter Two, in none of the CAR would these concepts/realities, when viewed as a whole, satisfy even minimal threshold criteria for “local self-government” as the term is understood in the West. Moreover, there are also some subtle distinctions in respect to how the term is used among the CAR themselves. Kazakhstan Executive entities (akimiats) and councils at city, rayon, and oblast levels are all “state power” and are governed by the local state power legislation. Designated akims in rural jurisdictions and rayon-subordinate cities are viewed as extensions or agents of the local state administration in rayons. Some block committees remain (as a hold-over from Soviet times), which are considered “local self-government” or “territorial self-government”. Kyrgyzstan Councils of all subnational levels are considered “local self-government”. (Note: a change in status of rayon and oblast councils is in the early stages of consideration.) State administrations exist at the rayon and oblast levels. “Mayor's Offices” are executive entities for republican and oblast significant cities. They are considered “local self-government” but with some state administration functions Administrations in rural jurisdictions and rayon significant cities are termed “local self-government”. The term “territorial local self-government” refers to block (mahalla in the south) committees, housing committees, and other community-based organizations. Tajikistan Councils and executive entities in all cities, rayons, and oblasts are “local state power”. Rural village governments (jamoats) are considered local self-government, though the chairperson is appointed by the rayons and the councils are relatively ad hoc bodies chosen by a show of hands at village assemblies. Tajikistan is currently grappling with the legislative definition of mahallas (block committees).


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Uzbekistan Councils and executive entities in all provinces, districts and major cities are “local state administrations”. Citizens’ assemblies (mahallas) are considered “local self-government”.

Some Distinctive Features of Local Governance in Uzbekistan In relation to adjoining republics, several features of local government structure and functioning that are relatively distinctive to Uzbekistan merit highlighting: Relatively Little Attention to the Legal Framework and Few, Even Rhetorical Expressions of Interest in Decentralization. The basic framework for local governance in Uzbekistan was set in the 1992 Constitution and elaborated shortly thereafter in three pieces of legislation: a law on local state administration (1993), a law on the election of local councils (1994), and a 1993 law on citizens’ self-government institutions (for towns, villages, and mahallas). Since then, there has been relatively little attention paid to this framework, and, at present, no active interest within high government circles in re-examining in any fundamental way the laws that govern intergovernmental relations. (One exception worth noting: In 1999, the law on citizen’s self-government was replaced by a new version that augmented the role of mahallas as agents of the state, part of an ongoing post-independence tendency towards legislation of the mahalla so as to increase its formal role in governance.) By contrast, Kyrgyzstan has made some significant steps in the direction of decentralization (direct election of some mayors; a local government finance law); in Tajikistan a presidential working group with USAID and other donor assistance is actively considering some measures to strengthen self-government at the lowest tier of village (jamoat) governance; and in Kazakhstan, in the past year there have at least been parliamentary hearings on “local government concepts” prepared by various interested parties, including oblast akims and at least one independent think tank—albeit, with no likely prospect of any real decentralization initiative emerging from this effort.

Note should be made that President Karimov, in at least one major address to the Oliy Majlis, has made a commitment to continued deconcentration within the state administration and some further empowerment of “self-government institutions”. However, as of yet, there is no indication of any organized effort to translate this intent into a concrete strategy for deconcentration (not to mention, movement towards actual decentralization of any kind).2

2 Deconcentration refers to the transfer of functions to lower levels within the national government. By contrast, decentralization connotes a transfer of power and functions (“devolution”) to units of subnational government that are democratically elected and truly autonomous from the central government.


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Excerpt from President Karimov’s Address to the Ninth Session of the Oliy Majlis, August 29, 2002 “It is necessary to provide for a gradual, phased transfer of central powers and functions from higher state organs to lower state bodies and citizens’ self-government institutions. In essence, we have already set off on this journey. Local budgets today already make up 56 percent of the revenue side of our country’s budget and 52 percent of its expenditure side. Thus, the majority of revenues and expenditures are under local control—and all issues of governance are determined by finances. And it is crucial that this process develops and takes root, acquiring specific, efficient manifestations and set procedures. We must always remain focused on issues of development and strengthening citizens’ self-government institutions—the mahalla, various social organizations and citizens’ bodies. It is, therefore, imperative that we amend the Law on Social Organizations and work towards passage of laws on social funds, on unions and associations of non-government, non-commercial organizations, and on charitable activities.” At present, efforts are underway to introduce a modern treasury system and rationalize the tax system. While these initiatives may contribute to the smoother functioning of the intergovernmental finance system in some constructive ways, they do not aim at increasing local fiscal discretion and self-sufficiency. The Demise of District -Subordinated Cities and Urban Districts: Re-concentration within the State Territorial Administration. The formal state structure consists of three distinct levels or tiers: the republican level (first tier), the viloyat-, or province- level (second tier), and the nohiya/tuman-, or district- level (third tier). In addition to Uzbekistan’s twelve provinces, the second tier viloyat-level encompasses Tashkent City, the capital and only city of republican subordination, as well as the autonomous Republic of Karakalpakstan. The third tier district- level also includes citie s of provincial subordination and Tashkent City’s own urban districts. Below the third tier exists a weak, de facto “fourth tier”: cities of district-subordination (under caretaker deputy district hokims), plus towns and villages (for which the main governing structures are citizens’ assemblies and their mahalla coordination bodies, as well as, in some places, appointed executive branch administrative representatives). In a move in the direction of re-concentration, a 1996 presidential decree abolished the administrations of cities of district subordination, absorbing them into third-tier administrative units. Uzbekistan’s 203 urban settlements, along with nearly 1,500 rural settlements (some of them quite sizable) have no hokim, council of deputies, or budget of their own. In December of 2003, another presidential decree provided for the integration of fourth-tier urban districts into their respective city hokimiyats, eliminating the last remaining formally fourth-tier state structures in the Republic.


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Some De-concentration in the Urban Services Sector. In recent years, within the state administrative structure, there has been some meaningful de-concentration, particularly in respect to the delivery of communal services and urban transport. This has not translated into any significant increase in transparency or introduction of a more consumer-service-oriented ethic in the provision of basic public services. It does mean, however, that decisions on tariff policy, investment, and operations are being made within the hokimiyats at the provincial and, in some instances, city level, with some lessening of the dual subordination to national level ministries. Within the sub-national tiers, any meaningful deconcentrated authority resides, for the most part, in the second-tier, provincial level hokimiyat, still at quite a distance removed from the citizens who look to government for reliable and affordable services to be delivered within their respective communities. All capital expenditures and budget transfers to urban utilities are programmed at the provincial level. Virtually all multi-unit housing has been privatized and organized into housing associations (TSJs), with the intent of transferring housing management and maintenance responsibilities from local government to owner-occupants. However, these TSJs are unwieldy in size (as a rule, consisting of many buildings), far too large to allow, in practical terms, for democratic management. Moreover, government communal service entities tend to dictate fees for management and maintenance, and provide maintenance and repair services on a monopoly basis. Efforts to redress these problems are the focus of the present USAID LGI-II program in Uzbekistan, alluded to above. Transformation of the Mahalla into a Governmental Entity. As in other historically non-nomadic regions of Central Asia [Tajikistan; southern Kyrgyzstan] the mahalla persists as a form of social organization at the neighborhood level with roots in traditional family and Islamic culture.

Uzbekistan is unique in Central Asia in the extent to which the government has acted to co-opt the mahalla as an agent of state administration and control—including a role in the collection of some communal service fees, in maintaining community order, in issuing various documents and collecting statistics, in allocating family assistance, and in implementing other aspects of social policy. This phenomenon has recently attracted attention and some critical comment from the international community. Though the Law on Citizen Self-Government provides for the selection of mahalla leadership through periodic meetings of citizens’ assemblies, by all reports it is the local hokims who recruit the mahalla chairmen (oqsoqols). Truly democratic meetings of citizens’ assemblies play little real role in the process. At the same time, it should be noted that a number of USAID and other donor programs have, in recent years, worked directly with selected mahallas to introduce concepts of community-based development and advocacy. Managers of several of these donor projects, who were interviewed for this assessment, indicate that they have found individual oqsoqols and mahalla committees who are constructively engaged with and quite responsive to their respective mahalla constituencies.


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LGUs Account for More than Half of Consolidated Government Revenues and Expenditures; Subsidized LGUs Retain All Revenue Collections from Significant National Taxes. Local governments in Uzbekistan find that their budgetary resources are meager in relation to the need to maintain basic services, not to mention the challenges of upgrading infrastructure after years of neglect. That said, local governments receive a significant and growing share of government revenues from taxes and fees. LGU expenditures as a percentage of consolidated government expenditures rose from 51 percent in 2000 to 63 percent in forecasts for 2003. This suggests that local governments hoping to augment their resources must hope for some improved ability to increase their own revenue-raising capacity and/or some improvement in overall macroeconomic conditions, rather than looking to increasing their share in government revenues. (Note: The central government finances its own operations in large part through its control of the sale of cotton, natural gas, metals, and other commodities.) Eight of the country’s 14 province- level LGUs receive general budgetary support in the form of transfers, with the others, most notably Tashkent City, serving as revenue donors. A strikingly large percentage of important national taxes are retained at the local level—100 percent of the VAT, personal income tax, and enterprise profit tax for the eight subsidized provinces alluded to above. The Current System Does Not Promote Good Financial Management The current intergovernmental finance system (which combines differential tax shares set in the annual budget law, general fiscal-gap closing transfers, temporary loans among tiers, and behind the scenes mutual settlements) is undesirable from the perspective of efficient, transparent and equitable public financial management. Although the Tax Code distinguishes between “national” and “local taxes”, both the rate and base for all important taxes is set by the Cabinet of Ministers (CoM), with little discretion to build revenue capacity at the local level or to consult with taxpayers themselves in balancing tax burden with service quality. Countrywide, provinces and districts depend on national taxes and budgetary transfers fo r approximately two-thirds of their revenues, with the balance from local taxes and fees. By contrast, cities obtain roughly two-thirds of their resources from own-revenues.3 Overall, the budget preparation and implementation process is a rigid and hierarchical one, with the size of the budget and line items largely determined by applying coefficients to historical expenditure data (rather than through any thoughtful process that allows for setting priorities in a strategic manner). A small provincial hokim’s reserve fund, extra-budgetary resources, and non-tax income (e.g., from fees or rent) allow local executives some, albeit quite modest, discretionary spending. Perhaps the most important source of discretionary funds comes from an LGU “over-fulfilling the revenue side of the budget”, which creates a perverse incentive to underestimate revenues. Little Clarity in Functional Assignments, Especially Below the Province Level.

3 For the purposes of these comparisons, Tashkent City has been grouped with other cities rather than with provinces and districts.


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Some assignment of functions between central and local governments in the aggregate can be found in the 2000 Law on the Budget System and other legislation, but no law spells out functional delineations among province, district, city, and local self-government institutions. Below the province level, the available budget data suggest that health and education dominate the expenditure side of the ledger. Special Institutions of Note: The Mahalla Foundation and the Presidential Academy. Mention should be made of two special institutions that could be further assessed as prospective partners in any international donor initiative in the local governance arena. The Mahalla Foundation has the appearance of an NGO but is officially sanctioned by the government. It presides over a republic-wide hierarchy of offices or affiliates that extends down to the neighborhood level. The Presidential Academy is a prestigious institution that offers mid-career training for senior officials. The Andijon Hokimiyat is unique (according to interviews) in maintaining its own training academy for local government personnel. At the present time, there is no form of municipal association in the country. Reorganization of Agricultural Sector Adds to Local Government Responsibility for Services to Rural Populations. In rural areas, the Soviet-era collective farms (kolkhoz) have been reconstituted as shirkat xo’jaligi. As part of this transformation, social infrastructure and related services (e.g., schools, medical facilities) once maintained by the collective farms have been transferred to local governments, generally at the district level. Implications for USAID and Other International Donor Assistance As can be surmised from the above, present-day Uzbekistan does not represent a hospitable political environment for promoting decentralization (and its concomitant values of transparency, responsiveness, and accountability). At the same time, international advisers to the Ministry of Finance report some high- level recognition that the system of intergovernmental budgetary relations is flawed, some likely receptivity to looking at new local revenue sources, and some increased transparency in fiscal relations between the central and local levels. Moreover, one can, no doubt, find individual local executives willing to take some initiative on their own and to experiment with new methods of local service delivery—if only because, in the absence of clear guidance and sufficient resources, they at times find they have no choice other than to act using whatever means they find available. Note should also be made that there are respected academics and professionals that have publicly advocated for decentralization and think tanks that are studying aspects of intergovernmental finance with an eye to improving the current system. (See box on next page.)


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Dr. X.I. Ruzmetov writing in Law, the legal journal of the Ministry of the Interior4 Thus, there is a rigid hierarchy, which restrains the initiative of the population’s local institutions in development of local self-governance. The approval of hokims by local representative institutions is ineffective. With an undeveloped civil society, weak political parties, and an imperfect electoral system (in which the link between deputies and the electorate is inconsequential), representative bodies cannot embody true representation of the people, cannot take their crucial place in the system of separation of powers.

Should USAID or another donor conclude that a more broadly conceived program for local government reform in Uzbekistan would be timely, one option would be to incorporate elements of the current LGI-II program as it has operated in other CAR republics. Assuming that responsive local hokims could be identified as partners, such a program would combine training and TA for pilot projects on selected municipal governance topics, with some efforts to encourage and demonstrate the ability of mahallas and local NGOs to advocate community interests with local authorities, and support for think tanks and other NGOs which might have some ability to at least initiate a policy dialogue on approaches to making government work better at the local level. However, in the near term, it might make more sense to look for more narrowly defined program opportunities that would build upon the current LGI work in Uzbekistan with housing associations and to take advantage of other donor investments already being made to the communal service sector. Three such opportunities are briefly described in the body of this assessment.

1. Explore options for using better targeted social protection subsidies [[AUTHOR: Is this “better-targeted social protection subsidies” or “better targeted-social-protection subsidies? ]] to increase the political feasibility of putting urban utility services on a more financially self-sustaining basis. Such an initiative could also be combined with technical assistance in terms of improved cost accounting, rate setting, and other management practices for selected urban services. Here there might be opportunities to link up with one or more of the other donor projects (ASB, World Bank, EBRD, or the Swiss government) that are providing capital resources for water/wastewater, district heating, and urban transportation infrastructure improvements. (See conclusions section of Chapter VIII.)

4 Ruzmetov, Xayrulla Ibadullayevich. “Printsip Razdeleniia Vlastei v Organizatsii Deiatel’nosti Mestnykh Organov Gosudarstvennoi Vlasti.” Huquq. #2, 2003. Academy of the Ministry of Internal Affairs of the Republic of Uzbekistan.


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2. Promote improved interrelations between local self-government institutions (mahallas) and housing associations (TSJs). This initiative would look to provide legislative and practical clarity to the relationship (now a quite troubled one) between these, the two most important truly local institutions within the cities of Uzbekistan. (See conclusions sections of Chapter V.)

3. Promote more democratic and accountable governance practices within mahallas, the

one existing level of self-government that is recognized as such in legislation. Given that the mahalla has become a somewhat compromised institution in the eyes of the international community, the merits of any such initiative would have to be assessed with a degree of skepticism. Perhaps a first step would be survey work to see if one could identify a subset of mahallas, no matter how small, that appear to be functioning, in some important respects, as genuinely representative bodies. A particular focus of such a survey might be the conduct of the recent (November-December, 2003) mahalla elections. (Also see conclusions section of Chapter V.)

Among the three options above, the first would require the largest commitment of resources in order to mount an effective new initiative. The second option would require the least and could easily build on existing LGI-II activities in Uzbekistan.


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II. A VIEW THROUGH THE PRISM OF THE EUROPEAN CHARTER Nine of the fifteen former Soviet Republics are formal signatories of the European Charter of Local Self-Government, perhaps the most widely cited embodiment of decentralization principles, but none from among the five CAR. Exhibit 1 below compares Uzbekistan with four other transitional countries (Kyrgyzstan, Tajikistan, Albania, and Slovakia) in respect to “Basic Characteristics of Effective Decentralization and Local Self-Government” drawn largely from the Charter itself. The chart (without an Uzbekistan column) was initially prepared about a year ago by one of the authors for a similar assessment in Tajikistan. 5 Tajikistan is of interest for comparative purposes based on several similarities alluded to above (a traditionally settled as opposed to nomadic culture, the common socio-cultural phenomenon of the mahalla, and reliance on a government controlled cotton monoculture as a mainstay of public finance). Kyrgyzstan was included because, among the five CAR, it has perhaps progressed the furthest in respect to attaining a measure of genuine municipal autonomy in terms of at least a few key measures (e.g., direct election of most local chief executives; a nascent, relatively independent municipal association). Albania and Slovakia are two relatively small countries that, for several years already, have undertaken relatively well-organized multi-year processes, first, to develop a decentralization strategy with stakeholder participation; second, to translate this strategy into legislation, implementing regulations and related initiatives.

The chart itself groups sixteen basic characteristics under broader five categories:

— Independence of Local Government Formation — Local Government Functions — Local Government Financial Resources and Management — Relations with Central Government — Other External Relations

In respect to the sixteen basic characteristics listed, it is clear that, with a few exceptions, Uzbekistan does not comply in law or practice; even in respect to the exceptions, the situation is at best ambiguous. Taken as a whole, the findings summarized in Exhibit 1 confirm Uzbekistan has yet to take any steps down the road towards developing effective local government institutions and practices that conform to the norms of modern democratic, market-oriented government (as embodied in the European Charter). Progress in this direction would require a commitment to thoroughgoing legislative reform, capacity building, and public education over a number of years.

5 Marilynne Davis, et. al., Assessment of Intergovernmental Relations and Local Governance in the Republic of Tajikistan , The Urban Institute, 2003.


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Exhibit 1. Characteristics for Effective Decentralization and Local Self-Government 6

The Current Situation In:

Characteristic

Uzbekistan

Tajikistan

Kyrgyzstan

Slovakia

Albania7

INDEPENDENCE OF LOCAL GOVERNMENT FORMATION

Local councils are democratically elected. Elections are free; conducted by secret ballot; and based on direct, equal, and universal suffrage. [ECLSG Article 3.2]. Note: In practice, the nomination of council candidates based on party lists tends to result in de facto selection of the council members by central government officials or party leaders. Nomination by local petition, with council members elected at-large and/or

NOT FULLY. According to the September 2003 version of the Law “on Elections to the provincial, district and city councils (kengash) of people’s deputies”, local council elections are free, direct, and conducted through secret ballot; suffrage is universal (Article 1). The law itself, however, contains provisions that seriously undermine these tenets, giving electoral commissions and the deputies themselves ample opportunity to collude and manipulate

NOT FULLY. Elections to regional and district councils are free;, conducted by secret ballot; and based on direct, equal, and universal suffrage. (The Law “On Elections of Deputies to the Local Council”). Deputies are elected directly by their citizens [territorially based]. Ninety percent of current council members ran as independents, but the local executive executed some influence over the registration/selection of candidates.

YES. Elections are held to councils at all tiers of government. Neither party lists nor significant role of parties. [[…is evident?]]Elections to councils are contested, but not very heavily, due to the perception of lack of influence. The position of head of administration and chairperson of councils in rural municipalities and rayon [[significant ?]]are combined. Open, direct elections are held for this position. Councils of all other subnational jurisdictions have a chairperson who

YES. Const. § 69.2 The municipality’s inhabitants permanently residing therein elect their municipal representatives for a four-year term. Elections of the representatives are performed on the basis of universal, equal, and direct suffrage by secret ballot. LG Law 346/1990 about election to local self-government: § 1 Elections into the Bodies of Local Self-Government are performed on the basis of universal, equal, and

YES. LG Law, Chapter 2—Local Government Units, Article 6, Paragraph 4: “The representative organs in communes and municipalities shall be elected through general, direct election and secret voting” and paragraph 5: “The members of Regional Councils shall be selected from the councils of the municipalities that comprise the region.”8 (That is, regional councils are indirectly elected, as per the Constitution.)

6 Jaroslava Zapletalova, Institut Byvania, provided input for the Slovakia column. Information for the other country columns was prepared with assistance from Urban Institute staff working on local government in those countries. 7 The Law on Organization and Functioning of Local Government (No. 8652, dated July 31, 2000) will be referred to as LG Law. 8 In Albania, communes and municipalities comprise the basic level of local government. Regions comprise the second level of local government.


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on a neighborhood district basis is preferable.

elections. (Article 41) The electoral districts they create can include as few as 20 people (Article 8), and councils can vote to remove their own deputies (Article 44). Anecdotal evidence indicates that, not only are elections manipulated at every stage, but the electorate tends to not even know of the existence of local councils. These factors result in the packing of local councils with de jure or de facto state appointees, which serves only to underscore the unitary power structure.

Members of jamoat councils (local self-government bodies) are not formally elected, but delegated by village communities (usually by voice vote), and they may change from session to session. On all levels, chiefs of the executive branches are at the same time chairmen of the representative assemblies.

is separate from the head of the corresponding administration.

direct suffrage by secret ballot. § 16.1: Candidates’ list for the elections to the local government are submitted by the political parties, separately for each election district and independent candidates. § 16.9 The independent candidate must submit a petition signed by citizens supporting his participation in the process.

The local chief executive is selected at the local level. The chief executive is either elected directly by the citizens or is appointed by the local council. With the exception of conviction for criminal wrongdoing, the body that selected him/her can only remove the executive: by a recall vote in the

NO. According to the 1993 Law “On local state government”, second-tier hokims are appointed and dismissed by the president and lower-tier hokims by the hokim directly above them (Article 2; see also Article 102 of the Constitution). Local councils may reject a candidate in theory, but

NO. In accordance with the Constitution, Chapters 4 and 6, Articles 69 and 78, the local chief executive is designated and dismissed by the president, who submits the candidatures for approval to the relevant councils of people’s deputies. Councils have a right to refuse a candidate and the right

YES. Chief executive in 467 village governments and 12 city governments directly elected. Ten cities have chief executives elected by council from multiple candidates proposed by president. Direct elections were held in December 2001, which were sharply contested in many cases, basically free and fair, and led to

YES. Const § 69.3 The mayor of a municipality shall be elected by the municipality’s inhabitants residing permanently therein on the basis of a universal, equal, and direct suffrage by secret ballot for a four-year term. The municipality’s mayor shall be the executive authority of the municipality; the mayor

YES. LG Law, Chapter 2—Local Government Units, Article 6, Paragraph 4: “The executive organs in communes and municipalities shall be elected through general, direct election and secret voting” and Paragraph 6: “The Chairman and Board of the Regional Council shall be elected by the members of its Regional Council.” (Also see Article


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case of an elected executive or by vote of the council when appointed.

this does not occur. to request dismissal; however anecdotal data says that it has never happened.

a high (44 percent) turnover of local heads of government. However, many local service delivery functions are undertaken by local state administrations, the heads of which are part of a ”vertical of power”’ up to the president and his appointed prime minister. The heads of local state administrations are not accountable to the local population in any meaningful way.

shall be responsible for administration of the municipality, and shall represent the municipality externally. Reasons for and manner of recalling a mayor before termination of his electoral term shall be laid down by the law.

42, Dismissal of the Mayor)

Local self-government authorities should “be able to determine their own internal administrative structures in order to adapt them to local needs and ensure effective management”. [ECLSG Article 6.1] In particular, local government decisions on the numbers and type of local employees and their salaries should not be subject to central government mandates.

NO. Staffing structures, levels, and wages are set by resolutions of the Cof M and underscored by the highly-centralized budget structure. Any flexibility achieved in practice occurs only in spite of rigid centrally imposed frameworks, often by cannibalizing subordinate structures and diverting human resources earmarked for one sphere of activity to another.

NO. Staffing levels and wages of oblast, rayon, and city governments are set by the national government. Staffing levels of jamoats are set by the council or council chairperson from the next higher tier of subnational government. Oblast department heads have a dual subordination to the local executive and to the central government agency responsible for that sector or service. Rayon and city department heads have

NO. Staffing levels and wages are highly regulated by national government resolutions. There is draft legislation on municipal civil service and functional assignments that would provide for greater local autonomy on administrative structures

YES. LG Law on Municipal Representation § 11.4.i Local government decides about basic issues relevant for the municipality, including the organization of the municipal office. § 16.3 The work of municipal office is organized/structured by the mayor.

YES. LG Law, Chapter 3— Rights of Local Government, Article 8, paragraph 1: “Local governments can create administrative structures to carry out their functions and exercise powers, in compliance with the laws in force.” At the municipal level, local government employees now come under pay scales similar to the national civil service, which serve as caps. Staff of communes are not part of the local civil service system.


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a dual subordination to the local executive and to the oblast department head responsible for that functional category.

LOCAL GOVERNMENT FUNCTIONS

The assignment of functional responsibilities and expenditures is based on the “Subsidiary Principle”. This means that, wherever practical, the responsibility for performing a function should be assigned to the lowest tier of local self-government closest to the citizens capable of performing that function effectively. Assignment to a higher level should be based on overriding considerations of economy, efficiency, or other national interest. [ECLSG Article 4.3] If this principle is followed, the result should be that local self-governments should “have the right and ability to manage a

NO. “Fourth-tier” territorial units (cities of district subordination, towns, and villages) do not have their own budgets (even their expenditure estimates, unlike in other CAR, include only expenses for administrative staff and sometimes for beautification activities). Formal responsibility for performing certain functions is deconcentrated, but little meaningful autonomy is transferred to lower levels. In particular, most elements of economic policy are centrally determined. Social policy is the most deconcentrated but is also poorly funded and, generally speaking, is in a state of crisis.

NO. While many functions are deconcentrated, the local chief executive, who is appointed from above, is directly responsible to a higher level of government and does not have real authority to make decisions about how to carry out these functions. Furthermore, the LSPLP and LSGST9 inadequately delineate functions and authorities across tiers of subnational governments. Sectoral laws also create confusion with the overlapping of tasks between the central and local levels.

NO. Functional assignments are vague and contradictory in law (Arts. 9, 16 and 61 in LG Law). There is no reference to subsidiarity in current law. Assignments de facto follow the allocation of budget revenues in which higher levels of government decide on targets for successively lower levels of government. A new local government finance law and pending draft legislation on functional assignments, if properly implemented, will establish the principle of subsidiarity and clarify assignments. In most cases local self-governments on an ad hoc basis manage a substantial share of

NOT YET. The subsidiary principle will be realized in the second stage of decentralization, which is planned to be completed by January 1, 2005.

YES. LG Law, Chapter 1—General Provisions, Article 4, Paragraph 2: “The relationship between Local Government levels and Central Government, and between the local government units themselves will be based on the principle of subsidiary and collaboration for solving mutual problems.” (Subsidiary is earlier defined in Article 2 – Definitions).

9 In Tajikistan the operational local government laws are the Law on State Power at Local Places (LSPLP) and the Law on Self-Government in Settlements and Towns (LSGST).


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substantial share of public affairs under their own responsibility.” [ECLSG Articles 3.1].

Furthermore, the main overriding feature of the governmental structure in Uzbekistan is the executive hierarchy, with each successive lower level appointed by the tier immediately above it. Additionally, an act of a hokim or local council can cancel any acts of lower-tier institutions The vast majority of local expenditures must go through the consolidated state budget, which is essentially a product of central organs.

public affairs

The assignment of functional responsibilities (expenditures) is clear. Note: In practice this involves clear distinctions among core functions at the local level (i.e., those mandated and performed by all, those that may be delegated by or shared with a higher level of government, and those that are discretionary). It

NO. The consolidated state budget is generally quite explicit in respect to specific expenditure responsibilities. Despite this, division of responsibilities in many spheres is often ad hoc and illogical. These assignments are not embodied in more durable parliamentary or administrative law, and thus are subject to custom or arbitrary year-by-year variation. Where fundamental law

NO. Same as above. It is also unclear who owns many key service facilities such as water pipes, gas lines, and so on. Responsibility is further confused by a lack of clarity on responsibility and management of joint stock companies and the role of local government (if any) in these services.

NO. See above. In addition “dual subordination” of local budgetary bodies (to both the local self-government and various central government line ministries) confuses functional responsibilities.

YES. LG Law § 4.1 Section 3, The municipality has specific tasks identified herein which creates a sufficient framework for undertaking initiatives and performing self-governing activities. In 2001, Law No. 416 /2001 on Transferring Competencies from the State Government Institutions to the Municipalities and Higher Territorial Units

YES. Exclusive, shared and delegated functions are defined in Chapter IV of the LG Law —Function and Competencies of Commune, Municipality and Region. The GoA has determined that a multi-year, sector-by-sector review is necessary to determine the respective roles of municipalities and communes, regions, and the central government for each of the shared functions. This is complete for water/wastewater and


17

also means that for each basic service, it is clear who actually manages the service on a day-to-day basis, who builds needed facilities and infrastructure, who finances it, and who provides standards and regulates it.

does distinguish central versus local roles (e.g., standard-setting as opposed to rate-setting or administration), emphasis is placed on the division with the provincial level, not between provinces, cities, towns, and villages. General divisions of spheres of responsibility are poorly defined and overlapping, both horizontally and vertically.

was adopted. The law identifies these areas (20 areas of competencies).

anticipated to begin this year for primary/secondary education, primary health care, and social assistance.

LOCAL GOVERNMENT FINANCIAL RESOURCES AND MANAGEMENT

Local self-government authorities should have financial resources commensurate with their responsibilities under the constitution and the Law. [ECLSG Article 9.2] This means that they should have discretion to freely use these resources within the framework of their

NO. Citizens’ assemblies are given an extremely wide mandate in almost every area of social policy and have important responsibilities in environmental and law enforcement policy as well; however, only four positions in the assembly’s kengash are paid. Kengashes of citizens’ assemblies are allotted resources from

NO: Jamoats cannot impose any taxes even though they have service delivery functions. Oblasts, rayons and cities have some autonomy in establishing appropriate tax instruments and determining tax rates. (Chapter 45 of the Tax Code defines the tax bases and rate parameters for locally set taxes.) However,

YES under law. The 2003 Law on Financial and Economic Basis of Local Self-Government (Art. 2), The LG Law (Art. 55), and pending amendments in budget legislation specifically provide for this. These provisions will be implemented beginning in the 2005 budget cycle only. Current practice involves higher levels of government set strict

YES. LG Law § 4.1 Municipality and higher territorial units are responsible for performing their tasks from their own budgets. For performing the state administration tasks they do acquire funds from state budget. (According to Law No. 303 on Budgetary Rules). LG Law § 7.1 The

YES. LG Law, Chapter 5— Local Government Finance, Article 15, paragraphs 3 and 4: “Through law, communes and municipalities are empowered with sufficient authority to obtain revenue independently to finance the exclusive functions under the jurisdiction. The central government shall provide local governments with funds that are sufficient to meet the


18

powers. [ECLSG Article 9.1] Some meaningful part of these financial resources should come from taxes and fees for which the local self-government can set the rate.

the district budget to provide social assistance, but they do not receive enough to meet rigid centrally-imposed standards and requirements for distribution of these funds. Lacking money to perform their duties according to the letter of the law, the chairperson of a citizens’ assembly, no matter how honest, may find himself vulnerable to threats of criminal prosecution and audits at the hands of the district attorney’s office or the hokimiyat, a crucial factor in subordinating them to executive structures.

tax collection rates are extremely low and tax revenues cannot address all the local requirements and needs. In addition, the Ministry of Finance controls expenditure levels (which are published in the Annual Budget Law). Approved figures are routinely far less than the sums requested.

revenue and expenditure targets for lower levels of government.

municipality funds its needs mainly from its own incomes, state subsidies and other sources.

requirements for the provision of shared and delegated functions.” Article 16 defines the taxes, charges and fees of municipalities/communes and what is their role/responsibility in respect to these revenue sources, including local rate setting, administration, etc. From 2003, this article is effectively implemented, with Law No. 8982 for the Local Tax System and Law No. 8978 for the Local Small Business Tax.

The system for intergovernmental transfers should be transparent and stable. Local self-governments should be able to understand the shared taxes and grants to which they are entitled. Annual decisions on transfers to sub-national governments should be predictable and timely

NO. Transfers at all levels are largely arbitrary, though they are approximately based on the principle of equalization. Transfers are negotiated both during the budget process and (unofficially) during the fiscal year. Budgetary loans from higher budgets may also be made available upon

YES in parts of the law. NO in practice. There are four revenue transfer sources available for the local government, but only one can be said to have an easily identifiable methodology for determining its size and distribution. The formal methodology is relatively straightforward, but it is

YES. The 2003 Law on Financial and Economic Basis of Local Self-Government (Arts 1, 7) establishes these procedures. Rates for shared taxes should remain constant for three years and transfers should be calculated by formula. NO in current practice prior to implementation of the law for the 2005

Currently being improved. Law 303 on Budgeting Regulations sets basic rules; the transfer amounts are modified each year in the Act on State Budget for the given calendar year. Shares on taxes administered by the state are defined as a special type of financial

Currently being improved. Shared taxes are collected and distributed on a regular basis not less than three times per year. Law will eventually determine the share of each tax due the communes and municipalities. Starting from 2002, unconditional transfers for the purpose of achieving equalization of resources among local governments have been


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enough to allow for orderly budget planning. The system should include some provision for equalization to protect financially weak, local self-governments. [ECLSG Article 9.5]

request.

also widely recognized to be vulnerable in its implementation to a significant degree of informal bargaining, both in the course of determining amounts distributed by the MoF to its directly subordinate subnational jurisdictions and in the subsequent intraregional process of distributing funds to lower-level local governments.

budget cycle. Transfers below the oblast level are currently not transparent and reportedly subject to behind the scenes negotiations and politics.

relationship between state budget and municipal/higher territorial unit’s budgets. Final specification of these incomes, structure and criteria for their distribution shall be stipulated by a special regulation within the second phase of public administration reform and financial decentralization, with expected validity as of January 1, 2005. LG Law § 7.4 The municipality that does not have sufficient income for covering the tasks’ implementation can acquire state subsidy according to a rule set by the government.

distributed on the basis of a transparent, objective formula. The formula incorporates a measure of equalization to take account of fiscal capacity disparities. The formula system is still evolving, with the implementation of the new local tax legislation for 2003. In 2002 and 2003, the formula criteria and resulting transfer amount for each local government were published as an annex to the annual State Budget Law.

In order to borrow for capital investment, local self-governments should have some power to borrow from capital market sources. [ECLSG Article 9.8] The definition and exercise of these powers to

NO. The Law “on the budget system” expressly forbids any borrowing by local governments from capital market sources. In any event, almost all local expenditures must be approved centrally, so municipal borrowing

QUESTIONABLE. In principle, municipalities are allowed (Article 35, Chapter VI of the Law on State Power at Local Places) to borrow from capital market sources. The market would define criteria for municipal

YES, WITH LIMITATIONS. The 2003 Law on Financial and Economic Basis of Local Self-Government (Arts 1, 8–11) allow local governments to borrow up to a threshold were debt service is not more than 20 percent of

YES. LG Law § 7.2 Th e municipality may use credit for financing its tasks. Law 303 on Budgeting Regulations § 26.2.c Municipal income may include credit.

QUESTIONABLE. LG Law, Chapter 5—Local Government Finance, Article 16, Paragraph 5: “Communes and municipalities shall be authorized to borrow funds for public purposes in a manner that is consistent with the conditions


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borrow should be based on an understanding of municipal credit-worthiness; the law should provide some limits on the amount of local indebtedness.

would have little meaning, even if allowed. In practice, most capital investments are made by republican bodies (through the CoM and the Ministry of Economics according to the CoM’s capital investments targeted list), though they figure into provincial budgets as well.

creditworthiness in each concrete case. The legislation does not provide limits on the amount of loc al indebtedness. However, municipal borrowing cannot be easily realized, as the country does not have a capital market.

the annual budget. All borrowing must be approved by the Ministry of Finance. In practice there is no borrowing from capital markets by local governments.

§ 29.a Sets allowable uses and rules for credit: For capital expenditures For current expenditures, only if the debt is paid back before the end of the budgetary year The municipality may create only such liabilities that will not jeopardize the long-term balance of its operating budget Loans over SKK 75 million must receive prior written approval of the Ministry of Finance Prior approval is also needed for the issue of municipal bonds (Act No. 530/90 on Bonds)

established by law.” However, there needs to be an additional law to establish the basic rules. As Albanian local governments cannot be considered creditworthy for at least another few years, the establishment of borrowing parameters is not the top priority.

Local governments keep complete, accurate, and transparent books of account

QUESTIONABLE. Local governments must keep complete books of account, reporting quarterly to the Ministry of Finance in great detail. Their accuracy, however, is questionable and a number of line items are

QUESTIONABLE. Local governments are required to keep complete books of account, and they are subject to internal state audits However, the accuracy and completeness is a matter of definition.

NOT ALWAYS. Financial departments of local governments are required to provide extensive monthly, quarterly, biannual and annual reports to the Ministry of Finance. These reports are aggregated at rayon and

YES. LG Law § 9.5 The municipality administers its accounting according to Act No. 563/91 on Accounting. The annual accounting report is audited by an independent auditor. The auditor verifies further facts, as

YES: LG Law, Chapter 5—Local Government Finance, Article 20 Archiving of Finance Records and Article 21 Internal Financial Controls. As required by the law, local governments have formed Financial Commissions to perform


21

confidential. Records of off-budget funds are even more opaque—deposits into off-budget funds from various sources are recorded in quarterly reports to the Ministry of Finance, but there is no transparent mechanism for tracing them after that. The community-based mahallas do not report in a consolidated way on income sources such as donations, businesses activities. Neither local state administrations nor self-government bodies do any financial reporting to citizens.

oblast levels. However, review of these reports indicates numerous inconsistencies. The Ministry of Finance relies more often on reports from the Treasury System, which is a centralized function. Tracking of arrears is ad hoc. Although there are restrictions on off-budget funds, they do exist and there is no adequate reporting mechanism for them.

stipulated in Law no. 303 on Budgeting Regulations.

internal audit function. Article 21 allows but does not require hiring of independent auditors to support the Commissions.

RELATIONS WITH CENTRAL GOVERNMENT

Supervision of local self-government by the State Administration should “aim only at ensuring compliance with the law or with constitutional principles”. [ECLSG Article 8.2] For example any review and approval of budgets should focus on completeness and

NO. An extremely large share of the work of local self-governments involves the execution of policies of formal executive structures; these same bodies see that their orders are implemented. Meetings of citizens’ assembly leaders with representatives of the hokimiyat are, generally

NO. Levels of service are de facto set by the dual subordination and budgetary controls of the central government. Budgets are negotiated and approved at levels above the local government. Local councils of deputies approve the local budget only after negotiation and

NO. State Administrations are authorized to coordinate service provision on their territories (Art. 9 and 61 of LG law).

YES. Const. § 67.3 The State may intervene in the activities of a municipality and a higher territorial unit only by means stipulated in the law. The Highest Control Office of the Slovak Republic (Act No. 39/1993) related to funds, municipalities,

YES. Per Law No. 8927 on the Prefect, Article 6, point d, the Prefect “is the only administrative institution to verify the legality of acts adopted by the organs of communes, municipalities and region…The Prefect exercises financial control over these organs, in ways and limits as defined by law.” Per Article 16 of this law, the Prefect is also


22

accuracy of information and compliance with procedural requirements.

speaking, quite frequent; interviews with oqsoqols (mahalla chairmen) indicated that they are expected to behave like hokimiyat employees. Legislation also provides for extensive supervision of local self-governments by state bodies

approval of proposed expenditures by oblast and central government approval.

non-profit institutions, and other legal entities is to control them only when they manage state budget financial resources and state properties and in no other cases.

responsible to monitor and control the performance only of delegated functions by local governments, as well as the use of funds transferred for such tasks.

Local self-government authorities may take any initiative, which is not, by law, excluded from their competence or assigned to another level of government. [ECLSG Article 4.2]

NO. Initiative of local self-governments is stifled by the asymmetry of relations between the citizens’ assemblies’ leaders and the district / city hokim. Self-government functions are vaguely defined, unrealistically broad, and often duplicate or expressly supplement functions of executive bodies. Local government activities are, in practice, negotiated with district executives and other relevant bodies. As local self-governments are plagued by a chronic shortage of funds, and normally cannot carry

UNCLEAR. Definitions of competencies at each level have significant overlap and functions are only vaguely defined. Activities are in reality defined by a series of laws, presidential decrees and negotiated agreements between local government tiers. In practice, some initiative is possible, but difficult. Depends on local exec’s relations with Dushanbe.

UNCLEAR. Local government law has a vague finite list of responsibilities undertaken by local governments and all additional activities should be designated by law (Art. 16, LSG & LSA Law of KR). In practice initiative is possible, frequent, and officially encouraged by the national government.

YES. Const. § 67. 2 The duties and limitations in implementation of territorial self-government may only be imposed on a municipality and a higher territorial unit by law or on the basis of an international treaty according to Art. 7, §. 5. LG Law § 4.1 The municipality independently decides about, and performs all the acts related to the municipality and property administration; likewise, it decides about and carries out all the activities that are under its jurisdiction, as stipulated in a separate law, provided that these

YES. LG Law, Chapter 3—Rights of Local Governments, Article 7, paragraph 1: “Each local government shall have full discretion to exercise initiatives in the interest of the Local Community to any matter which is not prohibited by law or which is not exclusively granted by law to any other government organ.”


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out most of their mandated duties in a satisfactory manner, initiative welcomed by district authorities is generally limited to fundraising or organizing unpaid labor (xashar) to meet these priorities.

activities are not performed, according to the law, by state or other legal entity or natural person.

Local self-government authorities should have recourse to the judicial system to protect their powers and secure respect for the principles of local self-government enshrined in Law. [ECLSG Article 11]

YES IN LAW; QUESTIONABLE IN PRACTICE. Local self-government authorities have the theoretical right to judicial recourse, constantly reaffirmed in legislative acts. This is, however, relatively meaningless in practice, as the judiciary and the provincial/district-level prosecutor’s office are not independent bodies. In practice, disputes are solved by negotiation according to local power distributions.

YES IN LAW; QUESTIONABLE IN PRACTICE. LSPLP and LSGST. Local self-government authorities are juridical entities with certain independence to initiate lawsuits. However, no explicit right to contest decisions of higher tiers of government through the judicial system and unlikely any such action has been attempted.

YES. Art. 69 of the LG law specifically provides for appeals to court against actions, which “violate the rights of local self-government”.

YES: Const. § 65 A municipality and a higher territorial unit are legal persons. In several cases, local self-governments have contested interpretation of laws through the Constitutional Court.

YES: LG Law, Chapter 3—Rights of Local Governments, Article 8, Paragraph 6: “Local governments are juridical persons and may exercise all the rights set forth in the Civil Code of the Republic of Albania (including) the right to bring a civil accusation.”

Changes in the geographic boundaries of local self-government authorities should be made based on

NO/QUESTIONABLE. The 30 August 1996 law “On the procedures for addressing matters of administrative -territorial structure and the

NO. There is no direct consultation with the affected population. Although boundary changes and transfers of administrative centers

YES. Consultation is mandated (though the degree of consultation is not specified); the decision is entirely within the authority of

YES. Const. § 64.2 “The basic unit of territorial self-administration shall be the municipality.” Const. § 66.2 The

YES. LG Law, Chapter 10, Reorganization of Local Governments, Justification and documentation of the reorganization process also requires submission


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consultation with the communities affected, possibly by means of a referendum. [ECLSG Article 5]

naming and renaming of places in the Republic of Uzbekistan” (#276-I) stipulates that second-tier local councils are to effect changes in boundaries of villages and towns (Articles 6 and 14, respectively); changes in boundaries of cities are proposed by the Cof M and approved by the Oliy Majlis (Article 13). In all cases, hokims are to petition the appropriate decision-making body for the change (district hokims petition for villages and towns; provincial hokims for cities). Changes to administrative borders of cities, towns, and villages are to take into account the opinion of local self-government bodies. Article 5 of the law “on citizens’ self-government institutions” also provides for changes in the geographic boundaries of mahallas , made by

should first be considered by the local council,10 any disputes are resolved by higher-level governments. Ultimately, the decision rests with the Upper Chamber of Parliament who can support or cancel the decision or proposal coming from below as well as establish or abolish oblasts, rayons, and villages on recommendation of the government. In case of necessity the Upper Chamber has the right to initiate these changes on its own except for the GBAO.

the national parliament. unification, division or cancellation of a municipality shall be regulated by law. LG Law § 2. 3 The municipality is established, closed down, divided, or merged by the governmental decree. It can be decided about only with the agreement of the municipality, based on the statement from the regional office in whose territory the municipality is located. LG Law § 11a.1 Local office announces local referendum if merging of municipalities, their division, or closing down is at stake.

of “the opinion of the community that lives in the local units that shall be affected by the reorganization as well as the opinion ’For‘ and ’Against‘ expressed directly or indirectly by various interested groups in this reorganization” (Article 67, point c), which must be documented. “The methods used to collect the opinions of the community such as public hearings, open meetings, surveys and referenda, if possible” (Article 67, point ç).

10 Constitutional Law on the Order of Addressing Issues of Administrative and Territorial Arrangements of the Republic of Tajikistan Chapter 3, Article 17.


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local state organs on the initiative of self-government bodies. Considering the degree of subordination of self-government organs to these same executive bodies, however, these modest provisions’ efficacy in guaranteeing real consultation with communities is questionable.

The Central Government has the ability to monitor the progress of effective fiscal decentralization. This means the data and resources to accurately report on revenue and expenditure patterns within and among different subnational levels of government.

N/A (given the absence of any fiscal decentralization). In respect to monitoring capability, the MoF collects data on the second-tier provincial governments, but province-to-province, comparative data on expenditures at lower-tiers can prove difficult, at least for an outside analyst to assemble, particularly below the provincial level. The Ministry of Finance has auditors (from its Supervision and Auditing Administrations) in each province, who have a wide mandate to access any financial records.

NO. Although the Law “On State Financial Control” and Presidential Resolution “On Establishment of the Committee on State Financial Control” provide that all necessary documentation should be available centrally, in practice all data are aggregated at the oblast level so the MoF cannot collect disaggregated information. In addition, all information submitted to the MoF is submitted in hard copy. There is no computerization of these data at the central level.

NO. Data is aggregated at the deconcentrated level of rayons for the Ministry of Finance. Data from village and small city governments is not centrally available

YES. Law 303/95 On Budgeting Regulations § 29.11 The municipalities are obliged to provide information and selected data about their management to the Ministry. The scope of the data and way of its submission is specified by the Ministry of Finance.

NO (but improving). The MoF and MoLG request detailed reporting forms that ask for too much data, which cannot be inputted and analyzed in any meaningful manner. There still needs to be some work to improve the various data sources within the system (reports to MoLG, reports to MoF, report s of the treasury). With the new local fiscal decentralization laws, developing timely, accurate local government finance information will become more important in order to refine the equalization aspect of the unconditional transfer formula.


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Data, especially at lower levels, are generally not computerized.

OTHER EXTERNAL RELATIONS

Local self-government authorities should be able to form consortia and enter into agreements with other local self-government units to carry out tasks of mutual interest. [ECLSG Article 10.1].

YES. See below. Chairpersons of local self-governments (i.e., citizens’ assemblies) have the power to conclude agreements and contracts, pursuant to their status as legal entities. Such relations, however, tend to be handled through hokimiyats, coordination councils, the Mahalla Foundation, or village/town citizens’ assemblies, which can unify several mahalla citizens’ assemblies.

YES. Explicitly allowed in Law on State Power at Local Places, Chapters I and III, Articles 3 and 14. In practice this does happen for joint service provision, but through ad hoc negotiated arrangements rather than formal agreements.

YES. Explicitly allowed in Art. 11 of LG law. In sectors like water and solid waste some de facto joint collaboration but nothing formalized through agreements in legal form. There have been only a few court cases initiated, all of which were settled out of court.

YES. Const. § 66 “A municipality shall have the right to associate with other municipalities for securing matters of common interest” LG Law § 20b Municipalities may establish an association which will be a legal person. Such agreements require approval of a majority of the local council members from each municipality that is a party to the agreement.

YES. LG Law, Chapter 3—Rights of Local Governments, Article 8, Paragraph 5: LG has the right in order “to carry out specific functions on behalf and in the benefit of their inhabitants, two or more units of local government may exercise any competence given to them by law through implementation of mutual agreements or contracts, delegation of specific competencies and/or responsibilities to one or the other, or contracting a third party.”

Local self-government authorities should have the right (1) to belong to a municipal, NGO association that can promote their common interests, and (2) to belong to an international association of local authorities. [ECLSG Article 10.1]

YES. No explicit law on this subject referencing municipal associations per se. However, the right to membership in other organizations is guaranteed to legal entities (and, therefore, to local self-government organs) by the Civil Code (Articles 40, 77) and reaffirmed in other

YES. The legislation allows the creation of municipal associations to promote common interests and membership in an international association of local authorities (Articles 3 and 14 of Chapters I and III accordingly of the Law on State Power at Local

YES. Both rights are explicitly enshrined in Art. 11 of LG law. At present, there are two active, registered non-governmental municipal associations: the Association of Cities and the Association of Villages.

YES. LG Law § 11.4 Local government is entitled to approve municipal representation in NGOs and associations. It can also approve the agreements on international cooperation and the municipality’s membership in an

YES: LG Law, Chapter 3—Rights of Local Governments, Article 8, Paragraph 5: “Local government units have the right to be organized in associations in conformity with respective legislation for associations.” There are presently three local government associations in Albania: Association of


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Article 10.1] and reaffirmed in other acts of legislation (e.g., Article 10 of 25 May 2000 law “On guarantees of freedom for entrepreneurial activity”). No municipal association exists that is truly independent from the center and engaged in advocacy. There is not even any centrally sanctioned association of hokimiyats or their associated councils (apart from, perhaps, the Oliy Majlis “Hokimiyat Bloc”). The officially sponsored NGO “Mahalla” and the parallel (often indistinguishable) organizations of oqsoqols exist at village, town, city, district, province, and republican levels. QUESTIONABLE. Legislation is somewhat unclear as to whether or not local self-governments can belong to international associations. Local self-governments can have relations with analogous

on State Power at Local Places). However, no such organization exists.

membership in an international association.

in Albania: Association of Albanian Municipalities, Association of Communes, and Association of Presidents of the Regions.


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relations with analogous foreign bodies through the Ministry of Foreign Affairs, on the basis of an interagency agreement (22 December 1995 law “On international agreements of the Republic of Uzbekistan”) and, reportedly, through agreement between the heads of the respective administrative territorial units, though the legal foundation for this is less clear.


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III. LEGAL FRAMEWORK: COMPOSITION AND STATUS This chapter orients the reader to the overall composition and status of the legal framework for intergovernmental relations and local governance in Uzbekistan. The provisions of specific laws, decrees, resolutions, and orders are referenced and discussed as relevant in the other chapters that follow. Annex B to this report contains a complete listing of the most relevant legal measures selected for review as part of this assessment. Annex C provides abstracts of selected legal documents from this list, compiled for this assessment by Andrei Makarikhin, an Uzbekistani legal specialist. NOTE References to “Legal Log #s” throughout this report refer to order in which documents are listed in Annex B. [[Should all Notes be set apart similarly?]] Exhibit 2 below summarizes the most important documents that form the legal framework within which local government operates in Uzbekistan. This legal framework must be understood in the context of a political culture that remains autocratic and statist in nature. Despite rhetorical commitments to the rule of law and civil rights (as embodied in a constitution that provides for separation of powers and guarantees of civil rights), the president, and various executive hierarchies subordinate to him, exercise pervasive control over the judicial and legislative functions, political activity, the media, civil society, and the economy. According to more cynical observers, Uzbekistan’s ruling elite (in contrast to Russia’s, perhaps Kyrgyzstan’s) tends to characterize laws as “symbolic”, in some instances as gestures to the international community, enacted without any real intent to implement them conscientiously. With this in mind, throughout this report an effort is made to distinguish law from practice. Little Re-Examination of the Legal Framework Since independence, the general legal framework for governance has received little reexamination and certainly not in the direction of democratic decentralization—with the exception of some significant reorganization within the state administrative structure in respect to communal services and urban transport.

• The 1992 Constitution itself addresses local government in three chapters: Chapter 16 very briefly specifies the types of sub-national jurisdictions within the system of territorial administration. Chapter 21 deals with the formation of local executive bodies in some detail, including the appointment of governors and mayors (hokims) and their powers (Articles 99 to 104). A final Article 105 in this chapter, in two sentences, provides for informal self-governance after a fashion at the town, village, and neighborhood mahalla levels. Chapter 17 sets forth the status of the autonomous Republic of Karakalpakstan.


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• Shortly thereafter, these constitutional provisions were reiterated and elaborated upon in three pieces of legislation, a law on local state administration (1993), a law on the election of local councils (1994), and a 1993 law on citizens’ self-government institutions (for towns, villages, and mahallas).

Exhibit 2. Summary Listing of Key Documents Shaping the Legal Framework for Intergovernmental Relations and Local Governance in Uzbekistan


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Constitution and Core Legislation Affecting Intergovernmental Relations

• Constitution of the Republic of Uzbekistan (12/08/92) • Law On the Cabinet of Ministers of the Republic of Uzbekistan (new version) (08/29/03) • Law On Local State Government (09/02/93) • Law On elections to the provincial, district and city councils (kengash) of people’s deputies

(new version) (09/29/03) • Law On citizens’ self-government institutions (new version) (04/14/99)

o Presidential Decree “On support for citizens’ self-government institutions” (04/23/98) o Presidential Decree “On increasing the role of citizens’ self-government institutions

in providing targeted social support to the population” (01/13/99)

Acts Affecting Intergovernmental Finance • Law “On the budget system” (12/14/00)

o Order “On approval of the instruction ‘On procedures for calculation of local taxes and fees and their payment into the budget’ (new version)” (02/16/03)

o Cabinet of Ministers Order “On improving the process of Financing Budgetary Entities” (09/03/99)

o Regulation “On the procedures for renting temporarily unused government property out to other enterprises and organizations by budgetary entities” (01/07/00)

o Regulation “On the reserve fund of the budgets of Karakalpakstan, the provi nces, and Tashkent” (01/22/00)

o Instruction “On order of quarterly allocation of annual planned amounts of revenues and expenditures, allocated in the budget of RK and local budgets, registration of amendments adopted during budget execution, financing of organizations and events described in the budget” (04/12/01)

Acts Governing Communal Services and Transport

• “Rules for rendering communal services to the population of the Republic of Uzbekistan” (02/20/99)

• Cabinet of Ministers Order “On improving the organization of activities in the communal service system” (21/12/00)

• “On Housing Associations” (04/15/99) • Order “On the approval of the regulation ‘On the mechanism of compensatory cash

payments for payments on housing and communal services (starting 25 April 2003)” (04/15/03)

• Law “On urban passenger transport” (25/04/97) • Presidential Decree “On demonopolization and improvement of management in the

automotive transport sector” (04/06/01) • Cabinet of Ministers Order “On approval of the rules for delivery of natural gas to consumers

in the Republic of Uzbekistan” (10/01/00) o Cabinet of Ministers Order “On measures to improve management of the natural

gas supply system in the Republic” (10/02/03) • “Rules for use of the communal water supply and drainage system in the Republic of

Uzbekistan” (09/16/94) • “Rules for rendering communal liquid and solid waste disposal” (20/02/99)

– The latter law was replaced in 1999 with a law (amended in 2003) containing language that considerably altered the mandate of the mahallas. Most changes made bestowed on citizens’ assemblies broader powers; notably, increasing their


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involvement in political activity (greater role in nominations for legislative candidates and in forming electoral commissions) and maintaining law and order. The 2003 amendments provided for a charter in each mahalla, included provisions for the (paid) mahalla offices of posbon (neighborhood guardian) and educational advisor (tarbiyatchi), and explicitly mandated a “make-up commission” to deal with divorce and dysfunctional families.11

– A new version of the law on elections for local councils was passed in September

of 2003, allowing for nomination of candidates to local council seats by voter initiative groups and stripping local councils themselves of this right; the new local electoral law also greatly expanded the list of government officials that are ineligible to hold seats.

• There is no separate law that deals with budgets and financial management at the

subnational level. The Law on Budget System and the Tax Code have some provisions helpful in understanding the structure of intergovernmental finance and how it operates. However, as in many CEE countries and Newly Independent States of the FSU (NIS) , one must look to the annual budget laws, as well as a large set of regulations and instructions, to understand tax sharing arrangements and functional assignments, to the extent they are spelled out in legislation at all.

• The urban service related laws listed in Exhibit 2 do reflect some effort to rethink the

roles of the central and local governments in delivering basic services, as well as the private sector (particular in respect to urban transport and housing management).

To the best of the authors’ knowledge, the only major legislation currently under development that would affect local government institutions and operations are a Treasury Law and a new version of the 1999 Law on Housing Associations. Neither of these initiatives looks to increasing autonomy of local authorities vis-à-vis the center. The September 2003 draft of the treasury legislation under consideration envisions local treasury offices as subordinated subdivisions of a central treasury within the Ministry of Finance. The housing legislation, initiated in large part at the prompting of the USAID LGI-II program, looks to bolster the ability of owner-controlled housing associations to manage their apartment buildings more democratically and without undue interference by local authorities. As such it would contribute to a clearer separation of private and public spheres of activity at the local level. The Distinction between Local State Organs and Organs of Citizens’ Self-Government. The reader should bear in mind that “local government”, as used in Uzbekistani legal and political parlance, designates all sub-national levels of government, from the province (viloyat) on down. In understanding the relevant legal nomenclature, it is important to note that government institutions in Uzbekistan are formally divided into two categories: 11 The posbon , educational advisor, and “make-up commission” were established in legal acts prior to 2003 (see CoM resolution #113, 15 March 1999) and were created in many mahallas, though not all; the 2003 amendments enshrined these acts in the Law on Citizens’ Self-Government and provided for their further institutionalization.


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• Firstly, state organs , formed mostly by a system of appointments from higher levels of government; local councils of people’s deputies are also considered state organs.

• Secondly, organs of citizens’ self-government, officially independent and autonomous

within their respective territories and theoretically selected by the citizens themselves through free and fair (though not necessarily direct) elections. In practice, however, these organs function as if subordinated to state executive structures in a variety of ways. In effect, they merely constitute a lower tier of the state hierarchy. Indeed, as discussed further in the chapter on self-government bodies, the mahalla, or neighborhood committees, themselves have their own kind of national hierarchy of coordination bodies at the village/town, district, provincial, and republican levels.12

These two categories of institutions are discussed in detail, respectively, in the two chapters that follow immediately below. Conclusion As will be apparent to any reader of this assessment, Uzbekistan could benefit from a thoroughgoing review of its system of intergovernmental arrangements and system of local government with an eye to bringing them, over time, into conformity with the norms of democratic, market-oriented countries. Such a process can begin with modest incremental steps in the direction of meaningful local autonomy, improvements in transparency and accountability, and more active engagement with citizens in decisionmaking on basic services. That said, in the current political climate, it seems unlikely that USAID or other donors could succeed in engaging the central government in sponsoring this type of policy dialogue.

12 Article 17, Law “On citizens’ self-government institutions”


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IV. TERRITORIAL STRUCTURE AND STATE ADMINISTRATION Territorial Administration: Three Tiers Plus One

The formal state structure consists of three distinct levels or tiers: the republican level (first tier), the viloyat-, or province- level (second tier), and the nohiya/tuman-, or district- level (third tier). In addition to Uzbekistan’s twelve provinces, the second tier viloyat-level encompasses Tashkent City, the capital and only city of republican subordination, as well as the autonomous Republic of Karakalpakstan. The third tier district- level also includes cities of provincial subordination and Tashkent City’s own urban districts. Below the third tier exist various other LGUs, which belong either to the state hierarchy or to self-government structures. Cities of district-subordination (under caretaker deputy district hokims),13 plus towns and villages (for which the main governing structures are citizens’ assemblies and their mahalla coordination bodies) together could be considered a weak, de facto “fourth tier” of self-government and state structures. The committees of neighborhood- level self-governing citizens’ assemblies (more commonly known as mahalla committees) represent the smallest territorial administrative unit. It should be noted that “fourth-tier” territorial units do not encompass the entire population, as cities of provincial subordination and Tashkent City’s tumans are subdivided into mahallas only. The diagram in Exhibit 4, below, depicts the structure of territorial administration in Uzbekistan. Exhibit 5 at the end of this chapter provides a statistical summary of the number of jurisdictions at each tier within the hierarchy with some related data on urbanization and population ranges. As can be seen in Exhibit 3 (immediately below), second-tier entities (provinces, the autonomous republic, and capital city) average about 1.8 million in population, on the high end of the spectrum in Central Asia. Third-tier districts and cities of viloyat subordination average in the 130,000 range. Exhibit 3. Central Asian Republics: Number and Size of Second-Tier Jurisdictions Country Number of Jurisdictions14 Average Population Uzbekistan 14 1,823,000 Tajikistan 4 1,533,000 Kyrgyzstan 9 536,000 Kazakhstan 16 935,000 Hokimiyat Executive Structure At the republican level, the executive branch, headed by the president and the CoM, dominates the governing process. This predominance of the executive branch repeats itself at the second

13 In 1996, hokimiyats of cities of district subordination were absorbed into the districts themselves; Presidential Order #1651 (26 November 1996) “On improving the structure of government institutions for hokimiyats of cities of district subordination” 14 Number of jurisdictions includes capital city, and in Uzbekistan, the autonomous republic as well.


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and third tiers as well. The executives of the twelve provinces and Tashkent City, known as hokims, are appointed by the president himself.15 Karakalpakstan’s Council of Ministers (its equivalent of the hokim) is appointed and dismissed in the same way. 16 Executives of third-tier LGUs, also referred to as hokims, are indirectly accountable to the center through the second-tier LGU hokims that appoint them. 17 The corresponding local council, theoretically a directly elected legislative body, technically has the power to reject a hokim’s appointment, but this does not happen in practice. In addition to the hierarchy of hokimiyats (as the hokim’s office is called), there is a distinct but interrelated ministerial structure with provincial- and district- level departments. Both hierarchies are characterized by upward, vertical accountability to the president himself, though local ministerial departments are generally also horizontally accountable to their respective hokims. On the local level, these hierarchies often complement each other, performing distinct functions, but they also compete for influence in less well-defined or especially important spheres. Other centralized national hierarchies, such as the Ministry of Internal Affairs, the National Security Council, the Tax Inspectorate and the prosecutor’s office (Office of the Procurator),18 also exist and, accordingly, compete for influence in certain spheres. As a result, dual subordination of lower- level institutions (to both the ministerial structure and the hokimiyat structure , or even to more than one different ministry) is systemic in Uzbekistan. Cities of District Subordination: Change in Status Cities of district subordination were officially abolished in 1996 by presidential order #1651, though they continue to exist as “cities” for some purposes (including statistical) and, typically, are run by a deputy district hokim. In this capacity, the deputy hokim oversees the city administration and, in particular, coordinates the city’s mahalla committees. Like all other sub-district government units, the former district-subordinated cities have no budget of their own; all their needs are theoretically addressed in the district budget itself. Dual Subordination and Functional Assignments The fundamental Law on Local State Authorities, itself, when addressing the powers of hokims (Article 25) speaks of the province, district, and city levels in the aggregate, making no effort to differentiate among tiers. Moreover, the law provides no specificity whatsoever in respect to delineating a concrete division of labor between the central government and local tier administrations in respect to basic functions such as education, health, urban planning, and communal services.

15 Article 2, Law “On local state government” (1993) 16 Article 88, “Karakalpak Constitution” (1993) 17 Article 2, Law “On local state government” (1993) 18 The prosecutor’s office in Uzbekistan differs from a prosecutor’s/district attorney’s office in the United States in that it has extensive investigative functions as well.


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Exhibit 4. Uzbekistan Structure of Territorial Administration Note: There are 29 cities of viloyat subordination with their own hokimiyats. Other cities and urban settlements, regardless of their formal characterization, are administratively subordinated to their respective districts. Number of urban settlements excludes Tashkent City and the 29 cities of viloyat subordination already accounted for in the chart. REPUBLIC OF UZBEKISTAN

- President - Cabinet of Ministers - Ministries, State Committees and Agencies - Oliy Majlis (parliament)

TASHKENT CITY - Hokimiyat - Local Council

12 VILOYATS - Hokimiyat - Local Council

Autonomous Republic of Karakalpakstan - Council of Ministers - Jokargi Kenes (parliament)

11 URBAN DISTRICTS - Hokimiyat - No Local Council (subject to Tashkent City Council)

29 Cities of Viloyat Subordination - Hokimiyat - Local Council

162 Rural Districts - Hokimiyat - Local Council

203 Urban

Settlements - Subject to district structures (often deputy hokim for city, some role for self-government structures in towns)

1462 Rural Settlements - Subject to district structures, some role for self-government structures

Mahalla Citizens’ Assemblies (self-government institution) The Mahalla Committee (Chairperson, Secretary, etc.), Educational Advisor, Posbon, Sub-Committees (the Welfare Commission, the Women’s Committee, etc.), Audit Committee, Administrative Commission


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Achieving Administrative Flexibility in Practice The following anecdote illustrates how the system, in practice, does accommodate a greater degree of flexibility than is first apparent in respect to the operations of executives at the local level. In interviews, government employees (understandably) proved reluctant to suggest that practice differs from law in any material way. However, one senior official interviewed was uncharacteristically candid with regard to the difference between the letter of the law and practice in his viloyat ’s administrative structure. In Uzbekistan, the republican level dictates the number of staff in local administrations (in hokimiyats and in ministerial offices) and their responsibilities. The department headed by this official, confronting a huge increase in its workload (in part due to new responsibilities for coordination with several international donors), found that it needed many more staff than the eight allowed to it by statute. The Department, on its own initiative, proceeded to obtain the needed personnel, creating new positions and divisions. This reorganization doubled the number of deputy directors from two to four. Though the two new deputy directors retained the official, lower, salaries attached to their previous positions, they were simply “given the titles they need to carry out their expanded duties.” The additional staff was obtained by cannibalizing organizations subordinate to the department in question (e.g., budgetary entities and government-controlled social organizations under its purview).

Instead, an intricate and, at times, ambiguous or even self-contradictory system has evolved that governs the division of functional assignments among different levels of government and among various departments and offices on the same tier. Insofar as a basis for these assignments can be found in law, one must search through a hodgepodge of provisions found in a variety of more sector-specific legislation, decrees, orders, and resolutions. Within these complexities, several broad, general tendencies or patterns can be identified. The center only delegates those responsibilities that it can afford to without losing its grip on the state apparatus. Robertson and Kangas, in their 2002 article “Central Power and Regional and Local Government in Uzbekistan”, write: “The power to appoint and remove officials as well as set goals for regional production and financing are strong indicators that the central government still maintains a firm control over the regional governments.”19 Social policy tends to be delegated farther down and more comprehensively than economic and political functions, which are more tightly controlled by the central government. Thus, law enforcement organs, local financial departments, and the tax inspectorate are more vertically subordinated to their respective line ministries vis-à-vis hokimiyats than local health and education departments. Official sources stress increased efficiency and accountability achieved in social services by making their daily management more local. Critics, however, see this as a convenient abdication of responsibility—in effect, a way for the central government to deflect blame for the rapid decay prevailing in education, health, and welfare. Dual subordination of lower-tier, local actors manifests itself in a variety of ways, both official and unofficial. In a system dominated by the executive branch, checks and balances from the legislative and judicial branches are weak. Instead, separate centralized executive hierarchies compete with each other for influence and control.

19 P. 270–71


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Two 1997 CoM orders transferred oversight of many local departments from ministries to hokimiyats (Legal Log #26, 27), representing a shift in the balance of power between these hierarchies. Dual subordination, however, remains a persistent feature of the political landscape in Uzbekistan. Personnel-related dual subordination One of the ways in which dual subordination manifests itself in Uzbekistan is through appointment and dismissal of local officials. For the vast majority of local- level ministerial positions, these personnel actions proceed on a consensus basis, requiring the signature of both the ministry and the hokimiyat. Even for positions in which the law does not require the signature of the hokim (such as for the tax inspectorate or for university rectors), custom dictates that the ministry that is in charge still act to secure the hokim’s permission. By contrast, as a rule, a hokim seeks no ministerial confirmation, formal or informal, for appointments of deputy hokims and other senior members of his immediate staff. Legal-institutional dual subordination The republican ministries set national standards (based on centrally-determined policy considerations, as well as on objective technical criteria)that apply to all of their subsidiary departments as well as to related budgetary entities, regardless of their formal subordination. For example, a medical university, naturally, follows standards set by both the Ministry of Higher Education and the Ministry of Health. A less legitimate form of central control can be found in the widely observed, bureaucratic mission creep of several republican entities, such as the tax inspectorate, the police, and the prosecutor’s office, as they endeavor to enlarge their official mandates to include an ever-increasing litany of standards and monitoring functions. In respect to policy direction and ongoing administrative oversight of ministry-subordinated entities, hokimiyats officially have the right to participate in matters of local significance. In most instances, this obligates the hokimiyat and the ministry to coordinate and compromise with one another, with major issues resolved by consensus. Local ministerial departments also work actively with the hokimiyat in the development of its own policies and programs, though here the hokimiyat is the senior partner, especially in light of its considerable powers over appointments and dismissals. Nonetheless, conflicts do arise, in part because legislation often gives the same or overlapping powers to several different institutions. Even in those cases in which the law is relatively explicit, with distinct spheres for particular institutions more or less spelled out with some clarity, struggle and confrontation does occur. Local officials interviewed cited numerous instances of their departments receiving contradictory orders from their ministry and the hokimiyat, as well as being caught between two masters in other ways. Even when there is a clear, unambiguous line of subordination to a single higher organ on one issue or another, special requests by other higher organs lacking formal legal authority over the given matter are not uncommon. Though no officials interviewed admitted to succumbing to any such requests, the considerable political pressure that hokimiyats and higher- level ministerial organs can bring to


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bear on local ministerial departments and other budgetary entities provides powerful incentives to comply. Fiscal-Budgetary Functional Assignments Local branches of the Ministry of Finance, security structures, and the tax inspectorate are financed from the central budget. Other sub-national departments of ministries (education, health, etc.) are financed from local budgets. These departments have no direct vertical budgetary ties with their respective ministries, though expenditures of higher-tier ministerial offices generally include objects directly subordinate to lower tiers, and ministerial directives powerfully influence local departments’ choices of what to include in a budget request. The interplay of ministry and hokimiyat in forming budgets for local Departments of Education graphically illustrates the patterns described above. Any given district-subordinated school receives most of its funding (for salaries, minor repairs, etc.) from its district- level Department of Education, which is funded through the district budget. However, the provincial Department of Education supplies district-subordinated schools with most of their equipment, from desks to chalkboards to library stock; all of this comes from the provincial budget. Thus, each district-subordinated school is actually sustained by both the district- and provincial- level budgets. Additionally, budget requests from both the district- and provincial- level Departments of Education must be based on standards established by the Ministry of Education in Tashkent; the Ministry itself has also purchased equipment for schools subordinate to lower tiers. Other Examples Of Dual Subordination In The State Government Structure Tax Inspectorate The tax inspectorate constitutes a special case. By law, it is supposed to be entirely independent of local government structures;20 its salaries and other expenses are included in the central, rather than the local, budget.21 Its officials are appointed and dismissed from the center, without the approval of the hokim,22 though it is “polite” to get his blessing. However, on a day-to-day basis, the local tax inspectorate officials work closely with the hokim, an immediately present and powerful figure, whereas they may rarely, if ever, see their actual boss at the republican level. The Committee of Architecture and Construction The provincial division of the Committee of Architecture and Construction is funded from the local budget; it receives its instructions from ministerial organs. The district- level chief architects answer to the provincial divisions regarding conformity with engineering, safety, and other standards. On questions of design, they are subordinate both to the district hokim and to the provincial administration of architecture and construction. The Security Apparatus

20 Article 3, Law “On the state tax service” (1997) 21 Article 3, Law “On the state tax service” (1997) 22 Article 10, Law “On the state tax service” (1997)


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Security structures are, for the most part, funded strictly from the central budget; the provincial Administration of Internal Affairs receives some funds from the provincial budget, however, for the traffic police and firefighters. Prisons are subordinated to the Internal Affairs Ministry as well. Ministry of Finance Local Ministry of Finance officials are paid from the central, not the local, budget. Their local directors are appointed by the hokim, with the Ministry’s approval. The hokim can also remove the local financial director. Communal Services and Urban Transport. Dual subordination in these sectors is discussed in detail in Chapter VIII, below. The Court System and Judicial Oversight of Local Government Administrative Practices Courts of General Jurisdiction (which handle civil and criminal matters) exist at both the district and province level and are subordinated to the Supreme Court. Commercial disputes, whether involving private or public corporate enterprises (including communal companies), are litigated within 143 regional Economic Courts with appeal to a High Economic Court in Tashkent. The Ministry of Justice handles procurement on behalf of the court system. An American Bar Association/Central European and Eurasian Law Initiative (ABA/CEELI) report cites laws that, on paper, give citizens the right to appeal to the courts for redress for any government administrative decisions that they feel are illegal or any government actions by government officialdom perceived as violating their civil rights and liberties.23 The authors go on to observe:

Lawyers with whom the team met could not identify a single high profile decision by the courts that directed the [public] executive to comply with a citizen request…Courts, however, will issue such orders to executives, and they would be complied with, as long as they did not involve important political oligarchic interests. Lawyers also reported uneven results when seeking orders to local authorities (khokims). In one case, the lawyer sought, and failed, to get the khokim to issue a propiska (residence registration). In an inheritance case, however, the court ordered the khokim to provide an apartment to a relative of the deceased. These victories, however, seem few and far between. Moreover, lawyers are not yet using these laws as tools to provoke societal change, because they do not believe that the judges will rule against the state.

A Tashkent lawyer interviewed for this local government assessment, in general, confirmed the above observation. He was aware of some property confiscation cases in which citizens succeeded in getting compensation awards adjusted. He also reported that private companies 23 ABA/CEELI, Judicial Reform Index for Uzbekistan, May 2002, p. 12. The two laws citied: Law on Appeals of Citizens [No. 1064-XII, 6 May, 1994], and The Law on Appealing to the Court Against Acts and Decisions Violating Civil Rights and Liberties [no. 108-I, 30August, 1995].


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have had quite good success in winning commercial disputes with communal companies in the Economic Courts, provided that the decision had no adverse effect on the hokimiyat budget. The Status of Karakalpakstan The legal foundation for Karakalpak autonomy is enshrined in chapter XVII of the Uzbek Constitution, and reiterated in chapter I of the Karakalpak Constitution. (See box, below.) In general, the autonomous Republic finds itself no less bound by Uzbek legislation than do other second-tier LGUs, but it does have more of a formal mandate to pass its own additional legislation. The Constitution also guarantees cultural rights, and confers official status on the Karakalpak language—the only official language to exist in the Uzbekistan besides Uzbek. “Chapter XVII of the Uzbek Constitution: The Republic of Karakalpakstan” Recap of Key Provisions Article 70: The sovereign Republic of Karakalpakstan (RK) is a part of the Republic of Uzbekistan (RUz). RUz protects the sovereignty of RK. Article 71: RK has its own Constitution. The Constitution of RK cannot contradict the Constitution of RUz. Article 72: Laws of RUz are also binding on the territory of RK. Article 73: The territory and boundaries of RK cannot be altered without its agreement. RK independently makes decisions on its territorial-administrative structure. Article 74: RK has the right to secede from RUz on the basis of a universal referendum of the people of RK. Article 75: Interrelations between RUz and RK, within the framework of the Uzbek Constitution, are regulated through agreements and contracts between RUz and RK. Disagreements between RUz and RK are settled through arbitration.”

The state administrative structure in the Republic of Karakalpakstan, as outlined in the Karakalpak Constitution, differs only slightly from that of other Uzbekistani LGUs. The main difference is that executive and legislative (representative) branches on the level of the autonomous republic are more distinct than they are in the provinces and Tashkent City. In other second-tier LGUs, the hokim heads both the provincial executive structures (the hokimiyat) and representative structures (the provincial local council). In RK, these positions are not merged. The chairperson of the legislature, the Jokargi Kenes (Supreme Council), proposes a candidate to head the Karakalpak Council of Ministers, the republic’s main executive structure. This proposal must have the approval of the Uzbek president (Karakalpak Constitution, Articles 70 and 81). Third-tier structures in Karakalpakstan, however, do not significantly differ from those in the rest of Uzbekistan. Hakims (rather than hokims) serve as both the district/city executives and the heads of their local councils. They are nominated by the republican executive (the Council of Ministers) and approved by the republican legislature (the Jokargi Kenes). Self-government on the neighborhood level is carried out, not through the mahalla, but via the “makan-kenes” (Karakalpak Constitution Article 99); there is no legal difference between the two, as they are both citizens’ assemblies.


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Despite meticulous rhetorical emphasis on Karakalpakstan’s unique status (much ink is spent in legal acts specifically referring to “the Council of Ministers of the Republic of Karakalpakstan and provincial hokims”), the RK’s autonomy is not well established. Except for a few structural matters, all Uzbek law is binding in Karakalpakstan; broadly speaking, it must observe standards, rules, taxes, and price controls set by the central government in Tashkent. In the Karakalpak Constitution, most nominations for major posts are done only with the agreement of the President of Uzbekistan (Karakalpak Constitution, Article 81). Weak on paper, Karakalpak autonomy is even less evident in reality. Writing in 2002, Robertson and Kangas comment:

As an example of […] recognizing regional autonomy when the position of the central authorities is relatively weak, the March 1990 legislation that established the presidency in Uzbekistan took great care to recognize that this new institution would not infringe on the rights of then Karakalpak Autonomous Soviet Socialist Republic. However, as old institutions were solidified and new institutions were created by the strengthening regime, the nominally autonomous republic was instead brought under the direct supervision of the government, and the existing leaders of Karakalpakstan were forced to resign. By July 1997, when President Karimov made an inspection tour of the Karakalpak Autonomous Republic to force the retirement of these new incumbents whom he blamed for poor cotton harvests, the republic was treated the same as any other viloyat. Karimov imposed the standard central response to political and economic problems in Nukus [the capital of Karakalpakstan]—a purge of the leading cadres.” (p. 277)

Also, as Uzbekistan’s poorest second-tier LGU and being situated downstream from the rest of RUz, Karakalpakstan is totally dependent on the rest of Uzbekistan both financially and ecologically. In its practical ability to exercise autonomy, therefore, Karakalpakstan is limited in ways that other ethnic minority areas (such as the industrialized, ethnically Tajik cities of Samarqand and Buxoro) would not be, were they to have a special status. Tashkent City The Constitution of the Republic of Uzbekistan confers no special status on Tashkent City, other than its designation as the capital city; legislatively, Tashkent generally receives the same treatment as any other second-tier LGU. The city is divided into 11 urban districts (tumans), each with its own hokimiyat. However, unlike other third-tier LGUs in Uzbekistan, these urban districts lack local councils of their own. Instead, all local council functions for individual Tashkent tumans (confirming the tuman budget, confirming hokim appointments, etc.) are performed by the second-tier Tashkent City Council. Due to Tashkent’s size, wealth, infrastructure, status as capital city, and other idiosyncrasies (the only city with a subway), Tashkent City (when compared with other provincial level governments) may be treated differently in some legislation or held to a different standard in


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practice. For example, in the “Rules for use of the communal water supply and drainage system in the Republic of Uzbekistan” (Legal Log #42), Article 1.2 reads, “For Tashkent City the present rules can be amended and modified in light of specific conditions in the city’s water supply and sewage disposal. Such modifications must be approved by the Ministry of Communal Services of the Republic of Uzbekistan and the Tashkent City Hokimiyat.” This is by no means an isolated case; many legal acts allow for Tashkent’s unique circumstances. That said, there is nothing in Uzbekistani legislation that systematically confers on Tashkent City any more autonomy than that enjoyed by the Republic’s 12 provinces. Conclusions Central Control With Some Limited Deconcentration “Local government”, as used in Uzbekistani legal and political parlance designates all sub-national levels of government. Within the subnational tiers, any meaningful deconcentrated authority resides in the second-tier, provincial- level hokimiyat, still at quite a distance removed from the citizens who look to government for reliable and affordable services to be delivered within their respective communities. The current administrative and political structures in Uzbekistan still closely resemble Soviet-era antecedents (notably the ispolkoms, or executive committees) in their vertical integration of decision-making authority between the center and the various levels of sub-national government. Centrally appointed executives are chosen for their loyalty to the president, and monitored for their conformance to policy directives handed down from above (e.g., fulfilling cotton plan targets). Thus, local government functions and is perceived more as a deconcentrated agent of the central government than as a distinct autonomous political and administrative entity. Upward Accountability Rather than Downward; No Incentive for Citizen Engagement The local government executive may or may not have any meaningful ties to the people of the local territory that he serves and, when appointed, may not even be a resident of jurisdiction over which he has been chosen to preside. Managers of local administrative entities must contend with a dual accountability up the chain of control but have virtually no accountability down the chain to either the Council of Deputies or to the people receiving services. Given these bureaucratic and political realities, local officials and their staffs have little incentive to involve citizens or citizen groups in solutions. Limited Motive and Scope for Local Executive Initiative The current legal, political and financial context provides little motive or scope for local executives and administrators to exercise initiative, especially those below the viloyat level. Nonetheless, despite this strong inclination to look to “the center” for solutions, some local executives do exhibit initiative and a willingness to experiment with new methods of local service delivery. And, in the absence of clear guidance and sufficient resources, local administrators at times find they no choice other than to act using whatever means are available to them.


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Moreover, practical realities (e.g., a timid, self-censoring media, a lack of computerization in administration and the limits of a poor telecommunication system) tend to allow some scope for unsupervised local action. That said, these opportunities for local initiative arise from circumstances that constrain effective centralized control, rather than from a well-established legal and regulatory framework that openly acknowledges the importance of local administrative autonomy for policy and service delivery.


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Exhibit 5. The Demographics of Territorial Structure in Uzbekistan

Tier % Urban

Type of Administrative Unit # of Units Population Population/Unit Population Range

First 36.9 Republic of Uzbekistan 1 25,523,000 - - 29.8 Viloyat (Province) 12 21,810,400 1,817,533 667,800 –

2,797,800 49.1 Republic of Karakalpakstan 1 1,554,800 - -

Second (province-level)

100 Capital City (Republican Subordination) 1 2,157,800 - - - Rural District (may include cities and towns with

urban population) 162 19,517,200# 120,785 – 120,169# 3,800 –

<250,000¦ 100 Urban District (Tashkent City only) ++ 11 2,157,800 196,164 29,642–

288,177††

Third (district-level)

100 City of Viloyat Subordination (with hokimiyat) 29† 3,848,000# 130,968 - 134,410# + 100 City of formal Viloyat Subordination that is

factually subordinated to the district/other city hokimiyat through a deputy hok im for the city

26 Sub-district (no independent state administrative structure)

100 City of district subordination (subordinated to district hokimiyat)

64

100 Town 113

3,404,900#

16,527 - 17,019# +

- Citizens’ Assembly (town, village, and mahalla): 9,782‡ 25,523,000§ - - 0 Of which Rural Citizens’ Assembly 1,462 - - -

Self-government

- Of which Mahalla Citizens’ Assembly 8,120‡ - - 500–17,000 (approx.) ‡

All figures for this chart were taken from the State Committee on Statistics of the Republic of Uzbekistan (2002 Annual Regional Statistical Report and Uzbekistan in Figures 2002) except for the following (Footnotes continue on the next page): † According to the list of cities of viloyat subordination included in CoM order #459 “On improving the staff structures of district and city hokimiyats” (Legal Log #26) ‡ Interview with Nigmatilla Abdullayevich Abdullaev, First Deputy Chair of “Mahalla” Foundation, 5 November 2003. Figures for number of mahallas and number of residents vary widely from source to source: Human Rights Watch, on page 6 of its 2003 report on human rights abuses by mahalla committees “From House to House” cites a January 2001 seminar paper that puts the number of mahallas at approximately 12,000, with them having between 150 and 1,500 households. In her Central Asia and the Caucasus article, Zoia Arifkhanova cites a 1997 Human Development Report as referring to over 10,000 mahallas in the Republic. § A citizen may belong to a mahalla citizens’ assembly and a village or town citizens’ assembly simultaneously. ¦ OSI table 9A.3 “Rural Settlements by Population Size Categories in Uzbekistan (January 1, 2000)” (Bektemirov and Rahimov, Local Government in Uzbekistan)


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# Plus or minus 49,900. Figures derived from (1) state statistics on population of most cities of viloyat subordination (2002 Annual Regional Statistical Report), (2) the official Tenth Anniversary Political Map of the Republic of Uzbekistan, which gives administrative designations as of January 20, 2001 and population ranges for all cities (ranges from this map used for Shirin, Xonobod, Quvasoy), and (3) The Tashkent Viloyat hokimiyat, which gave 33,000 to 35,000 as the approximate population for Ahangoran †† “Calculation of population [of Tashkent City] for January 1, 2004 (tentative figures)”, Tashkent City Administration of Statistics (Note: Bektemir District, with only 29,642 residents, is somewhat of an outlier; a mere quarter the size of the next largest district, Mirobod, with a population of 123,601) ‡‡ Ranges for urban settlements in Uzbekistan are quite wide and not particularly instructive. For urban population distribution, see OSI table 9A.2 “Urban Settlements by Population Size Categories in Uzbekistan (January 1, 2000)” §§ As of December 26, 2003 Cabinet of Ministers Order #570, which eliminated eight urban districts, all that remained in the Republic, except for those in Tashkent City.


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V. LOCAL GOVERNMENT COUNCILS, CITIZEN’S SELF-GOVERNMENT BODIES, AND RELATED GOVERNMENT-NGO HYBRIDS Uzbekistani law provides for three types of institutions which, in theory, allow for some check on executive authority at the local level, and, through these institutions, for some accountability to the public at large and opportunities for direct engagement of citizens with their government: (1) elected local councils of people’s deputies, (2) mahalla committees and their chairmen (oqsoqols), chosen by citizens’ assemblies, and (3) mahalla (citizens’ assembly) coordinating councils at the village, town, and district levels. In practice, these institutions tend to function, for the most part, as loyal extensions of the local state administrations. Local councils, in particular, rarely play a significant part in local governing; their extensive treatment in this chapter should not be understood to mean that the local council is an influential actor on either the provincial or district level. This chapter touches briefly on the role of the Mahalla Foundation, which, at first glance, looks like an independent NGO but, in reality, is government-sanctioned and supported. Mention is also made of the transition from Soviet-era collective farms to shirkats in the agricultural sector, and how this has increased the responsibility of hokimiyats for public service delivery in the countryside. Local Councils of People’s Deputies and State Executive Encroachment By law, people’s deputies of both district and provincial councils are to be directly elected by citizens. (See the subsection that follows on the local electoral process). The formal powers of these councils include confirmation of key local appointments (including hokims), creation of local extra-budgetary funds,24 approval of key local decisions, and ratification of the local budget. In addition to the “people’s deputies”, the council is chaired by the appropriate hokim (himself a people’s deputy) and his deputy hokims.25 He appoints his own deputy hokims, subject to presidential and local council approval. 26 In reality, however, legal requirements that hokims be chosen from among elected members of their local councils have little effect, and do not constitute a meaningful check on state executive structures’ power to appoint lower- level hokims. Rather, higher organs will often appoint their chosen candidate for hokim and either force a people’s deputy out of office or simply have the incumbent removed by the council itself.27 The council then schedules a special election and the path is cleared for the new hokim’s membership in the council.28

24 Article 14, Law “On local state government” (1993) 25 Article 2 Law “On local state government” (1993) 26 Article 21 Law “On local state government” (1993) 27 Local councils of people’s deputies are given the power to remove their own members in article 24 of the 1993 law “On local state government”. 28 The process for special elections to replace a deputy who has resigned is described in article 44 of law 520-II “On elections to the provincial, district and city councils (kengash ) of people’s deputies (new version)”.


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Councils Large but Variable in Size The sizes of councils of people’s deputies, determined locally, vary considerably. Olmaliq City and Buloqboshi District, for example, both have approximately 115,000 residents; Olmaliq, however, has 30 people’s deputies in its local council as compared to just over 20 in Buloqboshi. Tashkent’s urban districts do not have their own local councils; rather, the Tashkent City Council also serves as each district’s representative body. 29 Council Sessions Infrequent By law, a hokim must convene a meeting of the council of people ’s deputies at least twice a year; sessions generally last for two days, though nowhere is their length established by law.30 Additional sessions are rarely convened except for extraordinary circumstances such as the appointment or removal of the hokim. A session may also be convoked by no less than two-thirds of the people’s deputies (Legal Log #5, Article 17). Generally, the minimum of two short sessions is the norm, too infrequent and brief (typically a day or two per session) for councils to exercise any real oversight of the hokimiyat or to serve as a counterweight. The sessions are sufficient for local councils to rubber-stamp the budget, relevant appointments, and other measures. Indeed, much approval by local councils occurs only as an afterthought, well after implementation of the decisions that required their approval. Role of Permanent Commissions Local councils create their own permanent commissions,31 which largely reflect the committee structure of the Oliy Majlis. However, whereas the Oliy Majlis has 13 committees, most local councils only have four or five permanent commissions. The particular commissions vary according to locality, but the most common are commissions on the budget, construction, the environment, agriculture, industry and transport, and social issues. Individual local commissions have extensive contacts with the corresponding committees/commissions of representative bodies at both higher and lower levels. Although these commissions do work between sessions, virtually all local decisions of any importance are made by the hokim and his appointees. As a matter of fact, those elected as people’s deputies tend to be executive appointees anyway or are directly dependent on the hokimiyat in some other fashion (i.e., mahalla chairpersons, appointed directors of state-owned enterprises, etc.); their loyalty to the executive patronage structure is far more significant than any accountability to their constituencies. Councils Do Not Use Their Powers Many sources, both official and unofficial, indicate that the local councils of people’s deputies do not independently wield the powers the law gives them and merely function as rubber-stamp bodies. Their subordination to executive structures is in sharp contrast to their lack of accountability to the electorate. Official sources tend to blame this on a lack of initiative on the

29 Article 7, law 520-II “On elections to the provincial, district and city councils (kengash ) of people’s deputies (new version)” (2003) 30 Article 17 Law “On local state government” (1993) 31 Article 19 Law “On local state government” (1993)


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part of the local councils themselves; other observers note that the sweeping powers held by the executive branch, both de facto and de jure, dwarf those of local councils, rendering them ineffectual. Provincial local councils can cancel acts of lower executive and representative institutions;32 acts they pass, in turn, can be cancelled by the Oliy Majlis. All acts passed by local councils, therefore, can simply be cancelled by higher bodies. Another significant factor that prevents local councils from acting independently is that provincial- level councils are composed largely of district and city hokims—thus, the provincial hokim, who appoints and dismisses district and city hokims as members of the executive branch, presides over them in the council as well. In districts and cities, the local councils tend to be packed by mahalla chairs that, though formally elected by citizen assemblies, are known for their dependence on and obedience to the corresponding hokim. Local Council Elections Elections to provincial, district, and city councils of people’s deputies are extremely opaque and do not provide for fair competition. According to representatives of international NGOs in Uzbekistan, no significant impartial monitoring has been conducted for local council elections since their inception. Electoral Commissions Quite apart from independent Uzbekistan’s unfortunate electoral history in general, the law “On elections to the provincial, district and city councils of people’s deputies” (Legal Log #15) itself contains provisions that, in effect, provide the state with ample opportunity to manipulate elections. Most importantly, the process of selecting members of election commissions is firmly controlled by the state. These state-appointed bodies handle functions of districting, registration of candidates and voters, and conduct of the count, while mechanisms for oversight or appeal of commissions’ actions are weak or non-existent. Election commissions also control all private donations as contributions to specific campaigns are prohibited; any private money can only be donated through an electoral commission as general support for running the election as a whole (Article 48, see Annex C for full translation of article). Needless to say, this results in uneventful, lethargic races, and much of the electorate is unaware that local councils even exist. Provincial electoral commissions are formed by the corresponding provincial local council (Article 10); the provincial commissions, in turn, appoint members of commissions for individual electoral districts in provincial races, of which there may be up to 60 per province (Articles 7, 12). Members of both commissions require the approval of deputies from district and city councils (Article 16).

32 Article 24 Law “On local state government” (1993)


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Self-government bodies approve members of district and city electoral commissions (formed by the correspond ing local council); the self-government bodies also confirm appointments (by district and city electoral commissions) of members of commissions for electoral districts for third-tier local councils (there may be up to 30 electoral districts per administrative unit) and their sub-districts (Articles 12, 14, 16). The Nomination Process Procedures introduced in August 2003, in preparation for the December 2003 elections, specify that district and city councils will no longer have the right to nominate cand idates for the provincial council elections.33 Likewise, provincial councils will not be able to nominate candidates to the Oliy Majlis.34 Nomination rights will be reserved for parties, initiative groups, and self-government bodies. One observer states that this represents only a minor improvement (but a step in the right direction nonetheless), predicting that malleable mahalla committees will replace local councils as the instrument for packing local councils with the hokim’s favorites. In any event, parties also often nominate “independents” from the executive branch in lieu of their own members. The nomination process is arduous and constitutes a significant obstacle to free, fair, and contested [[Uncontested? Contestable?]] elections. Political parties and initiative groups of voters are allowed to nominate candidates; both, however, must be officially registered. Indeed, an initiative group must gather the signatures of eight percent of the voters in every mahalla or village of its electoral district after its registration with the appropriate electoral commission (Article 22); signatures gathered prior to registration are not counted (Article 22-1). In addition to registered political parties and initiative groups of voters, self-government bodies in an electoral district also have a right (through a meeting of their representatives) to collectively nominate a single candidate (Article 22). Elections are conducted in single-mandate districts for five-year terms (Article 1; see also Article 101 of the Constitution). The law does not require, but rather recommends, that local deputies be elected from among the residents of a given electoral district (Article 22). Taking into account the ease with which sitting deputies can be removed (Lega l Log #5, Article 24) and subsequently replaced via special elections (Article 44), this provision leaves the door open for the election of virtually anyone to a local council at any time. Since council membership is a prerequisite for the coveted post of hokim, the looseness of these procedures further strengthens the hand of the executive hierarchy to appoint whomever it wants and emasculate [[Could this possibly be changed to “weaken”?]] 33 Article 20, law 520-II “On elections to the provincial, district and city councils (kengash) of people’s deputies (new version)” (2003) 34 Article 20, law 518-II “On elections to the Oliy Majlis of the Republic of Uzbekistan”


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any genuine hokimiyat accountability to local councils. In practice, hokims are appointed first, and only then formally elected to their local councils. The law treats elections as valid if at least 33 percent of the electorate participates (Article 41). In order to win, a candidate must receive over 50 percent of votes cast; if no candidate receives over 50 percent of the vote, run-off elections are organized (Article 41). Unlike mahalla committee elections, balloting must be secret (Article 5) and direct. In order to vote for a candidate, voters must cross out the names of all of his/her opponents (Article 38). See Appendix J for a breakdown of the composition of the local councils of Tashkent City and Tashkent Province as of late February 2004. Data do not reflect the results of the February 29 Tashkent Province special elections (to fill the seven empty seats). Legislating the Mahalla: Modernization of an Indigenous Institution or State Co-optation? In contemporary Uzbekistan, the mahalla (a traditional form of societal organization in regions of Central Asia that have that have historically been sedentary) has been integrated into the government structure in important ways. While retaining some of its traditional functions, the mahalla today combines features of both local self-government and state administration; as such, it serves as perhaps the most significant instrument of government control below the district level. Thus in modern-day Uzbekistan, “mahalla” (roughly translated as “neighborhood”) has two overlapping manifestations:

1. In the socio-anthropological sense, “mahalla” refers to an informal solidarity group, common to all traditionally settled peoples of Central Asia. This is the understanding that continues to dominate outside of Uzbekistan (principally in Tajikistan, Afghanistan and China’s Xinjiang Province but also among some minority nationalities in Kazakhstan, Kyrgyzstan, and Turkmenistan).

2. Additionally, in the post- independence era, the Uzbekistani mahalla has acquired a legal

status as an organ of citizens’ self-government with paid officials and concrete responsibilities, especially in the social sphere.

(See the addendum to this chapter for more on the history of the mahalla in Central Asia.) “… the mahalla, or neighborhood, structure… de facto address[es] matters on [its] own. A traditional aspect of Central Asian society, the mahalla is being recreated in independent Uzbekistan. When it comes to addressing the day-to-day problems of Uzbek citizens, the mahalla has become a vehicle through which such matters are addressed.” —Robertson and Kangas, p. 266 “In public, the institution of the mahalla is evoked constantly as proof of the continuation of indigenous traditions and democratization, but in private the most democratic elements of the tradition are quietly repressed in the interest of national security”


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—Bichel, p. 302 Since 1992, Uzbekistan has made a concentrated effort to co-opt the mahalla into governing structures, including it in the Constitution (Article 105) and many other legislative acts as an organ of self-government. National legislation bestowed new responsibilities on mahallas, and they are also now expected to implement additional orders issued by district hokimiyats. While similar community organizations were given legal status within a hierarchy of local self-government in other countries, the extent of their formal integration into state structures distinguishes Uzbekistani mahallas from similar bodies in other former Soviet republics. According to official figures, by 2003 Uzbekistan had over 8,000 registered mahallas.35 As outlined in the April 1999 Law “On self-government” and other legislation, a mahalla’s population as a whole constitutes a type of citizens’ assembly. Everyone in Uzbekistan belongs to at least one such citizens’ assembly. At the head of the mahalla sits its kengash, or mahalla committee. The kengash typically has around 15 members: the oqsoqol (chairman), the kotib (secretary), and advisers on specific matters, which often roughly correspond to state ministerial functions—an adviser on religion, for the women’s committee, for health, etc. There are also advisers for more traditional functions, such as wedding planning and coordination ceremonies. The last few years has seen the creation of the offices of the neighborhood guardian (posbon) and educational advisor. The mahalla chairman (oqsoqol), according to Article 20 of the law “On citizens’ self-government institutions”, is elected to a 2.5-year term upon receiving over one-half of votes cast “with the approval of the appropriate district or city hokim.” According to Republic Mahalla Foundation officials, the election of the oqsoqols and other kengash members proceeds more or less as follows: All older than 18 are eligible. An electoral commission (nominating committee) divides the mahalla up into sectors (generally blocks or streets). Each sector will choose a representative to participate in the general assembly (in most cases the commission members simply find someone who is recognized as a leader of sorts). According to a district Mahalla Foundation director and an oqsoqol interviewed, the only official role of the hokimiyat in the selection process is to conduct a background check (vetting them for criminal record, religious opposition, terrorist association, etc.) on candidates nominated by the electoral commission. In practice, the election process appears to be a quite compromised one:

• The kengash is officially elected by individual citizens, but often only a small number are present—“representatives” of other voters (in more traditional areas, these tend to be male heads of households—elsewhere, though, it is not unusual even to have a female oqsoqol). One oqsoqol interviewed said that only 80 to90 individuals were present at his election—out of a total of 220 families. Another source reported that in her family’s mahalla, the selection process followed a traditional pattern of the recognized (and more religiously devout) elders simply on an informal, self-selected basis forming the committee (the kengash), with the current oqsoqol elevated to the post after completing a

35 Different sources give widely varying figures for the number of mahallas in Uzbekistan. The figure used here was provided in November 2003 by Nigmattilla Abdullayevich Abdullayev of the Mahalla Foundation.


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hajj (pilgrimage to Mecca). Though the law allows for either secret or open voting, thus far election by show-of-hands (and, usually, through representatives) has been the norm.

• According to many accounts, mahalla elections merely rubber-stamp an uncontroversial

and malleable candidate offered by the district hokim, and are not free, competitive, or fair. Nor are they broadly inclusive. District hokims apparently fire and appoint oqsoqols at will, without waiting for their term to end. The basic mechanism for this is to pressure them out of office. There is always some kind of deviation from state policy on providing welfare assistance; often other laws are also broken inadvertently in one way or another. In order to avoid the shame and legal implications of a full- fledged investigation by the Ministry of Finance’s Supervision and Auditing Administration or the procurator’s office, many oqsoqols simply resign at the hokim’s request. Then a meeting of “representatives” is called to elect a new chairman.

According to Mahalla Foundation sources, oqsoqols are younger than in the past, most being younger than 50. Some gender roles are also changing as the mahalla becomes a formal organ of government. As noted above, it is not unheard of for citizens’ assemblies to have female oqsoqols—a term that is literally translated as “white beard” and traditionally simply means “elder”. The Law on Citizens’ Self-Government allows for voting that is open or secret, direct or through representatives. Though voting by open meeting of representatives remains the norm, a number of mahallas reportedly were cons idering using a secret ballot for the November-December 2003 elections. Town and Village Mahalla Coordination Councils Town and village coordination councils are officially classified as “social organizations,” though they are currently financed from district budgets. They are unlike district and provincial councils, as they are not directly elected bodies, nor can they be called legislatures. Article 17 of the 1999 law “On citizens’ self-government institutions” gives mahalla citizens’ assemblies the right to form mahalla coordination councils (councils of oqsoqols); this is in addition to the options that villages and towns have to elect their own citizens’ assemblies. Town and village coordination councils’ main function is to mediate between the hokimiyat and the mahalla committees, which all send their own representatives. This, however, does not mean that third-tier LGUs and mahalla committees themselves do not have direct contact. Budgetary requests, for example, are made by citizens’ assemblies directly to the district financial department without passing through any intermediate body, and the district itself monitors mahallas’ expenditures. Town and village coordination councils also make decisions on matters that concern the entire town or village, such as a common cemetery or a community center used by all residents. Councils typically include, at the very least, a chairman, a secretary, and the head of the town/village draft board. Local governments, however, generally take the lead in mahalla coordination, especially as they wield the power to refuse confirmation of elected citizens’ assembly kengash chairpersons and


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have considerable unofficial levers of executive influence in the process of selection and removal of citizens’ assembly kengash leaders. Indeed, district and city hokimiyats often have one deputy hokim in charge of coordinating mahallas (i.e., citizens’ assemblies).


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The Modern Day Mahalla as an Instrument of State Administration The present-day mahalla finds its primary role in the arena of social policy, both as an instrument of state administration and in its more traditional capacity. In the words of one commentator: “The mahalla is the primary site and source of state welfare assistance, with the local leader having total control over who receives what and how much.”36 In addition to distributing social assistance payments, mahallas are expected to work with and help raise school-age children; they are responsible for important aspects of reproductive health and family planning, and they handle requests for divorce and complaints of domestic violence.

• The delegation of certain aspects of social policy is officially intended to make social programs more cost-effective and directed.

• Some programs (e.g., pensions) are still centralized,37 as is minority education and other minority policy (presumably because this has an effect on external relations), but much in this sphere (especially paperwork) has also been delegated to the mahallas and other organs of local government.

• General poverty makes competition for limited social funds particularly acute. This, along with third-tier LGU and mahalla discretion regarding distribution of welfare monies, probably contributes to corruption and misappropriation.

• Officially, the government envisions a proactive mahalla, involved in reforming society rather than simply governing the population. It [[The mahalla?]] should pass the complaints of its residents on to organs of state government.38

• In theory, the modern mahalla is supposed to bridge government and civil society/business. Indeed, the mahalla has engaged in some limited NGO cooperation, such as USAID’s Red Apple Program, which enlisted mahallas to distribute contraceptives and perform other reproductive health functions. The Swiss Water Project for Central Asia has mahallas in its pilot villages set up water committees, actually resurrecting one pre-Soviet aspect of the mahalla’s responsibilities.

• Many, however, fear that the government uses mahallas to crowd out truly independent NGOs—making them a government-controlled substitute for genuine grassroots involvement.

• The mahalla designates an educational advisor to work with schools and the local department of education to monitor truancy, encourage enrollment, consult with parents on special education options, and generally take an active interest in raising the children of the mahalla. The educational advisor is subordinate only to the mahalla’s kengash,

36 Bichel. p. 301 37 Robertson and Kangas. Unity or Separation? Kempton & Clark Eds. “Central Power and Regional and Local Government in Uzbekistan.” 2002. p. 281 38 Arifkhanova, Zoia. Central Asia and the Caucasus. “Traditional Communities in Modern Uzbekistan.” October 2000. p. 3


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and some officials from the Department of Education characterize them as unhelpful and claim that they are just “former teachers who don’t want to teach anymore”.

• Many informal traditional functions continue, often with an official mandate: care for the vulnerable, wealth redistribution, coordination and support for celebrations and holidays, etc.; the mahalla determines wedding dates, helps conduct various traditional ceremonies, organizes xashar (unpaid communal labor) twice a year (for cleaning, greening, or construction of mosques, tea houses, etc.) The primacy given to family loyalty and traditional family values remains a common theme; each mahalla has a “make-up commission” to provide counseling to dysfunctional families and couples considering divorce.

• The mahalla’s responsibility to issue certain certificates (a role assigned during the

Soviet era) has expanded in post- independence Uzbekistan. If neighborhood officials in the late Soviet period certified place of residence and family composition, mahallas now also issue certificates to verify that a resident does not owe anything for communal servicesand fill out forms for exit visas for the unemployed (the employed have them filled out at their place of work) in addition to handling many family and property-related issues.39 The kotib prepares the paperwork and the oqsoqol signs. All data collected in this way are passed on to the local hokimiyat.

• Some but not all mahallas have a role in collecting fees for communal services; the

kengash enjoys some discretion in spending these revenues40 if the neighborhood has no outstanding communal service debts.

While there is considerable republic-wide variation between mahallas’ structures and functions, within any given third-tier LGU there appears to be relatively little differentiation (a consistency that reflects the dominance of the district hokimiyat). Mahalla committee chairmen regularly meet with hokims, who generally treat the oqsoqols as employees of the state structure; they are frequently made to implement unpopular policies (such as the de-greening of many of the streets of Samarqand).

Relatively recent legislation (most importantly, the 1999 law “On citizens’ self-government institutions”) provides much of the foundation for the increase in accountability of the mahalla committees to the center. This legislation allows for theoretical two-way accountability, but actually gives local executives more extensive control than had existed in the Soviet period. For example, Article 10 of the 1999 law states that citizens’ assemblies (a category that includes mahallas) are to:

hear quarterly reports of the heads of district, city and regional hokimiyats on the issues included in the field of activity of self-government institutions. Minutes of citizens’ assembly meetings on these reports shall be sent to the hokimiyats of the provinces and

39 Article 13, Law “On citizens’ self-government institutions” (1999) 40 Presidential decree #2832 “On a new phase in deepening reform in the communal service sector” (2001)


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the City of Tashkent accordingly, which, in turn, register them and also supervise the handling [by mahallas] of citizens’ requests.

In reality, due to huge power asymmetries between the executive branch and self-government institutions, such provisions provide, not two-way accountability, but rather a sound legal foundation for mandatory meetings of oqsoqols held by the hokimiyat. Robertson and Kangas write, “Accountability of higher officials to lower constituencies [in Uzbekistan] simply does not exist.”41 As a result, the organs of self-government are de facto integrated into the state government structure. For example, Article 5 of the presidential decree “On increasing the role of self-government institutions in provision of targeted social support for the population” of January 13, 1999 (Legal Log #18) allows the hokimiyat considerable freedom to oversee a mahalla‘s distribution of social aid. While this may (quite appropriately) make mahalla committees more accountable in distributing state welfare aid, it also provides the government with yet another lever of control over them. Simultaneously, however, despite a large degree of local executive influence in self-government bodies, “[mahallas] are clearly seen as an important outlet for mass participation in a limited set of issues.”42 Mahalla Finances In interviews, mahalla committee chairpersons and their advisers often complained that they do not have enough resources to perform their duties under the law, much less to take advantage of their proximity to the community and help it mobilize as a true social organization. Many felt that resources they receive from the budget further restrict them by making them accountable to local financial organs and the hokimiyat. Mahallas do receive some funding from district/city budgets. For the first time ever, mahalla leaders (as well as secretaries, the posbon and the educational advisor) are paid employees of the state, with their salaries and pensions determined centrally, not locally.43 The oqsoqol, kotib (secretary), and the posbon receive a full standard salary; the pedagogical worker receives a half salary. All other functions in the mahalla are carried out on a voluntary basis. Mahallas also receive third-tier LGU funds from the appropriate budget for redistribution to low-income families and unemployed mothers of children under two, though they just determine recipients; physical disbursement is carried out by banks (for more details on social aid by mahallas, see chapter VIII below). Uzbekistani law also provides for non-budget sources of funding for mahalla activities. Mahallas in some localities collect communal service fees on behalf of public utilities and get to retain up to 10 percent of the gross revenues collected for their own activities; however, funds

41 p. 266 42 Robertson and Kangas. p. 283 43 April 23, 1998 executive order “On support for self-government institutions”, Legal Log #13


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collected in this manner must, first of all, go to paying back communal service debts and helping needy families pay their utility bills. Businesses can also make donations to the appropriate mahalla, as the citizens’ assembly and its committee have a considerable degree of oversight in relation to economic activity. Some mahallas also grow crops or operate small businesses (bakeries, barber shops, TV repair, real estate, etc.), a practice that is officially encouraged and may represent a step away from a market economy.44 One mahalla in Tashkent reportedly earns over one million so’ms annually from commercial services. Other revenue-creating activities, such as rental of furniture and dishes for weddings and other ceremonies, are not uncommon. Like other entities that receive budgetary money, mahallas have their own bank accounts. Their financial activities are monitored by the district financial department’s supervision and auditing administration. The prosecutor’s office also monitors mahalla activities, checking all documentation of appropriations decisions and making sure that official guidelines are followed in administering social assistance payments. Once a year, the mahalla council is required to prepare a written report for the general assembly of residents. However, general assemblies are often not held or are held with only a small fraction of a mahalla’s members present. Even when accessible to residents, the report does not include a clear accounting of the diverse revenues passing through the mahalla (the share in communal service collections, income from business activities, donations, and social protection payments it administers). As noted above, interviews with mahalla officials revealed that a shortage of funds is endemic; there is also a lack of meaningful flexibility in making spending decisions. One kengash member noted that “significant responsibilities have been given over to the mahallas, but these new powers can be exercised only within an extremely rigid and restrictive framework.” Funds raised by citizens’ assemblies through collection of payments for communal services must be used to pay off communal service debt and help low-income families pay for communal services and so do not normally constitute a source of funding for citizens’ assemblies’ general activities; indeed, payment collection in much of Uzbekistan is not administered by the citizens’ assemblies at all.45 Article 10 of the law “On citizens’ self-government institutions” stipulates that the minutes of citizens’ assembly meetings on quarterly reports are sent to hokimiyats, which register them and supervise the handling, by self-governments, of citizens’ requests. Executive organs’ supervisory powers are especially strong in relation to distribution by self-governments of social aid. Though the law repeatedly stresses accountability of the kengash of the citizens’ assembly to its residents, in practice it accounts only to the appropriate district hokim, whose approval is required to confirm the election of any kengash chair.

44 Order of the Oliy Majlis “On implementation of the law of the Republic of Uzbekistan ‘On citizens’ self-government institutions’ in Tashkent Province” (1997); Ministry of Justice Regulation #808 “On ‘Enterprise-Mahalla ,’ an economic cooperation and mutual assistance program” (1999) 45 Article 4, Presidential decree #2832 “On a new phase in deepening reform in the communal service sector” (2001)


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Key decisions on the consolidated state budget are made at the republican level; even the formal budgetary process does no t allow for discussion below the district level (beyond submission of requests)—payments to citizens’ assemblies are itemized in the district budget. The Problematic Relationship between Mahallas and Housing Association (TSJs) Housing associations (TSJs) and mahallas overlap in terms of territory, members, and often staff; moreover, their powers and responsibilities under the law also overlap. These factors, as well as the mahalla’s widely observed mission creep, have contributed to a profound lack of clarity surrounding mahalla-TSJ relations. Uzbekistani legislation provides for the TSJ as a democracy of multi-unit housing-owners, unified by a common economic interest in their building(s), whereas mahallas and other citizens’ assemblies are supposed to be democracies of citizens with a mandate in the social sphere that is considerably wider than that of the TSJ. Inasmuch as multi-unit housing-owners are also citizens, there is necessarily interaction between TSJs and mahallas, but, in law, their underlying raisons d’etre are distinct. The problem of under-defined, unregulated practical relations between TSJs and mahallas is further exacerbated by the large size of TSJs and their boards’ abdication of duties to residents. To ensure some baseline degree of care and management in the face of neglect by oversized TSJs, the Soviet-era domkom (“building committee,” though usually made up of one person) remains quite common in multi-unit buildings, despite the fact that it is not provided for anywhere in Uzbekistani legislation. The domkom often works closer with and accounts more directly to the mahalla committee than the TSJ board, an arrangement that undermines housing associations as an institution, clearly intruding on their mandate under existing legislation. The Urban Institute’s USAID supported LGI-II program office in Tashkent is currently in the process of conducting several joint activities with mahallas and the Mahalla Foundation, having identified problematic interrelations between the two institutions as a constraint on advancing the LGI-II program objective of promoting more democratic and effective TSJ management. To address this problem, UI has tried to promote open discussion among stakeholders on mahalla-TSJ relations, inc luding surveys of chairpersons of both types of organization and round table discussions. Based on the results of these and other activities, UI plans to prepare recommendations on viable alternatives for regulating interrelations between housing associations and self-government bodies. See chapter VIII, below, for more on the reorganization of the communal sector (including mandated TSJ formation in multi- family buildings) in the aftermath of housing privatization. The Mahalla Foundation and Hierarchy of Mahalla Coordinating Councils The president created the Mahalla Foundation by executive order in 1992. It is described by its leaders as an NGO, although it appears to function more as an adjunct to the government rather than a truly independent entity guided by its charter and members. The Mahalla Foundation even


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formally approves some acts of legislation that concern mahallas and their activities in the community (see, for example, Legal Log #49). Donor organizations that monitor the non-profit sector find little transparency (particularly in financial matters) or top-down accountability to its members. According to the Foundation’s chairman, the organization receives no government budgetary support, and claims to be member-supported, though in a cursory survey of legislation, the authors of this report found at least one documented instance of the Foundation receiving considerable funds from the reserve fund of the CoM (Presidential Decree #478, October 8, 1992). In parallel with the state administration itself there are, in fact, two related mahalla hierarchies that extend from the village all the way to the republic level. The first is the Mahalla Foundation itself with about 230 local offices at the district/city level. Secondly, Article 17 of the 1999 Law on Self-Government Institutions states that, in addition to a Republican Council of Chairmen (oqsoqols) [of Citizens’ Assemblies], [[“coordinating councils on the affairs of citizens” can be established at the city, district, provincial levels.”]] [[Is this sentence missing a set of quotation marks somewhere, or is there one extra?]] Additionally, in villages and towns, there may be a citizens’ assembly for the entire village/town, which overlaps with those of its constituent mahallas. Officially, both village citizens’ assemblies and those of mahallas on its territory are bona fide self-government bodies; in practice, however, the typical functions of the kengash of a larger citizens’ assembly which has several smaller assemblies on its territory closely resemble those of a village coordination council of oqsoqols. Based on Article 17 of the Law on Self-Government Institutions, the mahalla citizens’ assemblies each send a representative (generally the oqsoqol himself) to form village-coordinating councils (confusingly enough, also called kengashes). In turn, the village kengashes, as well as town and village citizens’ assemblies, each send representatives to a coordinating council at the district level, and so on up to the Republic level. The district or city level coordinating councils meet once a quarter though may be gathered more frequently by the corresponding deputy hokim. Although presumably, at each level, the members of the kengash coordinating council would choose their chairman, the head of the Mahalla Foundation at each territorial level typically doubles as chair of the coordination kengash, having been recommended by the hokim for both positions. One chairman interviewed asserted that the functions of the coordinating councils at the district level and above are relatively trivial compared to those of the mahallas themselves (primarily organizing volunteer “greening” and flower plantings and clean-up campaigns). Other observers, however, note that this dual-hierarchy of mahallas facilitates top-down management of local self-governments by hokimiyats, which can use these structures to hold individual mahallas accountable for implementing executive policy. The authors also encountered instances of regional Mahalla Foundation chapter decisions (i.e., decisions of a local NGO) being cited as though they were legislative acts, having equal force with other legislation (the authors, however, were not able to explore the extent to which this practice is widespread).46 46 For example, a Protocol Decision of the local chapter of Tashkent City’s Mirzo-Ulug’bek District (passed February 18, 2004) has been often cited as requiring participation of the corresponding citizens’ assembly in founding meetings for all new housing associations. This was cited by the hokimiyat’s registration department in at


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The Shirkat in Modern Uzbekistan In any assessment of local government in Uzbekistan, some mention should be made of the shirkat xo’jaligi (shirkat), the post-Soviet successor to the kolkhoz, or collective farm in Uzbekistan. Unlike in European parts of the Soviet Union, in Central Asia the collectivization drives of the early Stalin years tended to preserve and even underscore traditional solidarity groups within the new kolkhozes.47 In time, the kolkhoz itself became an integral part of traditional life in the Uzbek S.S.R., serving both to isolate rural communities and mediate between them and government bodies.48 The shirkat xo’jaligi differs from the Soviet collective farm in that shirkats have generally shed the social infrastructure objects they had maintained (and related social services they had supported) under socialism. For example, Andijon’s Buloqboshi District’s eight shirkats transferred their thirty-two schools, five hospitals, twenty-four kindergartens, and one medical clinic to the district Hokimiyat at no charge when it became clear that the collective farms could no longer afford to operate them. Additionally, now state land not used for cotton and wheat orders from the center is often sharecropped out under the traditional ijarat system. 49 Otherwise, however, collective farms have changed relatively little since independence.50 Each shirkat has a chairperson (rais), who is accountable to the district hokimiyat via the deputy hokim of agriculture (though some chairpersons of especially large, important, or lucrative shirkats may be accountable to someone above the district level). Deputy hokims of agriculture (who also have a key role in the distribution of irrigation water)51 often meet with shirkat chairpersons to coordinate their activities and manage resources. Shirkat chairpersons, therefore, are part of the executive hierarchy, and are shuffled around, appointed, and removed in much the same fashion as hokims and other appointees of republican executive hierarchies. The borders of shirkats do not necessarily correspond to those of territorial-administrative units—indeed, they can even straddle more than one district. Shirkats generally include several citizens’ assemblies, but their respective functions are relatively distinct—citizens’ assemblies fulfill mostly social functions, while shirkats are economic institutions. In their primarily economic capacity, shirkats command substantial land and property resources. They manage state land renting it out to private farmers (a significant way in which chairpersons and the deputy hokims to whom they are subordinate can supplement their meager official

least three instances as a reason for denying registration to new housing associations, although the April 15, 1999 “TSJ Law” states that only the agreement of one-half of apartment-owners is required. 47 Roy, Oliver, pp 86-87 48 Roy, Oliver, p 92 49 Roy, Oliver, p 187 50 Roy, Oliver, p 184 51 Potable water from the local vodokanal, however, is typically used for irrigation of vegetable gardens on private plots (i.e., those which belong to individuals under the permanent use right).


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salaries) and ensuring that planting quotas for cotton and wheat are met. Significantly, the performance of any given rural hokim or rais is judged largely according to cotton harvests, and, as a result, they often significantly overshoot planting quotas. Shirkats also supply seed, agricultural equipment, fertilizer, and pesticides to farmers; additionally, they handle cotton and wheat sales to the government (at below-market prices dictated by authorities in Tashkent). The rais also has important social functions (but, in contrast to the Soviet era, not in the oversight of municipal-type services such as schools and health clinics). The decisionmaking process within the shirkat is based on personal relations and other subjective criteria and is generally neither transparent nor even-handed (though this depends on the particular chairperson and the relevant hokimiyat). People approach chairpersons with their problems, and they, in turn, can make requests of the hokimiyat, the local vodokanal, the Ministry of Agriculture, their factory managers, and so on.52 Indeed, chairpersons are extremely well- integrated into local patronage networks. In his book The New Central Asia, Oliver Roy comments that “the kolkhoz [as a solidarity group] extends towards the town” making it relevant for urban power structures as well; 53 he does, however, indicate that, recently, increased income from central on- and off-budget sources has weakened the ties of the rais with his/her own peasant farmers and made republican politics in general less rural. Conclusions Regarding Local Councils of Deputies Although the councils of deputies are uniformly elected directly by the people and by law have some fairly broadly defined approval powers over executive action, in practice they function as anemic, rubber-stamp bodies over which the hokim holds sway. Moreover, the right of bodies at higher tiers to nullify any local action further discourages independence. No one interviewed for this assessment could recall a single instance of a council questioning the appointment of a hokim or refusing to ratify an executive action brought to a hokim for approval. They are constrained by the lack of control over the executive branch that manages their territories. Two brief sessions a year is insufficient for a council to exercise any real oversight of the executive, even if it were so inclined. Direct election of local government executives and/or strengthening of the local council (including its more active involvement in selecting and removing hokims) are a necessary pre-requisite for introducing any genuine accountability into the system. Meaningful changes in the present provisions for choosing hokims would most likely require a constitutional amendment. None of the senior government officials or members of parliament interviewed felt consideration of any such initiative would be at all likely any time in the near- to mid-term (next five years or so).

52 Roy, Oliver, p 185 53 Roy, Oliver, p 91


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Conclusions Regarding Mahallas As noted above, one of the most distinct aspects intergovernmental arrangements in Uzbekistan has been the anointment of the traditional mahalla, in law, as a form of local self-government, and, in practice, as an extension of state administration down to the neighborhood level. This co-optation of the mahalla has proved expedient for the government for two reasons:

• It makes the president a defender of tradition, adding to his legitimacy. By revolutionizing and modernizing the mahalla’s structure and functions, he can also claim to be a reformer.54 Reforms and delegation of duties allow the government to shift responsibility for a failing social policy and deteriorating social infrastructure away from the central government. Support for mahallas allows the government to assert that it has acted to make governance more local, and, therefore, more accountable and efficient. The mahallas, at little administrative expense to the government, currently run major social programs, providing aid for non-working mothers of children under two years of age, aid for low-income families, and aid for low-income families with children who are minors.

• Legisla tion of mahallas brings this entrenched institution into the official realm, making

it more accountable to the center and limiting its potential as a source of opposition. This begs the question: To what extent are mahalla committees actually self-government institutions and to what extent are they merely an extension of the state government’s executive structure?

As these arrangements have taken hold, the mahalla has become something of a compromised institution in the eyes of the international community, particularly insofar as it may serve as an arm of the state internal security apparatus. Implications for Technical Assistance Certainly, if USAID should decide to explore broadening its program to strengthen democratic local governance, it must regard the mahalla with a clear and skeptical eye. That said, there are some forms of engagement that might merit consideration: Option I—Promotion of Democracy and Accountability in Mahallas Option I would be a wide program of engagement and training predicated on the assumption that, in light of the considerable variation among mahallas in Uzbekistan, someone is doing something positive—and that the way forward is to identify exemplary practices and the conditions that make them possible, to analyze them, and to promote their adoption elsewhere in the Republic.

54 Robertson and Kangas. p 283


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• A starting point might be to conduct some formal survey work to identify, if possible, a subset of mahallas that appear to be functioning as genuinely representative bodies—that is, those tha t demonstrate some active, broad-based participation in selecting the chairman and other leaders, some evidence of general meetings being used to inform and engage constituents, some measurable perception among residents that the mahalla leadership is trus ted and perceived as working on behalf of citizens. Such a survey might focus, in part, on the recent (November-December, 2003) mahalla elections—including trying to follow up on reports that a few mahallas, on their own initiative, might experiment with some form of secret ballot. The authors’ interviews with managers of various donor-funded projects that operate at the grassroots level revealed several who felt they had true mahalla partners for their projects, which, in some meaningful ways, operate as accountable and constructive bodies (even if they do not necessarily function exactly as envisioned by the law “On citizens’ self-government institutions”).

• Assuming that the above survey work identified some model mahalla practices, a training

activity might be designed to deepen and broaden these practices. For example, partner mahallas might agree that, as part of their annual written report to their members (perhaps to be displayed on a community bulletin board, a practice that Mercy Corps, for instance, has found to be useful and verifiable), they would include a complete financial account of their revenues and expenditures (including donations, shares in gas collection receipts, and local hokimiyat budget support). Similarly, an initiative might look to more complete, standardized reporting on the distribution of social assistance payments through the mahallas. Also, the program design might look ahead to the next mahalla elections in mid-2006 as an opportunity to promote an active, democratic nominating process and widespread use of secret ballots, perhaps bolstered by some actual changes in law or other legal directives. Attraction of international monitors from other projects could be one goal for the 2006 mahalla elections, but there would have to be something promising to monitor by that time.

A precondition for proceeding with this type of initiative might be the willingness of the Mahalla Foundation to serve as an active implementing partner. At a minimum, the Mahalla Foundation and major central government actors would have to give real guarantees of passive support.

Of course, further consideration of any mahalla strengthening activity should also consider whether, from the strategic perspective of the international donor, it is better to accept as a permanent given the constitutional conversion of the mahalla into an official self-government body, or, if anything, to encourage its clearer separation from government altogether and continued development as a truly independent, accountable, transparent community-based NGO. Here it should be noted, as detailed in the concluding chapter below on related donor activities, that several international donors have sponsored assistance to mahalla development along NGO lines. Option II—Program on Interrelations between Local Self-Government Institutions and Housing Associations (TSJs)


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Option II would have a much narrower focus; by concentrating on the TSJ-mahalla relationship, it would build on existing USAID LGI-II activities in Uzbekistan, which are currently limited to TSJ development. It would use working groups, trainings, and other activities to provide legislative and practical clarity on the division of functions between mahallas and TSJs in relation to multi-unit housing stock and on the potential for constructive, structured cooperation between Uzbekistan’s two most local institutions. Option II could also serve as a useful entrée into a more extensive program based on option I, should the mahallas or the Mahalla Foundation prove to be a constructive partner. Even if option II were not followed by an expansion of work with mahallas, it would help define issues within the chaotic housing and communal services sector on its most micro level and stimulate a crucial dialogue between these two significant bodies. A relatively modest expansion of LGI-II could build on these efforts and reinforce progress made with mahallas in the course of the existing USAID program. Such an expansion might include:

• improvement of legal regulation of this crucial interrelationship; • joint trainings of TSJ and mahalla chairpersons on matters of common interest; • dissemination of best practices in mahalla-TSJ cooperation and encouragement of their

adoption elsewhere.


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________________________________________________________________________ ADDENDUM TO CHAPTER V: THE MAHALLA IN AN HISTORICAL AND CENTRAL ASIAN CONTEXT Traditionally, the mahalla is a self-contained unit that mediates between the individual and the outside world. For its members, it often represents a much more meaningful point of identification than some meta-personality, such as class or nationality.55 The traditional mahalla values collegiality, trusteeship, paternalism, respect for elders and the family, and deference to custom. 56 Family (rather than the individual or any alternative subgrouping) represented, and still represents, the most important solidarity group within the mahalla.57 The mahalla’s main traditional spheres of activity are (1) economic, (2) religious, (3) ritual, and (4) everyday social.58 Traditional mahalla functions (some of which have been relegated to the dustbin of history) include:

• provision and coordination of venue, support, goods, and services for ceremonies and holidays; there is a constant flow of goods and services among members;

• intervention in the sharing and redistribution of wealth (especially around holidays and the opening of new businesses);

• governing water rights; • mediation of property disputes and other local matters; • maintenance of social order; • tax collection; • levying of militaries; • dealing with familial matters, marriage disputes, and so on with the participation of the

female elders; • caring for the vulnerable (elderly, orphans, destitute, etc.).

Soviet Repression and Co-opting the Mahalla At first, the Bolsheviks tried to eradicate the mahalla, dismissing it as a relic of the region’s feudal past. In particular, it offended their ideological sensibilities by serving as an alternative focus of civic duty and social responsibility. After several decades, however, the Soviets found it expedient to co-opt this institution, albeit under a different name and with major changes. Thus, the mahalla reality often existed parallel to fabricated official institutions, leaving it in a position to recover quickly after independence.

55 Bichel, Anthony. Unity or Separation? Kempton & Clark, Eds. “Identity / Difference in Central Asia: Tribes, Clans and Mahalla.” 2002. p 293 56 Arifkhanova, Zoia. Central Asia and the Caucasus. “Traditional Communities in Modern Uzbekistan.” October 2000. p 1 57 Robertson and Kangas. Unity or Separation? Kempton & Clark Eds. “Central Power and Regional and Local Government in Uzbekistan.” 2002. p 273 58 Arifkhanova, Zoia. Central Asia and the Caucasus. “Traditional Communities in Modern Uzbekistan.” October 2000. p 1


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Throughout the 1920s and 1930s, the mahalla was caught up in the broader official Soviet campaign against traditional Central Asian culture and a purge of its pre-revolutionary cadres.

The Sovietization of the region was particularly harsh on…[economic] practices, as the notion of non-elected village elders interpreting social customs was simply unacceptable. Economic matters, such as water rights, were to be subsumed under the control of planning agencies and economic ministries. Social and legal matters, likewise, were taken over by more centralized institutions. It was often the case that the village elders, the [oqsoqols], were forced publicly to perform demeaning tasks, such as building latrine trenches, in an effort to destroy this social institution. In the late 1930s, such figures were often considered ”enemies of the state” and simply purged.59

Moscow also sharply curtailed the religious functions of the mahalla, in accordance with its policy of atheism; however, the mahalla and local party officials often played an important role in protecting mullahs (and their personal libraries) from state persecution. 60 Later, especially under Brezhnev, the Soviet state adopted a more hands-off attitude towards local governance that allowed mahallas to readjust to new conditions. This changed again under Andropov and Gorbachev, who were widely perceived as interfering in traditional life—for example, a worker was given only three days off for the death of a close family member, as opposed to the customary forty. During Soviet times, oqsoqols existed unofficially and were active in housing arrangements and wedding planning. Women’s committees were active and officially organized on the mahalla scale, as was the issue of certain certificates, especially in the later Soviet period. Changes/Adaptations over the Course of the Soviet Era :

• The mahalla lost much of its economic function due to central planning and much of its religious function due to official atheism.

• Collectivization was implemented on the basis of existing solidarity groupings—often the

mahalla—a development, which served to strengthen and modernize the institution. In his book, The New Cent ral Asia, historian Oliver Roy indicates, “The brigade and the uchastok (groupings of houses) duplicate the qawm (extended family) and mahalla segmentations and give them an almost administrative reality, which… has never been expressed in official terms.” Within the collective farms and state farms, even the traditional system of land tenure was largely preserved: in the collective farm, sons’ houses are often built on the father’s plot.

59 Robertson and Kangas. Unity or Separation? Kempton & Clark Eds. “Central Power and Regional and Local Government in Uzbekistan.” 2002. p 282 60 Roy, Oliver. The New Central Asia. New York University Press, 2000. p 146.


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• Local electoral commissions and party associations were established in each mahalla.61

• The mahalla became responsible for the inventory of population, for issuing certain official certificates, and for performing some important bookkeeping functions.

The Post-Soviet Mahalla Outside of Uzbekistan Elsewhere in Central Asia, the mahalla, where it exists today, remains a largely informal, traditional institution. During the civil wars in Tajikistan and Afghanistan, the mahalla, in many areas, was seen as the only legitimate, capable governing body, and it often intervened to fill the power vacuum that opened in the absence of more centralized authority, providing social support, essential services, and a semblance of order. Despite extensive discussion after the war of bringing mahallas under the purview of official legislation, mahallas in Tajikistan today still largely function as non-governmental organizations; as such, their activities and responsibilities vary widely from case to case. Unlike Uzbekistan and Tajikistan, the other three post-Soviet CAR draw more on a nomadic heritage, one in which the settled tradition of mahalla is largely absent. Though Kazakhstan, Kyrgyzstan, and Turkmenistan are all home to significant minorities of historically settled peoples for whom the mahalla is a reality (mostly Uzbeks, but also Tajiks, Uygurs, and other non-Uzbek Turkic populations), the national majorities in these republics have no history of the mahalla. Thus, the governments themselves generally hearken to other pre-Soviet institut ions to gain the legitimacy that continuity with past traditions affords. In these republics, as in Tajikistan, those mahallas that do exist are often unofficial or register as non-governmental organizations.

61 Bichel, Anthony. Unity or Separation? Kempton & Clark, Eds. “Identity / Difference in Central Asia: Tribes, Clans and Mahalla.” 2002. p 301


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VI. INTERGOVERNMENTAL FINANCE Note: As it was not possible to obtain detailed budget data for all or even for a representative sample of LGUs (especially on the third tier), the authors reviewed data from an illustrative city, two districts, and one province to capture some of the diversity among LGUs throughout the country. Macroeconomic Context for Local Government From 2000 to 2003, local government expenditures more than doubled in real terms.62 At the same time, republican government expenditures have seen a smaller increase. In 2000, local government expenditures were only 5 percent greater than republican government expenditures. In 2003 they were forecasted to be 60 percent greater than republican government expenditures. However, local government as a share of GDP has decreased in the past four years, from 30 percent in 2000 to 25 percent in 2003. This means that growth in the economy has outpaced growth in government expenditures. Exhibit 6. Macroeconomic Context for Local Government (in million so’ms) 2000 2001 2002 2003

(forecast)

1 GDP 3,255,600 4,925,300 7,469,300 9,849,000 2 Consolidated government expenditure 960,571 1,308,200 1,900,542 2,492,507 Of which - 3 Republican government expenditure 467,966 582,132 868,206 952,729 4 Local government (LG) expenditure 492,605 726,068 1,065,193 1,539,778 Of which - 5 Transfers to LG from State

budget 67,090 116,811 188,349 257,053 6 LG expenditure/GDP (%) 30% 27% 25% 25% 7 LG expenditure/consolidated government

expenditure (%) 51% 56% 56% 62% 8 Transfers to LG/consolidated government

expenditure (%) 7% 9% 10% 10% 9 Inflation rate (%) 18% 14.4% 13.2% 9.6%

Source: Ministry of Finance, 2003 Republic- level bodies are, in large part, supported by commodities sales. Cotton, gold, copper, precious stones, and energy account for roughly 70 percent of Uzbekistan’s US$2.8 billion in exports (with cotton alone accounting for 25 to 30 percent).63 Uzbekistan is the biggest natural

62 IMF, 2003 Monetary Policy and Uncertainty: Adapting to a Changing Economy" Jackson Hole, WY gives 39.9% for inflation rate in Uzbekistan during 2000-2003. 63 Commodities and cotton as share of export from 2001 World Bank data, World Bank Uzbekistan Country Brief 2003; export figure for 2002 from CIA World Factbook. See links below:


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gas producer in the CAR (though Turkmenistan’s reserves are much more vast) and one of the top ten producers in the world; over one-quarter of its production is sold or traded to its neighbors.64 All of these export sectors are firmly under the control of the central government. Customs duties are also a lucrative source of funding for central institutions. Transfers And Mutual Settlements The intergovernmental finance system in Uzbekistan is fairly complex, ostensibly in order to achieve an equalization of financial resources among provinces that have very different fiscal capacities.65 In the absence of an equalization grant, equalization takes place through differential tax-sharing rates and general budgetary support from higher levels of government. Currently, eight (Karakalpakstan, Andijon, Jizzax, Namangan, Samarqand, Surxondaryo, Sirdaryo, Xorazm) of the country’s fourteen provinces receive general budgetary support through transfers. Transfers as a share of consolidated government expenditures have risen from seven percent to ten percent from 2000 to 2003. Provinces also equalize among districts and cities within their jurisdiction, much in the same way as the central government equalizes among provinces. Officially, the size of transfers cannot be altered during the budget year, though this does happen de facto through the mechanism of mutual settlements. Shared National Taxes and “Local” Taxes Shares of several important national taxes are apportioned at various levels to each province, based on its estimated fiscal capacity. In 2003, eight of the country’s fourteen provinces received 100 percent of the value-added tax (VAT), personal income tax (PIT), and enterprise profits tax collected in their jurisdictions.66 Tashkent City (a second-tier LGU, like the provinces) received the smallest share of these taxes collected within its jurisdiction: only six percent (VAT), thirteen percent (PIT) and seven percent (enterprise profits tax).67

http://lnweb18.worldbank.org/ECA/eca.nsf/ExtECADocbyUnid/909615C3A1325A8A85256D5D006894FF?Opendocument http://www.cia.gov/cia/publications/factbook/geos/uz.html 64 Data on production from US Department of Energy, Energy Information Agency Website 2003 Report; data on share exported from CIA World Fact Book. See links below: http://www.eia.doe.gov/emeu/cabs/caspian.html http://www.cia.gov/cia/publications/factbook/geos/uz.html 65 In 2002, the GDP per capita of Tashkent City was four times that of Karakalpakstan Republic and per capita revenues generated in the capital were ten times that of Karakalpakstan. 66 Of tax collections allocated to LGUs, the VAT is the largest contribution, followed by the PIT, a collection of excise taxes, and then the enterprise profits tax. (MacNevin, October 2003) 67 MacNevin, October 2003


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In addition to these three principal taxes, the 2003 Annual Budget Resolution states that all revenues from several other national taxes will be credited to the local budgets: the water use tax, the ecology tax, the unified tax on small and medium enterprises (SME), and excise taxes for beer, vegetable oil, and soap and detergent (see 2003 Annual Budget Resolution). In 2003, some provinces also received a share of other excise taxes. All provinces have a unified land tax on agricultural enterprises. Although this is considered a local tax, a portion of the unified land tax went to the republican budget to finance the Fund of State Promotion of Equipping Rural Areas with Agricultural Machinery. 68 NATIONAL TAXES AND LOCAL TAXES AND DUTIES , AS IDENTIFIED BY THE 1998 TAX CODE National Taxes (Article 6) Local Taxes and Fees (Article 7) Enterprise profit tax Property tax Personal income tax (PIT) Land tax Value-added tax (VAT) Infrastructure development tax Excise tax Vehicle fuel consumption taxes Natural resource tax Fee charged for the right to trade Ecology tax Water use tax

Registration fee imposed on legal and natural entities involved in entrepreneurial activity

The major “local” taxes have their rate and base established by the CoM. “Procedures for payment and rates of the unified tax on SME are specified by the Cabinet of Ministers of the Republic of Uzbekistan.” (Article 8, Tax Code) “Rates of property tax imposed on legal and physical entities are established by the Cabinet of Ministers of the Republic of Uzbekistan.” (Article 91, Tax Code) “Rates of land tax are specified by the Cabinet of Ministers of the Republic of Uzbekistan.” (Article 99, Tax Code). For both land taxes (a unified land tax on agricultural enterprises and an alternative land tax), the Annual Budget Resolution (passed by the CoM) defines even the tax rates for the individual districts and cities within each province. In addition to specifying a base rate for each district and city, the Budget Resolution provides the coefficients with which to modify the base rate of the unified land tax based on whether or not the land is irrigated and the quality of the land. The 2003 Annual Budget Resolution also states that the “maximum” rates provided for the vehicle fuel consumption taxes are actually “unified and fixed throughout the whole territory of the Republic of Uzbekistan” (Annexes 16-18, 2003 Annual Budget Resolution). State institutions at the provincial level are able to set the rate of the infrastructure development tax and some local fees within maximum rates established by the CoM through the Annual Budget Resolution. (Annex 18, 2003 Annual Budget Resolution, Legal Log #38) However, a “procedure for the calculation and payment of property tax, land tax, infrastructure development tax, and the consumption tax on petrol, diesel fuel and liquefied gas is regulated by certain instructions” (Resolution on Approval of Directions on the Procedure for the Calculation and Payment to the Budget of Local Taxes and Fees, February 16, 2003). Despite established quarterly tax rates, the amount companies pay tends to be negotiated rather than percentage-based and companies are even encouraged to make pre-payments. (See Exhibit 7 for a complete list of local government revenue sources.)

68 MacNevin, October 2003


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Exhibit 7. Local Government Revenue Sources

In addition to the taxes and fees specified in the Annual Budget Resolution, local governments obtain revenues from other taxes and fees, including permits from vendors, as well as fines and

Nationally administered shared taxes with shares of up to 100 percent allocated to subnational budgets as specified on an annual basis in a resolution of the Cabinet of Ministers:

Excise taxes VAT Enterprise profits tax Personal income tax Unified tax on SME Ecology tax Water use tax

Taxes which have their base and rates established by the Cabinet of Ministers, but whose revenues are allocated to local governments:

Property tax on enterprises Personal property tax Land tax Unified land tax on agricultural enterprises

Local taxes and fees set at the provincial level within parameters established in the annual budget resolution:

Infrastructure development tax Vehicle fuel consumption taxes Fees charged for the right to trade in commodities Registration fee for entrepreneurial activity

Non-tax revenues identified in various legislation, including:

Proceeds from privatization Revenues from leasing of local government property Administrative fees Some fines and penalties Revenues from economic activities Revenues from auctions and lotteries Voluntary contributions from enterprises and individuals Deposits into extra-budgetary funds for local tax collection or frugality beyond official prognoses

Transfers from higher tiers of government, including:

Intergovernmental transfers for general budgetary support

Mutual settlements between budgets for deficit reduction (including forgiveness of budgetary loans from higher tiers)


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penalties, road police duties, and other receipts.69 Some of these are divided among the various tiers of government. Maximum Rates on Local Taxes and Fees, As Established by the 2003 Annual Budget Law Tax Maximum rate Infrastructure development tax 8 percent of net profit Vehicle fuel consumption taxes for: Petrol, diesel fuel and liquefied gas 30 Uzbek so’m per liter† Natural gas 30 Uzbek so’m per kilogram† Fee charged for right to trade 3.5 times the monthly minimum wage Licensing-related fee levied for the right to trade in: Alcoholic beverages 5 times the monthly minimum wage Tobacco products 5 times the monthly minimum wage Registration fee imposed on legal and natural entities involved in entrepreneurial activity

5 times the monthly minimum wage

†A footnote to this table in the 2003 Annual Budget Law explains that the “maximum” rates for the vehicle fuel consumption taxes are actually unified and fixed throughout the whole territory of the Republic of Uzbekistan In addition to setting the 2003 rates for local taxes and fees, the 2003 Annual Budget Resolution changes the tax rates on most national taxes—only the VAT remains unchanged. However, given the fact that local governments are generally given the amount of revenues that will cover their historical costs, plus an adjustment factor, these changes may affect them little. If at some time the local governments are to be held accountable to their citizens for taxes and expenditures, then it would be important to have relatively stable tax rates and for the shares apportioned to the provinces to be codified. Revenue Structure Of Provinces, Districts And Cities Andijon Province is an example of a “subsidized” province—it receives central government transfers as well as retains 100 percent of the revenues from the VAT, PIT, and the enterprise profits tax collected within its jurisdiction. Andijon’s largest tax collections are from the VAT, PIT, enterprise profits tax, and vegetable oil excise tax; in 2001, these four items constituted 73 percent of the province’s tax revenues. Xo’jaobod is a “donor” district in the “subsidized” province of Andijon. It indirectly benefits from the republican transfers that Andijon Province receives while “contributing” much of the tax revenues collected within its jurisdiction to equalization for poorer districts and cities elsewhere in the Province. In 2002, Xo’jaobod District retained only 43 percent of the revenues it had collected, but in 2003 it was allowed to retain VAT revenues that constituted 39 percent of its budget revenues.

69 MacNevin, July 2003


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Exhibit 8. Distribution of VAT and PIT Tax Shares Among Provinces, District and Cities (percent share of actual 2002 revenues) National Tax Province District City % VAT 59.8 36.9 3.3 100 PIT 39.8 48.9 11.3 100 Source: Ministry of Finance, 2003 Much of the national tax collections, which are apportioned to local budgets, stay at the provincial level. In 2002, sixty percent of the VAT collections apportioned to provinces were included in the provincial level budgets, while 37 percent were reapportioned to districts and only 3 percent to cities.70 For the PIT, 40 percent of collections apportioned to provinces were included in the provincial level budgets, 49 percent were re-apportioned to districts and 11 percent to cities. Both the provincial and district levels of government are heavily dependent on shares of the national taxes and general budgetary support (transfers) from higher levels. Across the country, these constitute two-thirds of local budget revenues. These numbers, of course, oversimplify the situation, as the six “donor” province- level governments receive no general budgetary support at all. Exhibit 9. Revenue Structure of Provinces, Districts, and Cities (percemt share of actual 2002 revenues) Province District City Local government revenues transferred from state budget 1 General budgetary support 25.6 32.0 1.4 National taxes with shares apportioned to the local government 2 VAT 15.6 12.9 5.5 3 PIT 7.7 12.7 13.7 4 Enterprise profits tax / Unified tax on SME 6.8 4.2 2.7 5 Property tax on enterprises 0.9 2.7 7.0 6 Excise tax 11.9 2.3 7.1 Own revenues 7 Capital revenues - - - 8 Non fiscal revenues 0.2 0.4 0.9 9 Local taxes and fees 1.1 3.5 7.2 10 Other revenues 30.3 29.3 54.7 Total 100 100 100 Source: Ministry of Finance, 2003 In contrast, cities receive very little in the way of general budgetary support (less than 2 percent of their budgets). Across the country, roughly two-thirds of cities’ budgets are own revenues and one-third comes from shared national taxes. Cities with the status of provincial subordination are generally larger than districts, and they are more likely to be commercial centers. Therefore, it is

70 Here, cities of provincial subordination (district-level)


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not surprising that they would have stronger fiscal capacity and thus be able to generate more revenue and, for those cities located in donor provinces, to serve as “double donors”. Olmaliq City (Tashkent Province) is an example of a “double donor” city. Of the six taxes producing the most revenues within Olmaliq City, the city received no revenues from four of these – enterprise profits tax, natural resource tax, social infrastructure development, and VAT. These revenues will go towards equalization with other districts in Tashkent Province and, ultimately (as the Province itself is a “donor” on the republican level) to other provinces in the republic. Olmaliq received seven percent of PIT revenues collected within its jurisdiction, which equaled 15 percent of the city’s budget. Olmaliq was allowed to retain all revenue collections from the property tax on enterprises (10 percent of the city’s budget) and the ecology tax (40 percent of the city’s budget). (The ecology tax is a one percent tax on enterprise production, so it is understandable tha t a city with several large enterprises could generate a large portion of its revenues from this tax.) Olmaliq also retained all of the revenues from the tax on physical and legal entities’ business income, the total land tax, and the unified tax, each constituting six percent of the city’s budget. Reform Efforts in the Tax System Efforts underway to reform the country’s tax system involve changes in local taxes, which will hopefully contribute to a larger and more stable tax base for local governments. Since 1998 the base of the property tax on enterprises is now reevaluated at the beginning of each calendar year. The Ministry of Finance characterizes the property tax as “a stable source of funds for financing local budget expenditures.”71 While this has produced relatively significant revenues in larger cities, the property tax is still a very small part of revenues in most provinces and districts. In Olmaliq, the property tax on enterprises was ten percent of the city’s revenues in 2002 and 2003, although the personal property tax was only one percent of the city’s revenues. However, in Xo’jaobod District, the property tax on enterprises and personal property tax each were only one percent of the district’s revenues. In Andijon Province as a whole, property tax on enterprises was two percent of provincial revenues and personal property tax contributed less than one percent of tax revenues. The Ministry of Finance notes that, by introducing a unified tax on SME, they have encouraged the development and legalization of small businesses, which has consequently tripled revenues from the tax in its three-year existence.72 In Olmaliq City, this tax constituted six percent of the city’s budget, but in Xo’jaobod District and Andijon Province the tax constituted only two percent and three percent of the respective jurisdictions’ budgets. Again, it is still a far way for this tax to play a significant role in most local budgets. 71 Juraev, Turabjon. Deputy Minister of Finance for Taxation Policy, “On the Road to Perfecting Tax Policy”, Halq So’zi, September 20, 2003 72 Juraev, Turabjon. Deputy Minister of Finance for Taxation Policy, “On the Road to Perfecting Tax Policy”, Halq So’zi, September 20, 2003


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The 1998 Tax Code denotes national taxes and local taxes, but in reality there is little distinction because 100 percent of the revenues of several “national” taxes go to local budgets, while the CoM dictates the rate and base of the major “local” taxes. However, rationalization of the tax system, reducing the number of taxes, simplifying their calculation and evaluating tax bases with market value proxies, should have a positive effect on local government revenues. Expenditure Responsibilities There appears to be some consistency as to which functions are performed by each level of government, despite the fact that these functional responsibilities are neither articulated in the Constitution nor in the Law on Local State Authorities. The Law on a Budgetary System (December 14, 2000) does make an attempt to define responsibility assignments by sector for republican and local bodies, but fails to distinguish between province- and district- level budgets or otherwise elucidate their respective roles in a similar manner.73 As one can see from the table below, the share of expenditures for each sector has seen little change in the past several years. Education remains the largest single sector in local government expenditures. Exhibit 10. Local Government Expenditures by Sectors (percentage) 2000

2001

2002

2003

1 Local administration 1.23 1.28 1.15 0.80 2 Education 38.21 40.77 40.77 37.19 3 Health 14.51 15.09 14.95 13.03 4 Social assistance 11.01 10.27 10.57 9.55 5 Other 35.04 32.59 32.57 39.43 Total 100.00 100.00 100.00 100.00

Source: M inistry of Finance, 2003 Below the provincial level, education and health are clearly the top two expenditure responsibilities of local governments. Most of the expenditures made by Olmaliq City were for hospitals, schools, and kindergartens. These three budget items constitute 74 percent of the city’s expenditures for 2003. A large share of these expenditures was on salaries; 86 percent of the city’s employees work in the educational and health sectors. Schools, hospitals, and kindergartens are also big expenditure items for districts. In Xo’jaobod District, these three budget items constitute 64 percent of the district’s expenditures for 2003. Ninety percent of the district’s employees work for the education or public health departments. In Buloqboshi District, also in Andijon Province, these three budget items constitute 71 percent of the district’s expenditures for 2003 and 93 percent of the district’s employees are health and

73 Center for Economic Research.


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education workers. Clearly these are service providers—teachers, doctors, and nurses—as well as administrative and managerial staff. In contrast, provinces across the country spend only one third of their budget on the education and health sectors combined. Within the education sector, provinces are responsible for professional colleges. A province also has other schools subordinated to it—generally boarding schools, special education, and several additional schools, which, for one reason or another, are not administered by a third-tier LGU. Within the health sector, provinces may also be responsible for hospitals, as well as ensuring public health in general. Exhibit 11. Expenditure Structure by Type of Administrative-territorial Subnational Jurisdiction (percent share of actual 2002 expenditures) Expenditure Responsibility Province District City 1 Local administration 1.01 1.23 1.49 2 Education 22.60 56.55 53.33 3 Health 11.00 17.66 21.48 4 Social assistance 1.08 19.80 11.94 5 Capital investments 30.12 - - 6 Other expenditures 34.20 4.77 11.77 Total 100 100 100 Source: Ministry of Finance, 2003 It appears that districts bear a relatively heavier social assistance burden than do cities. Across the country, social assistance makes up 20 percent of districts’ budgets and only 12 percent of cities’ budgets. Xo’jaobod District spent 23 percent of its budget on social assistance, with the two most important items being allowances to low-income families with children under 16 and to unemployed mothers with infants. Buloqboshi District spent 19 percent of its budget on social assistance, again mostly for allowances to low-income families with children under 16 and to unemployed mothers with infants. In reality, the district does not perform these functions itself, but transfers most of the funds and responsibilities for social assistance to the citizens’ assemblies (mahallas) located within its jurisdiction. Provinces have very little expenditure responsibility for social assistance. Across the country, social assistance comprises only one percent of provincial budgets. Provinces are the only type of local government with capital investments in their budget. Thirty percent of provincial budgets are spent on capital investments. The provincial governments also subsidize district heat and hot water. Conclusions Need to Establish Guidelines and Transparent Procedures for Allocating National Tax Revenues and Transfers


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There is no explicit set of instructions or transparent procedures as to how to determine what percentage of its taxes a donor unit must contribute, nor for deciding how much to allot a subsidized local government unit—such judgments are subjective. Distribution of national tax revenues and transfers should be an open and transparent process, with the local governments (including districts and cities) receiving an explanation of how the distribution was decided. Uniform Treatment of National Tax Revenue Shares Will Help Bring Stability to Local Government Revenues It is encouraging that the 2003 Annual Budget Resolution states that all revenues from several national taxes will be credited to the local budgets. However, as long as such statements are made in annual budget laws, which pass shortly before the budget year begins, local governments do not have the ability to plan budgets accurately. It appears that Uzbekistan is moving toward a more stable and consistent assignment of national tax revenue shares from year to year, but this should be codified in a local government finance law, as opposed to annual budget laws. Current Intergovernmental Finance System Does Not Promote Good Financial Management The current intergovernmental finance system, which combines differential tax shares, general transfers, and mutual settlements to make up for budget shortfalls, is undesirable from the perspective of efficient and equitable public financial management. There are potential incentive problems and, generally, too large a role for bilateral negotiations across multiple tiers of government. An elimination of transfers based on ad hoc coverage of the operational deficit between expenditures and revenues would be a first step in introducing a hard budget constraint for local governments. Under the current system, local governments are not accountable for efficiently us ing their revenues or for revenue collection effort. A system under which transfers equalized according to fiscal gap, rather than simply covering budget shortfalls, would reduce potential disincentive effects for local revenue mobilization, as well as provide greater predictability for sub-national revenues.


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VII. LOCAL BUDGETS AND FINANCIAL MANAGEMENT The Budget Process

Uzbek officialdom tends to project an image of a thoroughly proceduralized and monitored budget process that produces a balanced budget at the local and central levels.74 The end result is portrayed as a rigid, non-negotiable plan for the coming year, giving actors at all levels little freedom to deviate significantly from the budget. There are, however, several mechanisms for giving the budget some flexibility and even modifying it during the year, as well as other important ways in which budget entities and LGUs, especially hokimiyats, achieve some freedom in spending, essentially outside of the budgetary framework. Prior to passage of the Law on the Budget System in 2000, reportedly the Ministry of Finance in Tashkent was more unilaterally directive in specifying expenditure allocations at the local level. Under the new system, the territorial (dual subordinated) finance departments perform the lead role in initial budget preparation, which gives the hokimiyats somewhat more of an opportunity to advocate and negotiate for their interests. The Consolidated, Central, and Local Budgets. The budget in Uzbekistan can be separated into two categories—the central budget (central government spending) and local budgets, produced by second- and third-tier LGUs.75 Sub-district LGUs do not have a budget. The central budget and all local budgets, plus republican targeted funds (such as the Road Fund, the Pension Fund, etc.) collectively form a consolidated state budget.76 Interbudgetary relations within this structure are entirely vertical, indeed hierarchical. Horizontal relations are effected only through the appropriate higher- level budget77 – Redistributions between local budgets on the same level are managed by the next level up. Loans can be taken only from higher- level budgets. Local ministry offices from different LGUs communicate extensively with their respective hokimiyats during the budget process, but not with each other. MoF officials assert that some territorial units below the third tier (towns, villages, urban regions) have an “expenditure plan” (in Russian, smeta raskhodov), but, unlike in other CAR, this plan includes only the territorial administrative personnel, their office space, communal service expenditures, and other related expenses. Budgetary entities on the territories of towns, villages, and urban districts are not included in the expenditure plan, though some plans also dedicate funds to “development”, a category that, in those instances the authors encountered, constituted greening and beautification activities.

74 Articles 5 and 24, law “On the budget system” (2000) 75 Article 3, law “On the budget system” (2000) 76 Articles 3 and 9, law “On the budget system” (2000) 77 Articles 18.5 and 21, law “On the budget system” (2000)


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Projection Based on Coefficients The sizes of local budgets each year are determined by looking at earlier years, taking into account changes that took place that year and modifying this figure by a standard coefficient determined by the Ministry of Finance. Sometimes, the base number will be adjusted in connection with a specific event, such as the construction of a large factory, which would drastically increase the productive capacity of the affected LGU as a whole. Balancing of local budgets is achieved by tinkering with subsidies and the sharing rates for national taxes. Though legislation is rather vague regarding spending obligations of different levels of government, the center pays for most defense expenditures, national security, and justice; other expenditures are shared between different levels. The Budget Preparation Calendar The budget process itself begins in early May every year, when the Ministry of Finance asks the CoM for permission to send budget requests to the provinces. The actual requests are dispatched May 25, and the provinces pass them on to district hokimiyats. Also in May, budgetary entities such as libraries and sport complexes calculate their estimated expenditures78 and submit their budget requests to the local ministerial department to which they are subordinate. Local departments of district and provincial line ministries, then, send their requests to district and provincial financial departments, theoretically without any involvement from higher-tier departments in their respective ministries. Next, district- level financial departments, with the assistance of the local council’s budgetary commission, are to prepare “applications”—draft local budgets—on behalf of their respective hokimiyats, which they are to submit to provincial financial administrations by June 25. The budgetary commission that helps produce the initial draft includes both local council deputies and representatives from the hokimiyat. Local councils’ budgetary commissions are largely used to diffuse blame for budget cuts, and their main task, according to one observer, is to keep expenditures down. After making the appropriate revisions, provincial hokimiyats submit provincial budgets (including budgets of all their subordinate cities and districts)79 to the Ministry of Finance by July 1. This is also the deadline for the ministries to prepare their drafts. The Ministry of Finance’s territorial and sectoral divisions review all applications and make amendments, theoretically after consultation with the applicant. It is here, in the central ministry, that the biggest cuts are made. No later than September 15, the Ministry of Finance sends a draft state budget to the CoM for approval. The budget document is then passed on to the Oliy Majlis by October 15 for ratification, and by the end of December, the CoM issues a regulation containing the approved budget for the coming year. Finally, revised local budgets are sent back to their respective provinces/districts for ratification by the appropriate local council80 (they can, theoretically,

78 Article 6, supplement to Cabinet of Ministers resolution #414: “On improving the process of financing budgetary entities” (1999) 79 Article 9, law “On the budget system” (2000) 80 Article 7, law “On the budget system” (2000)


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amend it, but this happens only very rarely) 81 and the hokim issues a regulation with the approved local budget for the coming year. Modifications during the Budget Year During implementation, the “planned budget” can be altered, producing a quarterly “modified budget” that includes all changes and deviations from the plan, whatever their source. Changes are made using budget form #11 at the national level and budget form #17 at the provincial level;82 local financial departments meticulously record all alterations.83 Additionally, mutual settlements can be used to bring local budgets into balance when there has been a change in the functional division of responsibilities between the center and local governments during the course of the year, non-realization of a revenue plan, or when budgetary loans are to be forgiven. At the core of central budgetary control in Uzbekistan is a system of highly specified categorization of explicitly justified expenditures. Officially, each budgetary entity gets exactly what it needs (or what it is entitled to by legislation) every year, though elementary logic and overwhelming amounts of anecdotal evidence indicate that social and economic infrastructure does not, broadly speaking, meet the high standards established by legislation. Moreover, the size of each local budget is not determined by these requests, but rather by the historical size of the local budget and a few other factors, as described above. A district hospital, for example, may be ordered by the Ministry of Health to purchase items which local financial organs will then be unable to fund. Thus, ministries can set impossible standards for social programs at the republican level, while shifting the blame for not meeting these standards to LGUs. Schoolchildren who want books routinely pay for them themselves and entire infrastructure projects may exist only on paper.84 Expenditure Categories Defined in Law Each distinct local budget request must directly refer to a particular article of an official act as a justification for the expenditure. Uzbekistani law recognizes four broad categories for local expenditures, which are further divided into a number of subcategories:

• Category I: Salaries for employees of budgetary entities and other payments gauged on the salary scale (aid to low income families, student stipends, etc.);

81 An official from the Tashkent Province Financial Administration noted that a few years ago, the local council made some significant changes to the provincial budget, but he said such instances are quite rare; officials from other LGUs said they could not recall this happening in their own provinces/cities/districts. 82 Article 92, MoJ #1025 “On order of quarterly allocation of annual planned amounts of revenues and expenditures, allocated in the budget of RK and local budgets, registration of amendments adopted during budget execution, financing of organizations and events described in the budget” (2001). 83 Article 91.1, MoJ #1025 “On order of quarterly allocation of annual planned amounts of revenues and expenditures, allocated in the budget of RK and local budgets, registration of amendments adopted during budget execution, financing of organizations and events described in the budget” (2001) 84 Experience with water supply system outside of Qo’qand, from interview with Melinda Leonard, Mercy Corps, Uzbekistan—September 20, 2003.


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• Category II: Supplements, representing payments to the Pension Fund, unions, or other social support funds—set at 37.2 percent of salaries themselves;

• Category III: Capital investments are usually a part of the provincial, but not the district, budget, as major capital projects tend to be too expensive for third-tier LGUs. This category includes construction of new buildings, such as schools, colleges, and hospitals. Decisions on what new objects need to be built are made by local departments of the Ministry of Economics; the CoM also has a list of specific priority construction projects, “the State Investment Program”. 85

• Category IV: Other expenditures, including communal services, renovation and repair of existing capital stock, food for some hospitals or schools, and so on. It is within this category that there can be some flexibility in spending, though this can be used only to effect minor changes, which must be registered with the appropriate financial department.86

1. The hokim can order a shift of up to 10 percent from any one budget entity to another, to be approved by the Ministry of Finance and its local department; larger reappropriations must be approved by the local council of people’s deputies, rather than the hokim.87

2. Additionally, any budgetary entity enjoys 15 percent flexibility in spending resources allotted to it by the budget;88 for example, a principal could elect to use monies designated to repair a roof in his school to replace a broken window instead. Such changes are registered with the local financial department. Any larger-scale reallocation requires prior approval from the appropriate financial authority.

According to CoM resolution #414: “On improving the process of financing budgetary entities”, categories I and II have first priority for financing.89 Additionally, payments for the first category cannot be made without the corresponding payments for category II. Within category IV, “other expenditures” are prioritized by law as follows: (1) foodstuffs, (2) medicine, (3) communal service payments, and (4) other expenses.90 Budget Implementation

Hokims bear official responsibility for budget implementation. 91 If revenues cannot cover expenditures in the short-term and the working cash balance has been exhausted, it is possible to

85 Article 2, Cabinet of Ministers resolution #414: “On improving the process of financing budgetary entities” (1999) 86 Article 34, law “On the budget system” (2000) 87 Article 34, law “On the budget system” (2000) 88 Article 34, la w “On the budget system” (2000) 89 Articles 11 and 16 90 Article 18, supplement to Cabinet of Ministers resolution #414: “On improving the process of financing budgetary entities” (1999) 91 Article 7, law “On the budget system” (2000)


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receive a loan from a higher- level budget. According to Article 36 of the 2000 law “On the budget system”, the Ministry of Finance determines the procedure for awarding budgetary loans and sets limits on their duration and other conditions; budgetary loans are interest-free and typically have to be repaid within one to three months. Loans are typically repaid by the end of the quarter, but loan forgiveness through mutual settlement is not uncommon. Particularly in agricultural districts, budgetary loans are a crucial source of liquidity—the economy of Andijon Province’s Xo’jobod District, for example, relies on agricultural processing; many of its factories operate only seasonally; therefore, Xo’jobod relies on budgetary loans to finance its first-quarter expenditures every year. Budgetary loans are all the more important for LGUs because they are prohibited from borrowing from other sources (banks, other LGUs on the same tier, etc.). Despite strict provisions in the main budget law prohibiting deficits, many local budgets end the year in the red. Getting arrears under control becomes a first priority for the next year, but this just leads to even bigger arrears a year later—creating a republic-wide problem of rolling arrears in local budgets. The authors of this report encountered conflicting opinions as to the scale of this problem. According to one MoF official interviewed, some progress has been made in recent years in imposing some discipline on this process. He reports that five years ago, the aggregate arrears of all local governments at the end the year exceeded 20 billion so’ms. A Department of Inter-budget Relations was created within the MoF to police the system (utilizing the threat of freezing bank accounts and reducing subsidies to get local officials to be more fiscally responsible). According to this source, the end of the year debt was reduced to two billion so’m in the Department’s first year of operation, and by the end of 2002 had shrunk to a “nominal level”. Other sources, however, assert that these “rolling arrears” still constitute a major problem. One way in which donor LGUs appear to keep some wealth on their territory is through manipulation of the privatization process. For example, Olmaliq City (subordinate to Tashkent Province) relies on this approach to finance local social facilities. In 2003, Olmaliq was slated to retain only 12 percent of the revenues it collected, providing 28 percent of provincial budgetary revenues. The city’s largest factory is the state-owned AGMK metallurgical plant. In addition to its productive capital, the AGMK plant owns and operates approximately 40 percent of city roads, a large share of unprivatized housing stock, as well as many social and commercial objects, including 15 of 36 kindergartens, preventive medical treatment centers, campgrounds, and a hotel. AGMK records expenditures on social objects and roads under its purview and, according to section 2, Articles 19 and 31 of the Tax Code, it can write this amount off of its profit tax base. Thus, a considerable share of the wealth produced in the city is used to finance social objects without ever being entered in the budget.

In other LGUs that were visited, social object divestiture was more advanced (especially among the notoriously cash-strapped shirkat xo’jaligi collective farms), as was privatization. The main reasons cited for this were (1) that the formerly state enterprises had been operating at a loss; they could not sustain their social objects, and (2) the need to attract private (especially foreign) capital. Indeed, even Olmaliq’s second- largest factory, Ammofos, divested itself of most of its social objects in order to attract foreign capital.


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Discretionary Spending by Local Executives: The Reserve Fund, Privatization Proceeds and Extra Resources LGU’s have three revenue sources tha t allow them some modest spending autonomy: first, the provincial hokim’s reserve fund; second, proceeds from privatization; and, third, extra-budgetary resources (“extra resources located during budgetary implementation”). Additionally, especially frugal budgetary entities or those with a non-tax source of income (such as rent) also enjoy some freedom in determining expenditures. The reserve fund and extra resources located during budgetary implementation are controlled by the local executive, with very few limitations on their use. Proceeds from privatization must be spent, according to established proportions, on renovating housing stock, providing housing for the poor, and investments in rural development. The size of the reserve fund as a portion of the budget is relatively stable, at approximately one half of one percent of planned expenditures,92 while the importance of extra resources varies geographically and over time. In sharp contrast to the rigidity of budget expenditures (which are theoretically hard to change, even for the local executive), the reserve fund and extra-budgetary hokimiyat funds (and, to a lesser extent, proceeds from privatization) are spent at the hokim’s discretion. The hokim’s reserve fund exists only at the provincial level; its purpose is to allow the executive to put on important ceremonies and to address unexpected problems. These funds are used for cultural celebrations and holidays, sporting events, epidemic fighting, natural disaster relief, “improvement of budgetary allocations” if not enough funds were provided in the budget, and for “other expenditures”93 (urgent repairs of social objects, employee bonuses, etc.) Apparently, resources from the reserve fund are also disbursed as general grants to budgetary entities or local ministerial departments. All expenditures from the reserve fund must go through the local financial department for approval.94 Unused money in the reserve fund is not carried over to the next budget year.95 Provincial governments also receive 30 percent of the proceeds from privatization of objects on their territory. These funds must be dedicated to making capital repairs on multi-unit housing, building housing for low-income families, and developing social and physical infrastructure in rural regions. “Extra resources” can accrue in a variety of ways—the largest amounts come from the LGU overfulfilling the revenue side of the budget96 and from “free remainders”97 on the LGU’s 92 The exact figure is set on an annual basis by the MoF. 93 Article 7, MoJ registration #877, Regulation “On the Reserve Fund of the Budgets of Karakalpakistan, the provinces, and Tashkent” (2000) 94 Article 10, MoJ registration #877, Regulation “On the Reserve Fund of the Budgets of Karakalpakistan, the provinces, and Tashkent” (2000) 95 Article 14, MoJ registration #877, Regulation “On the Reserve Fund of the Budgets of Karakalpakistan, the provinces, and Tashkent” (2000) 96 Collection of excess revenue appears to be quite significant, especially in large donor LGUs such the Tashkent Province-subordinated City of Olmaliq, which routinely collects excess revenues —in 2003, it overcollected by 27 million sums [[so’ms?]]and 92 million sums [[so’ms?]]in the first and second quarters, respectively. Andijon


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settlement account above and beyond the requis ite working cash balance, 98 which is determined by the Ministry of Finance. Other, less significant ways of getting extra resources do exist, such as funds freed up by leftover unused reserves (for example, of gasoline or animal feed) and the difference between payables and receivables at the end of the quarter. The hokim’s first priorities must be fulfilling the expenditure plan and maintaining the requisite working cash balance;99 often, LGUs do not even meet the requirements for the working cash balance and must request budgetary loans.100 LGUs that meet these requirements, however, can spend the additional funds with few restrictions. By law, extrabudgetary hokimiyat funds must go toward economic, social, or cultural events; capital investments included in the state targeted list; maintenance of objects in districts, cities, and villages; renovation of buildings; or purchasing equipment for hokimiyats and local ministerial departments.101 The hokim receives requests for financing on additional expenditures from budgetary entities and then directs the funds through financial organs. These resources, however, are vulnerable to being partially or totally reappropriated by higher-level organs, especially when other provinces or districts fail to collect their scheduled amounts. In any event, most sources of discretionary spending theoretically represent just a one-time windfall, as they reflect imperfections in the Ministry of Finance’s estimates that should be rectified in the next year’s budget,102 and a LGU that has collected excess revenues or saved on expenditures may just have its plan for the next quarter or year adjusted as a result. However, the negotiated nature of the entire budget process implies that, here too, there is room for maneuver, and observers note that sources of additional funds such as overfulfillment of the revenue side of the budget and free remainders nonetheless serve as powerful incentives for LGUs to distort their forecasts, underestimating their revenue plans and overestimating their spending. Budgetary Entities’ Development Funds A budgetary entity’s development fund comes from unspent budget money at the end of each quarter, profits from paid services, half of all rents, and donations.103 Resources in the budgetary entity’s development fund should go, first of all, towards paying off its debts. If all of a

Province’s Xo’jobod District (a donor district in a subsidized province) reported less-significant excess collection; the neighboring Buloqbashi District, which receives double subsidies, characterized its collection of excess revenues as unimportant. 97 Free remainders are not as significant a source of extra resources as overfulfillment of the revenue side of the budget—in 2002, out of twenty-three third-tier LGUs in Toshkent Viloyat, only three had free remainders. 98 For definition of “working cash balance”, see Article 3, law “On the budget system” (2000) 99 Article 87, MoJ #1025 “On order of quarterly allocation of annual planned amounts of revenues and expenditures, allocated in the budget of PK and local budgets, registration of amendments adopted during budget execution, financing of organizations and events described in the budget” (2001) 100 Article 32, law “On the budget system” (2000) 101 Article 85, MoJ #1025 “On order of quarterly allocation of annual planned amounts of revenues and expenditures, allocated in the budget of RK and local budgets, registration of amendments adopted during budget execution, financing of organizations and events described in the budget” (2001) 102 Article 15, supplement to Cabinet of Ministers resolution #414: “On improving the process of financing budgetary entities” (1999) 103 Article 5, Cabinet of Ministers resolution #414: “On improving the process of financing budgetary entities” (1999)


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budgetary entity’s debts are paid off, at least 75 percent of all remaining funds must be spent on efforts to strengthen the material and technical base of the entity itself. No more than 25 percent of remaining funds can be spent on employee bonuses and hosting social events.104 Expenditures of budgetary entities’ development funds are overseen by the local financial department’s Supervision and Auditing Administration in the same way as other expenditures. When unused government property is rented out to a private entity, the budgetary organization keeps half of the proceeds, depositing them into its own development fund; the other half is considered local “other revenue” and is contributed to the local budget.105 The price of rental of non-housing real estate is determined in an agreement between the budgetary entity and the renter, but should be no lower than the minimum set by the provincial hokim.106 The minimum cost of rental for other government property is set in the Regulation “On the procedures for renting temporarily unused government property out to other enterprises and organizations by budgetary entities” (MoJ registration #869); yearly rent should be 20 percent or 30 percent of the book value of the property itself, depending on when it was included in the inventory of major resources.107 Treasury Functions All LGUs in Uzbekistan, from ministries to provincial hokimiyats to mahalla committees have their own accounts in private banks; it is through these accounts that all transfers and other budget operations are made.108 Theoretically, each LGU can make its own choice as to which bank it uses, based on where it can get the best services and terms.. Official sources cite factors such as geographic proximity and professional qualifications of bank staff. Other observers indicate that agreements are more complicated, particularly that banks often want their accountholders to deal with certain contractors. It is not uncommon for a provincial hokimiyat, a district hokimiyat, and their corresponding mahallas to all use separate banks. For example, Olmaliq, a city subordinated to Tashkent Province, uses the Real Estate Savings Bank, whereas all its mahallas keep their accounts in the People’s Bank (indeed, they are required to by various regulations on distributing social aid). The province itself uses the Uzbek Industrial Construction Bank. This practice of keeping all government accounts in private banks and carrying out all transfers through them is slated for elimination in 2006, with the World Bank-supported introduction of a national treasury system. The pending treasury system reforms may reduce the role of local governments in actually processing transactions and reduce the extent to which revenues and expenditures flow through 104 Article 29, supplement to Cabinet of Ministers resolution #414: “On improving the process of financing budgetary entities” (1999) 105 Article 5, CoM order #414 “On improving the process of financing budgetary entities” (1999); Article 3.12, MoJ regulation #869 “On the procedures for renting temporarily unused government property out to other enterprises and organizations by budgetary entities” (2000) 106 Article 3.4, MoJ regulation #869 “On the procedures for renting temporarily unused government property out to other enterprises and organizations by budgetary entities” (2000) 107 Article 3.9 108 Article 37, law “On the budget system” (2000)


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hokimiyat bank accounts. Under the new system, budget implementation would be overseen by treasury offices at the province, district, and city levels. These offices would not be subordinated to the hokims. A unified treasury account would reside at the central bank in Tashkent City. Some functions and MoF staff of the territorial finance departments will be transferred to this more vertically subordinated treasury structure. 109 Audits and Monitoring All financial departments undergo a general audit once every two years to verify that they have been spending according to the budget. This general audit is carried out by the Ministry of Finance’s Supervision and Auditing Administration. It also analyses monthly and quarterly reports submitted by all local financial organs.

In addition, the Supervision and Auditing Administration also checks budgetary entities—both their budget expenditures and their extra-budgetary development funds.110 The Ministry of Finance has the power to stop financing a budgetary entity if it is found to be making unlawful expenditures, breaking budgetary discipline, or failing to fulfill reporting requirements.111

Particularly, welfare expenditures by mahallas are under the constant supervision of district financial departments—often to the point of severely restricting the mahalla’s decision-making autonomy.

“Non-state” companies, including “self- financing” utilities, must go through an annual private audit. They may choose from approximately 75 registered auditing firms in Uzbekistan, which mainly do a large amount of perfunctory filling out of forms under the tax filing format; there is no separate management filing. According to accountants interviewed for this study, the utilities do not use the auditing information internally, nor do tax inspectors consider it. Audits are conducted in a perfunctory way, simply to comply with the law. Conclusions Perverse Incentives to Underestimate Revenues The principal source of local budget autonomy comes not from budgeted funds, viewed as inadequate even for covering the basic “protected” spending items, but rather from “surplus” revenues above budget projections. This creates a strong incentive for downward bias in budget revenue projections. Other things constant, the bias would also increase the size of the intergovernmental transfer for budgetary support calculated to close projected fiscal gaps. Local executives should have discretionary authority, but it should not rest upon generating excess

109 MoF staff assigned to the World Bank Public Finance Management Reform Project. 110 Article 35, supplement to CoM resolution #414: “On improving the process of financing budgetary entities” (1999) 111Article 36, supplement to CoM resolution #414: “On improving the process of financing budgetary entities” (1999)


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revenues for which no formal budget items exist. In addition to the negative financial management implications from this downward bias in revenue projections, discretion in this form equates with a lack of accountability and transparency. Need for More Programmatic Presentation of the Budget and Better Budget Classifications Budget preparation at all tiers of government stands to be improved from the very outset, with modern approaches to strategic prioritization and a transparent presentation of established budget priorities oriented more toward program outputs and outcomes. Determination of expenditure needs should be linked to these budget priorities, programs, and outputs. Need for More Orderly Budget Preparation Process That Allows for Setting Priorities in a Strategic Manner Based on More Predictable Revenues The determination of local revenues and, to some extent, expenditures under the present system leaves local governments subject to great uncertainty in their financial operations, becoming aware of their actual budget only at the very end of a process that is largely outside of their control. Effective budget preparation, from establishment of key priorities and commitments forward through final sectoral and program allocations, demands a clearer and more predictable knowledge of revenues, so that specific sectoral objectives can be pursued within a realistic budget constraint. Effective strategic prioritization also requires more than an annual time horizon. Although local “socioeconomic development plans” typically make reference to multi-year objectives, they tend to lack necessary detail and financial realism. These multi-year plans also tend to exist in isolation from the annual budgeting process. This contrasts with the multi-year capital improvement plan (CIP) process as practiced in the West, where, on an annual basis the capital portion of the local budget is reviewed and approved in concert with approval of a revised and extended CIP. Need for Stronger Horizontal Accountability Legislation formally establishes both horizontal and vertical accountability mechanisms in the form of financial reporting and audit processes. Horizontal mechanisms (such as quarterly reporting to the local council’s budget committee, year-end reporting to the full council, and the local council’s authority to initiate inquiries and carry out audits) are, in reality, quite weak and not utilized, except perhaps sometimes at the initiative and with the support of the hokim.


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VIII. URBAN SERVICE DELIVERY AND RELATED FUNCTIONS Urban service providers in Uzbekistan grapple with transition-era problems endemic to former Soviet republics: aging, obsolete (high energy-consuming) equipment, the depressed economic conditions and reduced public expenditure capacity which constrains needed reinvestment, a huge gap between costs and revenues reflecting a heritage of free or heavily subsidized services, the decline in real wages which frustrates efforts to move towards full-cost pricing, the chicken/egg dilemma of having to introduce real pricing concurrently with a collapse in quality and reliability of service, and bloated communal companies lacking the skills and organizational culture needed to convert public utilities into self- financing, market-based enterprises with a consumer service ethic.112 In dealing with these problems, Uzbekistan, with help from a variety of donors, has made some efforts to reorganize the sector, introduce pricing reforms, and reduce subsidies, but the problems remain daunting—most notably, the sheer magnitude of deferred maintenance and investment needed to achieve efficient and environmentally sound operation. Reorganization of the Communal Service Sectors During most of the transition period, a Ministry of Communal Services directly oversaw the regional and local entities responsible for delivering most utility-type services (potable water, sewage, solid waste, gas supply, housing maintenance, heat and hot water). The heads of the local agencies responsible for these services were appointed by ministerial order. Electricity was provided through a Ministry of Energy; today a state stock company, GAK Uzbekenergo, produces and distributes electric power. In September 2000, under a major reorganization, the communal service ministry was converted into the State Agency for Housing and Communal Services (O’zkommunxizmat), which reports directly to the CoM but no longer enjoys ministerial status. The new agency has only about 40 employees compared with over 300 in the Ministry it replaced. Today, O’zkommunxizmat primarily conducts training, contributes to developing tariff methodologies, and sets standards (e.g., for water quality). However the new agency has no organizational mechanism or resources to monitor compliance with these standards. O’zkommunxizmat does have direct administrative responsibility for distribution of natural gas (which is regarded as a state resource) and for major water lines that cross viloyat boundaries. The other communal services are now subordinated to the viloyat hokimiyat through an entity known as a TKEO. All communal service organizations (except for natural gas and electricity) now report to a TKEO. The TKEOs, in turn, report to hokimiyats and also provide relevant data to local tax and statistical bodies. However, they do not have significant direct accountability to central ministries. Aside from the hokimiyats and the tax inspectorate, only the prosecutor’s office is entitled, in some sense, to supervise/monitor communal service organizations 112 See for example, Price and Subsidy Policies for Urban Public Transport and Water Utilities, Working Paper # 5, World Bank, March 1999.


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By law, the general director of the TKEO hires and fires the heads of individual communal service organizations with the approval of the viloyat (provincial) hokim; in practice, though, the hokims often choose the heads themselves. The TKEO director also needs the hokim’s blessing on appointments to his “nomenklatura” (a defined list of only 2 or 3 positions after the director himself); other staff he would generally select without such consultation. 113 District and city level hokimiyats will typically provide hokimiyats at the viloyat level with information and recommendations related to communal service management and have considerable influence over their respective district and city KEUs (Communal Services Operation Administrations), but lack meaningful formal approval authority in the delivery of the services themselves.114 For example, the viloyat hokim, through the TKEO and its province- level vodokanal, would appoint and remove the heads of water companies at the city/district level, just as the provincial hokim and TKEO have the official power to appoint all heads of district and city KEUs. In both cases, though, the lower-tier hokims would be consulted in the process and, in some instances, might actually nominate or block the appointment of candidates. Republican officials interviewed characterize the reorganization of communal services described above as a change from dual subordination to direct subordination under the hokimiyat. They noted gains in responsiveness to local needs but at the price of some loss in professionalism. Rate-Setting In The Communal Service Sector Institutional Interaction in Tariff-Setting Roughly in parallel with the reorganization described above, the Ministry of Finance was assigned responsibility for setting tariffs for the basic urban services regarded as “natural monopolies” (heat, hot water, potable water/sewage) that operate under the purview of the local TKEOs. The Republic level MoF has, in turn, delegated primary responsibility for rate setting to viloyat level MoF offices, and these do, indeed, tend to be the key decision-makers in the process. However, on closer examination, the rate-setting process is still influenced by multiple agencies at the local and republic levels, with significant central government involvement.

113 "After this Assessment was written, the government of Uzbekistan began to rethink the structure and functions of state bodies for administration of communal services at the local level. As of December 2004, legislation providing for the liquidation of TKEOs and KEUs had been reviewed by all relevant state bodies, and preparations were being made to submit it to the CoM for approval. Under the new resolution, existing TKEOs and KEUs would be replaced with province- and city-/district-level communal service divisions everywhere except for Tashkent City. The divisions are to fulfill information-gathering functions and monitor implementation of state communal service policy. Divisions will not, however, have direct administrative authority over utilities and, in particular, will not have the power to hire and fire directors of utilities. In Tashkent City, the existing TKEO will lay off roughly two-thirds of its personnel, though it is unclear to the authors whether it will undergo similar changes in its functional responsibilities; it is also unclear whether district KRAVSes will be affected. It remains to be seen to what extent these changes will actually increase the administrative independence of utilities vis-a-vis hokimiyats." 114 The administrative environment in Tashkent City is somewhat different; there, by CoM order #178 (April 18, 2001), KEUs were replaced with KRAVSes, which were theoretically relieved of all administrative powers and responsibilities. This provision, however, has largely been ignored, and KRAVSes continue to wield influence and operate as they had before the reform.


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• The MoF and O’zkommunxizmat establish the methodology for rate calcula tions, an explicit criterion being the ability of the population to pay.

• The given communal service organization (e.g., the vodokanal for water) initiates a rate

request, performs the draft rate request, and takes it to the TKEO (technical staff of its constituent vodokanal, the district heat company, initiate requests for rate increases and perform the initial calculations).

• The TKEO checks the figures and does its own analysis.

• At this point, the hokim, although he has no formal authority to do so, might assert

himself and impose his own views and analysis. The hokim’s approval is, in practice, mandatory (especially in more urban areas, where tariffs are more politicized), though not always written. The TKEO then takes the request directly to the provincial financial administration for review.

• The MoF, at the provincial and national levels, performs additional review and analysis,

and in some sense ratifies or modifies the proposed rate.

• The MoF at the provincial level, and subsequently at the republic level, forwards the proposed rate to the corresponding level of the Anti-Monopoly Committee, which reviews the proposal for legality.

The hokimiyat formally approves and promulgates the rate as determined by the MoF (with no involvement by local council of people’s deputies anywhere in the rate setting process). The Ministry of Finance also sets prices for gas and electricity (based on rate proposals from the directors of O’zkommunxizmat and GAK Uzbekenergo, respectively). The Office of Analytic Administration (within the CoM apparat), presides over an influential inter-ministerial “analytic group on rates” which combines representation from the republic agencies listed in the above bullets as well as the Ministry of Economics and the City of Tashkent. The chairman of this group also leads a group on communal services. Not surprisingly, the republic- and local- level officials interviewed gave somewhat contrasting descriptions of how the tariff setting process works in practice. One local finance director asserted that, while his office will, in conjunction with the hokimiyat, submit tariff proposals and calculations, the republic level MoF more often than not sets the tariffs itself. Another specialist commented that, generally, the province- level MoF office has the most influence on the process. Most likely further investigation would confirm that the interplay among hokimiyat, TKEO, republic and local level offices of the MoF and of the Anti-Monopoly Committee varies from province to province.


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Rate Variations Among and Within Provinces While it is the hokimiyat at the viloyat level which issues tariffs for the entire province, the rates themselves, based on input from lower-tier communal service agencies, may vary among the constituent district and city service areas—although such intraprovince variations are probably the exception rather than the rule. Moreover, under the rate-setting methods in effect, tariffs also differ considerably from one province to another. For example, in Tashkent City, water costs 24 so’ms per cubic meter; in another province, the reported cost is in the order of 400 so’ms per cubic meter. Water in Tashkent Province costs more than twice what it costs within the capital city itself. Though established by a central body, rates for gas can also vary among provinces. Electric rates, by contrast, remain uniform across regions, but on a nation-wide basis are different for roughly 10 different categories of consumers. Hokimiyats (and local solid waste companies) enjoy more genuine discretion to establish prices for solid waste removal, which is not regarded as a natural monopoly. Housing management/maintenance fees in multi-unit buildings, in principle, are established by residents themselves, through their housing associations (known by their Russian- language acronym, TSJ), although in practice local officials often dictate the charges to be imposed. The Effort to Achieve “Self-Sufficiency” Targets In mid-summer 2001, a cabinet resolution introduced the principle of “self-sufficiency” (i.e., full cost recovery) for communal service tariffs. According to the MoF office responsible for tariff policy, water, sewage, and solid waste tariffs are now set levels that meet these “self-sufficient” criteria (or at least come close); natural gas tariffs are also close to attaining this target. Moreover, occupants of apartments are on their own in respect to funding housing maintenance through their TSJ housing associations. Heat and hot water rates, however, constitute the biggest burden on consumers and have much farther to go, with the aim being to phase in full cost rates by 2006 (pushed back from the original year 2000 goal). In the meantime, the shortfall is funded through the viloyat (provincial) budgets. Exhibit 12 below compares the City of Tashkent’s estimated unit costs and unit rates for basic communal services. As evidenced by these estimates, none are over 85 percent of cost recovery, with hot water lagging far behind the others. Although this assessment did not examine rate-setting in detail, based on interviews our impression is that, for official purposes, “self-sufficiency” refers only to current operating expenses without taking into account the recovery of capital investments. The cost-accounting methods in use do not seem to allow for capital cost amortization or for hidden subsidies (e.g., office space or electric power provided to the local utility company for free or nominal cost). Thus, in reality, all communal services remain either subsidized to some degree or are able to be self-sufficient only through starving themselves of any investment in maintenance, repair, and improvements. The MoF rate methodology does allow communal companies up to a 10 percent net revenue (in effect, a profit), which could, in theory, be used to fund infrastructure renewal and reserves for capital purposes. In practice, we were told that the figure for Tashkent City, by far the richest jurisdiction in RUz, hovers around the two percent level.


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Typically, commercial and industrial users pay higher utility rates than residences (perhaps 20 percent more for heat and hot water), resulting in substantial hidden cross-subsidies among the sectors. This differential between rates for commercial and residential consumers also leads to subsidies from communal service divisions in industrialized provinces to those in heavily populated provinces with less industry, particularly for natural gas. According to one expert, efforts to stop this practice are behind the large number of reorganizations of the natural gas sector since independence.


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Exhibit 12. Cost and Rates for Communal Services to Residential Customers, Tashkent City Cost and Rates for Communal Services to Residential Customers, Tashkent City

As of 01.01.2004

As of 01.02.2004

(expected)

Service

Unit of

Measurement

(monthly,

according to

standard

usage norms

where

applicable)

Cost Rate Rate

/

Cost

Cost Rate Rate

/

Cost

Legal Basis

Heat

m2 of heated

area

129.6

78.00

60.2

139.97

95.00

67.9

Hot

water

per person 3181.00 1100.00 34.6 3444.04 1303.92 37.9

Declaration

#508-TG-

2003

Cold

water

m3 of water 25.42 22.00 86.5 25.42 22.00 86.5

Sewage m3 of waste 13.96 10.50 75.2 14.0 10.50 75.2

Declaration

#478-TG-

2003

Solid

waste

per person 286.43 250.00 87.3 290 250.00 86.2 Order of

hokim

#766

To date there is no history of debt finance being used to finance communal service infrastructure (that is debt secured by the faith and credit of a communal service entity itself, or by collateral pledged from among its assets). Billing, Collections, and Financial Reporting In respect to billing and collections, the pattern varies geographically and among types of utilities. In some second tier LGUs (particularly Tashkent City), utility entities perform this function themselves; in other areas, the mahallas (for single-family homes) or the TSJs (for multi-unit housing stock) collect fees from apartment owners. Recently, the Tashkent City hokim, reportedly in reaction to low collection rates, has transferred the responsibility for collecting utility fees from TSJs and mahallas back to the utilities. A senior official speculates that overall cold water/sewage collection rates, for instance, had been averaging about 60 percent


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of the total amount billed. Namangan, for example, also has a collections service that collects communal service payments. Communal service providers in Uzbekistan also find themselves beset with collection problems attributable both to corruption among collectors and to rampant cheating by consumers. Some common collection problems (metered services)

• Meters that can be manually rewound or tampered with in other ways routinely are—with the tampering performed either by consumers themselves or by collectors/electricians as a paid service. As a result (somewhat counter- intuitively) some homeowners invest in meters at their own expense, because they will end up paying less than they would if billed on a person-based or area-based calculation.

• If meters are stolen, there is a penalty that can be paid; if that penalty is cheaper than the

payment due for services received, customers often fake theft.

• Bypasses onto main pipes, or even neighbors’ lines. For example, tapping into neighbors’ phones, for instance, to make long-distance calls is especially common, so much so that many households have their long-distance turned off altogether or, where available, encoded.

Some common collection problems (services by formula)

• People can plead destitution (“I can’t pay, so I’m not going to”)—this is often true, but even when not, it is a comfortable lie and does not require conservation.

• Certification as “vacant” of apartments that are actually occupied, or undercounting of

occupants (when rates are calculated on a per person basis). (In Tashkent City, registration difficulties exacerbate this problem—people who illegally reside in the city cannot register as communal service consumers even if willing to do so).

Generally, utility entities maintain their own bank accounts and books. In practice, the hokimiyats (and their agent TKEOs), despite their financial stake in utility performance, do not monitor and review the expenses of the communal companies under their purview. (The tax inspectorates examine the utility company books, but with a view to tax compliance, not the cost-effectiveness of their operation.) An Additional Note on the Water Sector Prior to 1993, water companies related through a republic- level vodokanal, which, in turn, was part of the above referenced Ministry of Communal Services. In 1993, parallel presidential and cabinet orders liquidated the republican- level vodokanal, making the local vodokanals subordinate to lower tier governments.


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Today, under the overall communal service structure described above, the vodokanals (which render water and sewage services) function under TKEO and KEU supervision—with district level vodokanals reporting to the TKEO at the provincial level. The division of labor among regional, district, and city level vodokanals varies by location, depending in part on the geography of the water supply. Sometimes a regional entity pumps water to the city, and the city handles the retail distribution. In other instances, a city may enjoy a sufficient water supply within its borders. O’zkommunxizmat operates nine republic pipelines among lower-tier jurisdictions, and one province (Xorazm) obtains water from Turkmenistan. Villages generally obtain their water from wells, although in some cases they receive water by pipe from urban systems. (Several donor projects have been helping to create water associations to maintain village water supply infrastructure as impoverished communal farms [shirkats] have proven unable to do so themselves, understandably so, in the face of expectations to overfulfill already high planting and production quotas for Uzbekistan’s thirsty leading export.) The Ministry of Agriculture and Water oversees collection and initial distribution from major reservoirs and rivers for agricultural purposes, but hokimiyats maintain power over the local distribution systems. At the regional level there have been some initiatives to create water basin authorities. In principle at least, viloyat (provincial) level vodokanals are supposed to pay fees to the republican budget for water received from external sources via the nine republic pipelines. However, in most instances, vodokanals rely on groundwater sources within their own service areas. With ASB and other international donor support, there has been some experimentation with introducing water meters, but, with the exception of a significant number of meters in homes in Tashkent City, households still pay based on a formula rather than actual consumption. The difficulty of introducing water meters is compounded by the hardness of potable water in most areas, which causes even the most expensive meters to break down relatively quickly. The widespread use of essentially free potable water for home garden irrigation constitutes a tremendous drain on local systems, especially in the more arid areas of the South and West. Experts from the ADB and Swiss water projects interviewed for this assessment estimate system losses from leakage at well over 50 percent and payment collection rates as low as 30 percent in the jurisdictions with which they are familiar. ADB engineers believe that, in the cities they are focused on, leak reduction initiatives (aimed at reducing leaks to 30 percent or less) could increase water supply from six to ten hours a day. Pumps typically are oversized; more efficient models could pay for themselves quickly in energy cost savings. An Additional Note on Solid Waste Management In Tashkent an agency known as PO Spetstrans performs “sanitary cleaning”—solid waste disposal, as well as street cleaning; in the provinces, the equivalent entities are denoted as Oblspetstrans. Legally, these are limited liability state-owned stock companies, viewed as


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monopolies but not natural monopolies. They enter into agreements with housing associations (TSJs), mahallas, and commercial property owners for trash removal. Outside of Tashkent City, private individuals or companies with lower rates are frequently recruited to perform solid waste disposal functions in lieu of Oblspetstrans, often on a semi-official basis. In Tashkent City, however, Spetstrans was revived by an extensive EBRD program and remains the only significant service provider. Landfills are operated by other entities known as PPOs (the Russian-language acronym for waste processing enterprises). Hokims would not generally involve themselves directly in setting rates for solid waste services, leaving this determination to the Spetstrans itself and the TKEO. However, there are exceptions. Tashkent City guaranteed repayment of an EBRD loan for trash collection equipment; given this financial exposure, the Hokimiyat took the lead in setting rates at levels sufficient to meet EBRD requirements for loan repayment. An Additional Note on District Heating / Hot Water Heat and hot water in Tashkent are provided by the PO Tashteploenergo, elsewhere through provincial organizations known as Issiklikmanbai. In Tashkent, about 90 percent of multi-unit buildings have centrally provided hot water/heating; elsewhere the percentage varies. In Andijon City, a city-operated plant provides heat (but no hot water) to a service area with about 300,000 residents. Several international donors (the World Bank, EBRD, the Swiss, the Japanese) have joined together to cofinance a project designed to reorganize district heating in Andijon and upgrade its heating infrastructure (including the addition of hot water) through investment in a newly established, heating/hot water entity (HITS, Uzbek- language acronym for Partnership for Provision of Heating Services).115 Management services are to be procured through an international competition (in progress at the time of the research for this assessment). The project provides for metering and a new need-based subsidizing system. A tariff reform study, aimed at ensuring full cost recovery, has been completed and is under review by the government. According to Andijon City’s first deputy hokim, HITS will be more directly accountable to the City administration than was the entity that operated the system in the past (which had its finances intermeshed with that of the province- level district heating organization, which prepared the rate proposals and allocated the local budget subsidy transfer). If successful, the project could prove a precedent for more deconcentration of communal service operations in the future. According to one recent news report, in Tashkent City, this season has witnessed an unprecedented aggressive campaign to collect heating/hot water tariffs from delinquent customers.116 The City Tashteploenergo, having found that the legal actions it had been taking against delinquents in the city district (tuman) courts were not having any appreciable effect, is reported to be entering basements to physically cut off service. At the same time, even Pravda

115 Hamkor Issiqlik Ta'minot Servis (Partnership for Provision of Heating Services) 116 Pronkina, Tatyana. “’Tashteploenergo’ vyshlo na tropu voiny s neplatezhesposobnym narodom.” Zamon.info. http://www.centrasia.ru/newsA.php4?st=1076016420. 00:27, February 6, 2004.


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Vostoka and Xalq So’zi, official government newspapers, are cited as characterizing heat/hot water rates as too high for the population to pay. The report states that many customers assessed by formula rather than use (which is the norm, even in Tashkent City) are requesting that their hot water and heating infrastructure be physically cut off because the charges are prohibitive. This type of news report highlights in human terms the dilemma of trying to pursue communal service financial reforms (with an eye to the proclaimed 2006 date for heating/hot water to achieve self- financing status) while overall efforts to improve macroeconomic conditions (including growth in real household incomes) still struggle. An Additional Note on Housing Management and Maintenance At the start of the USAID LGI-II project, the Urban Institute prepared an assessment of TSJs created pursuant to a 1999 law as the mandatory vehicle for managing and maintaining the urban housing stock.117 To recap briefly here, the main findings relevant to the broader subject of this local governance assessment were (1) Since 1993, ownership of virtually all multi- family housing has been transferred to occupant-owners, and with the 1999 law, these privatized units have, in turn, been organized into more than 1,400 housing associations ; (2) Concurrently with the introduction of TSJs, the state-owned housing and communal service entities (known as ZhEKs) were disbanded, in part with the idea that the owner-controlled housing associations would be taking over most of the housing management functions previously performed by the ZhEKs. That said, two new entities, the above-mentioned TKEOs and their subsidiary district-level KEUs have also taken over some of the ZhEK functions. In Tashkent City, KEUs were subsequently transformed into KRAVSes (Communal Repairs and Emergency Service Agencies) and their functional responsibilities were redefined (with little practical success) to remove any administrative powers they had wielded as KEUs. In practice, it appears that the TKEOs preempt housing management functions (setting and collecting housing partnership fees; appointing TSJ directors) in ways that preclude the associations’ ability to function as democratic, owner-controlled entities. Moreover, the housing associations are obligated to contract with the KEUs/KRAVSes for housing maintenance. These problems are compounded by the unwieldy size of the housing associations themselves, each often encompassing a thousand or more units in numerous buildings. Official recognition that the reforms were not working as intended prompted a 2002 Presidential Decree and CoM resolution, which provided needed tax relief to the partnerships and earmarked some funds for repairs to apartments built prior to 1991. The present USAID LGI-II project has as its major aim the implementation of further reforms aimed at improving the independence of the housing associations and their cost-effectiveness and responsiveness in providing housing services to their owner-occupants. These aims are being pursued through support for amendments to the legal framework, now making their way through the adoption process, and pilot initiatives to break up the oversized TSJs into more compact associations, ideally on the

117 Carol Rabenhorst, et. al. Assessment Of Current Legal And Operational Status Of Housing Partnerships In Uzbekistan, The Urban Institute, November 2002.


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principle of “one building-one association” with active participation and control by their members. Recap of Organizational and Budgetary Status of Communal Service Companies Again, all the service-providing agencies cited above—vodokanals (cold water and sewage), Spetstrans and Oblspetstrans (solid waste, Tashkent City and provinces, respectively), and Tashteploenergo and Issiklikmanbai (district heat/hot water, Tashkent City and provinces, respectively), and KRAVSes and KEUs (communal and housing repair companies in Tashkent City districts and the district/city subdivisions of TKEOs in provinces, respectively) are each subordinated to the general director of the viloyat TKEO, who, in turn, is subordinated to the hokim. With the exception of KEUs, these agencies are not regarded as government entities. In other words, they book their own fee revenues and expenditures; only the transfer payments from the hokimiyat to cover the difference between heating/hot water costs and revenues is recorded in the local government budget. The Urban Transportation Sector In the urban transportation sector, the government has moved, with some success, to separate regulatory and management functions and to create a framework for private sector participation though a competitive tender for route franchises. A 1997 Law on Urban Transport, as further elaborated in 1998 and 1999 Cabinet of Ministers Orders, sets the legal framework for urban transport as it exists today. 118 Previously, urban motor transportation was monopolized by a government-owned stock company called Uzavtotrans. By 2001, Uzavtotrans was eliminated and its routes turned over to the respective hokimiyats at the provincial level. The hokimiyats are now required to allocate the rights to all urban motor transport routes through competitive tenders. A dual-subordinated, special tender commission (headed by a deputy hokim) manages the tender process with the technical work performed by an administrative department of the Republic level Public Agency for Motor and River Transport (“Motor Agency”). In rural areas, similar commissions operate under the provincial hokimiyat. According to the Motor Agency, concessions for the operation of over 1,000 urban routes have been allocated through such tenders, with active competition including private companies and small owner operator associations. Buses and shuttle taxis belong to the respective carriers themselves; trolleys, in most instances, remain under public ownership. This tendering process has now been operative for several years with considerable assistance from the World Bank and international consultants, who as early as 2000 were reporting “steady improvement” and “healthy competition”.119 The number of passengers entitled to fare reductions had been reduced to 5 percent (mainly veterans and invalids) of all passengers. Receipts were substantially increased from the other categories of passengers who are still entitled to discounts (e.g., students,

118 CoM orders # 350 (August 17, 1998) on Organization of Tenders for City Transport, and # 313 (November 26, 1999), Implementation of the Urban Transport Concept. 119 The World Bank, Urban Transport Project, Project Appraisal Report, April 20, 2000, p. 4


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pensioners, etc.—about 20 percent of ridership), with fares from the remaining 80 percent of riders approaching full cost recovery levels, at least on an operating basis. The 1997 law also assigned tariff-setting responsibility for urban transport to second-tier LGUs based on cost and market considerations (through the commissions described above). The Motor Agency and MoF share responsibility for elaborating policies that govern the rate setting process at the provincial level.120 In practice, the republic agencies set basic rules for setting tariffs and conducting the requisite tenders. Within these guidelines, the hokimiyats have a fair amount of discretion to set tariffs. Losses in the urban transport sector are covered by local budgets (and, to some extent through the mutual settlement process described earlier). Discounts for various categories of socially protected individuals are funded through the state budget, but with the amounts defined at the viloyat level. (See Annex E for two charts provided by the Motor Agency. The first details the functional division of labor between republic and provincial level agencies in the urban transport sector. The second chart identifies the legal basis for these functional assignments.) Since 2000, the World Bank has sponsored a $30 million urban transport project in five medium- sized cities.121 At the time of project initiation, more than 80 percent of the bus fleet was deemed to have exceeded its useful life, with daily breakdowns the rule, only about 60 percent of the fleet considered operable, and oftentimes as few as 25 percent of the buses in service on a given day. An interesting feature of the World Bank project is the creation of a commercial leasing company that would make new buses available to private operators on a full cost-recovery basis. Tashkent City also operates an extensive underground metro system. It is managed by Tashkent Metropolitan, a body within Tashgorpastrans (which manages passenger transportation within Tashkent City). Much public transportation, especially outside of Tashkent City, is available through private shuttle taxis, which purchase their licenses (and other necessary documents) from local governments. Indeed, in some of Uzbekistan’s largest cities (e.g., Andijon, Fergana) this is the only form of urban public transportation. Travel routes are set by transportation authorities for older shuttle taxis that still have their rates officially dictated by the Motor Agency (these are rather dilapidated vehicles and are now something of a rarity, as decaying fleets have not been renewed at all in most places). Prices for private shuttle taxis are not set by the Motor Agency, but they must travel the routes determined by the government and compete with the state’s own fixed-price fleet.

120 This was further elaborated in the presidential order that formally liquidated Uzavtotrans, Presidential Order 2871 of June 4, 2001,on Demonopolization of Motor Transportation. 121 Uzbekistan-Urban Transport Project. See World Bank country web site for PID and appraisal report and Annex D below for more details.


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Local Governments and Social Protection Reform of the social protection system often proves essential to the successful transition to urban services that operate on a largely self- financing basis. Government leaders face political risks in trying to convince their citizens to forgo entitlements of the past and pay from their own pockets the full cost of services such as water and district heat. It greatly strengthens the hand of leaders in making this case if they have in place a system of social protection that allows them to communicate that these necessary pricing reforms are being introduced in a fair and compassionate manner. At present, in Uzbekistan, little attention, if any, is being given to this critical linkage between urban service reform and social protection policy. One problem is the extent of poverty. The most expensive utilities, such as heat and hot water, are expensive for almost everyone, not just the poorest, even subsidized as they are now. The difficulty of establishing an effectively targeted, social protection-based pricing system in Uzbekistan is compounded by the government’s limited ability to judge need objectively and fairly. The “shadow economy” remains quite significant in Uzbekistan, by one estimate 35 percent of GDP, and constitutes many people’s main source of income.122 Other social protection programs, such as welfare aid to low-income families, are administered through mahallas in a relatively opaque and subjective process (see below). The government, therefore, often resorts to objective but imperfect measures of need, such as veteran status or official occupation. Communal Service Subsidies Until recently, specified categories of socially protected persons received discounts (ranging from 30 percent to 100 percent) on their communal service payments. Moreover, if one member of a household qualified, the entire family received the privileged discount. In spring of 2003, Presidential Decree #3227 introduced a new system of compensation. The eligible persons remain the same (33 categories of privileged persons), but the discount is now set at 45 percent of the minimum wage for the eligible person only, regardless of the number of family members. In autumn of 2003, the discount was 2,448 so’ms per month based on the then minimum wage of 5,440 so’ms.123 This compares with an estimated total of about 13,500 so’ms (about US$14) in monthly communal service charges for a family of four in Tashkent,124 with GNI per capita estimated at US$38 per month. 125 This subsidy is administered through the major state employers and other social institutions, with the payment disbursed by the appropriate budget entity or fund along with one’s salary or pension as the case may be. As recalculated, the subsidies amount to between one-half and one-third of what was provided before. Nonetheless, according to one member of a republic commission on tariff policy, the

122 Taskanov, Alisher. “Tenevye otnosheniia v Uzbekistane: byli, iest’ i … budut?” Tsentral’naia Aziia i Kavkaz. #6, 1999. p 4. This figure is given for 1997. According to the author, though several times higher than in developed countries, the share of the shadow economy as a percent of the official economy in Uzbekistan is considerably lower than in many other FSU countries. 123 The official exchange rate as of 16 February 2004 was 990 so’ms = US$1. 124 From Table in Annex G for City of Tashkent 125 World Bank Country Brief for Uzbekistan estimates annual GNI per capita at US$460.


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state has no ability to ensure these payments are made on a timely and regular basis. He feels the categories should be reconsidered and their number reduced, but, in the near term, sees no likely movement in this direction. General Assistance for Needy Families Three types of social protection are funded by district/city budgets but administered through the mahallas:

• Aid to unemployed mothers with children under two years of age, with some means testing (according to one MoF source, perhaps 70 percent of all mothers of toddlers are eligible). Benefits are approved for a renewable one-year period. Starting in 2003, the monthly amount was set at 200 percent of the minimum wage (per mother, not per child under two years of age). Family income is also considered; a family with an income of less than 150 percent of the minimum wage per family member is eligible for consideration. Unemployed single mothers (or fathers) of children under two years of age and mothers of children with disabilities automatically receive the subsidy (see order of March 20, 2002, MoJ registration #1112).

• Low-income families—temporary income support for particularly needy families.

Approved for a renewable three-month period. Monthly amount is from 150 to300 percent of the minimum wage, determined by the citizens’ assembly welfare commission according to need. Other criteria include social justice; proven desire to work by able, unemployed family members; and the potential of the family’s land for supplementing its income (see CoM order #434, August 24, 1994).

• Assistance to low-income families with children under 16 years of age. Eligibility also

based on need. Approved for a renewable six-month period. Set at 50 to –175 percent of the minimum wage, depending on the number of children under 16. Recommended main criterion is family income; a family with an income of less than 150 percent of the minimum wage per member is eligible to be considered low-income. Non-encouragement of voluntary unemployment is another central principle that the citizens’ assembly welfare commission must consider (see CoM order #437, December 10, 1996; procedural guide of June 4, 1999, MoJ registration #740).

As described by leaders of the Mahalla Foundation and relevant legislation, the administration of these subsidies works as follows: Each citizens’ assembly has a “welfare commission” (alternatively referred to as a “social commission”) to administer these subsidies; it reviews applications, checks their validity (e.g., examines wage certificates and other documents), and visits homes as need be. The commission then votes to decide which families of those on the list of eligible applicants will receive subsidies. All subsidies are paid monthly. Once per month, the secretary (kotib) of the mahalla takes copies of the list of approved beneficiaries and subsidy amounts to the hokimiyat, which, in turn, transfers the requisite funds to the branch People’s Bank for disbursement. Other copies of the list go to the local MoF financial administration, the appropriate bank and the labor market office.


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This system lacks transparency and professional administration. The mahalla personnel engaged in distributing this family assistance have no training and, for the most part, are free to choose beneficiaries on relatively subjective grounds. Mahalla workers interviewed assert that budgetary funds allotted to them for dispersal of subsidies are miniscule compared to need, and that this also contributes to subjectivity. Based on our interviews and the recent Human Rights Watch report cited earlier, decisions often reflect personal favoritism, and, in some cases at least, assistance is withheld to punish political or social non-conformity and even membership to an ethnic group. Reportedly, there has been some discussion within the government, but with little real progress, about unifying these three forms of support into a single, means-tested family income support. Role Of Ministry Of Social Protection The Ministry of Social Protection appears to play little to no role in overseeing the administration of either the communal service or the family assistance subsidies. In the overall state provision for social protection, the ministry primarily assists pensioners, blind persons, and other invalids, in large part by providing social services such as nursing homes and specialized medical services or by hosting high profile sporting and other events. It lacks experience and expertise in the design and implementation of means-tested forms of income support. Urban Property, Development Permitting, and Cadastral Records In respect to public property, Uzbekistan has both Republican property and municipal property (of a province, district or city); self-governments can also have property (see chapter 17 of the Civil Code). The CoM’s lists of enterprises slated for privatization, however, do not reflect this. Indeed, according to the head of one city cadastral agency, his cadastre, for record keeping purposes, does not distinguish between objects of republican, viloyat, district, and city property, though these distinctions exist (as reflected in the subordination of individual budgetary entities)—all land, infrastructure, and buildings are simply recorded as state property. Sales of public property are made by auction through a local office of the Department of State Property, with 30 percent of the proceeds accruing to the account of the provincial hokimiyat. The provincial hokim, by written order, must spend 50 percent of these funds on capital repairs of multi-unit housing and public places; at least 25 percent must go to building housing for the destitute. The remainder of the privatization money is to be dedicated to development of physical and social infrastructure and industry in rural areas.126 A local Bureau of Technical Inventory (BTI, an institutional holdover from the Soviet era) maintains physical and legal cadastral information on residences. Prior to 1997, the BTI performed broader recordkeeping functions on physical structures and natural resources. At that time, a new Administration of Geodesy, Cartography, and Real Estate Cadastre was formed. Local level offices of this agency each maintain 19 cadastres in all (a water cadastre, a city construction cadastre, a transportation cadastre, etc.). Reportedly, housing records may soon be 126 Forty percent of proceeds from privatization go to the state budget to close the deficit, twenty-five percent is reinvested into the enterprise and five percent go to cover the administrative costs of the Department of State Property.


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transferred to these offices as well, effectively merging the BTI completely into the Cadastral Administration. 127 The cadastral offices serve as registration offices for the transfer of private interests in real estate. In Uzbekistan, in strict legal terms, one cannot buy or sell land itself, only a use right to the land and the physical objects on it—buildings, trees, and so on. (However, a permanent transferable use right for most practical purposes is tantamount to ownership). Data on record at the cadastre office is also used for fiscal purposes to calculate the land tax. The office of the provincial, district, or city chief architect (heading the respective Department of Architecture and Construction), dually subordinated to the State Committee of the Republic of Uzbekistan and to the appropriate hokimiyat, maintains strict control over the urban planning and development process and administers the permitting system for building construction. Larger urban planning projects are normally subject to approval by the CoM. Conclusions A Common Set of Management Issues Confront All Service Providers Some of the key issues common to the management and finance of local urban services are:

• From a comparative international perspective, the reorganization of the communal service sector in Uzbekistan does encompass some deconcentration in administrative functions—but with no meaningful decentralization in respect to giving lower tier LGUs any real discretion to manage the essential equation between setting the price of services on the one hand and establishing the quality of service and levels of investment on the other. Certainly there is no democratic interplay between citizens, either as consumers or taxpayers, and local government in respect to determining the standards of basic services or their pricing.

All basic services suffer from serious deterioration of physical infrastructure and equipment

due to a decade of deferred maintenance and lack of capital investment. The current World Bank effort to introduce equipment leasing as a means to facilitate replacement of

127 "On 19 October 2004, after this Assessment was written, CoM Resolution 483 On Organization of the Activity of the State Committee of Land Resources, Geodesy, Cartography and the State Cadastre in the Republic of Uzbekistan was passed. This altered the structure of the cadastre bureaus throughout the Republic, forming a more centralized body—Goskomzemgeokadastr (the State Committee). Heads of territorial divisions of the State Committee are dual subordinated to the appropriate hokimiyat and the Goskomzemgeokadastr hierarchy (they are appointed or dismissed by the appropriate higher body in the State Committee, subject to approval by the corresponding hokimiyat, Article 16 of attachment #5). The republican BTI administration was liquidated (Article 5) and the approved staffing structures of the new province, city, and district departments of Goskomzemgeokadastr do not provide for separate BTI clerks. The new State Committee's local offices have broad responsibilities in relation to registering use rights and owners hip of land and real estate (including residences), as well as surveying and other functions (see section II of attachment #5 to CoM Resolution 483 On Organization of the Activity of the State Committee of Land Resources, Geodesy, Cartography and the State Cadastre in the Republic of Uzbekistan)." [[TO whom is this quote attributed?]]


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obsolete urban transport vehicles merits monitoring and possible replication. In the water sector, there may be opportunities to link relatively modest investments in leak detection

and energy saving investments that have quick paybacks (such as better-sized pumps) that can translate into improved service with improved cost-accounting, continued movement towards full cost pricing, and more aggressive rate collection.

• The current process for rate-setting in communal services is needlessly complex and

opaque, with rate increase requests initiated from lower tiers requiring six months or more to receive approval from the central government in Tashkent. Simplification of this process (preferably through greater local discretion) and the provision of greater transparency must be achieved before Uzbekistan can hope to attract meaningful private investment in the improvement of communal services (through concessions, franchises, and the like).

• Not too far down the road, the continued lack of clarity among levels of government in

respect to ownership and disposition of urban land and property may also prove a constraint on both mobilizing private investment in urban development and also on introducing debt financing techniques to help fund needed infrastructure investments.

The Critical Linkage between Social Protection Policy and Tariff Reform As suggested above, a major constraint on introducing full-cost tariffs and putting basic urban services on a secure financial footing are the low collection rates even at current below-cost tariff levels, as well as a political culture born of universal subsidies and resistant to introducing real prices. Here, thought might be given to linking tariff reform with better-targeted social protection systems, which would allow the government to tell the public:

• If we want decent services, we have no alternative to charging real prices and being aggressive in collecting payments;

• We will earmark increased revenues for concrete improvements in service quality;

• Our longer-term policy is one of efficiency and cost cutting, which will eventually lead to

lower tariffs;

• We recognize that doing this requires pain. With this in mind, we are introducing more targeted forms of subsidy based on ability to pay to insure that these pricing reforms are implemented in a manner perceived as fair.

One approach to accomplishing the above might be to introduce means tested utility (or housing) allowances, such has been adopted in Russia and the Ukraine with some success. Support for some initiative along these lines might be a promising option for expanding USAID LGI-II activities in a way that complements and builds on the housing association reforms being supported through the current LGI-II program. Assistance on the social protection side could be coordinated with other ongoing donor funded efforts to reform specific urban services (water, district heat, etc.), perhaps supplemented by some direct USAID LG-I help in municipal capacity


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building, particularly in respect to pricing and cost-accounting. Additionally, any program of this kind would have to anticipate the risk of corruption among bureaucrats who would administer the utility allowances. A precondition for any such project should be strong checks so as to lower as much as possible the potential for middlemen to sell benefits rather than actually means-testing them, creating yet another lucrative niche for lower officialdom. In addition to increasing municipal capacity, therefore, transparency and accountability would be key. A constraint on introducing the type of program described above is the apparent absence at the national level of a strong counterpart agency with relevant experience and skills. The Ministry of Social Assistance has little capacity to serve as a counterpart for designing and implementing this type of reform. Government institutions with a considerably broader mandate, however, (the MoF, MoJ, and sections of the CoM) all have an interest in setting up a system of social aid for communal services and have proven to be valuable partners in USAID LGI-II project implementation thus far. Need to Address Rampant Cheating As part of a program aimed at strengthening communal service finances, there are practical ways to discourage cheating that could be explored and that would build on USAID LGI-II work with housing associations. For example, meters could be installed at the point of connection between apartment buildings and communal service company infrastructure. Residents could install additional individual meters for their apartments if desired. Payments would be collected for the building as a whole, which would be a powerful incentive for self-policing of cheaters—and encourage the perception that the “stealing” involved is from neighbors rather than from some remote communal services company. Of course, individual meters do more to encourage conservation, but this would require considerably higher costs for investment in equipment, a burden that most of the population cannot afford to bear. In the near term, perhaps metering policies aimed at helping to create a culture of responsibility to pay for services received does merit priority.

Approaches to Improving the Collection System The collection system for payments on communal services also deserves serious attention. Currently, Uzbekistan has no one model for how collections are to be conducted and legislation does not ensure participation by the three key stakeholders: consumers, service providers, and TSJs. In the provinces, collections tend to be carried out by mahallas for single-family homes and by TSJs for multi-unit housing.128 As this arrangement proved ineffective in ensuring adequate collection rates, the Tashkent City hokimiyat decided to change to a system by which consumers settle with each utility company individually. Some areas of the republic have since followed suit and others are considering doing so.129

128 This system can constitute a tremendous drain on TSJ finances as well, since debts and non-payments on communal services are often covered from the TSJ’s own collections for its own maintenance and repairs. 129 Indeed, one provincial TKEO chairman interviewed indicated that his office was considering a similar arrangement, by which workers from the appropriate banks would go door-to-door and collect communal service fees, keeping a share for themselves as compensation.


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Under current realities, a collection system that removes the TSJs from the equation (for multi-unit housing stock) and puts the burden of collecting from individual customers on the utility companies is undesirable for several reasons.

• First of all, it excludes the TSJ, complicating the process of improving in-building infrastructure, where much loss is incur red. Individual consumers, without their TSJ, lack a framework for organization and are insufficiently powerful to ensure quality service.

• This arrangement also deprives both TSJs and mahallas of one of their only potential sources of additional funds—the commission they receive upon achieving a sufficiently high collection rate.

• Additionally, this is an expensive system for the utility companies, requiring a dramatic expansion of their staff and a huge amount of paper and equipment for the required documentation; such costs would either be passed on to consumers or subsidized by the government.

• Finally, the system of individual direct payments to each utility company is simply inconvenient for residents.

One aspect of a program designed to put communal service financing on a more sound footing would be work on development of a sound legislative basis to regulate relations between utility companies, TSJs, and consumers. An end goal would be the creation and introduction of a clear system of delivery and payments that would realign the interests of each party to encourage investment in their respective parts of communal service infrastructure, simultaneously increasing practical consumer control over quality. One critical prerequisite for such an arrangement is the existence of genuinely democratic TSJs that are accountable to residents, the encouragement and fostering of which is the primary goal of the existing USAID LGI-II project in Uzbekistan.


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IX. RELATED PUBLIC ADMINISTRATION TRAINING CAPACITY This assessment identified some in-country public administration training institutes which, if USAID should at some point design a broader local government capacity building program, might have some potential role as training partners: the Presidential Academy in Tashkent, at least one viloyat (province) level training institute for local officials and staff, and the training arm of the State Agency for Housing and Communal Services (O’zkommunxizmat ). The Presidential Academy The Academy of State and Social Construction under the President of the Republic of Uzbekistan was founded by presidential decree on April 19, 1995. A brochure for the Academy describes it as “the biggest scientific and educational center of the Republic.” According to the President’s decree, its mission is to provide continuing education for intellectually gifted state personnel and young, ambitious specialists to encourage them to be “staunch supporters of a democratic state and civil society” and also function as a research center and think tank.130 According to independent observers consulted, the Presidential Academy does not have a reputation for encouraging personal initiative, critical thinking skills, or exploration of ideas that would represent a departure from the status quo. In principle, the Academy recruits from all parts of the government and from major NGOs; in practice, however, the vast majority of the student body comes from executive organs. Students choose from two main areas of concentration: “State Construction” (the path of choice for the many students from the security structures) and “the Economics Bloc” (Principles of Market Economy and Interstate and Foreign Economic Relations). Each year the Academy enrolls approximately 140 students and employs 60 lectors. The Academy cooperated actively with foreign donors and, between 1995 and 2000, received nearly US$6 million in grants. The Academy’s departments are State Construction and Law; Finance, Credit and Currency Exchange; Management; Marketing and Audit; Social and Political Sciences; Philosophy; Foreign Languages; National Heritage and Religion; Theory and Practice of State Regulation of Market Economy; the History of Uzbekistan; International Law; Foreign Policy and Diplomacy; World Economy and Contemporary Foreign Economic Relations; Physical Training and Sport. None of these departments features a course specifically on local administration or decentralization processes, though several treat this material in their syllabi. The Department of Political and Social Sciences, for instance, offers courses in Political Science; Modern Political Science; Political Sociology; Political Parties and Movements; Political Culture; Political Institutions and Processes in Leading Foreign States—but nothing specifically local. 130 Official booklet of the Academy of State and Social Construction under the President of the Republic of Uzbekistan, p 2.


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The Academy operates its own publishing house, research centers, and a self- financing Public Administration Management Development Center set up with the help of a European Union Tacis Programme grant to offer short, intensive courses for high-ranking civil servants. Representatives of the Academy, however, said that the center, at present, does not dedicate courses to local administration, intergovernmental relations, or decentralization topics. Other Training Organizations The Andijon Viloyat Hokimiyat has established a small academy, which offers training, primarily on economic and engineering topics, open to local government personnel selected from throughout the province. The academy offers both a one-year program with a relatively broad public administration curriculum and week- long courses that address more narrowly defined areas of government operation. Our understanding is that this is the only such viloyat sponsored training institute in the country. Earlier reference has been made to the role of The State Agency for Housing and Communal Services (O’zkommunxizmat) in communal service delivery. The Agency operates a Training and Engineering Center (O’zkommunukuvtashkilotchi). The Agency, and the Training Center in particular, is an active partner in the current USAID LGI-II project’s work with housing associations. Prospectively, the Training Center might cooperate with any additional capacity building activities related to the delivery of the communal type urban services (water, waste-water, heat, etc.) that come under its purview. The earlier UI assessment of housing associations 131 also described the Tashkent Public Training and Education Center, the main purpose of which is the training of “secondary school teachers and administrators, and development of textbooks. Some of the public education work has been sponsored by grants and contracts with Eurasia Foundation, the National Endowment for Democracy, and the Open Society [Institute] (Soros Foundation). Their focus is on changing teaching methodology and ‘democratization’ of the mentality of Uzbekistani students.”132 Of particular relevance to this broader local governance assessment,“The Center recently began to design an in-service training program with state sponsorship, for Tashkent local officials. The focus will be on public culture, education, and healthcare.” A Note on the Absence of Municipal Associations Apparently there is no municipal association of any kind (unless one chose to construe the Mahalla Foundation, its closely associated Council of Oqsoqols, or local city and province level associations of TSJs as such), nor is there an association of hokims in their capacity as appointed executives. According to one report, the government does bring all hokims together every winter

131 Rabenhorst, Carol, et. al. “Assessment Of Current Legal And Operational Status Of Housing Partnerships In Uzbekistan”, The Urban Institute, November 2002. 132 Ibid. p. 14.


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for a conference of sorts, which includes seminars on various topics. Additionally, a bloc coalesced within the Oily Majlis of the hokims that also serve as deputies in parliament.


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X. RELATED INTERNATIONAL DONOR INITIATIVES At this time, no international donor to our knowledge is engaged in a major, ongoing effort explicitly directed at improving the legal/institutional framework for intergovernmental relations, local government capacity building, or democratic governance at the local level. As noted earlier, the USAID LGI-II program for which this assessment is being prepared centers on promoting housing associations of owner-occupants. That said, if USAID should contemplate providing broader support for local government strengthening, there are a number of other USAID and international donor activities that should be taken into consideration—both in the design and implementation of any such initiative.

• Intergovernmental Finance. As noted earlier, Bearing Point’s USAID-funded program of support for think tank development has underwritten policy analysis in respect to intergovernmental transfers and revenue capacity. The World Bank has a Public Finance Management Reform Project under preparation that aims at improved budget preparation/execution and establishment of a Treasury. Although the focus is on the central government, this work will most likely address relevant intergovernmental aspects of budget process and treasury operations as well. In conjunction with project preparation, some grant funded TA on these topics is already being delivered.

• Urban Infrastructure. A number of donors have projects aimed at improving urban

infrastructure including solid waste management (EBRD/World Bank), urban transport (World Bank), potable water supply (World Bank, ADB, the Swiss and Canadian development agencies), and district heat/hot water (the World Bank, EBRD, the Swiss and Japanese development agencies). Typically these projects combine financing for infrastructure and equipment with some TA directed at management, organizational, and tariff reforms, and, in some instances, the promotion of competitive practice and private sector investment through franchises, concessions, and equipment leasing. Where these efforts have promoted policy dialogue and some revisiting of enabling law and regulation, the focus has been quite sector specific. (Note: USAID’s water sector program concentrates on larger transboundary and irrigation issues rather than urban water supply needs, though it has helped provide potable water for the arid, highly-polluted Karakalpak Autonomous Republic.)

• NGOs and Community-Based Development. Under the USAID Community Action

Investment Program (CAIP), grantees carry out stakeholder-based community development projects in “conflict vulnerable” communities in the Fergana Valley and in the southern provinces of Surxondaryo and Qashqadaryo. Often, the CAIP communities as defined may encompass two or more mahallas. Of the sixty communities in the south, most lie within the suburban areas of cities where the housing stock consists of single-


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family housing. 133 Twelve new communities are being added which may include higher- density areas with apartment buildings. Before this addition, there had been limited potential for coordination between CAIP and the LGI projects work with housing associations. However, going forward, there may be some possibilities for targeting some CAIP grants in ways that would complement LGI initiatives to promote more effective, resident-based control of multi-unit buildings.

The CAIP project operates by convening a town hall-type meeting to select a representative group that then serves as the counterpart to identify priorities for modest, grant- funded community development initiatives and subsequently for carrying out their implementation. Improvements include municipal- type infrastructure investments such as extending gas lines, digging wells, and school repairs. For water projects, the group prepares a sustainability plan. The CAIP projects reportedly coordinate with local governments at various levels, in part to obtain necessary permits and other approvals. However, if during the life of the CAIP, USAID should decide to broaden the LGI to encompass broader municipal capacity building, there would be important opportunities for integrating the two programs with an eye to encouraging hokims themselves to initiate (and, in time, institutionalize) stakeholder consultation in making capital spending decisions.

Another USAID initiative, which could prove a useful partner with any expanded local government program, is the Civic Advocacy Support Program (CASP). CASP supports a network of Civil Society Support Centers. These centers might partner in dissemination on a variety of topics related to local government reform, training of facilitators and providing other forms of support in promoting various models of local government/citizen engagement and participation. Some of the centers have assisted mahallas (and other forms of local NGOs) in performing Participatory Community Assessments and implementing solutions that have emerged from these surveys. Also, as described in UI’s 2002 assessment of housing partnerships, the Eurasia Foundation has supported a comprehensive training and development program for NGOs and makes grants to NGOs to implement related activities. This has included a program to develop mahalla advocacy skills on behalf of their constituents. State and local government is listed as an eligible category for grant applications to Eurasia.

The World Bank supports a Community Empowerment Network Program that also operates at the interface between local government and the NGO community.

NDI, IRI, and OSCE have performed some national election monitoring, but our impression is that none has conducted significant monitoring of local elections (i.e., mahalla or local council).

133 The description here of CAIP activity is primarily based on interviews with the CoP [[AUTHOR: Please define acronym]]and staff of the Counterpart/CHF[[AUTHOR: Please define acronym]] project, which operates in the south. Mercy Corps carries out comparable CAIP activities in the Fergana Valley under an agreement that extends to May 2005.


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As reported in UI’s earlier housing association assessment, “OSI ended its program of assistance to local governments because it was considered a negative experience in that the local authorities were uncooperative in introducing more transparency and citizen participation in their decision making…”134 Several years ago they did work directly on trying to strengthen mahallas as community-based entities, including the training for the Mahalla Foundation staff in NGO leadership. OSI lists its current programs as “civil society”, “law”, and “economic and business development program.”135 UNDP does not support any intergovernmental policy work with the central government and, at the local level, its activities consist primarily of discrete projects on micro-finance and environmental topics. Annex D contains a chart summarizing the most relevant of the projects funded by donors other than USAID.

134 Carol Rabenhorst, et. al. “Assessment Of Current Legal And Operational Status Of Housing Partnerships In Uzbekistan”. 135 After completion of this Assessment, in April 2004, OSI was denied official registration and was thus forced to halt its operations in Uzbekistan.

Annexes - Assessment of Intergovernmental Relations and Local Governance in the Republic of Uzbekistan

ANNEX A

BIBILIOGRAPHY OF RELEVANT ARTICLES AND REPORTS


ABA/CEELI, “Judicial Reform Index of Uzbekistan”, May 2002.

Arifkhanova, Zoia. “Traditional Communities in Modern Uzbekistan.” Central Asia and the Caucasus. October 2000.

Baker and McKenzie. Doing Business in Uzbekistan. January 2003. http://www.bakernet.com. Bektemirov, Kuatbay and Rahimov, Eduard; “Local Government in Uzbekistan.” Open Society Institute’s Local Governments in Eastern Europe, in the Caucasus and Central Asia: Developing New Rules in the Old Environment, Open Society Institute.

Bichel, Anthony. “Identity / Difference in Central Asia: Tribes, Clans and Mahalla .” Unity or Separation: Center-Periphery Relations in the Former Soviet Union, D. Kempton and T. Clark, Eds, Praeger Publishers, 2001.

Center for Economic Research Report (Preliminary Draft), “Local Budgets under Liberalization of the Economy: Strengthening Revenue Base and Perfecting of Interrelation with Central Budget.” Davis, Marilynne, et. al. 2003. “Assessment of Intergovernmental Relations and Local Governance in the Republic of Tajikistan”. Washington, D.C.: The Urban Institute.

Human Rights Watch, Vol. 15, No. 7(D). “From House to House, Abuses by Mahalla Committees.” September 2003. Karatnycky, Adrian, et. al. Nations in Transit 2002, and Nations in Transit 2003, Freedom House, 2002 and 2003, respectively.

MacNevin, Alex. “Estimating Revenue Capacity of Oblasts in Uzbekistan: Assessment and Recommendations.” Bearing Point / USAID,11 July 2003.

MacNevin, Alex. “Estimating of Revenue Capacity of Oblasts in Uzbekistan.” Bearing Point / USAID, 14 October 2003.

Rabenhorst, Carol, et.al. “Assessment Of Current Legal And Operational Status Of Housing Partnerships In Uzbekistan”, The Urban Institute, November, 2002.

Robertson and Kangas. “Central Power and Regional and Local Government in Uzbekistan.” Unity or Separation: Center-Periphery Relations in the Former Soviet Union, D. Kempton and T. Clark, Eds, Praeger Publishers, 2001. Roy, Oliver. The New Central Asia . New York University Press, 2000.

Ruzmetov, Xayrulla Ibadullayevich. “Printsip Razdeleniia Vlastei v Organizatsii Deiatel’nosti Mestnykh Organov Gosudarstvennoi Vlasti.” Huquq. #2, 2003. Academy of the Ministry of Internal Affairs of the Republic of Uzbekistan.


Taskanov, Alisher. “Tenevye otnosheniia v Uzbekistane: byli, iest’ i … budut?” Tsentral’naia Aziia i Kavkaz. #6, 1999.

The World Bank, Europe and Central Asia Region, Price and Subsidy Policies for Urban Public Transport and Water Utilities, Working Paper # 5, World Bank, March, 1999.

The World Bank, Urban Transport Project, Project Appraisal Report, April 20, 2000.


ANNEX B

LEGAL LOG OF LEGISLATION, DECREES, AND RESOLUTIONS

SELECTED ACTS, BY DATE


No. Title of Document Official Document # Date Adopted

Amended

1. Constitution of the Republic of Uzbekistan

N/A 12/08/92 -12/28/93 Law 989-XII; -04/24/03 Law

2. Constitution of the Republic of Karakalpakstan

N/A 04/09/93 -02/26/94 15th session Supreme Soviet; -10/31/95 4th session Jokargi Kenes; -12/15/97 13th session Jokargi Kenes

Laws of the Republic of Uzbekistan

3. “On property in the Republic of Uzbekistan”

Supreme Soviet Bulletin 1990; #31-33; p371

10/31/90 -Law of 05/07/93; -09/23/94 Law 2022-XII; -Law of 05/06/95; -12/27/96 Law 357-I; -12/13/02 Law 447-II

4. “On the reorganization of local government institutions in the Republic of Uzbekistan”

496-II 01/04/92

5. “On Local State Government” Supreme Soviet Bulletin 1993; #9; p320

09/02/93 -08/30/97 Law 485-I; -12/25/98 Law 729-I

6. “On the processes for settling matters of territorial-administrative structure, naming and renaming objects in the Republic of Uzbekistan”

276-I 08/30/96

7. “On Accounting” 279-I 08/30/96 8. “On urban passenger transport” 419-I 04/25/97 9. “On the state tax service” 474-1 08/29/97 -05/01/98 Law 621-I;

-08/20/99 Law 832-I; -08/31/00 Law 125-II; -05/12/01 Law 220-II; -08/30/01 Law 271-II; -12/13/02 Law 447-II; -04/25/03 Law 482-II


10. “On citizens’ self-government institutions

(new version)” 758-I 04/14/99 -08/30/2003 Law 535-II

11. “On housing associations” 761-I 04/15/99 See commentary 12. “On the budget system” 158-II 12/14/00 13. “On regulatory and Legal Acts” 160-II 12/14/00 14. “On the Cabinet of Ministers of the

Republic of Uzbekistan” (new version) 524-II 08/29/03

15. “On elections to the provincial, district and city councils (kengash) of people’s deputies (new version)”

520-II 08/29/03

Presidential Decrees

16. “On improving the structure of government institutions for hokimiyats of cities of district subordination”

1651 11/26/96

17. “On support for citizens’ self-government institutions”

1990 04/23/98

18. “On increasing the role of citizens’ self-government institutions in providing targeted social support to the population”

2177 01/13/99 04/17/01 PD#2832

19. “On further reform of the system of management of communal services”

2791 12/19/00

20. “On a new phase in deepening reform in the communal service sector”

2832 04/17/01 -05/30/02 PD#3079; -08/07/02 PD#3113; -03/27/03 PD#3227

21. “On demonopolization and improvement of management in the automotive transport sector”

2871 06/04/01

22. “On the introduction, starting 1 April 2003, of compensatory cash payments instead of discount benefits for payments on housing and communal services”

3227 03/27/03


Orders of the Cabinet of Ministers

23. “On the organizational and operational issues of the Uzbek state-owned automotive transport stock company ‘Uzavtotrans’”

21 01/12/93 -06/30/98 CoM#272; -12/17/98 CoM#525

24. “On measures to radically improve urban passenger transport services for the population of Tashkent City”

291 08/19/96 -08/07/97 CoM#392; -04/06/01 CoM#162; -10/07/02 CoM#346

25. “On improving the staff structures of the provincial and Tashkent City hokimiyats”

301 06/17/97 -02/28/98 CoM#82; -02/28/03 CoM#112

26. “On improving the staff structures of district and city hokimiyats”

459 09/30/97 -04/24/02 CoM#139; -02/28/03 CoM#112

27. “On introducing amendments to CoM Order #301 of 17 June 1997 ‘On improving the staff structures of the provincial and Tashkent City hokimiyats’”

82 02/26/98

28. “On issues of organizing and holding open tenders for urban passenger transport”

350 08/17/98

29. “On approval of the ‘Strategy for deepening of economic reforms in the system of communal services for the population’”

461 11/03/98 -04/19/00 CoM#153; -02/13/01 CoM#74

30. “On improving the process of Financing Budgetary Entities”

414 09/03/99 -12/30/02 CoM#455

31. “On the Strategy for development of urban passenger transport in the Republic of Uzbekistan”

513 11/26/99 -09/19/00 CoM#359; -02/28/03 CoM#112

32. “On measures to implement the law of the Republic of Uzbekistan ‘On natural monopolies’”

364 09/21/00


33. “On approval of the rules for delivery of

natural gas to consumers in the Republic of Uzbekistan”

8 10/01/00 -03/20/02 CoM#90; -02/28/03 CoM#112

34. “On regulating the structure of supervisory inspections by provincial, city, and district hokimiyats”

455 11/21/00

35. “On measures to regulate the system of mutual settlements for electricity consumed”

469 12/05/00 -11/01/01 CoM#434

36. “On improving the organization of activities in the communal service system”

493 12/21/00 -10/08/02 CoM#347

37. “On approving the regulation on the agency ‘O’zkommunxizmat,’ model regulation on TKEOs of Karakalpakstan, the provinces, and Tashkent City”

74 02/13/01 -10/07/02 CoM#346

38. “On forecasting major macroeconomic indicators and parameters of the state budget of the Republic of Uzbekistan for 2003 (excerpts)” (i.e., the annual budget resolution)

455 12/30/02 -07/02/03 CoM#300; -08/21/03 CoM#361

39. “On the ‘Year of the Mahalla’ Program” 70 02/07/03 40. “Rules for Use of Heating” 271, s.2 06/16/03 -08/05/03 CoM#341 41. “On measures to improve management of

the natural gas supply system in the Republic”

421 10/02/03

Orders, Instructions, Rules, Codes

42. “Rules for use of the communal water supply and drainage system in the Republic of Uzbekistan”

Ministry of Communal Services #144

09/16/94

43. Civil Code of the Republic of Uzbekistan Approved by Law #163-I

12/21/95


44. Tax Code of the Republic of Uzbekistan Approved by Law

#396-I 04/24/97

45. Order of the Oliy Majlis “On implementation of the law of the Republic of Uzbekistan ‘On citizens’ self-government institutions’ in Tashkent Province”

443a-I 06/05/97

46. Regulation “On contractual relations in the system of housing and communal services”

MoJ #638 02/17/99

47. “Rules for rendering communal liquid and solid waste disposal”

MoJ #647 02/20/99

48. “Rules for rendering communal services to the population of the Republic of Uzbekistan”

MoJ #648 02/20/99

49. Regulation “On ‘Enterprise-Mahalla,’ an economic cooperation and mutual assistance program”

MoJ #808 08/27/99

50. Regulation “Procedures for registering expenditure estimates and staff lists for budgetary entities in the Ministry of Finance and other financial bodies”

MoJ #849 12/09/99 -03/07/00 MoJ #849-1; -11/18/00 MoJ #849-2

51. Regulation “On the procedures for compiling, examining, and approving expenditure estimates included in the budgets of the Republic of Uzbekistan, the Republic of Karakalpakstan, as well as provincial and district local budgets”

MoJ #888 12/28/99

52. Regulation “On the procedures for renting temporarily unused government property out to other enterprises and organizations by budgetary entities”

MoJ #869 01/07/00 -09/10/01 MoJ #869-1

53. Regulation “On the reserve fund of the MoJ #877 01/22/00 -05/03/00 MoJ #877-1;


budgets of Karakalpakstan, the provinces, and Tashkent”

-03/16/01 MoJ #877-2

54. Instruction “On order of quarterly allocation of annual planned amounts of revenues and expenditures, allocated in the budget of RK and local budgets, registration of amendments adopted during budget execution, financing of organizations and events described in the budget”

MoJ #1025 04/12/01 -07/22/02 MoJ #1025-1

55. Order “On determining the composition of expenditures and introduction of a maximum level of profit in setting rates for communal services”

MoJ #1059 08/04/01 -10/13/03 MoJ#1059-I

56. Order “On approval of the rules for formulation and implementation of the state budget of the Republic of Uzbekistan”

MoJ #1111 03/14/02

57. Order “On approval of the instruction ‘On procedures for calculation of local taxes and fees and their payment into the budget (new version)’”

MoJ #1217 02/16/03

58. Order “On the approval of a national accounting standard for the Republic of Uzbekistan: ‘Accounting Balance’”

MoJ #1226 03/20/03

59. Order “On the approval of the regulation ‘On the mechanism of compensatory cash payments for payments on housing and communal services (starting 25 April 2003)’”

MoJ#1232 04/15/03


ANNEX C

ABSTRACTS OF SELECTED LAWS AND LEGAL DOCUMENTS RELATED TO LOCAL GOVERNANCE IN UZBEKISTAN

Prepared by Andrei Makarikhin


[Note: Numbers refer to the order in the legal log, Annex C] I. The Constitution and Laws of the Republic of Uzbekistan ? 1. Constitution of the Republic of Uzbekistan, 12.08.1992 The Constitution is the fundamental legal act of the Republic of Uzbekistan (RUz). All provisions of regulatory and legal acts issued and adopted in the Republic must not contradict the provisions of the Constitution. All regulatory acts shall be adopted so as to implement the provisions of Constitution. In general, the Constitution describes the overall structure of the system of local authorities on the territory of the Republic. The general provisions of the Constitution regarding local administration, then, are expounded on in detail by laws, decrees, and resolutions. The Constitution established the administrative-territorial division of RUz. The Republic of Uzbekistan consists of provinces, districts, cities, towns, villages (qishloqs or auls) and the Republic of Karakalpakstan (RK). Change to the borders of RK, the provinces, the City of Tashkent, as well as the formation or elimination of provinces, cities, and districts shall be made with the consent of the Oliy Majlis of the Republic of Uzbekistan (Articles 68, 69). The Constitution establishes the basic principles of local state government. Representative bodies in provinces, districts, and cities (except for cities of district subordination and districts within cities) are Councils (Kengashes) of People's Deputies, headed by hokims, which, proceeding from interests of the state and citizens resolve issues within their mandate. Local authorities are responsible for: - Maintenance of legality, law and order, and safety of citizens; - Issues of economic, social, and cultural development of territories; - Formulation and implementation of the local budget, establishment and collection

of local taxes, formation of extra-budget funds; - Control over local municipal services; - Protection of the environment; - Registration of civil status; - Issuance of regulatory acts and other powers not contradicting the Constitution and

legislation of RUz.


Local authorities are responsible for implementation of the laws of the RUz, decrees of the President of the Republic of Uzbekistan, decisions of higher government institutions; they participate in discussions of issues of republican and local significance. It is mandatory that lower government institutions implement the decisions of higher government institutions issued within the limits of the latter’s authority. The term of office for local council deputies and hokims is five years. The hokim of a province, city, or district heads both the representative and executive structures of the corresponding territory. The hokims of provinces and Tashkent City are appointed and dismissed by the President of RUz and approved by the corresponding Council of People's Deputies. Hokims of districts and province-subordinated cities are appointed and dismissed by the hokim of the corresponding province and are approved by the appropriate Council of People's Deputies. Hokims of districts within cities (urban districts) shall be appointed and dismissed by the hokim of the corresponding city and approved by city Council of People's Deputies. A provincial, district, or city hokim executes his powers on the principle of undivided authority and therefore bears personal responsibility for the decisions and actions of institutions headed by him. The organization of activities, scope of powers of hokims and local Councils of People's Deputies, as well as the procedure for electing local Councils of People's Deputies are determined by law. The hokim, within the limits of his powers, makes decisions, which are obligatory for execution by all enterprises, institutions, organizations, and amalgamations, as well as officials and citizens, in the appropriate territory. Local self-government institutions in towns, villages, and mahallas of cities, towns, and villages are citizens’ assemblies, which elect a chairman (oqsoqol) of the citizens’ assembly’s committee and his advisers. The term of office for the chairman and his committee is 2.5 years. The procedures for electing the committee, for organization of its activities and scope of powers of self-government institutions are established by law. ? 3. Law “On property in the Republic of Uzbekistan” 10.31.90 This law is not commensurate with the current state of the economy of Uzbekistan. Many provisions of the given law cannot be applied for various reasons. Nevertheless, the law is still valid and below are some provisions which are of interest: For example, article 22 of the law states that the property of a province, district, city, or other administrative-territorial formation is property established or acquired at the expense of the local budget, and also transferred state property that has local value. In article 10, mahalla property is defined as property which is in the ownership, use, and possession of primary tiers of community self-government—the mahalla, property

Central Asian Republics Local Government Initiative Phase II created on the basis of family labor of mahalla residents or their joint income, revenues from use of this property and donations, financial or charitable aid rendered by legal or physical persons, material and financial resources provided by local Councils of People's Deputies. Owners of mahalla property are mahalla residents. Elected bodies of mahalla make decisions regarding the utilization, development, and transfer of mahalla property. ? 4. Law “On the reorganization of local government institutions in the Republic of Uzbekistan” 01.04.92 This law was issued before ratification of the Constitution due to need to enhance the power of executive authorities during the period of transition.

The law established the positions of hokims in the provinces, districts, and cities of RUz, as heads of the local representative and executive decision-making authorities.

It modified the prior Soviet structure of local authority, introducing a system of new local government institutions based on the old ispolkom (executive committee) structure of the U.S.S.R. while also ostensibly hearkening back to traditional Uzbek governing structures .1

It is established, that:

- hokims of provinces are accountable to the President of the Republic of Uzbekistan and the appropriate Councils of People’s Deputies, they are his official representatives in the appropriate territories, are appointed and dismissed by the President of the Republic of Uzbekistan and these decisions are approved by the appropriate provincial Council of Peoples Deputies; - hokims of districts and cities (except for Tashkent City) shall be appointed by the hokim of the corresponding province and approved by the corresponding district / city Council of People's Deputies;

- hokims of districts and cities are accountable to higher hokims and to their corresponding Councils of People's Deputies.

? 5. Law “On Local State Government” 09.02.93 This Law is the main document determining and regulating the structure and powers of local government. The law contains 29 articles, each of them crucial for understanding local government structure and functioning; therefore, only the most significant provisions contained in the Law are stated below. The Law is divided into the following chapters, each dealing with a distinct aspect of local authorities’ functioning:

- Chapter I: General regulations - Chapter II: Economic basis for local state government functioning

1 Robertson L. and Kangas R. Unity or Separation? Eds. Kempton and Clark. “Central Power and Regional and Local Government in Uzbekistan.” 2002. p 265


- Chapter III: Financial basis for local state government functioning - Chapter IV: Structure and organizational bases for local state government

functioning - Chapter V: Local state government institutions - Chapter VI: Powers of the Council of People’s Deputies and the hokim - Chapter VII: Guarantees of lawfulness in the functioning of the Council of

People’s Deputies and the hokim In particular, the Law establishes that Councils of People’s Deputies are to be the representative authorities in provinces, districts, and cities (except for cities of district subordination and districts within cities, i.e., Tashkent City’s urban districts). An LGU’s hokim is the supreme executive officer in the province, district, or city and simultaneously heads its representative body. Formally, he is chosen from among the Council’s deputies, though this provision does not seem to restrict the freedom of higher-level executive officials to appoint and sack hokims at will. The hokims of provinces and Tashkent City are accountable to the President of the Republic of Uzbekistan and the appropriate Council of People's Deputies. Third-tier LGU hokims are formally accountable to the respective higher hokim and to the appropriate Council of People's Deputies. Councils of People's Deputies and hokims manage social and economic development in their respective territories, ensure observance of the law, manage relations between state institutions and citizens’ self-government institutions, and recruit talented personnel into the governing structures of the province, district or city. Two amendments have been made to the Law: 1. Law #729-I, dated 12.25.98, amended Article 21 so as to eliminate the provision according to which “deputy hokims shall be appointed and approved, as a rule, from among the deputies of corresponding Council of People's Deputies”. 2. The law dated 08.30.97 introduces a provision according to which

The hokim of a province, upon agreement by the Cabinet of Ministers of RUz, is empowered to subordinate the hokim of a city to the hokim of a district (except for the districts within cities) and to form integrated governing institutions, with subsequent approval of this decision by the provincial Council of People's Deputies.

? 8. Law “On urban passenger transport” 25.04.97 This law defines urban passenger vehicles and establishes legal bases for their activity. The law establishes that the payment for passenger transport and baggage in urban passenger vehicles is subject to official tariffs, regulated by the Council of Ministers of the RK, provincial state authorities, and the City of Tashkent. Official prices for passenger transport and excess baggage in urban passenger vehicles shall be based on the economic costs of transportation and demand for passenger transportation services.

Central Asian Republics Local Government Initiative Phase II The powers and responsibilities of local state authorities regarding regulation and management of urban passenger transport activities include: - determination of major areas for development and the approval of integrated regional programs; - conclusion of agreements with the administrative organs of urban passenger transport for providing transportation services to the population and approval of routes and schedules; - establishment of maximum tariffs and supervision of their application; - issues of location, construction, and improvement of passenger transport stations, stops, control points, and other objects; - quality control of passenger transport activities; - other powers prescribed by legislation. The powers and responsibilities of administrations of urban passenger transport include: - conclusion of contracts with specific carriers and coordination of their activity; - ensuring timely functioning of all kinds of urban passenger transport; - application of a unified technical policy; - formulation and implementation of integrated measures for development of all types of urban passenger transport and improvement of systems for serving passengers and increasing the volume and range of services available to them; - development of regulatory documents that determine procedures and rules for provision of services to passengers; - approval of routes of passenger transport and schedules of buses, trams, trolleys, and shuttle taxi services; - monitoring of observance of passengers’ rights; - introduction of unified ticketing system for urban passenger transport, issuing of tickets, cards and documents regarding rights to privileged use of transport for certain categories of passengers; - other powers prescribed by legislation. Payment for passengers and baggage on urban passenger transport shall be made according to tariffs, established by local executives of second-tier LGUs. Tariffs for passengers and baggage shall be established according to economically justified costs and the market of passenger transport services. Baggage in shuttle taxis is free.


? 9 The Law “On the state tax service” 08.29.97 The law establishes structure of the tax service in the Republic of Uzbekistan. The bodies of the State Tax Service are: the State Tax Committee of RUz; state tax administrations of RK, Tashkent City, and the provinces; and the state tax inspectorates of districts, cities, and urban districts. The bodies of state tax service implement their activities independently of local state authorities and government institutions in accordance with the legislation (article 3). Cooperation of state tax service with other institutions and organizations: The state tax service performs its assigned tasks in conjunction with other state authorities, local state authorities, self-government institutions, law-enforcement, statistical and financial institutions, banks, and other organizations. These institutions and organizations are obliged to render assistance to the state tax service for implementation of state control over the observance of tax laws and in the struggle against tax offences (article 7). Thus, the Tax Service operates independently of local authorities; hokimiyats are obliged to assist the Tax Service in collection of taxes, explanation of provisions of tax laws, etc. ? 12. Law “On the budget system” 14.12.00 This law is mostly dedicated to the central and consolidated state budgets but contains a number of articles concerning local budgets. The law contains certain relevant definitions, such as: “The local budget is that part of the state budget, which determines the monetary resources of the corresponding province, district, or city. It is formed taking into consideration sources of income and amount of revenue from them, as well as categories of expenditure and amount of resources allocated for specific purposes during the fiscal year.” Additionally, the law contains the following provisions: - Local representative institutions shall: -ratify local budgets, and also confirm reports on their implementation; -establish amounts of local taxes, duties, and fees that go into the local budget, as

well as privileges regarding them. - Hokims shall: -present draft local budgets to local representative bodies for approval; produce

reports on budget implementation for local representative bodies;

Central Asian Republics Local Government Initiative Phase II -oversee the completeness and timeliness of collection of funds for the budget;

verify that expenditure proceeds as set out in the budget. Revenues for local budgets shall be formed from: 1. Local taxes, duties, fees and other obligatory payments given to local budgets

according to criteria established by legislation; 2. State taxes, duties, fees and other obligatory payments given to local budgets

according to criteria, established by legislation; 3. Income from leasing state-owned objects according to procedures established by

legislation; 4. Monies, inherited by the state and donations received in accordance with

legislation; 5. Budgetary grants, budgetary subventions and budgetary loans from higher-tier

budgets; 6. Monetary grants from legal and physical entities and governments of other

countries; 7. Other revenues not forbidden by legislation. Local budget expenditures shall be distributed within the limits of authorized budgetary assignments in the form of: 1. operational expenditures of organizations financed from local budgets; 2. current budgetary transfers; 3. capital expenditures on purchase and reconstruction of basic facilities for state use

(including necessary labor and services); 4. purchase for utilization by the state of rights to land and other intangible assets. 5. other expenditures not prohibited by the legislation. Local budget finances shall be spent on: 1. science, education, culture, public health services, physical education and sports

(in organizations financed from budgets of provinces and the City of Tashkent); 2. social security and welfare; 3. social protection of people; 4. activities of local state authorities; 5. funding of budgetary entities in various sectors of the economy, financed from the

budgets of provinces and the City of Tashkent; 6. implementation of specific programs and actions regarding development of

certain sectors of the economy, in accordance with legislation; 7. other goals stipulated by legislation. Revenues and expenditures of local budgets should be balanced. Local budget deficits are not permitted. During approval and implementation of local budgets, it is prohibited to: 1. establish funds from sources not stipulated by legislation; 2. obtain loans, with the exception of budgetary loans, from higher budgets;


3. authorize expenditures in excess of authorized budgetary assignments, except in cases stipulated by this law; 4. issue financial guarantees from budget funds for the benefit of other persons; 5. provide budgetary loans to legal or physical entities. ? 14. Law “On the Cabinet of Ministers of the Republic of Uzbekistan” (new version. 08.29.03 The Law contains general definitions of the Cabinet of Ministers, its structure, and its relations with other governmental bodies (representative, local executive authorities, self-government institutions).The Cabinet of Ministers is the highest body of executive authority, headed by the Prime Minister, though the President has the right to preside if he so wishes (Article 13). It supervises all state organs on republican and local levels (Article 7). For center-periphery relations, the most relevant article of this law is article 11, “Relations of the Cabinet of Ministers with local executive authorities”. Article 11 states:

Within its authority, the Cabinet of Ministers: - coordinates the activities of local executive bodies in matters related to the

provision of economic, social, and cultural development in regions; - considers proposals of hokims of provinces and the City of Tashkent on issues,

which demand a resolution by the Cabinet of Ministers; it controls the process of implementation of Cabinet of Ministers resolutions, orders and directives; it is entitled to invite heads of local executive organs and hear information on implementation of its resolutions;

- ensures cooperation of ministries, state committees, agencies and other institutions of state governance and economic management with hokims of provinces and Tashkent City; it also resolves issues and disputes that arise in this process;

- approves basic indicators of economic and social development in regions; it establishes limits for the size of local executive institutions’ staffs, as well as their approximate structure;

- has the right to suspend and annul resolutions and orders of hokims of provinces and Tashkent City if they contradict the legislation of the Republic of Uzbekistan.

(Although the hokimiyats are entitled to appeal these decisions of the Cabinet of Ministers if they consider such cancellation illegal, this does not occur). Article 10 regulates relations between the Cabinet of Ministers and the Karakalpak Council of Ministers; the relationship is roughly the same as that between hokims and the Cabinet of Ministers, though additionally, article 10 includes a provision that the Cabinet of Ministers ensure that ministries and other state organs respect Karakalpakstan’s rights in implementing certain regional development programs. Additionally, Karakalpakstan is guaranteed permanent representation in the Cabinet of Ministers.

Central Asian Republics Local Government Initiative Phase II ? 15. Law “On elections to the Provincial, District, and City Councils (Kengashes) of People’s Deputies (new version)” 09.29.03. (also see treatment of this law in chapter V of the main text) This law establishes the procedures for all stages of elections to provincial, district, and city Councils of People’s Deputies, including issues of voting districts, polling stations, electoral commissions, procedures for nominating candidates, rules for election campaigns, procedures for voting, and so on. Elections to provincial, district, and city Councils of People’s Deputies shall be carried out in single-member districts on a multi-party basis for a term of five years. All citizens of RUz who have reached the age of 21 by the day of elections are eligible to run. Territorially based voting districts shall be established for deputies’ elections: - no more than 60 voting districts for provinces and the Tashkent City Councils of Peoples Deputies; - no more than 30 voting districts for district and city Councils of Peoples Deputies. Only one deputy from each voting district shall be elected to the corresponding Council of People's Deputies. Political parties and citizens themselves have the right to nominate candidates to provincial Councils of People's Deputies (district and city councils no longer have this power, as per revisions approved 09/29/03). Political parties, self-government institutions, and citizens themselves have the right to nominate candidates to district or city Councils of People's Deputies. A political party can nominate candidates to Councils of Peoples Deputies provided that it has been registered in accordance with the law no later than six months before the date of the announcement of elections. Any citizen or group of citizens of the Republic of Uzbekistan with suffrage can form an initiative group of at least 50 voters of the appropriate voting district to nominate candidates to provincial, district or city Councils of People's Deputies. Campaigns are government financed, and any donations must be made through local electoral commissions (Article 48). Article 48: Financing Elections

Expenditures related to the preparation for and conducting of elections for provincial, district and city councils of people’s deputies are made by the


government. Financing or other material support of people’s deputy candidates from other sources is prohibited. Political parties and other groups, enterprises, establishments, organizations and citizens of the Republic of Uzbekistan can volunteer their own resources for conducting elections. These resources are accepted by the provincial, district, and city election commissions for their use during the election campaign.

To win, a candidate must receive more than 50 percent of votes cast. If more than two candidates ran and no one received more than 50 percent of the vote, there is a run-off within two weeks between the two candidates who received the most votes. Elections are considered invalid if less than half of registered voters take part. Repeat elections shall be conducted in the following cases, no more than a month after the initial elections (Article 43): a. elections in this voting district are recognized invalid or void; b. repeat elections failed to yield a deputy-elect; c. there are no more than two nominees running in the voting district and neither was elected. Currently, many key provisions of this law are not being observed, or are being executed in a perfunctory manner. When elections are held, the winners are already known, and in many cases elections are only held to give the illusion of democracy. II. Presidential Decrees ? 17. “On support for citizens’ self-government institutions” 23.04.98 The following privileges were established for oqsoqols (chairmen) and kotibs (secretaries) of citizens’ assemblies: 1. Their salaries were increased by two categories in the uniform scale of salary rates. Expenses related to payment of their salaries are covered from the local budget. 2. They are paid a full pension, as opposed to the half-pension that other working pensioners receive in Uzbekistan. ? 18. “On increasing the role of citizens’ self-government institutions in providing targeted social support to the population” 13.01.99 Self-government institutions shall serve as a vehicle for: 1. allocation and payment of childcare allowances to non-working mothers of children under two years of age; 2. provision of basic foodstuffs to pensioners without a family.

Central Asian Republics Local Government Initiative Phase II The Council of Ministers of RK, provincial, city, and district hokimiyats shall be charged with constant supervision of the observance of the principles of transparency and social justice in assignment of social privileges and verification that state budget proceeds are used by self-government institutions strictly for their intended purposes. According to many observers, local state government supervision over mahalla administration of these and other welfare activities through Ministry of Finance auditing organs and the Procuracy (Office of the Public Prosecutor) plays a major role in subordinating self-government institutions to state executive structures. ? 20. “On a new phase in deepening reform in the communal service sector” 17.04.01. This decree establishes that, upon timely collection of 100 percent of communal service payments by self-government institutions (mahalla committees., 10 percent of collected funds are granted to the self-government institution. The proceeds shall be used to pay back any debts on payments for housing and municipal services; issue bonuses to employees of self-government institutions ; render assistance to low-income families in payment for services; repair apartment buildings; and improve and develop mahallas, towns, and villages. It should be noted that mahallas tend to have a poor collection rate and do not collect communal service payments in all LGUs. Such a determination is normally made at the provincial level. ? 21. “On demonopolization and improvement of management in the automotive transport sector” 04.06.01 According to this decree, the Uzbek state-owned joint stock corporation for motor transport (shipping and passenger), Uzavtotrans, was liquidated; new, provincial automotive associations were formed. The corporation Uzautotrans was a closed joint-stock company, the successor of the Ministry of Automotive Transport of RUz and liable for all of its previous agreements and obligations. It held all equipment and technical resources of enterprises included in it and reported directly to the Cabinet of Ministers. The territorial state joint-stock concerns and associations, which had been parts of Uzavtotrans, were reorganized into territorial automotive transport associations and transferred to the management of provincial hokimiyats and Tashkent City. Issues regarding the formulation of tariff policy for motor transport services are relegated to the Ministry of Finance of the Republic of Uzbekistan and the Uzbek Agency of Automotive and River Transport. Establishment of precise tariffs for motor transportation was assigned to hokimiyats of the provinces and Tashkent City.


III. Orders of the Cabinet of Ministers of the Uzbek Republic ? 24. “On measures to radically improve urban passenger transport services for the population of Tashkent City” 19.08.96 According to this resolution, the association "Tashgorpasstrans" (“Tashkent city passenger transport”) is transferred to subordination of the hokimiyat of Tashkent City. ? 25. “On improving the staff structures of the provincial and Tashkent City hokimiyats” 17.06.97 This resolution details reforms of hokimiyat staff structures in the provinces and Tashkent City. The staffs of the hokimiyats of the provinces and Tashkent City are formally changed from a system of “branch control” (control of ministries over their respective local departments) to “functional control” (control of local execut ives over ministerial departments on their respective territories). It establishes an organizational structure for hokimiyat staff in the provinces and in Tashkent City, also setting limits on the number of employees. Groups for research and analysis within the staffing system of hokimiyats of provinces and Tashkent City are established; their primary task is to implement and analyze the progress of reforms in the respective territories. Draft resolutions and documents are to be prepared by the secretariats of hokimiyats and must be coordinated with these groups for research and analysis. ? 26. “On improving the staff structures of district and city hokimiyats” 30.09.97 The staffs of city and district hokimiyats are formally changed from a system of “branch control” (control of ministries over their respective local departments) to “functional control” (control of local executives over ministerial departments on their respective territories). A new template for district and city hokimiyat personnel structure was approved with limits established on the number of staff. What is the difference between #25 (for provinces) and #26 (for districts and cities)? The system of executive authority in the Republic of Uzbekistan is built on the principle of subordination to higher- level government structures. This is how relations between hokimiyats are organized.

Central Asian Republics Local Government Initiative Phase II The highest executive authority in the Republic is the Cabinet of Ministers (first tier), followed by the Council of Ministers of RK, the hokimiyats of the provinces and Tashkent City (second tier); the third tier is composed of city and district hokimiyats. These two orders address the powers and authorities of the second and third levels of executive structures, respectively. The research and analysis groups were established only in second-tier units, so as to monitor implementation of reforms. ? 27. “On introducing amendments to CoM Order #301 of 17 June 1997 ‘On improving the staff structures of the provincial and Tashkent City hokimiyats’” (UI Legal Log #17) 26.02.98 This order establishes Departments of Special Secondary Education and Vocational Training within the personnel structure of the hokimiyats of the provinces and Tashkent City. These Departments should be created using the staff of the abolished Vocational Education Departments and their curriculum committees, as well as the Departments of People’s Education of the provinces and Tashkent City. In light of this, the personnel structure of the hokimiyats of the provinces and of Tashkent City was reviewed. ? 31. “On the Strategy for development of urban passenger transport in the Republic of Uzbekistan” 26.11.99. This order approves a development plan for urban passenger transport in the Republic of Uzbekistan from 2000 to 2005 and the program of measures for its realization. The hokimiyats of provinces and Tashkent City shall develop their specific regional programs of reform and development of the urban passenger transport system on the basis of this plan. ? 33. “On approval of the rules for delivery of natural gas to consumers in the Republic of Uzbekistan” 10.01.00 According to this order, the state will regulate the wholesale prices for natural gas and ensure their realization (i.e., the rules for securing permission to purchase at these prices). The rules establish a system of gas delivery from gas producing enterprises through gas distribution enterprises to consumers. The rules do not address other issues, such as tariff establishment, relations between suppliers and local authorities, and so on. ? 34. “On regulating the structure of supervisory inspections by provincial, city, and district hokimiyats” Before issuance of this order, supervisory inspections were conducted by the Jokargi Kenes of RK and hokimiyats of provinces, cities, and districts. Their main purpose was to supervise implementation of republican legal acts by local government and management institutions.


In the process of liberalization and deepening of economic reforms, the controlling and regulatory functions of the state are being reduced. Therefore, as of January 1, 2001, the positions of provincial, city, and district deputy hokim in charge of supervisory inspections were eliminated; monitoring functions were assigned to departments for supervision of execution of republican legal acts, to be established on the basis of the staffs of provincial and Tashkent City hokimiyats. ? 35. “On measures to regulate the system of mutual settlements for electricity consumed” 05.12.00 This resolution draws attention to the high level of consumer indebtedness to the enterprises of SJSC Uzbekenergo (as of November 1, 2000 it was approximately 20 billion Uzbek so’ms). The responsibility of heads of enterprises consuming power, which have debts to state joint-stock company (SJSC) Uzbekenergo, is increased (the heads of enterprises can be taken to administrative court for failure to pay for supplied electric power). Electric power shall be sold by suppliers according to tariffs set by SJSC Uzbekenergo and coordinated with the Ministry of Finance. Payments shall be settled through bank transfer by the consumer to the settlement account (or other bank account) of the supplier. Settlement of accounts with the population for electric power can be made on a contractual basis through “Integrated Consumer Service” (SEZ—an organization providing repair and maintenance services), which is influential in local communal services and housing. ? 36. “On improving the organization of activities in the communal service system” 21.12.00 This order approves the organizational structure of the agency "O’zkommunxizmat" and the organizational structure of the Territorial Communal Services Operation Union (known by their Russian acronym, TKEO). TKEOs are subordinate to second-tier LGU hokimiyats. (see Annex I [[AUTHOR: Is this perhaps Annex C, Section I?]] for structure of O’zkommunxizmat, TKEOs and KEUs) ? 39. “On the ‘Year of the Mahalla’ Program” 07.02.03 The year 2003 was proclaimed “The Year of Mahalla” in RUz.

Central Asian Republics Local Government Initiative Phase II Accordingly, the program “The Year of Mahalla” was approved. The program is directed at further strengthening of the role and status of the mahalla in governance of the state and society and in increasing its profile in the Republic’s socio-political and economic life in 2003. Additionally, it aims to improve the regulatory framework for mahalla activities. Mahallas should intensify their activities in encouragement of entrepreneurs, development of the mahalla’s financial base, job creation, development of social and communal service infrastructure, landscaping, strengthening of welfare help to low-income families and young families, intensified care for the older generation, strengthening of medical services in the mahalla, development of youth athletic activities, and activation of the mahalla in preserving and spreading national values and traditions. Hokimiyats of provinces, cities, and districts must develop and carry out concrete measures providing timely and appropriate performance of the program. This act (along with Legal Logs #45and #49) epitomizes the broad, amorphous mandate of the mahallas and demonstrates how legislation blurs and erases boundaries between (theoretically) directly elected self-government institutions and appointed state executive structures. Also typical of legislation regulating relations between central and local government institutions, by heaping enormous responsibilities on the mahalla, the center abdicates responsibility for resolution of many pressing social and financial problems. IV. Orders, Instructions, Rules, Codes. ? 42. “Rules for use of the communal water supply and drainage system in the Republic of Uzbekistan” 09.16.94 These rules determine relations between municipal enterprises providing water supply and sewage disposal services under the Ministry of Communal Services of the Republic of Uzbekistan (which as of 2000 became O’zkommunxizmat—see #36) and consumersconnected to the systems of municipal water supply and sewage disposal. The Rules are binding for all ministries, state committees, concerns, agencies, the Council of Ministers of RK, hokimiyats, associations, enterprises, institutions, organizations, and citizens in the territory of RUz. In particular, the rules establish: - the procedures for connection of objects to systems of municipal water supply and sewage disposal; - installation and operation of devices for measuring and recording water supplied and sewage disposed; - accounting of water supplied and sewage received; - accounts for water use and sewage disposal; - conditions for cutting off of water supply and refusal of sewage; - responsibilities of suppliers and consumers.


? 43. “The Civil Code” In relation to local governance, the Civil Code establishes the following concepts: public property, republican property, and municipal property. “Public property” means “state property”, consisting of republican property and the property of administrative-territorial formations, that is, municipal property (Article 213). Municipal property includes property of local government institutions, local budget resources, municipal housing stock and communal services, enterprises and other property complexes, national education, culture, public health facilities, and other property. Municipal property is managed by the local government authorities or bodies authorized by them. Municipal property can be assigned to legal entities. Local budget resources fall under municipal property and are composed of taxes, fees, and other payments to the local budget, as well as other revenues. ? 44. “The Tax Code” Local taxes, dues, and fees include: 1. property tax; 2. land tax; 3. tax on infrastructure development; 4. tax from physical entities for consumption of gasoline, diesel and gas for vehicles; 5. fee for permission to engage in commerce, including licensing fees for the right to

sell certain types of goods; 6. fee for registration of legal entities and physical persons engaged in business. Local taxes and fees listed in items 1 and 2 shall be established by legislative acts of the Republic of Uzbekistan and shall be levied over the whole of its territory. The rates of these taxes and fees shall be determined centrally, by the Cabinet of Ministers of the Republic of Uzbekistan. The remaining taxes and fees shall be established by the state government institutions of the provinces and Tashkent City. Maximum rates of these local taxes and fees shall be established centrally, by the Cabinet of Ministers of the Republics of Uzbekistan. Local taxes and fees shall be counted in the local budget.

Central Asian Republics Local Government Initiative Phase II ? 45. Order of the Oliy Majlis “On implementation of the law of the Republic of Uzbekistan ‘On citizens’ self-government institutions’ in Tashkent Province” 05.06.97 This Resolution sheds light on practical implementation of the law “On self-government institutions” (#10 in the Legal Log), as applied in Tashkent Province. The Presidium (Kengash) of the Oliy Majlis has studied data on the implementation of this law (Legal Log #10) in each province, and the resolution regarding Tashkent Province has been published to provide an example. In particular, the resolution shows how self-government institutions were established in the districts of Tashkent Province, how they function, how they work with local authorities, and how their financing is carried out. The Xonobod Village citizens’ assembly and the Usman Nosir Mahalla citizens’ assembly are used as examples of successful implementation of the law “on citizens’ self-government institutions.” Practices singled out as exemplary include preservation of law and order, organization of festivals, drawing the community in to help beautify the neighborhood, and addressing unemployment by working with small business. Other citizens’ assemblies are put forward as negative examples—oqsoqols who do not know their responsibilities, yearly programs not being confirmed democratically at general meetings, mahallas that are bad at finding additional sources of financing, and unjust use of state welfare aide. Certain hokimiyats are reprimanded for not helping enough in coordination of citizens’ assembly activities, presumably for giving them too much autonomy. This order gives official support to the Mahalla Foundation, reprimanding localities that have “not even set up local chapters.” ? 46. Regulation “On contractual relations in the system of housing and communal services” 17.02.99 Owners of housing stock and communal facilities, hereinafter referred to as "customers", or their representatives, shall conclude contracts on maintenance and repair of housing and communal facilities in their ownership and on provision of services to consumers. Organizations and enterprises of various forms of ownership, specializing in maintenance and repair of housing and communal facilities and provision of communal services shall be referred to here as "contractors". The relations between customers and contractors regarding the maintenance of housing stock and provision of communal services shall be based on a system of contractual relations. The system of contractual relations includes:

- a service contract between local state executive institutions and housing/communal services organizations of all forms of ownership or enterprises from other branches of the economy;


- an agreement between legal entities, housing associations (known by their

Russian acronym, TSJ), citizen-owners of housing stock or communal facilities, and organizations and enterprises of various forms of ownership;

- an agreement between housing/communal service providers of various forms of ownership and consumers of services;

- agreements between organizations of various types, which specialize in various activities in the sphere of housing and communal services.

The agreements should include the following terms and conditions: - a level of quality, reliability, and environmental safety for labor and services

provided, to be guaranteed by the contractor; - a scope of work (service); - obligations of the customer regarding payment for works/services, as well as

terms and methods of settlement; - economic sanctions against each party in the case of violation of contract terms; - procedures for alteration of the conditions of the agreement; - procedures for termination of the agreement and other provisions, prescribed by

the legislation; - provisions protecting consumers’ rights.

? 47. “Rules for rendering communal liquid and solid waste disposal” 20.02.99 Any physical person or legal entity that specializes in disposal of solid and liquid waste, irrespective of form of ownership and departmental subordination, may handle disposal services. The consumer of the service is a physical person, who uses the service (i.e., disposal of solid and liquid household wastes). In multi-unit houses, the legal entity operating the housing stock (housing association [TSJ], the housing operating organization [ZhEK], etc.) shall conclude a contract on disposal of waste on behalf of consumers. The tariffs for disposal of solid and liquid household wastes shall be established by

second-tier local executives. ? 48. “Rules for rendering communal services to the population of the Republic of Uzbekistan” 02.20.99 These rules regulate relations between suppliers and consumers of heat, gas, water supply, and sewage disposal. They are binding throughout the territory of RUz. The rules also contain (1) provisions regarding the procedure of supply, use of, and payment for municipal services; (2) the rights, obligations, and responsibilities of the consumers; and (3) the rights, duties, and responsibilities of suppliers.

Central Asian Republics Local Government Initiative Phase II The rules establish that local government institutions monitor the safety of services for consumers and that they have the right to determine standards and supply schedules and establish a guaranteed level of quality, taking into account the capacity, structure and condition of capital in municipal facilities, climatic conditions, and other local factors. The supplier must notify the consumer on all rate changes. ? 49. Regulation “On ‘Enterprise-Mahalla,’ an economic cooperation and mutual assistance program” 27.08.99 The economic cooperation program "Enterprise-Mahalla" stipulates that business entities located on the territory of one or several mahallas shall carry out joint production and commercial activity on the basis of contractual economic relations. Officially, establishment of such cooperation enhances the role of self-government institutions in the realization of market transformations in the country and the solution of social problems (provision of the mahalla’s unemployed residents with jobs, especially for young people; creation of new jobs; protection of interests of small businesses, etc.). The means of cooperation are not limited to the mechanisms included in the regulation; they are only the most widely applicable forms of cooperation. ? 56. Order “On approval of the rules for formulation and implementation of the state budget of the Republic of Uzbekistan” 29.12.01 These rules describe, in detail, the procedure for compiling and implementing the state budget. Additionally, these rules give the procedures for consideration of draft local budgets and for finishing work on ratified budgets. The procedures established by #12, are specified here in more detail. ? 57. “On approval of the instruction “On procedures for calculation of local taxes and fees and their payment into the budget (new version)” 16.02.03 The instruction establishes the permitted range of local taxes and fees, procedures for their collection, which authorities are entitled to impose them, etc. The instruction describes in detail and establishes the concepts of local fees imposed by local state authorities of RK, the provinces, and Tashkent City, such as fees for permission to engage in commerce and the hokimiyat’s registration fee for legal entities and physical persons engaged in business). ? 59. “On approval of the regulation on the mechanism of compensatory cash payments for payments on housing and communal services (starting April 25 2003)” – 27 March 2003


Order #1232 identifies recipients of the newly established communal service compensations and the size of the payments they receive. Recipients include much of the educational sphere, some categories of the disabled and elderly, and some medical professionals (all to receive an amount equal to 45 percent of the minimum wage monthly, along with their paycheck or pension payment); veterans of labor get 18 percent of minimum wage (Articles 1 and 2). This act also sets documentation requirements (not too strict) for perspective recipients (Article 5). Payments are not taxed (Article 13). Compensatory payments for the employed come from the state budget; pensioners receive them from the extra-budgetary Pension Fund (Article 16). Workers in non-budget organs receive them through their organization, which gets an equivalent discount in its payments to the Pension Fund (Article 16). All affected organizations must report on their payments monthly to the Ministry of Finance’s Supervision and Auditing Administration (Article 18). The new system of compensatory cash payments for communal services replaces a system of discounts on communal service payments for certain categories of the population.


ANNEX D

SUMMARY OF RELATED INTERNATIONAL DONOR PROGRAMS


PROJECT NAME

START DATE

END

DATE

PROJECT

COST

SUMMARY DESCRIPTION

ORGANIZATION

Public Finance Management Reform TA Project

03/25/03

12/31/07

US$ 10 million

Public Finance Management Reform TA Project will improve fiscal discipline, strategic resource allocation, and efficiency of budget resource use by supporting the establishment of a treasury; placing the budget into a medium-term perspective; strengthening budget preparation, execution, and monitoring capacity;, as well as fiscal transparency and related treasury information systems

World Bank

Tashkent Solid Waste Management Rehabilitation

12/01/1998

12/31/2003

US$ 46 million

The main objective of the project was to restore the basic municipal and industrial waste collection and disposal services. Other objectives were to address urgent environmental problems and public health hazards and to strengthen the institutional arrangements surrounding the municipal solid waste management in Tashkent.

EBRD/World Bank

Tashkent Water Supply Improvement

06/03/2003 continuing

US$ 14.5 million

The project would continue to support the reform process initiated by the ongoing Tashkent Solid Waste Management Rehabilitation Project and expand this process to the water supply sector.

EBRD/World Bank

Bukhara and Samarkand (Buxoro and Samarqand) Water Supply Project

02/19/2002 (Approval)

06/30/2007

US$ 62.33 million

The project seeks to improve the safety, quality, reliability, efficiency, financial viability, and sustainability of the water supply services in Buxoro and Samarqand.

World Bank


Urban Transport Project

05/11/2000

12/31/2004

US$ 29 million

The Urban Transport Project for Uzbekistan aimed to develop efficient and sustainable urban passenger transport services in Samarqand, Namangan, Buxoro, Nukus, and Olmaliq. Supported activities included the establishment of a commercial leasing scheme for the allocation of new buses; rehabilitation and repair of new buses; strengthening of urban transport operators; and improvements in the institutional, financial, and regulatory framework for urban transport services.

World Bank

Urban Water Supply

09/27/2001 (Approval)

12/31/2003 (Estimated)

US$ 65.50 million

This project supported the Government's objectives of decentralization, human development, and social protection by providing improved urban water supply services and training programs to strengthen institutional capacity and community participation. The project area covers three provincial capital cities, Karshi, Jizzax, and Guliston, in the central and southern parts of the country, with high incidences of poverty. The Project improved water supply services to approximately 484,000 people, about 45 percent of who m are poor.

ADB


ANNEX E

LEGAL AUTHORITY FOR URBAN TRANSPORT MANAGEMENT IN THE REPUBLIC OF UZBEKISTAN


LEGISLATIVE BASIS FOR URBAN TRANSPORT MANAGEMENT IN THE

REPUBLIC OF UZBEKISTAN (Source: Uzbek Agency for Motor and River Transport)

Republican level Territorial level

HOKIMIYATS OF CITIES

Act on the basis of: the Law of the Republic of Uzbekistan “On local state authorities”. Art. 12 of the Law of RUz “On urban passenger transport”

UZBEK AGENCY FOR AUTOMOBILE AND RIVER TRANSPORT

Acts on the basis of: CoM order #296 of 07.11.1998 “On establishment of Uzbek Agency for automobile and river transport” and #245 of 06.05.2001 “On measures on improvement of organizational structure of management in the field of automobile transport”, Decree of the President RUz “On de-monopolization and improvement of in the field of automobile transport” as of 06.04.2001

TERRITORIAL DEPARTMENTS OF UZBEK AGENCY FOR AUTOMOBILE AND RIVER

TRANSPORT

Act on the basis of: CoM order #296 of 07.11.1998 “On establishment of Uzbek Agency for automobile and river transport” and #245 of 06.05.2001 “On measures for improvement of organizational structure of management in the field of automobile transport”, Decree of the President of RUz “On de-monopolization and improvement in the field of automobile transport” as of 06.04.2001, regulations of territorial departments

TERRITORIAL COMMISSION OF UZBEK AGENCY FOR

AUTOMOBILE AND RIVER TRANSPORT FOR ORGANIZATION OF URBAN PASSENGER TRANSPORT

Act on the basis of: CoM order #350 of 08.17.1998 “On issues of organization and carrying out of tenders on urban passenger transport services”, decision of City Hokim on establishment of commission, regulations of the Commission itself

SPECIALLY AUTHORIZED ORGANIZATION

FOR URBAN PASSENGER TRANSPORT MANAGEMENT Acts on the basis of: Art. 12 of the Law of RUz “On urban passenger transport”, CoM order #513 of 11.26.1999 “On strategy of urban passenger transport development”, resolutions of city hokims, bylaws

CARRIERS (ASSOCIATIONS, ENTERPRISES, INDIVIDUAL BUSINESSMEN)

Act on the basis of: Decree of the President “On de-monopolization and improvement of in the field of automobile transport” of 06.04.2001, #245 of 06.05.2001 “On measures on improvement of organizational structure of management in the field of automobile transport”, Civil Code of RUz, Laws “On automobile transport”, “On urban passenger transport”, “On protection of consumers’ rights”

Central Asian Republics Local Government Initiative Phase II ORGANIZATIONAL STRUCTURE OF URBAN TRANSPORT MANAGEMENT IN THE REPUBLIC OF UZBEKISTAN Republican level Territorial level

CITY HOKIMIYATS

• elaboration and implementation of complex regional programs of city passenger transport development

• formation of competitive environment and establishment of equal conditions for carriers

• establishment of routes and schedules of urban passenger transport service

• quality control of services to passengers

UZBEK AGENCY FOR AUTOMOBILE AND RIVER TRANSPORT

• supervision over realization of strategy of urban passenger transport development and carrying out of tenders

• elaboration of regulatory and legal framework for urban passenger transport activity

• organization of licensing and control over observance of license requirements and conditions

• study of institutional, legal, and financial reforms of urban passenger transport

TERRITORIAL DEPARTMENTS OF UZBEK AGENCY FOR AUTOMOBILE AND RIVER TRANSPORT

• working out of proposals and assistance in preparation of regulatory and legal documents

• supervision over realization of strategy of urban passenger transport development

• preparation of documents, organization, and carrying out of tenders • organization of licensing and control over observance of license

requirements and conditions

TERRITORIAL COMMISSION OF UZB EK AGENCY FOR

AUTOMOBILE AND RIVER TRANSPORT FOR ORGANIZATION OF URBAN PASSENGER TRANSPORT

• coordination of urban passenger transport services • establishment of equal conditions for carriers of different forms of

ownership and development of competition • control over realization of complex measures intended for urban

passenger transport development

SPECIALLY AUTHORIZED ORGANIZATION

FOR URBAN PASSENGER TRANSPORT MANAGEMENT

• conclusion of agreements with carriers and coordination of services • approval of routes and schedules of urban passenger transport services • elaboration and implementation of complex measures aimed at urban

passenger transport development • establishment of single ticketing system on city passenger transport,

production of tickets, passenger cards, and other documents for privileged travel of some categories of people

• supervision over passengers’ rights observance

CARRIERS (ASSOCIATIONS, ENTERPRISES, AND INDIVIDUAL BUSINESSMEN)

• Provision of extension of market reforms in the field of city passenger transport • Improvement of quality and culture of services to passengers and extension of range of automotive transport services • Introduction of contemporary techniques and technologies; development and up-grading of maintenance and repair base; and

increase of the effectiveness of use of transport


ANNEX F EXCERPTS FROM “THE PRINCIPLE OF SEPARATION OF POWERS IN THE

ORGANIZATION OF THE ACTIVITIES OF LOCAL GOVERNMENT INSTITUTIONS”

By Dr. X.I. Ruzmetov

Central Asian Republics Local Government Initiative Phase II NOTE: The following excerpts are taken from an article published in the Uzbek Interior Ministry’s professional journal Law, #2, 2003. Dr. Ruzmetov is a professor at the Institute of Law and associated with the Presidential Academy (a prestigious public administration training institute). He is also a member of the ruling XDP (People’s Democratic Party)

“…The question of achieving balanced relations between branches of government on the local level is more difficult than at higher levels. This is explained by the fact that other institutions do not interfere in the activities of central institutions. The affairs of local organs, however, are invaded by higher-level institutions, which influence the balance of power on the local level. In order to achieve separation of powers on the local level, therefore, it is imperative to simultaneously address two issues: First of all, to decentralize state governance; Second of all, to better define and delimit institutional and functional powers between the representative, executive, and judicial branches on the local level…” (p. 33) “…The Republic of Uzbekistan is governed under a unitary system. It has two main characteristics: first of all, the legal status of the administrative-territorial formations that make up the unitary government are determined by the central government; second of all , the central government both directly and indirectly controls local government institutions…” (p. 33) “…The central government appoints heads of local administrations (hokims) in the provinces and Tashkent City. These hokims, in turn, appoint lower hokims. In this way, the central government is assured an overbearing, crude presence in the periphery. Through hokims, the center can interfere in all areas of local life: political, economic, social, and cultural. Other mechanisms further fortify this tendency, such as granting hokims leadership over both representative and executive institutions at the local level, the right to veto acts of the representative institutions, as well as the right of the central government to cancel acts of, and even sack, hokims. Thus, there is a rigid hierarchy, which restrains the initiative of the population’s local institutions in development of local self-governance. The approval of hokims by local representative institutions is ineffective. With an undeveloped civil society, weak political parties, and an imperfect electoral system (in which the link between deputies and the electorate is inconsequential), representative bodies cannot embody true representation of the people, cannot take their crucial place in the system of separation of powers. Therefore, in order to establish civil society in Uzbekistan, it is necessary to create a balance of power not only between branches of local government, but also in center-periphery relations. Accordingly, a top policy priority for organization of center-periphery relations should be decentralization. This does not mean that it is necessary to hastily decentralize governance and remove local governance from the control of the center. The process cannot be forced, but nor can it be delayed. Indeed, the current system of center-periphery relations remains unchanged for 12 years. The lagging process of democratization in the state sphere impedes progressive processes in the social sphere. It is, therefore, essential to transition from a centralized form of governance to a decentralized form through relative decentralization. For this, it would be expedient, on the one hand, to relinquish the power to appoint local leaders and, on the other, to introduce the institution of local representative of the central government. The matter of election of the local executive could be handled by the locality itself: election either by the local representative body or by the population. The central government representative, then, should serve as the channel, through which the center implements its policies locally: that is, to influence the implementation of central decisions, observance of the law, guaranteeing human rights, address general government matters in issues of defense, wholeness of territory, etc… For this, the representative of the central government should be granted powers of arresting acts of local executive organs and of passing such acts on to the courts. Other possible levers of influence vis-à-vis local institutions could be dissolution of the local representative body, the power to sack the hokim, etc.” (p. 34–35) Further, Ruzmetov proposes the French model, based on prefects, as the most appropriate for Uzbekistan. He suggests that hokims be elected by local representative bodies, as he does not believe that a strict separation of powers is as necessary on the local level as it is on the central level.


ANNEX G

COMMUNAL SERVICE TARIFFS, TASHKENT CITY, JANUARY 2004


Apartments

Service

Unit of

measure (monthly

where applicable)

Rate

1 room, 18m2 / 30m2*, 2

people, 110 kilowatts /

hour

2 rooms, 28m2 / 42m2, 4


hour

3 rooms, 42m2 / 69m2, 5


hour

4 rooms, 55.5m2 / 81m2, 7 people, 200

kilowatts / hour

5 rooms, 70m2 / 100m2, 10 people, 220 kilowatts /

hour

Communal property maintenance and repair per m2 of total area (average full rate) 44,27 so’ms

1st group (all-

inclusive, with

elevator)

per m2 of total

area

53.86 1615.80 2262.12 3716.34 4362.66 5386

2nd group (all-

inclusive, no

elevator)

per m2 of total

area 40.81 1224.30 1714.02 2815.89 3305.61 4081

3rd group (hot water

not included, no

elevator)

per m2 of total

area 35.95 1078.50 1509.9 2480.55 2911.95 3595

4th group (hot water

and heat not

included, no elevator)

per m2 of total

area 34.87 1046.10 1464.54 2406.03 2824.47 3487

5th group (hot water,

heat and sewage not


per m2 of total

area 27.17 815.10 1141.14 1874.73 2200.77 2717

Communal Services

Heating per m2 of living

area 95.00 1710.00 2660.00 3990.00 5272.50 6650

Hot water per person 1303.92 2607.84 5215.68 6519.60 9127.44 13039


Cold water per person 357.84 715.68 1431.36 1789.20 2504.88 3578

Natural gas per person 115.82 231.64 463.28 579.10 810.74 1158

Solid waste per person 250.00 500.00 1000.00 1250.00 1750.00 2500

Electricity per kilowatt/hour

*

18.20 2002.00 2730.00 3367.00 3640.00 4004

Total for communal

services 7767.16 13500.32 17494.90 23105.56 30929

Telephone per line 910.00 910.00 910.00 910.00 910.00 910.00

Total payment per month

1st group (all-

inclusive, with

elevator)

so’ms 10292.96 16672.44 22121.24 28378.22 37225

2nd group (all-

inclusive, no

elevator)

so’ms 9901.46 16124.34 21220.79 27321.17 35920

3rd group (hot water

not included, no

elevator)

so’ms 9755.66 15920.22 20885.45 26927.51 35434

4th group (hot water

and heat not


so’ms 9723.26 15874.86 20810.93 26840.03 35326

5th group (hot water,

heat and sewage not


so’ms 9492.26 15551.46 20279.63 26216.33 34556

* [[AUTHOR: Is this “kilowatt hour”, “kilowatt or hour”, or “kilowatts per hour”? ]]


ANNEX H

ORGANIZATIONAL STRUCTURES FOR COMMUNAL SERVICES


Administrative Structure

of O’zkommunxizmat Agency

Source: From CoM order #421 (2003)

General Director

First Deputy General Director

Communal Services Reform and Reform

Monitoring Administration 13 employees

Department of Economic Analysis

and Forecasting 4 employees

Department of Privatization and Post-Privatization Support

3 employees

Head of General Directorate for Operation and Development of Interregional

Water Pipes

Central Administration for Supplying Natural Gas to the Population and Enterprises

11 employees

Auditing Commission for Natural Gas

9 employees

Department of External Economic Relations

2 employees

Accounting and Analysis

Division 3 employees

Management Division 3 employees

Human Resources Manager

Juridical Consultant

Security Division 1 employee


Organizational Structure of O’zkommunxizmat

Uzbekistani Communal Services Agency

Source: From CoM orders #493 (2000) and #421 (2003)

O’zkommunxizmat Agency

O’zkommunalloyiha Institute

Public Corporation Kommunalinvest

Five Departments for Operation and Development of

Interregional Water Pipelines

(Tuyamuyun-Nukus, Tuyamuyun-

Urgench, Damxoji, Jizzax Province Water Pipelines,

Dehqonobod)

General Directorate for Operation and

Development of Interregional Water

Pipes

Specialized Repairs and Parts Enterprise

Open Joint Stock Companies:

O’zkommunmashta’minot (Tashkent City),

Fergana Gas Equipment Factory,

Kommunalnik (Samarqand City) Gazavtomatika (Tashkent City) Angrengazmash (Angren City)

Kommunalsozlovchi (Tashkent City)

O’zbekgazsuvqurilish (Tashkent City)

O’zkommunissiqlikta’mir (Tashkent City)

Territorial Gas Supply Companies in

Provinces, Districts and Cities

Training Center O’zkommunuvtashk ilotchi

O’zgazloyiha Institute


Organizational Structure

of Territorial Communal Services Operation Union (TKEO)

Except Tashkent City


Director

Deputy Director for Economics

Communal Services Reform

Division

Economic Analysis and Forecasting

Division

Communal Service Rates and Marketing

Division

Privatization and Post-Privatization Support Division

Deputy Director for Construction

and Capital Repairs

Open Joint Stock Company Ta’mirqurilish Training and

Methodological Center

Vodokanal (Cold water and

sewage)

Issiqlik Manbai (Heating and hot

water)

Outdoor lighting concern

Electronic transport Concern (trolley)

Other organizations and enterprises

Construction and Capital Repairs

Division

Logistics Division

Communal Drainage Concern

Bureau of Citizens’ Services

Other enterprises and organizations for capital repair

and construction of communal service

facilities

Management Division

Accounting Division

Division for Training and Retraining

Legal Division

Security Division

District and City KEUs (Communal

Service Administrations)

Cadastre Bureau for Technical Inventory

Division of Infrastructure and

Networks

Department of Technical Policy and

Task Coordination

Central Operating Service

First Deputy Director—Head Engineer



of Tashkent City Territorial Communal Services Operation Union

(TKEO) Source: From CoM order #493 (2000)

Economic Analysis and Forecasting Division

Communal Services Reform Division

Privatization and Post-Privatization Support

Division

Communal Service Rates and Marketing Division

Construction and Capital Repairs Division

Spare Parts and Components Division

Division for Facades and Landscaping

Workers’ Safety Division

“Sanitary Cleaning”

Division of Official Letters and Quality Control

Administrative Division Security Division

Accounting Division

Division for Training and Retraining

Legal Division

Concern for Development and Operation of Equipment for

Protection from Electric Shock and Hazardous Materials

Special Works Division

Tashkent Elevator Concern

Hotels

Logistics Companies; Parts and Components Concerns

Repairs and Construction Division Kommunal-Ta’mirlash

Gordorstroyremont Concern

Other Organizations and Enterprises

Trust Suvsoz (Vodokanal)

Urban Improvements Division

Producers’ Union Tashteploenergo

Toshshaharnur Enterprise

High-rise Office Building Operation Enterprise

Self-financing Division for Dormitories

City Operator Service

Self-financing Methodological Center

Division of Infrastructure and Networks

Housing Stock Management Division

Head of Department of “Sanitary Cleaning” (Deputy Director)

First Deputy Director Deputy Director for Management of Housing

Stock

Deputy Director for Maintenance and Repair

of Communal Service Infrastructure

Director’s Apparat (Management Division)

11 district KRAVSes (local

maintenance enterprises)

Unified Buyer Service (SEZ)

Director



of City / District Communal Service Administra tion (KEU)

except Tashkent City


Territorial Communal Services Operation Union of Provincial

Hokimiyat

City / District

Hokimiyat

Director

Communal Services and Maintenance Division

Engineer for Safety and Citizens’ Protection

Landscaping and Irrigation Service

Construction and Repair Sections

Greening Service

Emergency Operator

Privatization and Post-Privatization Support Division

TSJ Cooperation Division

Accounting Division

Human Resources Manager

Producers’ Divisions for Maintenance of

Housing Stock

“Sanitary Cleaning” Service

Bureau of Citizens’ Services

Other Services

First Deputy Director—Head Engineer


ANNEX I

TASHKENT CITY AND TASHKENT PROVINCE LOCAL COUNCILS LATE FEBRUARY, 2004


Tashkent City Council of People’s Deputies

by nomination as of late February, 2004

At the time of writing, the Tashkent City Council included the City Hokim, all 11 district hokims, as well as various executive appointees, an apparent violation of paragraph 6 of article 24 of the Law on Elections to the Provincial, District and City Councils of People’s Deputies (which states that, with the exception of hokims, executive branch officials may not simultaneously hold office as people’s deputies). One informed observer stated that the vast majority of Tashkent City people’s deputies are, either formally or informally, direct executive branch appointees. In Tashkent City, they tend to be nominated by either the National Democratic Party (political parties can nominate either their own members or independents) or mahallas.†

Tashkent Province Council of People’s Deputies by nomination

as of late February, 2004 Nominated by # Xalq Demokratik Partiyasi (National Democratic Party) 12 Vatan Taraqqiyot Partiyasi (Party for Development of the Fatherland) 1 Fidokorlar Partiyasi (Party of Self-Sacrifice) 2 District Local Councils 29 Initiative Groups of Voters 2 Total (since 1999 elections, seven have resigned; old total number of deputies was 54) 47 of which city or district hokims 7 of which former hokims who remained deputies after dismissal 10 † In Tashkent Province, district-level local councils tend to nominate candidates from the executive branch (including hokims and former hokims as well as other appointees). Elections were held for the seven open seats on February 29, 2004.

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