Alisher Taksanov, Ph.D. (Economics)

UZBEK TOURIST INDUSTRY: BEFORE AND AFTER INDEPENDENCE

TENDENCIES IN UZBEK TOURISM. In Uzbekistan, tourism has always been regarded as the most efficient sector of the national economy. Oriental amicability, developed infrastructure, abundance of unique historical, religious and natural monuments couldn’t but create certain auspicious prerequisites for its dynamic development. And small wonder, then, that in Soviet times, Central Asia in general and Uzbekistan in particular attracted many tourists from the European part of the USSR and even from the Caucasus, which was rightfully considered to the health-resort paradise. The formation and development of the Great Silk Road, dating back to the 3rd millennium B.C., are universally viewed as the main historical prerequisites for the development of tourism in Uzbekistan.

In an effort to maintain the country’s image as a hospitable and cordial nation, and preceding from the available potentialities of the Uzbek economy, the Government devoted particular attention to developing the industry of hospitability. It should be said in all fairness that this was the case both before and after the acquisition of independence by Uzbekistan. Some two decades ago, the Soviet Government categorized Uzbekistan as a tasty morsel of the tourist “pie”.

Therefore, the history of national tourism should be broken down into 2 periods: before and after the country’s embarking on the path of independent development. However hard you may try to make secret of the fact, the 1st period had a strong ideological bias (friendship of peoples, support of the country’s transition from feudalism to socialism etc.). Despite its greater ideological, rather than economic, significance, the sector was backed by budgetary funds and investments made by departments, enterprises and organizations. At that time, tourism was characterized by a variety of types and vectors, as different institutions were involved in its development, including:

- organizations, whose activity had a direct bearing on tourism (the State Foreign Tourist Committee, the State Sports Committee, Ministries of Public Health and Culture, municipal services and suchlike);

- departments, which ran their own holiday homes, health-resorts and rest centers (Ministries of Defense, Internal Affairs, Industry and Agriculture etc.);

- public organizations (the communist party, VLKSM, trade unions etc.);- cooperative organizations (kolkhozs, consumer’s unions etc.).Such a situation in the tourist industry had its “pluses” and “minuses”. Among its negative consequences,

one can mention the absence of single policy and common standards imposed on tourism as a separate sector. This, in turn, led to a number of ways, in which its management, investment and planning were carried out. The fact that each of these institutions invested in the creation of the material and technical base of tourism, thereby promoting travel, sports and leisure activities, is on the plus side of the posture of affairs in tourism in that period.

TOURISM BEFORE THE ACQUISITION OF INDEPENDENCE. Traveling, beyond doubt, has deep roots in Central Asia. Suffice it to recollect the fact that it is across this very region that the Great Silk Road was running. Innumerable caravans loaded with goods of every description and accompanied by merchants, skilled craftsmen, scholars and travelers moved along the ancient route for centuries. En route they stopped to stay overnight in caravanserais based in the world’s renowned cities of Samarkand, Bukhara, Khiva, Shakhrizabs, Tashkent etc. The primary aim of this review, however, is not the history of traveling within the region from time immemorial. Instead, its focus will be on the development of travel in Central Asia over the past 90 years.

The period of proletarian tourism formation (1917-1930). After the Great October Socialist Revolution in Russia, the territory of Central Asia appeared under the communist party’s overall control. A civil war continued the devastation of the leisure sector’s infrastructure. In particular, the material base available at the

time was ruined. At this stage, it is worth mentioning that it comprised holiday hotels, guest houses, country rest homes for functionaries and army officers, as well as special farms intended for hunting and horse-racing built by Russian colonizers. This means it was necessary to start forming the tourist industry practically from scratch. Needless to say, the sector didn’t top the list of economic priorities in that period. That’s why emphasis was placed on those elements of tourist infrastructure that local authorities managed to preserve or reconstruct. To tackle the problem of accommodation shortage, dwelling houses of local aristocrats situated on the territory of Turkestan Governor-Generalship and the Ferghana Valley were expropriated. With the conquest of Bukhara by the Red Army, the Emirate’s rich infrastructure, including beautiful country houses, summer palaces and residences owned by local feudals changed hands. Later on, all those buildings were used to accommodate holiday-making servicemen, Soviet and party functionaries, guests from Russia and Ukraine. At the same time, some of the expropriated edifices were turned into orphanages for homeless children and shelters for refugees from different regions of the former tsarist empire. Between 1919 and 1924, there were about 50 such establishments. Apart from merely providing a roof and rehabilitating their visitors, they were also involved in the organization of tourism. It was the period of close contact between Russians and local inhabitants, with the former getting to know the regional culture and traditions, as well as the mode of life of its denizens.

1918 saw the creation in Russia of the first tourist organization, called the Bureau for School Excursions. Three months later, its branches emerged in Turkestan. Following the passage of decrees on health-improving areas, all sorts of resorts were opened across the region. Construction of tourist centers, sanatoria, pioneer camps, resorts etc. was under way all over the place. Churches, country houses and estates of domestic landowners as well as other unique architectural masterpieces owned by rich people, which are now regarded as historical monuments, were easily transformed into public rest houses. It needs to mention in this context that although these decrees were mainly approved by the government of the Russian Federation, they were applicable to all territories of the former tsarist empire.

Let it be noted here that despite the fact that tourism was not prioritized as a separate sector, such issue as the organization of recreation for working masses was raised time and again by new governments of the People’s Soviet Republic of Bukhara and the People’s Soviet Republic of Khorezm. The main problem facing the local authorities was the scarcity of available resources, including accommodation facilities, foodstuffs, specially trained personnel etc. With the formation in 1924 of the Uzbek SSR and its subsequent entry into the USSR, all directives issued by the communist party and the Soviet government were binding upon all newly-established national republics. And the tourist sector was no exception. Almost all tourist infrastructure facilities in the region were serviced by Russia’s representatives, who arrived in Central Asia to handle a range of socio-political and economic issues. The bulk of holiday-makers in local rest houses and resorts was accounted for by high-rank functionaries and their family members, with industrial workers making up a minor portion. By the start of 1929, there were already 160 tourist facilities in Turkestan, whose capacity, however, was limited owing to a variety of reasons. What’s more, local inhabitants represented only 20-30 per cent of their total staff, meaning that specialists from regions other than Central Asia were widely employed there.

Since 1925, an important process of creation of new socio-economic prerequisites started to unfold in the region, following the ongoing process of nationalization of feudal and capitalist enterprises based on the territory of the Tashkent Province and in the towns of Namanghan, Andijan, Bukhara and Samarkand. The excursion and tourist movement initiated by Russian intelligentsia was gaining strength at the same time. Official documents stated that “as a result of the restoration and reconstruction of the national economy and the development of the cultural revolution, the first establishments of proletarian tourism started to appear, whose aim was to organize massive recreation of work people and to meet their cultural needs and demand for studying the motherland’s cultural values and nature”. Schools, museums, komsomol organizations etc. were combining efforts to meet the target. Sub-divisions set up at tourist societies arranged all kinds of excursions and walking tours. In 1920, there was founded the United Lecture and Excursion Bureau in Russia, with a view to ensuring popularization of proletarian tourism and excursion activity. Its branches and prototype organizations were then founded in Uzbekistan, in particular in Tashkent and the Tashkent and Samarkand Provinces, for workers and employees. Tourist visits and excursions were organized by trade unions. It should be noted here that as this work was not paid for, it was carried out by enthusiasts and volunteers who were not on permanent staff. In spite of this fact, they were the first to develop more or less comprehensive tourist programs and routes. In the Samarkand Province alone, there were as many as 23 popular tourist routes at the time. However, the profitability of tourist facilities and resorts remained low – some 20 per cent.

Naturally, a complex criminal situation and social disturbances in some of the republic’s districts were hardly conducive to the development of tourism in the region. For instance, peasant revolts took place in the Ferghana Valley and the Khorezm Province, whose inhabitants protested against the “military communism” policy and tyranny of Soviet administration. That several areas were dominated by basmatch counter-revolutionary robber bands made the situation worse. Armed bandits frequently robbed tourists, with local militia being unable to guarantee their safety. It is for this reason than the hospitality industry thrived only in two locations, namely the Tashkent and Samarkand Provinces.

As the population’s interest for active tourism and excursions grew, the necessity to train special cadres came to the fore. Excursion centers were the first to start preparing professional guides and tourism organizers. Their work was aided by certain steps taken by the government to develop the tourist sector. All of them were focusing on creating a material and technical base and training professional cadres for tourism. Moreover, understanding the directions, which should be given priority attention, was gradually taking a clear-cut shape: centralization of tourist activity; provision of tourists and sightseers with means of transport, accommodation, food, guide-books and information on tourist destinations; preparation of professional organizers, guides and group leaders. Teachers and active komsomol members became the first professionals in Soviet tourism. Special tourist bureaus set up at komsomol committees were tasked with providing assistance to local mass-travel societies and performing reference-instructing functions. These bureaus comprised the following sections: study of local lore, camp-based tourism, long-distance tourism and suburban tourism. Apart from accumulating tourism-related materials, such as maps, route descriptions etc., these organizations were busy building cooperative links with public-catering enterprises, hotels, municipal and transport services. In short, their efficient activity was highly contributive to the formation of tourism as an independent industry.

As the development of corresponding infrastructure continually gained in scope, a growing number of people from Russia, Ukraine and the Caucasus showed interest for Uzbekistan’s attractive tourist routes. With the Turksib railway line put into service and new main lines being under construction, Central Asia increasingly turned into one of the USSR’s most popular mass recreation destinations. Inhabitants of Uzbekistan, in turn, could visit tourist destinations in the European part of the country and the Caucasus. Concerted efforts by trade unions and komsomol organizations in the field of tourism made it possible to introduce preferential tariffs on travel by railway for tourists, to lease premises for tourist camps, to acquire the necessary tourist outfit etc. All this was needed to render tourist services, which were partially funded by trade unions. At the same time, with the Soviet economy developing at a quick pace, there appeared a stratum of people who could afford to pay for tourist services and travel, thus laying down the foundation of elite tourism. A lot of commercial organizations emerging countrywide offered a range of travels and excursions for solvent sections of the population in different regions of the USSR. By the end of 1929, their number reached 45, of which 30 provided services to guests from other republics.

In 1925, in accordance with a decision by the Soviet government, the state joint-stock company, called Soviet Tourist (GAO Sovtur) was set up in the USSR, with a view to organizing trips on motor-ships and trains and servicing groups of holiday-makers traveling on certain routes. The territory of Uzbekistan was included in Sovtur’s scheme of operation, since one of the latter’s functions was the formation of a network of tourist centers and regional-study tours throughout the Soviet Union. This means that the period under discussion saw the introduction of planned management mechanisms, with tourism assuming a distinct character of separate economic sector. Despite declarations of its orientation towards the servicing of work people, Sovtur’s tourist centers quickly turned into the rest sites for its shareholders and their family members (who were high-paid intelligentsia, including high-rank party workers and Soviet bureaucracy). Industrial and agricultural workers, however, had little chance of spending their holiday there. By the year 1930, the number of commercial organizations specializing in tourism halved.

What characterized this period of tourism development was a clash of economic systems: a nascent market system and a centralized command control system, whose outcome was predetermined. With the New Economic Policy curtailed, the Soviet system of management started reigning supreme across all economic sectors. The following trends characterizing that period are worth mentioning:

- creation of small and medium-sized commercial enterprises involved in tourism; - formation of the market for tourist services and the elite nature of their consumption; - creation of far-flung tourist infrastructure, including restaurants, hotels, transport networks etc.; - break-down of tourism into two distinct types: servicing of well-to-do layers of the population and

excursion (recreation) tourism for intelligentsia; - establishment of tourist firms, bureaus, companies, clubs, societies etc. In the 1930s, however, all of them were either re-organized or liquidated.

According to official statistics, in 1980, there were 31 young-tourist stations in Uzbekistan, which served 48,000 children (in 1985 – 32 and 107,400 and in 1990 – 36 and 65,000, respectively). Over a decade, the number of summer pioneer camps grew from 1,417 in 1980 (with 593,500 children served) to 3,880 in 1980 (825,100 children served). So, in the Soviet period, the state paid much attention to the development of tourism for teenagers.

Let us now look at some more relevant figures. In the composition of aggregate income of workers and office employees, the share of subsidized vouchers to sanatoria, rest homes and pioneer camps reached 10.2 per cent in 1980, and 10.0 per cent – in 1990 (10.0 per cent and 11.8 per cent, correspondingly, for farmers). On the other hand, a significant portion of the population’s expenses on tourism and health-improving services was covered from public consumption funds, which heightened the importance of social tourism in Uzbekistan. For instance, in 1980, 778.2 million Rubles were paid from public consumption funds for free medical service, treatment in sanatoria and health resorts and physical training. In 1988 and 1990, this indicator was 1,25 billion Rubles and 1,58 billion Rubles, correspondingly.

Moreover, in 1990, the per capita indicator of tourist and excursion services came to 6.4 Rubles, cultural services – 4.2 Rubles, physical training and sports – 0.4 Rubles and health-improving and resort – 2.2 Rubles. All in all, in the composition of paid services, the share of tourism and excursions amounted to 4.9 per cent in 1989 and 4.6 per cent in 1990 (physical training and sports – 0.4 per cent and 0.3 per cent, health improving and resort treatment – 1.6 per cent and 1.6 per cent, respectively).

It should be noted that in 1980, the state social insurance’s expenses on treatment of workers and office employees in sanatoria and resorts ran at 26.1 million Rubles, in 1985 – 36.8 million Rubles, in 1990 – 60.5 million Rubles; on servicing of children in pioneer camps and their pre-school and extra-school education – 8.8 million Rubles, 18.8 million Rubles and 21.8 million Rubles, correspondingly. The total amount appropriated from the state budget of the Uzbek SSR was 918.3 million Rubles in 1980 and 1.62 billion Rubles in 1990.

No less dynamic and impressing are indicators characterizing the Republic’s hospitality industry in the final decade of Soviet power. (See Table 1).

In 1990, as many as 2,01 million workers and their family members underwent treatment and rested in sanatoria and health resorts, holiday hotels and rest centers. Of these, 1.6 million people enjoyed a long-term treatment and rest, with the remaining 413,500 – resting within 1-2 days. At the same time, the number of those who took part in excursions was 7.26 million in 1990, compared with 4.07 million a decade ago. In summer, approximately 900,000 children and teenagers rested in pioneer and school camps, tourist centers and country-cottages.

According to some estimates, in the period 1985-1989, the volume of domestic and regional tourism in Uzbekistan made it possible to encompass 1.4-1.6 million people, with foreign tourists accounting for 130,000-180,000. In 1992, the country’s tourist industry offered foreign visitors only 27 types of services. To compare, in Turkey, Italy and Spain, this figure ranged from 250 to 400. It is clear that, the scope of Uzbek tourism was limited. The main reason for such a limitation lied in the planned system of management and the socialist form of economy.

A sharp transition in the mid-1980s to the policy of regional self-financing and disintegration of economic links, inflation, collapse of the Soviet state that followed, and as a result, a complicated political situation in Central Asia caused a lingering crisis and stagnation, in which the tourist industry of Uzbekistan found itself since 1990. It is necessary to observe in this context that the same fate overtook other sectors of the national economy as well. The number of foreign tourists coming to visit the Republic plummeted 4-5-fold, according to some tallies. The country’s tourist potential was used at no more than 6 per cent, with the average per-tourist profit not exceeding US $12 per day. To attract tourists, services were often offered at reduced rates. Although the domestic hotel resources in that period were quite scarce, they met corresponding international standards. By the end of 1992, almost 50 per cent of tourist facilities in Uzbekistan were loss-making or of little profit. What’s more, both the shares of inter-republic exchange and domestic tourism started to shrink. The number of national parks, nature reserves and shooting areas, involved in tourism, decreased from 13 in 1980 to 10 in 1990, with their acreage diminishing from 272.100 ha to 239.900 ha. This produced severe impacts on the ecological types of recreation and natural tourism.

Before the acquisition of independence, tourism in Uzbekistan, as all other industries of the national economy, was toughly regulated by central authorities. The main centers of tourist activity in the USSR included the Caucasus, the Crimea, the Baltic states, the historical centers of Russia and Central Asia. In that period, the historical significance of numerous architectural , archeological and cultural monuments and natural sights of Uzbekistan were not advertised. Hence a low demand for them on the part of overseas tourists. In Soviet times, tourism represented one of the elements of cultural work designed to perform

certain ideological functions. Notwithstanding the latter’s dominant role in tourist activity, the sector’s funding was not given a priority and its economic significance was low.

There are several reasons why the tourist industry remains underdeveloped in Uzbekistan. Insufficient attention to tourism as a separate economic sector is the main reason for such a slow progress. This means a lack of complex prognostication, long-term planning and territorial organization of tourism, as well as disregard for non-governmental tour operators. Another obstacle in the way of the sector’s sustainable development seems to be the non-recognition by local authorities of tourist activity as a priority economic direction, in spite of the fact that a lion’s share of revenues derived therefrom goes to the local budget.

With the acquisition of independence, Uzbekistan set the stage for the restoration of the nation’s historical and cultural heritage and regulation of tourist activity. “Tourism affords ample opportunity to cognize the world, while, at the same time, providing access to the international arena. We need to develop this important sector and to capitalize upon its vast potentialities,- stressed the President Islam Karimov of the Republic of Uzbekistan at the session of the Khorezm Province Kengash of People’s Deputies on 16 March 1996. – Our ancient cities of Tashkent, Samarkand, Bukhara and Khiva are 2,500-3,000 years old. They represent an enormous spiritual legacy, which could be translated into material riches and prosperity through the development of tourism. The greater the number of foreign tourists arriving in our country, the more the international community will know about Uzbekistan and the more potentialities we’ll be able to show. To materialize these plans, we need, above all, to upgrade the quality of tourist facilities, for them to be in a position to meet modern requirements and the performance criteria now demanded.

There are countries in Europe, whose territory is so small that it is not always possible to discern them on the map. However, the number of tourists they receive annually is 90-100 times as great as their population. This ensures their progressive development. As for the town of Khiva, whose 2,500 th anniversary we are celebrating today, it was visited by a little more than 15,000 foreign tourists in the past four years. Such a situation cannot be explained by anything else than an inability to demonstrate our wide potentialities, feebleness and incompetence. (Newspaper “Narodnoe Slovo”, 17 March 1996). In this way, the head of the Uzbek state pointed to the problems facing the national tourist industry and an inefficient utilization of the Republic’s tourist potential.

TOURISM AFTER THE ACQUISITION OF INDEPENDENCE. As mentioned above, in the first years of Uzbekistan’s evolution as a sovereign entity, domestic tourism experienced certain difficulties, which were associated mainly with the following factors:

- transition from the centrally-planned economy to a market-oriented system of economic relationships;- functioning as a separate industry;- formation of a single structure, encompassing the sector’s entire resources (accommodation, transport,

tour organization, personnel training and decision-making).Meanwhile, in the space of 15 years since independence, Uzbekistan has succeeded in forming its own

model of tourist activity. On the one hand, it is characterized by the number of tourist visits, while on the other, by the state of its infrastructure. Table 2 provides indicators of tourist flows in Uzbekistan compiled by the National Company Uzbektourism, customs authorities and a group of researchers from the World Trade Organization.

These data clearly indicate that the dynamic of tourist flows tended to change depending on a combination of internal and external factors. It goes without saying that a model susceptible to external determinants may lack stability. In particular, the 11 September tragic events in the US adversely affected the tourist market of Uzbekistan. Nowhere are the results more visible than in relevant statistics: in the period 1993-1999, the number of tourist visits grew at 165.1 per cent , compared with 89.5 per cent in the period 1999-2004. Overall, the growth rate reached 147.9 per cent during the 11-year period. In 2005, the Republic was visited by 241.900 foreign tourists from 117 countries.

Data are also available on the dynamic of services provided only by tourist organizations, which enjoy licences from the National Company Uzbektourism. Table 3 shows that over the 9 years under review, the volume of their services increased 11.1-fold.

The total number of Uzbek citizens going abroad in 2005 reached 380,000. The main destinations comprised Russia, Ukraine, Kazakhstan, Turkey, China, UAE, South Korea, Israel, Greece etc. As regards local tourism, 334.100 citizens of Uzbekistan visited the towns of Samarkand, Bukhara, Shakhrisabz, and Khiva, as well as the mountainous areas of Chimgan and Charvak.

Comparing the tourist-related data for the past two years, one can clearly see that the number of foreign tourists visiting the Republic in 2005 (241,900 citizens from 117 countries) is 25.9 per cent lower than the 2004 figure. Experts stress that the main countries, which provide a greater inflow of tourists to Uzbekistan, remain Austria, Great Britain, Germany, Italy, Korea, the US, Russia, France and Japan. More than 90 per

cent of overseas tourists visit the Republic with cognitive purposes. It should be noted in this connection that in the last few years, interest for cultural and historic tours along the Great Silk Road, religious tourism (pilgrimage) and ecological tourism is on the rise.

Additionally, the formation of tourist infrastructure is in process. There are 408 enterprises in the sector, which carry out their activity on the basis of an appropriate licence. Of these, 326 enterprises are under private ownership. In 2005, 80 organizations were granted the right to operate in the hospitality industry. Another positive tendency worth mentioning is certification of services. Services certified in accordance with this procedure not only acquire legal status, but become in line with corresponding requirements.

In keeping with the data presented by the State Statistics Committee of the Republic of Uzbekistan, as many as 168 hotels, under different types of ownership, are now functioning in the country. Their total accommodation capacity exceeds 14,000 rooms. More than 20 medium-sized and small private hotels and guest-houses came on stream in the last 6 years.

The development of interstate linkages in the field of tourism was also on a rising trend. Last year, for example, the National Company Uzbektourism signed cooperation agreements with the leading tourist administrations of India, Poland and China. The Memorandum of bilateral cooperation was signed with the Republic of Malaysia. Besides, the Uzbek delegation took part in the work of the UN General Assembly of the World Tourist Organization (Dakar, Senegal).

What’s more, in 2005, the Cabinet of Ministers of the Republic of Uzbekistan approved “List of measures to accomplish the stage-by-stage reformation of the tourist industry of Uzbekistan for the period 2006-2010”. In accordance with this document, Uzbektourism worked out a package of regulatory documents to be submitted to the Government and Parliament for consideration. These include, among others, a draft program for the development of tourist services up to the year 2010, as well as draft regional programs for the development of tourism in the Khorezm, Ferghana, Namanghan and Kashkadarya Provinces and in the Republic of Karakalpakstan for the period, in which a new version of the Law of the Republic of Uzbekistan, “On tourism” is in effect. Regional programs for the development of tourism in other provinces of Uzbekistan are in the making. As well as that, the classifier of tourist services was elaborated.

Interesting findings were received by the Center for Expert Estimates, Trans-Asia in respect of tourism development prospects in the Central Asian region. In accordance with the experts’ tallies, the tourist potential was more fully utilized by national tourists in Uzbekistan, and by foreign tourists in Turkmenistan (Table 4).

By the way, the Manila Declaration on World Tourism (1980) accentuates, in particular, the fact that “the share of tourism in the national economy and international trade has turned it into a pivotal indicator of global development”.

Without doubt, within the framework of one country, efficient tourist activity is conducive to a more balanced position of its economy thanks to the re-distribution of national revenues and development of industries, which are auspicious for the national economy as a whole.

Therefore, the development of foreign tourism should be accompanied by similar efforts to develop local tourism. Some estimates show that there are 8-12 local tourists per 1 overseas tourist in Uzbekistan, who use the same services, ensure employment countrywide and contribute substantially to regional budgets.

OUTLINE OF THE UZBEK MODEL. Thus, the Uzbek model of tourism, which has taken shape in the last 15 years, combines the elements of Oriental hospitality (cordiality, security, respect and esteem) and the Western-type standards of servicing (hotel and transport services, reservation, excursions, simultaneous translation etc.) Of no less importance is the fact that the Uzbek model is predetermined by the specific system of communal life that has endured the impact of urbanization processes. This communicates a certain color to the national tourist product. Local communities (makhallyas) continue to be the centers of traditions, mode of life and mentality of the Uzbek people.

Hence, it can be concluded that the Uzbek model of tourism is characterized by the following features:- a dynamically developing services sector is steadily increasing its contribution to the nation’s GDP;- efficient privatization and formation of a mobile private sector were conducive to turning tourism into a

profit-generating industry;- enforcement of basic laws helped create a favorable market environment, while stimulating the inflow

of foreign and government investments, technologies and managerial experience to the tourist sector and infrastructure;

- an efficient personnel training system made it possible to raise the level of services offered;- established diplomatic relations strengthened Uzbekistan’s position on the world stage and initiated

much interest for the Republic on the part of Western tour operators;- air and rail communication links were established with many tourist centers of the world;

- tourism-related agreements were signed with many countries , where tourism is an efficiently performing industry;

- a well thought-out system was introduced for organized arrival of foreign tourists in Uzbekistan.

Table 1. Number of people undergoing treatment and resting in sanatoria and rest-homes of the Uzbek SSR, thou peopleIndicators 1980 1985 1988 1990Total number (excluding 1-2-day rest) 811,3 1241,7 1497,1 1603,8In sanatoria (fro adults and children) 95,9 140,7 170,5 175,0In sanatoria and preventive clinics 76,8 133,0 180,4 187,8In resort polyclinics 4,3 5,3 7,8 8,6In rest-homes and holiday hotels 59,2 56,6 91,8 72,3In rest centers and other rest organizations 16,2 18,1 31,6 24,1

In tourist hotels and centers 558,9 888,0 1015,0 1136,0

Table 2. Rated indicators presented by 3 tourist movement centers in Uzbekistan in the period 1993-2005Period Uzbektourism data Customs service data Forecast data by WTO

groupTotal tourist number, thou

Foreign tourists, thou

Departure, thou

Arrival, thou

Tourist number, thou

Profit from tourism, billion dollars

1993 332,2 92,35 - - - -1994 309,5 60,9 - - - -1995 305,8 92,02 - - - -1996 368,3 173,9 - - 174 0,1981997 484,2 252,9 954,4 1030,5 270 0,3511998 486,2 272,0 810,5 939,8 400 0,5601999 549,7 274,0 486,8 - 500 0,7502000 552,8 278,0 - - 650 1,042001 529,9 231,4 - - 710 1,1362002 445,5 198,1 - - 800 1,3202003 471,4 230,4 - - - -2004 492,4 261,6 - 287,63 - -2005 241,9 330,13 - -

Table 3. Tendencies observed in the tourist sector of Uzbekistan in the period 1996-2004Indicators/ Period

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Total volume of services, billion Soum

1,77 3,65 4,69 5,304 6,88 10,1 15,7 17,5 17,9

Profit, million Soum

399,1 544,5 382,3 517,6 443,0 1111,8 -166,5 150,61 -258,7

Export of services, million dollars

14,49 33,77 20,98 25,43 27,13 22,66 21,54 23,58 28,02

Table 4. Respondent opinions on the use of tourist potentialities in Central Asia (average figures)States Use of the country’s potentialities by tourists

National Foreign Republic of Kazakhstan 6 4Republic of Kyrgyzstan 3 3Republic of Tajikistan 4 1Turkmenistan 5 7Republic of Uzbekistan 7 5

HISTORICAL EXCURSUS IN THE DEVELOPMENT OF UZBEK TOURISM One would be mistaken to claim that tourism is a new sector in Uzbekistan, for its widespread

development started as far back as the 1960s, when the organization of mass recreation on the basis of local resources came to the fore. Following corresponding governmental resolutions and decisions made by non-state organizations, a solid material and technical base of tourism was established in the Republic. By the end of the 1980s, its structure was as follows:

- 10 per cent of property was in the Union’s ownership;- 30 per cent of property was owned by both the Union and the Republic;- 60 per cent of property was owned entirely by the Republic.The very organization of the tourist industry was not uniform by structure and composition,

since the following entities appeared in the role of participants and proprietors:- ministries, departments and committees, which built rest homes and tourist centers within

the framework of their sectors (some 40 per cent of the total number);- public organizations (the communist party, Komsomol, trade unions, women’s committees

etc.) – their share reached 20 per cent;- enterprises and institutions, with rest homes, sanatoria, children’s summer camps and tourist

centers on their balance (30 per cent);- cooperatives and other economic establishments (collective farms, consumers’ cooperatives

etc.), with rehabilitation and tourist facilities on their balance (9 per cent);- local administrations and self-government institutions (executive committees and village

soviets), which also run tourist centers on their territories for regional development purposes, but their share in tourist business was negligible – less than 1 per cent.

There were some peculiarities that characterized the organizational structure of tourism in the period 1960-1990. First of all, one should mention the many-vector pattern of development and the lack of well-coordinated development policy. This situation, however, was a natural result of the tourist sector’s extremely scattered character. The point is, it was composed of the following tourist facilities:

- enterprises incorporated into the USSR State Committee on Foreign Tourism (hotels and tourist centers) and located on the Republic’s territory;

- tourist centers and installations subordinated to the State Committees on Sports and Physical Training of both the USSR and Uzbekistan;

- rest homes and children’s summer camps owned by the ministries of industry, agriculture, construction and internal affairs, as well as by industrial enterprises, research institutions and collective farms;

- tourist installations incorporated into the trade union systems of both the USSR and Uzbekistan;

- tourist facilities owned by Komsomol organizations of both the USSR and Uzbekistan, and public organizations;

- health resorts, rehabilitation clinics, health centers and sanatoria incorporated into the ministries of public health of both the USSR and Uzbekistan;

- tourist installations owned by local village soviets and executive committees.

Needless to say that tourist facilities run by the State Committee on Foreign Tourism surpassed other categories in terms of technical equipment, architectural excellence and construction quality. It is quite clear that tourist installations owned by local soviets and public organizations were on the opposite end of the range, i.e. they were poorly-equipped and offered low-quality services. A fierce struggle for financing and investments required to build and maintain tourist facilities was carried on within decades and not only between the republics of the former USSR, but also between local institutions of self-governance within the republics. As a consequence, the development of tourism didn’t take account of technical, natural and infrastructure potentialities of one or another region. Moreover, most ecological and geographical requirements were ignored, which could not but adversely affected the environment, employment and profitability of this sector. For all that, tourism continued to develop, with the following factors influencing the process:

- the availability of so-called “iron curtain” between the USSR and the rest of the world, that made mass foreign tourism impossible, but facilitated the exchange of tourists between the republics;

- the existence of social economy, where tourism-related services were viewed as luxury and therefore were very attractive for common citizens;

- the reinforcement of USSR state property on the territories of national republics, which led to a centralized distribution of tourist flows;

- the support of low-profitable and unprofitable tourist organizations by injecting state subsidies, which scaled up the social importance of the sphere of recreation and tourism.

According to some estimates, in the period 1985-1989, the number of domestic and regional tourism in Uzbekistan approximated 1.4- 1.6 million people, including 130,000-180,000 foreign tourists. In 1992, the Republic’s tourist sector could offer foreign tourists only 27 types of services. Compare this indicator with 250-400 types of tourist services offered in countries well advanced in tourism, such as Turkey, Italy and Spain. As you can see, the potentialities of Uzbek tourism were limited. And the main reason behind such a deplorable state of affairs in the region, which had everything to become a tourist Mecca, was a planned-directive method of administration, combined with the peculiarities of socialist economy.

A sharp transition to regional self-financing in the former USSR in the middle of the 1980s, the ensuing disintegration of economic links between the regions, inflation and a complicated political situation in Central Asia resulted in a protracted crisis, which befell almost all the industries of Uzbekistan in 1990. Tourism was no exception. By 1992, the sector witnessed a 4-5-fold slump in the number of foreign tourists arriving in the Republic. Utilization of the national tourist potential didn’t exceed 6 per cent, with daily profit generated by a foreign tourist averaging US $12. Very often, tourist services were rendered at reduced tariff rates. By the most modest tallies, Uzbekistan received US $3 million less in profit in 1992. It must be observed that the number of rooms, which met generally accepted international standards was insignificant in that period. By the end of 1992, almost 50 per cent of tourist installations available in the Republic were loss-making or low-profitable. What’s more, the situation exacerbated by a sharp drop in both the volume of inter-republic exchange of tourists and the share of domestic tourism.

On the other hand, at the end of the 1980s, the “iron curtain” was completely destroyed, and international tourism entered the phase of continuous progress. In 1990, a total of 7.2 million foreigners arrived in the USSR, of whom 2.2 million as tourists. At the same time, 9.08 million Soviet citizens went abroad, including 2.1 million as tourists. The same tendency could be observed in Central Asia, in particular in Uzbekistan and Kazakhstan. According to customs statistics for 1997, more than 1 million people left the Republic, for various reasons, mainly for the CIS member states.

The entire period of tourism development in Uzbekistan can be divided into several stages:The period of formation: 1990-1998. It started simultaneously with the introduction of the

Law on Foreign Economic Activity. This document allowed domestic enterprises to trade in their produce and services in the international markets. The Law specified that each subject of foreign economic activity may independently determine the form, type and direction of its participation in

foreign economic relationships, to enlist, in accordance with the established procedure, cooperation of legal entities and natural persons on a contract or gratuitous basis, for the purposes of its foreign economic activity. In addition, it was entitled to possess, use or dispose of the results of its foreign economic activity, including foreign exchange receipts, in keeping with the legislation of the Republic of Uzbekistan. The objects of foreign economic activity encompass all kinds of industries, goods and services created in all industries and sectors of the national economy, as well as securities, scientific findings, intellectual and other values, with the exception of the objects, whose utilization in foreign economic activity is banned under the law of both the USSR and Uzbekistan. Legal entities and natural persons, including foreign and international organizations operating within and outside the Republic and registered in Uzbekistan as participants of foreign economic activity may be the subjects of foreign economic activity, irrespective of their type of ownership.

The second important step taken by Uzbekistan was the passage of laws on enterprise and cooperation, which enabled the private sector to join the process of market transformation in the tourist industry. Cooperatives and facilities taken on lease started to appear in the tourist sector. They specialized primarily in public catering, accommodation and transportation, offering their services to foreign and home tourists. The Law on Citizenship constituted one more step in the development of tourism in the country. Under this document, Uzbek citizens may leave the Republic as representatives of a sovereign and independent state, and their status was determined on the basis of international agreements and conventions signed by Uzbekistan. It should be noted in this context that over the 8-year period in question, more than two-third of intergovernmental and inter-departmental agreements were concluded with foreign countries in the field of tourism. They formed the regulatory and legislative framework for the expansion of cooperation with overseas tourist organizations. The year 1994 saw the signing of the Samarkand Declaration on Revival of the Great Silk Road, which defined Uzbekistan as the heart of the new tourism direction.

At the beginning of the 1990s, it became clear that the tourist sector needed root-and-branch reformation. The necessity to concentrate resources for joint action and a breakthrough to the international market took central stage. By that time, Moscow-based structures could no longer represent Uzbekistan’s interests abroad. The Republic had to elaborate its own vision and approaches to tourist business.

Established following the July 27, 1992 Presidential Decree, the National Tourist Company, Uzbektourism incorporated upwards of 150 economic operators functioning in the Republic. Later on, there were issued other governmental resolutions, bearing, directly or indirectly, on the development of national tourism. Let it be mentioned that experts and specialists positively assessed a decision to form a single tourism regulation center. In many countries, tourism is subordinated to the ministries of civil aviation, transport, foreign and home trade, internal affairs, the environment, manufacturing and crafts, youth and sports, culture, labor, economy etc. This hampers the development of tourism as a separate activity. A national tourist administration set up in Uzbekistan made it possible not only to cover a wide range of tourism-related issues, including advertising, information services, licensing, statistics, compilation of economic data, management etc., but also to champion the sector’s interests in the ministries of finance and macroeconomics, the Goskomimuschestvo Committee and other instances.

To tell the truth, its establishment per se failed to radically change the situation in the tourist sector at once. As of January 1, 1993, Uzbektourism ran 1.04 billion Rouble deficit of payment balance, including compensation for installations handed over to Uzbekistan after the demise of the USSR. Among the reasons that led to such a posture of affairs were the departmental dissociation of long standing, the lack of a single controlling abs coordinating body, plus hyper-inflation and various economic problems.

The newly- created tourist administration began elaborating a national tourism model. When working out its general concept, domestic specialists studied the positive experience accumulated by Turkey, Israel, Greece and Spain and methodical recommendations of the World Tourist Organization. The following priority directions were identified: national (home) tourism, international tourism on the basis of the Great Silk Road Project, the sphere of services and trade,

training of personnel and creation of new jobs, and, finally, re-establishment of state ownership rights in the sector. Delineating the main directions in which to perfect tourism, the Presidential Decree, “On measures to activate the participation of the Republic of Uzbekistan in the revival of the Great Silk Road and development of international tourism in the Republic” and the Resolution of the Cabinet of Ministers of the Republic of Uzbekistan, “On measures to create modern infrastructure of international tourism in the Republic of Uzbekistan” gave a new impetus to the development of the industry of hospitality in our country. During the process of re-establishment of state ownership rights and privatization, many tourist facilities were privatized and changed the form of ownership. In the period 1991-1995, the number of rooms available in Uzbek hotels grew 70 per cent, amounting to 9,800. However, in 1996, their number decreased to 7,900, mainly as a result of reconstruction of 1st - and 2nd –category rooms, which were subsequently categorized as top-class suites. A procedure for licensing tourist activity introduced in 1994 created the legal framework for the emergence and functioning of private structures in the national hotel and tour business.

In 1993, the Uzbektourism National Company joined the World Tourist Organization and since then it has been upholding the right of Uzbekistan to become a coordinating center of the Great Silk Road International Project. A year later, under the aegis of the UN and UNESCO, Uzbektourism conducted a WTO seminar, titled “The Silk Road” in Tashkent. At its visiting session on the Registan Square, the participating countries signed the Samarkand Declaration on the development of the Silk Road route within the framework of the international project. Tenacious efforts made by domestic tourist organizations to promote the national tourist product to the world arena bear witness to their aspiration for penetrating the regional and global markets for tourist services. With this objective in view, they also take active part in large-scale international travel-business exchange-fairs held in London, Berlin, Milan and Moscow. In particular, at the WTO seminars in Japan and Teheran dedicated to the Silk Road International Project, the Republic of Uzbekistan was defined as its geographical and coordinating center. Uzbektourism’s successful international activity obtained the recognition at the 12th General Assembly of the World Tourist Organization convened in Istanbul in October 1997, where Uzbekistan, together with France and Italy, was elected a member of the WTO Executive Council.

The 1st International Tourist Fair, Tourism on the Silk Road held in Tashkent in October 1995 was attended by more than 100 firms from 33 countries and official delegations of national tourist organizations operating in the countries, through which the Great Silk Road runs. The 2nd International Tourist Fair held in 1996 brought together 150 companies from 100 countries. As many as 170 firms took part in the 3rd International Tourist Fair. Such a steady rise in the number of participants reflects the fact that the position of the Tashkent Tourist Fair in the rank of the most prestigious international tourist forums solidifies year in, year out.

In 1996, the National Tourist Company incorporated 98 enterprises, under all types of ownership, including 24 state-owned organizations, 31 public joint-stock companies, 2 private joint-stock companies, 10 limited liability societies, 27 collective enterprises and 2 enterprises taken on lease. The high efficiency of economic and financial activity carried out by some of them was apparent, while others didn’t report such impressing results.

In order to improve the situation, Uzbektourism decided to attract foreign capital and advanced managerial experience. A special program was worked out to ensure the attraction to the sector of capital investments from abroad. By 1997, the National Tourist Company completed reconstruction of Shodlik-Palace Hotel with 107 rooms. The project’s total volume of capital investments came to DM 15 million. Uzbektourism planned to channel US $31.5 million to a project to reconstruct the Uzbek-Malaysian joint venture, Hotel Uzbekistan. For the time being, two-third of the invested capital has been already realized. Reconstruction of another hotel facility, the 60-room Hotel Khivahas also been recently brought to completion, with the amount of capital investments in excess of 20 million Soum. In addition, Uzbekistan received a 117.3 million Soum credit toward the development of motor tourism in general and construction of gas filling stations nationwide in particular.

The March 17, 1994 Resolution of the Cabinet of Ministers of the Republic of Uzbekistan, “On the procedure for entry to the Republic of Uzbekistan of foreign citizens and non-citizens” specified a procedure for visiting the country by foreigners and for visiting foreign countries by Uzbek citizens. Tourist flows started taking shape. By 1997, the number of foreign tourists arriving in Uzbekstan grew substantially. According to data furnished by the State Customs Committee of the Republic of Uzbekistan, in 1997, 53, 086 thou tourists came to the country from abroad with cognitive purposes, 108,69 thou – on business, 709,66 thou – on private visas, and 83.01 thou – as passengers in transit. As for tourists from the CIS and “far abroad”, their number reached 953.47 thou. At the same time, the flow of tourists leaving Uzbekistan for foreign countries increased as well. Uzbektourism data demonstrate that domestic tourists went to 74 countries.

The Resolution of the Cabinet of Ministers of the Republic of Uzbekistan, “On professional activity carried out by citizens of the Republic of Uzbekistan abroad and by foreign citizens in the Republic of Uzbekistan” dated October 19, 1995 made it possible to draw a distinction between tourism and labor migration. This document freed domestic tourist agencies from problems associated with the sending of Uzbek citizens abroad as labor force, while re-orientating their overall performance to a specific segment – organization of tours.

One more step in the development of Uzbek tourism was the approval by the Cabinet of Ministers of the Republic of Uzbekistan of the National Program, Meros, aimed at preserving the Republic’s rich historical and cultural heritage, including architectural and historical monuments, works of arts and suchlike. One should also mention in this context the Presidential Decree, “On measures to provide state support to folk crafts and applied arts to ensure their further development” dated March 31, 1997. The Uzbek Government also drafted Regulations on the establishment of special open economic zones of international tourism in the towns of Tashkent, Samarkand, Bukhara and Khiva. Unfortunately, this document is approved so far, in spite of the fact that it bears a great potential, substantiating the possibility for creating such zones in the world renowned touristy centers of Uzbekistan.

The period under discussion was also marked by a noticeable expansion of Uzbektourism’s international relations. With a view to establishing direct linkages with foreign tour operators, the National Tourist Company opened representative offices in countries, with which the Republic of Uzbekistan maintained direct air communication. These included Germany (Frankfurt-on-Maine), Great Britain (London), the US (New York), the United Arab Emirates (Shardge), Russia (Moscow), as well as India and Japan, where some employees from local tourist firms combined jobs. By the ways, most western experts positively assessed their performance and even proposed to broaden their functions. The international tourist community also recorded the accomplishments achieved by Uzbekistan in the hotel industry. In 1996, Hotel Intercontinental won first place in Europe in the “Quality of Services” nomination. As a result of all these steps, by 1997, the Uzbektourism National Company provided services to the tune of 3.26 billion Soum and US $18.84 million, compared with the similar indictors for 1996 – 1.77 billion Soum and US $14.5 million. According to relevant statistics for 1997, the domestic tourist enterprises serviced 730,000 tourists (8.2 per cent higher than the 1996 number), including 350,000 foreigners (12 per cent). Let us underline one more important fact: in a move to augment the nation’s export potential and to put in place corresponding infrastructure facilities in the tourist sector, a group of international and domestic experts worked out a plan of measures designed to ensure a sustainable pace of tourism development in Uzbekistan in 1998. It comprised a number of projects, all directed at the improvement of the material and technical base of tourism and recreation facilities, raising of the level of services, development of advertising, elaboration of new tourist tours and charter flights etc. However, by the end of 1997, Uzbektourism was classified in the national industry classification system as sub-sector of the services industry, rather than a separate sector..

Notwithstanding the apparent progress made by Uzbek tourism, the sector faced certain difficulties at that period. All of them were associated with factors such as conversion of the national currency, stagnation in the field of economic reform, excessive bureaucratism in the sector’s administration, an increased number of check-ups and inspections on the part of controlling

bodies, impaired management practices and the lack of real marketing. In addition, low personal incomes didn’t allow the local population to spend money on traveling and recreation. The bulk of their trips abroad and within the country were motivated by economic reasons. That’s why the overwhelming majority of charter flights and a lion’s share of tour firms’ activity were associated with the servicing of tourists involved in shopping and chelnok commerce. Meanwhile, the tour firms themselves lacked a corporate association, which could protect them from unfair competition, regulate their international relationships, appear in the role of arbitrator, and introduce the codes of business ethics for domestic entrepreneurs.

Uzbektourism experts revealed that some 50 per cent of exchange receipts was generated by visa-cards and transfers of money funds by foreign firms to settlement accounts of tourist enterprises and hotels of the Republic of Uzbekistan. 15 per cent of exchange receipts came from the exchange by foreigners of freely convertible currency at the Central Bank exchange offices in accordance with the fixed rate of exchange. Interestingly, 35 per cent of currency receipts received by Uzbektourism came from the exchange of freely convertible currency bypassing the Central Bank exchange offices,. At the same time, the amount received by foreign tourists via channels other than official ones reached some US $7.0 million or 549.5 million Soum at the effective rate of exchange, compared with 1.33 billion Soum received as a result of illegal exchange operations. The difference between the indicators was 780 million Soum, or US $9.9 million at the official rate of exchange that was in effect at the time. It meant that the Republic’s budget lost about US $10 million that distorted the figure of service exports in the tourist sector.

According to experts, one of the ways for the resolution of this problem stipulated the receipt by Uzbek tourist organizations of foreign exchange funds directly form overseas tour operators.

A significant role in the attraction of foreign tourists was played by tariffs on air, rail and bus communication, as well as accommodation in hotels, catering and servicing en route. All these factors were reflected in the contracts signed. However, transport tariffs tended to increase. Uzbektourism experts calculated that in 1996, the cost of flights to such cities as Istanbul, Frankfurt-on-Maine and New York, compared with that a year ago, grew 16 per cent on the average, while in 1997, it was already 62 per cent, 41 per cent and 49 per cent higher than the 1996 indicators, correspondingly. Although the cost of services offered by Uzbektourism hotels remained unchanged, the inflow of foreign exchange and tourists to the Republic decreased.

As far as tourist servicing is concerned, it accounts only for 20 per cent of the total volume of tourist services exports, with the rest 80 per cent being represented by works accomplished by other ministries and departments of Uzbekistan. Meanwhile currency revenues generated by the tourist sector in the period of its stable development (1997-2002) may grow from US $82.4 million to US $192.6 million. This figure may be reached at the expense of those segments that spawn demand for tourist products (hotels, transport and other conveniences typically associated with the reception of foreign tourists). Besides, the proposed growth would depend on an increase in budgetary appropriations for marketing and popularization of tourism.

However, all those calculations and forecasts were far from local realities, because lots of problems of macroeconomic character were not taken into consideration.

As is evident from what has been said above, national tourism made no headway in the period in question. New approached were needed to state policy and management in the field of tourism, which were elaborated and introduced in the next period of development.

1998-2002 – the period of re-orientation. The tourist industry started analyzing the results achieved and the situation in the tourist market as a whole, as well as looking for new ways and directions of further progression. The Republic introduced the uniform rules for the provision of hotel services. In addition, some hotels, including Le Meridian Tashkent, were granted a number of tax and customs privileges. To further improve the situation in the sector, the Ministry of Foreign Affairs of the Republic of Uzbekistan introduced the practice of issuing return certificates to those Uzbek citizens, who encountered certain problems abroad following the loss of their passports. What’s more, a procedure for import and export of cash foreign currency was substantially streamlined. Procedures for examination of hand luggage and baggage by the homeland security

authorities at airports, as well as procedures for execution of frontier and customs control at the road, rail, air and river border posts were ameliorated. This made it possible to avoid lots of criminal and medical problems. The Law on Frontier became the fundamental document regulating the border crossing by natural persons, goods and material values. The Law “On import and export of cultural values” complemented the overall legal framework for crossing the Republic’s frontier. It should be noted in this context that several legal documents approved in the Republic of Uzbekistan contributed much to legalization of entry to and departure from the country. In particular, the February 26, 1999 Presidential Decree, “On the passport system in the Republic of Uzbekistan” specified a procedure for drawing up national documents. Another document, the Resolution of the Cabinet of Ministers of the Republic of Uzbekistan No 519 dated December 30, 2000 laid down a procedure for registering and issuing identity cards to citizens of the Republic of Uzbekistan under the age of 16.

The most important landmark of the period under discussion was the passing by Uzbek Parliament of the Law on Tourism, which noticeably reinforced the status of tourist organizations and the tourist sector as a whole. In particular, this document introduced the Temporary Procedure for sending tourist groups abroad. According to the Resolution of the Cabinet of Ministers of the Republic of Uzbekistan, “On improvement of the organization of activity carried out by tourist agencies”, the Association of Private Tourist Organizations was conferred a status of corporate/public structure with precise powers. To tell the truth, this organization failed to win any special authority, despite the fact that it provided assistance within its powers to the private sector.

On the other hand, procedures relating to foreign exchange remained unresolved. This affected many sectors of the national economy. Tourism was no exception, where the lack of convertibility led to serious distortions. The problem came on a head with the approval on May 13, 1999 of the Procedure for providing services to foreign tourists for freely convertible currency. Needless to say, the document debased the situation by confusing mutual settlements between suppliers and consumers of tourist services. Besides, it exposed a number of other drawbacks and weaknesses that had contagion effects on the sector’s development. It appeared that the location of tourist installations was highly deformed, which couldn’t held leading to an uneven distribution of revenues and material benefits, as well as a disproportioned employment of production capacities and labor force. For instance, up to 40 per cent of the tourist sector’s total production potential was concentrated in the Uzbek capital city and the Tashkent Province, 37 per cent – in the Bukhara, Samarkand and Khorezm Provinces, and some 16 per cent – in the Ferghana Valley and the Surkhandarya Province. Other provinces making up 50 per cent of the Republic’s territory accounted for a mere 7 per cent of the estimated national tourist potential.

The number of companies involved in tourist activity remained stable. Uzbektourism’s data show that in 1998, 370 licensed tourist enterprises were functioning in the Republic at that period. The biggest non-state organizations in the sector included JV Hotel Uzbekistan, AO Shodlik-Palace, AO Hotel Sayokhat, AO Uzintour, AO Bukhorotourist, KTF Orient Star, KTF KATS, JV Sitara International etc. Some tourist firms terminated their activity for different reasons (violation of the law, bankruptcy, re-orientation of economic activity and the like), while a number of newly-established tourist companies emerged. Meanwhile, notwithstanding the difficulties referred to above, the inflow of tourists tended to grow. In the period 1993-1997, it grew 2.7 times, including the visits by foreign tourists, which increased 5.4 times. In 1993, 92.3 thou people arrived in Uzbekistan, in 1994 – 60.9 thou, in 1995 – 92.0 th0u, in 1996 – 173.0 thou and in 1997 – 252.9 thou. An upward tendency on this front was evident. Domestic tourism grew 129 per cent in the period in question.

At the end of 2002, the Cabinet of Ministers of the Republic of Uzbekistan passed the Resolution, “On measures to ensure the completion of the BUMI Tashkent International Hotel reconstruction project”. This document introduced amendments into the Resolution, “On the sale of the hotel complex in Tashkent to the Bakri Investindo “Indonesia” Company” issued in February 1996. In particular, the Government extended the validity terms of property tax-related privileges. In the words of Gesang Budiarso, executive manager of this hotel complex, the edifice, bought in

2000 for US $39.4 million, remains the biggest installation in the domestic real estate market. A year later, management of this 14-storeyed building was transferred to Choice, a US-based company. Under the management contract, the operator masterminded a reconstruction project valued at some US $2 million. In particular, hotel rooms were substantially widened. Two storeys of the hotel were allotted for apartments in the form of mini-flats intended for residence over a long period of time. Beyond that, the hotel’s room reservation network was expanded. Reconstruction works were finalized by the end of 2003. It should be added that for the American company, it was the first hotel business management project not only in Central Asia, but in the CIS as a whole.

The Uzbek Government took measures to preclude any pressure on entrepreneurship in the tourist industry on the part of enforcement and other controlling authorities. The Law “On guarantees of freedom of entrepreneurial activity” dated May 25, 2000 was an important step in this direction. On April 23, 2001, the Republican Council for Coordination of Controlling Authorities’ Activity approved the Regulations on the procedure for coordinating check-ups of economic operators’ performance carried out by controlling authorities. This document streamlined the way in which inspections and check-ups were conducted at non-state enterprises. Two other documents – the Procedure for payment of duty on the purchase of freely convertible currency issued in 1998 and the Rules for the transaction of operations in foreign currency issued in 2000 – contributed much to the efficient regulation of the domestic foreign exchange market. However, certain limitations contained in the documents made it impossible to put an end to the functioning of the black market.

The period under discussion also saw the continuation of work on the reinforcement of the tourist sector’s international legal base. More than 15 agreements were concluded between the Uzbek Government and the Uzbektourism National Company on the regulation of tourist activity. Using the data furnished by Uzbektourism, the World Tourist Organization compiled its own table highlighting the development of tourism in the Republic of Uzbekistan.

The period 2003 – up to the present time is marked by a sustainable growth of tourism in the country. Since 2003, certain changes took place in the sector as a result of geopolitical transformations in the Central Asian region. They urged on the interest for Uzbekistan on the part of overseas tourists. In 2003, the Uzbek Government simplified visa registration procedures for certain categories of citizens. Starting May 2004, new regulations governing the acceptance of foreign tourists by the Republic’s tourist organizations came into force. This facilitated an increase in the number of visitors arriving in Uzbekistan from abroad, while entrenching the sector’s financial position. In 2003, the tourist industry (within the framework of the Uzbektourism National Company) rendered services to both foreign and domestic tourists to the tune of 16,857 billion Soum, up 105.2 per cent over the established forecast indicator. In 2002, this figure was 15,778 billion Soum (118.1 per cent), in 2001 – 10,118 billion Soum (144.4 per cent) and in 2000 – 6,882 billion Soum (128.5 per cent). The volume of tourists totaled 1.398 million man-days in 2003, 1.399 million – in 2002, 1.590 million – in 2001, and 1.741 million – in the year 2000. These figures provide a clear evidence of the tourist sector’s increasing importance for the national economy. In 2003, the Republic’s tourist infrastructure was significantly strengthened with the commissioning of the following new and reconstructed tourist facilities: Tashkent-based hotels – Grand-Mir, Le Meridian Tashkent, Dedeman and Radisson-Tashkent, as well as President Hotel in the town of Samarkand. Additionally, two new Boeing-757-200 airliners were bought to solidify the tourist industry’s air fleet, in a move to expand the geography of flights and thereby to attract more foreign tourists to the Republic.

According to statistical data, as many as 162 hotels, tourists centers and campings, with a total capacity to accommodate 8,900 tourists, functioned in Uzbekistan in 2004. The load coefficient in the tourist sector reached 22.2 per cent in 2003. 351 organizations under different types of ownership enjoyed licences to carry out tourist activity. 290 of them were privately-run firms. The private sector accounted for 90 per cent of all services provided in the sector. Upwards of 15,000 people are employed in the domestic tourist industry, of whom 30 per cent are university-degree specialists and 70 per cent of workers finished specialized secondary educational

establishments. Efforts were made to further expand the network of tourist installations across the Republic. In November 2003, in particular, the Uzbek Government issued a special resolution on the creation of a health resort area in the town of Khanabad located in the Ferghana Valley. It will be built on the basis of an incomplete rest home. With its construction due to be completed by the end of 2005, the region’s population will have the opportunity to rest and improve their health. The sanatorium will specialize on cardiology, neurology and lung and motor diseases.

As recent studies graphically demonstrates, the Bukhara, Samarkand, Korezm and Tashkent Provinces and the capital city account for 76.2 per cent of the total tourist inflow to the Republic. At the same time, interest is growing on the part of foreign tourists for the Ferghana Valley, the Djizak, Kashkadarya and Surkhandarya Provinces, whose share in the tourist sector now doesn’t exceed 24.8 per cent. The greatest number of tourists come from countries such as Germany, Japan, France, Italy, the UK, Turkey, the US and the Russian Federation. At the same time, citizens from the CIS member states stay 5 days on the average, whereas the duration of stay of tourists from “far-abroad” countries reaches 3-4 days. 89 per cent of all non-residents arrive in Uzbekistan with business, professional and private purposes. The marketing studies also show that, apart from travel-related expenses, foreign tourists readily spend money funds on additional services , which represent 60 per cent of their total expenditures.

Meanwhile, the marketing studies stress an insufficient development of tourist infrastructure and advertising in Uzbekistan, which narrows the national tourism’s potential. According to estimates, the average expenditure per tourist in the world approximates US $2,000, while in Uzbekistan this indicator was less than US $1,000 in 2003.

In this connection, the Cabinet of Ministers of the Republic of Uzbekistan issued the Resolution, “On further development of activity carried out by the Uzbektourism National Company” on July 24, 2004. The document was intended to optimize the organization’s overall performance. Uzbektourism is an authorized state body in the field of tourism, incorporating the Samarkand, Bukhara and Khorezm regional sub-divisions, as well as state-run travel and excursion bureaus that operate in the regional centers nationwide, the Republican Research-Training Consulting Center, the Central Directorate of Dispatching and Servicing and other departmental structures. The company pursues a common state policy in the field of tourism and forms the national infrastructure of tourist services. Uzbektourism implements the state sector development program, including measures designed to ensure a high level of tourist safety. In addition, the company accomplishes certification and licensing procedures. Moreover, Uzbektourism is tasked to attract foreign credits and investments, to carry out advertising and information activity, to train and to raise skill levels of personnel, as well as to encourage research in the field of tourism. On August 29, 2004, the Ministry of Justice of the Republic of Uzbekistan approved the Regulations on the imposition of tourist duty on tourist firms and hotel operators for tourist servicing, which made an appreciable contribution to coordination of tourist activity in the Republic.

The Regulations, “On the procedure for importation and exportation of national currency of the Republic of Uzbekistan” dated March 1, 2004 also had a positive role to play in the development of national tourism. The document laid down that natural persons, both residents and non-residents of the Republic of Uzbekistan, may import to and export from the Republic of Uzbekistan national currency funds, whose amount doesn’t exceed a total of 50 minimum wages. In other words, the Regulations fixed a quota on cash national currency funds that may be imported to or exported from the Republic by foreign and domestic tourists.

Uzbekistan’s international tourist-center status strengthened with the approval by the Cabinet of Ministers of the Republic of Uzbekistan of the Resolution, “On preparation and conduct of the 4th World Tourist Organization (WTO) Meeting in the town of Bukhara” No 356 dated October 12, 2002. It was stated in the document’s preamble that “the event is held with a view to popularizing culture, history and traditions of the Uzbek people, and the tourist potential of Uzbekistan on the basis of ancient historical and architectural monuments that are part and parcel of the world civilization’s treasure-house, to ensuring a wider acquaintance of foreign tourists with the country as one of the famous commercial centers along the Great Silk Road, as well as to attracting

foreign investments to the tourist industry”. All expenses associated with the organization and conduct of this meeting, plus the stay of the program director and WTO Secretariat employees in Uzbekistan, were born by the Uzbektourism National Company. No consular duties were charged on registration of entry visas for its participants. The most favorable regime was ensured for all guests and participators when they settled customs formalities.

The reinforcement of tourist infrastructure was accompanied by the approval of corresponding normative and regulatory documents. For example, the Resolution of the Cabinet of Ministers of the Republic of Uzbekistan, “On measures to further develop the hotel business and international tourism in the Republic of Uzbekistan” No 310 dated September 2, 2002 decreed to set up, on the basis of the hotel complexes “Dustlik”, “Tashkent” “Rossiay” and “Chorsu” located in the capital city, joint venture enterprises specializing on reconstruction, construction and subsequent running of these tourist installations. These Measures aimed to prepare Tashkent-based hotels for the reception of participants and guests of the Annual Meeting of EBRD Board of Governors in 2003, to further develop international tourism and to ensure the attraction of foreign investments to the hotel business. It should be noted that foreign partners of these joint ventures made contributions to their authorized capital in both foreign and domestic currency. Necessary funding for the projects was secured on property of the newly-created joint ventures and their founders, with the subsequent mortgage of their buildings to banks upon completion of the construction and reconstruction projects.

In the period of credit repayment, the above-mentioned hotels and Hotel Uzbekistan were exempt from customs payments on materials and equipment imported for reconstruction and construction purposes under the “turn-key” contracts signed. As well as that, they were granted exemptions on payment of income (profit) tax, value-added tax, property tax, land tax and environment tax. The Uzbek Government prescribed that the money funds thus exempt from taxation should be directed, in keeping with the established procedure, to the repayment of credits attracted to implement reconstruction and construction projects. In addition, foreign banks and insurance agencies taking part in the financing of given projects were exempt from payment of profit tax imposed on non-residents in the Republic of Uzbekistan. The reconstruction of the Chorsu Hotel complex stipulated the establishment of a joint venture between the Uzbektourism National Company and the Turkish firm, Emsash, which would take the form of a limited liability society, called Chorsu Hotel with the authorized capital of US $10 million. The Uzbek side contributed US $3 million in the form of the Chorsu Hotel complex, while the Turkish side’s contribution took the form of equipment and money funds to the tune of US $7 million.

As is evident from the facts mentioned above, the development of hotel facilities constitutes a priority policy objective in the field of tourism. The Uzbektourism National Company is determined to intensify work in this direction. Its plans for reinforcement of the industry’s material and technical base provides for the construction, by the year 2010, of 56 hotels, capable of accommodating 2,100 tourists; reconstruction of the hotels “Bukhora” (situated in the town of Bukhara) and “Ziyorat” (situated in the town of Ferghana) and AO Kumyshkan tourist center (located in the Tashkent Province). A network of campings will be built along the Tashkent – Urgench motorway. The introduction of modern technologies is expected to more efficiently exploit the sector’s 217 hotels, which will have 9.900 rooms and suites for 18,600 tourists. As a result, the load coefficient may reach 66.9 per cent, which corresponds to the world level.

Development of the regulatory and legal framework. After acquisition of independence, Uzbekistan began taking active steps toward the elaboration and introduction of a sound regulatory and legal framework for a sustainable development of tourism, including the encouragement of private entrepreneurs to set up in the tourist sector. In practice, these two processes were inseparable. Take, for instance, a resolution of the Cabinet of Ministers of the Republic of Uzbekistan aimed at improving tourist infrastructure. This is bound up with the development of small and private businesses, through which all programming documents are implemented. Some 60 per cent of the documents governing the tourist industry were approved in the period 1990-1997, when the foundations of a market-oriented economy were laid down in the Republic. In the second

period, the number of tourism-related regulatory and legal documents reached 30 per cent. Since 2003, the Uzbek Government has passed 10 per cent of all documents that constitute the regulatory and legal base for carrying out activities in the tourist sector. Needless to say, the documents approved in the first period had the most important implications for the sector as a whole, by providing a precise definition of the national tourism model and formulating the major directions of its future progression. The period 1998-2002 can be classified as a period of re-orientation, when the earlier approved fundamental documents were amended and supplemented to meet new requirements and challenges.

Re-establishment of state ownership rights and privatization. Tourism was one of the sectors, where re-establishment of state ownership rights started to unfold earlier than in other industries of the Uzbek economy. The process was triggered by the January 21, 1994 Presidential Decree, “On measures to further intensify economic reforms, to ensure protection of private property and to develop entrepreneurship”. The document allowed to sell, on a competition basis, commercial and servicing enterprises, together with the land plots adjacent thereto, to legal entities and physical persons, including foreigners, without the requirement to declare the source of money funds they use to privatize these enterprises. The Government was commissioned to guarantee that enterprises involved in trade and services, whose construction and creation is financed by private entrepreneurs, are located in the most prestigious parts of towns and populated areas. Additionally, the Presidential Decree stipulated the granting of all necessary privileges, including credits and government guarantees, to legal entities and individuals, with corresponding resources and possibilities being provided by the Government for the latter to operate successfully in the tourist sector. According to experts, this document contributed to a further reinforcement of market infrastructure in the tourist industry.

The next period has seen the unfolding of a well-orchestrated process of tourism development in Uzbekistan, despite the fact that certain tourist installations remained in the state’s possession. The list of enterprises, objects and groups of state property, which were not subject to re-establishment of state ownership rights, privatization or redemption through the Uzbektourism National Company, included, in particular, the Khiva Tourist and Excursion Complex. Anotehr 13 objects were included in the list of enterprises, installations and groups of state property, whose privatization required approval by the Cabinet of Ministers of the Republic of Uzbekistan. Presented below are all these objects: the Interim Board of Directors in the town of Bukhara (construction); the Kuksaray Agency in the town of Samarkand (tourism); the Interim Board of Directors in the town of Samarkand (construction); Uzbektourism in Tashkent (management); the Dayokh Insurance Company in Tashkent (insurance); the Central Directorate of Rest Homes in Tashkent (tourism); the Education and Production Complex in Tashkent (tourism, education); the Yoshlik-Show Enterprise in Tashkent (cultural tourism); a new hotel in Tashkent (hotel services); the Uztourstroy Enterprise in Tashkent (construction); the Advertising and Information Agency in Tashkent (tourism, the press); the Yordamchi Enterprise in Tashkent (sporting tourism); the Board of Directors of the Great Silk Road Exchange in Tashkent (tourism).

Later on, all these enterprises changed the type of ownership, and by the year 2005, almost 98 per cent of agencies, organizations, enterprises and complexes operating in the tourist sector are no longer under state ownership.

On November 5, 2002, the Uzbek Government approved a list of activities, to be carried out as prescribed in the law, exclusively by entrepreneurs with legal entity status. These include the organization of hotels and campings and the provision of catering services in private houses or at places specially allocated for these purposes by local authorities.

Investment and crediting. The Government of the Republic of Uzbekistan views tourism as the most promising industry. Evidence of the importance it attaches to this sector is reflected in the fact that tourism is included in the nation’s economic development plans and programs. The Resolution of the Cabinet of Ministers of the Republic of Uzbekistan, “On issues surrounding the organization and performance of the Private Entrepreneurship and Small Business Support Foundation (Business Fund)” dated July 26, 1995 contained a provision that in the tourist sector, banks extend credits on preferential terms by implementing credit lines opened by the Business Fund, which, in turn, uses both its own money funds and attracted resources to finance the realization of investment projects by small and medium-sized enterprises. The credits are to be repaid within 10 years, with a grace period ranging from 2 to 5 years, depending on the term fixed for recoupment of one or another projects. The interest rate on credits allotted on preferential terms is non-fixed. Instead, it is specified by the Business Fund in coordination with the Finance Ministry of the Republic of Uzbekistan.

During the implementation of the 1997 Privatization Program, a new joint-stock company, called Sayekh Sugurta, and a limited liability company, Chimghantourstroy were set up within the framework of the Uzbektourism National Company.

The hotel business proves to be one of the most attractive sectors for domestic and foreign investors. In the November 22, 2001 Resolution of the Cabinet of Ministers of the Republic of Uzbekistan, “On the Investment Program of the Republic of Uzbekistan for the year 2002”, the total amount of investments and credits provided against government guarantees to the Uzbektourism National Company was estimated at US $29,16 million. Of this sum, US $22, 8 million was appropriated for the construction of President Hotel in the town of Samarkand, and the remaining US $6.36 million – for the construction of Khorezm Palace Hotel in the town of Urgench. Moreover, the Uzbek Government earmarked 1 billion Soum toward the realization of the Charvak – Cimghan Area Development Project.

The Government of Uzbekistan tries to provide lavish incentives and tax breaks to enterprises specializing in tourism. According to the Resolution of the Cabinet of Ministers of the Republic of Uzbekistan, “On the provision of privileges to the hotel complexes run with participation of foreign investments” dated July 12, 1999, starting January 1, 1999, the hotel complex “Le Meridian Tashkent” of the Bakhri Investindo Company (Indonesia) and a new hotel built in Tashkent by France’s Boigue, were granted exemption from payment of value-added tax on hotel services for the term of 3 years. As well as that, Le Meridian Tashkent didn’t pay VAT, till January 1, 2000, on imported equipment and materials intended for reconstruction and equipment of its edifice. Moreover, the hotel was granted a 18-month delay of payment to the budget of VAT arrears as of January 1, 1999.

In keeping with the 2004 Investment Program approved by the Uzbek Government, the Hypo Wereins Bank of Germany extended a US $6 million credit for the construction of a hotel in the town of Shakhrizabs. It was planned to implement half of the amount in the course of one year. The Government of the Republic of Uzbekistan included a projects to complete the construction and equipment of the Chorvak Oromgokhi health-improving center located in the Tashkent Province in the list of priority investment proposals. Valued at US $27.94 million, the center is now popular with Tashkent inhibitors and foreign visitors alike. Experts think that its outfitting with modern services and utilities will make it possible to improve the quality of services offered there and to shape the image of the center as one of the most attractive regional tourist destinations of Uzbekistan.

Besides, tangible foreign investments are expected to be made in the Republic’s hotel business in the foreseeable future. In particular, the Government of Poland will extend credits to reconstruct Bukhara Hotel based in the town of Bukhara (US $5.0 million) and a hotel located in the town of Nukus, the capital of the Republic of Karakalpakstan (US $4 million). It is also planned to build a three-star hotel facility in the town of Termez, with German investors taking active part in the project.

State investments to the tune of 500 million Soum will be directed to the reconstruction of the old part of Samarkand, whose marvelous historical monuments generate a constant inflow of overseas and domestic tourists interested in ancient architecture and national crafts.

It should be emphasized that the Uzbek Goevrnment attaches special importance to the development of infrastructure facilities, including transport communications, realizing that the “Great Silk Road” brand may ensure the attraction of travelers who use different means of transport in their trips across the globe. In connection with this, in 2004, the Government of Uzbekistan apportioned 3,0 billion Soum to the State Joint-Stock Rail Company, Uzbekiston Temir Yullary, for the construction of a new railway Guzar – Baysun – Kumkurgan. It is appropriate to mention here that the Baysun region enjoys wide popularity with tourists interested in ethnography and social anthropology. UNESCO included its cultural values in the list of mankind’s non-material heritage. A US $75 million project is now under way to modernize the railway section Samarkand – Khodjidavlet. The OPEC Foundation and the Asian Development Bank have given a credit to meet its costs.

The Uzbek Government intends to earmark US $50 million needed to develop and equip rail links connecting Uzbekistan and Afghanistan, and thereby to restore transport communications between the ancient cities of the two states. Undoubtedly, this will not only ensure a greater degree of political and economic stabilization in the region, but also augment tourist interest for

Central Asia. Road infrastructure plays an essential role in the development of the Great Silk Road

Project. In a move to step up the fulfillment of its far-reaching plans and programs, the Government has earmarked the wherewithal to the tune of 5 billion Soum - for the construction of a highway Andijan – Tashkent – Nulus – Kungrad – Beineu; 7.5 billion Soum – for the construction of small-scale ring road in Tashkent; and 17.5 billion Soum – for the reconstruction of a number of major motor-roads currently in operation, including 5 billion Soum required to upgrade the Tashkent – Gazalkent – Charvak section. The International Bank for Reconstruction and Development has provided a US $29 million loan to the Uztranssanoat Association towards the realization of urban transport development project. The Tashgorpasstrans State Association has received a US $$38.1 million credit to purchase 304 Mercedes-Benz-Conecto 0345 buses.

For Uzbekistan, seeking to intensify its export activity and tourism, aviation is a priority sector. The National Air Company, Uzbekiston Khavo Yullary, has acquired, with financial support from the Eximbank of the US and the Socijete Generale Bank (France), two Boeing0767-300 jets for a total of US $181.36 million. Since airports are the country’s air gates, passenger flows are highly contingent on their performance. Using the loans for a total of US $2.3 million extended by the European Bank for Reconstruction and Development, modernization of Tashkent Airport will be continued. Baerishe Hypo Wereins, a German bank, and the Socijete Generale Bank of France, have given Us #15.9 million and US $19.8 million in loans, respectively, to meet the costs of reconstruction and expansion of Navoi Airport.

The hotel sector and transport services. By 1996, the total accommodation capacity of domestic hotels, tourist centers, campings and other installations incorporated in the Uzbektoruism National Company, could provide accommodation to 8.137 tourists. Given their average annual utilization rate of some 67 per cent, this indicator reached 5,452, of which only 2,579 rooms were in line with international standards. According to sociological studies, however, 50 per cent of demand for tourist accommodation in Uzbekistan was met by hotels and other similar facilities run by other ministries and departments. Overall, they provided approximately 9,000 rooms, of which only 1,076 were up to international requirements. To satisfy demand for accommodation on the part of foreign tourists on their visits to the country, it was necessary to refurbish the available material base (some 7,518 rooms) in accordance with internationally accepted standards, to construct new hotels with an aggregate accommodation capacity of 15,000 rooms by the year 2000, as well as to develop the private sector’s accommodation facilities.

Uzbektourism signed a contract with Gordial Tours & Cargo for the supply of 10 motor vehicles for a total of US $1.413 million. In 1997, the company bought 6 comfortable buses valued at US $847.800.

In May 2003, the Turkish companies – AySel, Emsas, APEAC and Demir Group – completed the reconstruction of 5 hotels in Tashkent, with the total cost of the projects coming to US $62 million. Their reconstruction was carried out as part of a wider program of measures to prepare the capital’s major hotels for the annual meeting of the Board of Governors of the European Bank for Reconstruction and Development (EBRD), which was held in Tashkent on May 4-5, 2003.

To facilitate the realization of the projects valued at US $51.2 million, the Tashkent Khokimiyat set up 4 joint ventures with the Turkish firms referred to above. Created on the basis of the hotel complexes Dustlik, Tashkent, Rossiya and one incomplete hotel, these enterprises were designed to ensure their reconstruction, erection and further exploitation. These included Khak Sel JV (established together with Ay-Sel, on the basis of the former Tashkent Hotel; Ipak Yully-Tourism Invest JV (set up together with APEAC on the basis of Dustlik Hotel); Grand Mir JV (set up together with the Demir Group on the basis of Rossiya Hotel) and Ay-Sel Invest JV (founded together with Ay-Sel on the basis of Ay-Sel Hotel). At the same time, contributions made by the Turkish firms to their charter capital were mainly in the form of money funds, whereas the Tashkent Khokimiyat contributed hotel edifices and land plots adjacent thereto. The projects were financed our of credits extended by Turkey’s Eximbank to the tune of US $25.2 million, a US $7.2 million loan from the European Bank for Reconstruction and Development, plus resources from the joint ventures’ charter funds for a total of US $18.8 million. All the credits were secured on liquid property owned by the newly established enterprises and their founders, with the subsequent mortgage of the hotels’ buildings to the banks upon completion of their construction and reconstruction projects.

After their refurbishment was finalized, all the hotels, enjoying in sum 700 rooms, were handed over to foreign operators. In particular, Tashkent Hotel, reconstructed by Ay-Sel, was managed by France’s Le Meridian. Management of another hotel built by Ay-Sel was carried out by the American company, Radisson SAS.

At present, 4 Tashkent-based hotels are managed by renowned international operators. Choice Co, of the US, is carrying out management of Indonesia’s Bumi Resources Tbk. This hotel complex has been bought by the Indonesian company, Bakhri Group, for US $38 million. A hotel of the Agency for Foreign Economic Relations of the Republic of Uzbekistan, put into operation in October 1997 by Turkey’s Ay-Sel, is currently run by the British company, Inter Continental.

The Turkish company, Emsas insaat turizm ticaret AS and the Tashkent Khokimiyat set up a joint venture, called Premier International Turan, to be involved in reconstruction of Dustlik Hotel. The reconstruction projects was valued at US $16.8 million. The joint venture’s charter capital, created by the founders on an equal footing, totaled US $6.8 million. The Turkish party contributed money funds, while the Uzbek counterpart made its contribution in the form of the hotel’s premises together with an adjacent land plot. Reconstruction of the hotel domiciled in the center of the Uzbek capital city started in 2002. The entire duration of the reconstruction project was 2 years. After its completion, Dustlik Hotel was conferred a 3-srat hotel status. Nowadays, it is known as Dedeman Hotel.

The funding towards this reconstruction project was provided out of the joint venture’s charter capital and a credit allotted by Turkey’s Eximbank. Built as far back as 1969, the hotel consisted of two 9-storeyed edifices, with a total number of rooms reaching 450. With its reconstruction having been finalized, the hotel’s administration seeks to attract a foreign operator for management purposes. According to estimates, the project’s costs will be repaid in five years.

Germany’s Veno GmbH is going to build a US $25 million hotel complex in the town of Termez. The project’s customer is the Surkhandarya Province Khokimiyat. Apart from a new 220-room hotel, the foreign partner plans to erect a business center and a supermarket. The construction of such a complex is necessitated by an increase in the volume of goods traffic transported via this town, including the amount of goods in transit through the territory of Uzbekistan, to Afghanistan.

As a result, there is now an urgent need to improve all infrastructure facilities involved in the process.

The hotel complex will be well-positioned to service some 30,000 visitors a year. The project’s fulfillment will take 18 months. To ensure its successful implementation, Veno GmbH plans to create a joint venture on a par with the Surkhandarya Province Khokimiyat. The construction project will be financed by credits to be extended by German banks for a total of US $19 million, as well as by the enterprise’s own money funds.

For the time being, one more German company, Inpro GmbH, which has founded, together with the Uzbetourism National Comaony, a joint venture, called Uzolmonhotels, is completing construction of a new hotel worth US $24 million, in the town of Samarkand. With its construction launched in 2001, President Hotel, as this hotel facility is called, will be a 7-storeyed building with 180 rooms.

The two projects for a total value of US $30.3 million will be financed by a US $28.05 million credit facility supplied by Germany’s Hypo Wereins Bank. The money will be given under insurance coverage from Germes, for 9 years and a half, with the interest rate of 8.5 per cent, against the guarantee from the Uzbek Government. Uzolmonhotels JV was set up in 1999, with the charter capital amounting to US $11.65 million. At the same time, Inpro GmbH owns 42.49 per cent of its charter capital, with the remaining 57.51 per cent possessed by the Uzbek partner.

In 1997, Inpro GmbH reconstructed Shodlik Hotel in Tashkent, with the project’s total value coming to DM 17.6 million. For now, this hotel, whose full name is Shodlik Palace, is managed by SRS, a German operator.

In April, 2002, the German company has finalized reconstruction of Khorezm Hotel situated in the town of Urgench. Valued at US $10 million, the project made it possible to upgrade the hotel to such a pitch that it was conferred a 3-star hotel status. The number of rooms there was almost doubled – from 76 to 150. The necessary funding was provided out of a US $28.05 million credit allotted by Germany’s Hypo Wereins Bank, as well as from the joint venture’s charter capital.

Meanwhile, the Turkish firm, Emsas insaat turizm ticaret AS and the Uzbektourism National Company have founded a joint venture, Chor-Su Hotel, to be engaged in reconstruction of Chor-Su Hotel in Tashkent, with the reconstruction project worth US $22.9 million. The joint venture’s charter capital is US $10 million, of which the Turkish side has contributed 70 per cent in the form of equipment and money funds. The 30-per cent contribution made by the Uzbek partner comprised the hotel’s edifice and a land plot adjacent thereto.

The cost of this project will be met by the joint venture, which will use it’s the resources from its charter capital, plus a US $12.9 million credit supplied by Turkey’s Eximbank, with the term of repayment fixed at 7 years. Besides, the Goskomimuschestvo Committee of the Republic of Uzbekistan plans to sign an agreement with the Turkish counterpart on the sale of the Uzbek side’s US $3 million share in its charter capital within a 5-year period following the completion of the hotel’s reconstruction project.

Uzbektourism leaders intend to open hotels of some world-known networks along the main directions of the Great Silk Road, which presently enjoy a growing popularity with foreign tourists.

Export activity forecasts for the tourist sector. According to the State Program of Export Potential Development in the Republic of Uzbekistan, approved by the Uzbek Government on March 12, 1998, by the year 2000, the volume of tourist inflows to the country will reach 1 million people, including 650,000 tourists from abroad. The volume of services rendered to foreign tourists will worth US $1 billion. Over the period 1998 through 2000, the tourist enterprises incorporated in the Uzbektourism National Company will earn US $75 million in foreign exchange receipts. The Program estimated the sector’s demand for investments in the indicated period at US $42 million. These money funds were mainly required to reconstruct a number of hotels, including Uzbekistan, Chorsu and Shakhrisabz. At the same time, foreign credits were expected to account for a lion’s share of this amount – US $41.5 million. This would ensure an increase in the export of services from US $17 million in 1997 up to US $30 million in the year 2000. As well as that, the Program stipulated that the tourist sector would turn out produce to the tune of 9.455 billion Soum in 1997;

11.5 billion Soum – in 1998; 15.4 billion Soum – in 1999 and 18.9 billion Soum – in 2000. Regarding the value of exports, in 1998 it would increase by 118 per cent compared with the 1997 figure, in 1999 – by 147 per cent and in 2000 – by 176 per cent.

The development of tourist infrastructure in Uzbekistan. The November 27, 2002 Resolution of the Cabinet of Ministers of the Republic of Uzbekistan No 143, “On measures to further develop the market for insurance services” prescribed that the minimum amount of charter capital for underwriters specializing in life insurance should be equivalent to US $250,000; for those involved in general insurance – US $150,000; for re-insurers (on condition that re-insurance is the exclusive line of their activity) – US $2 million, and for underwriters specializing in obligatory insurance – US $500,000. The document also specified the annual expenditure limit for legal entities on voluntary types of insurance at the rate of 2 per cent of their annual volume of receipts earned from the sale of goods (works or services).

In Uzbekistan, much prominence is given to the development of crafts and applied arts, whose output generates a constant interest in foreign and domestic tourists. In this connection, on March 28, 2005, the President of the Republic of Uzbekistan has issued the Decree, “On measures to further develop folk crafts and applied arts”. The document envisages to extend, till April 2008, the validity of tax incentives and privileges granted to legal entities and individuals alike, involved in this sector. Issued with a view to stimulating the development of folk crafts and applied arts, creating an favorable environment for their efficient creative activity and attracting more citizens to the sector, the Presidential Decree covers the following directions: production of souvenirs, wood, stone and bone carving, ceramics, production of goods from metals (including precious ones), tin-plate, wood, glass, porcelain, leather and fabrics; production of musical instruments, gold embroidery, miniature, toys, footwear etc. The improvement of the quality, range and volume of craft goods that has become possible thanks to this Presidential Decree will, undoubtedly, lead to an increase in their sales volumes.

Foreign exchange procedures intended for the tourist sector. Broaching the aspect that is bound up with the transaction of foreign exchange operations, it should be noted that the following rights granted to physical persons are essential for the Uzbek tourism system:

to possess currency values, imported, transferred or sent to the Republic of Uzbekistan, or those earned or acquired in the Republic of Uzbekistan;

to open foreign exchange accounts and deposits in authorized banks and their branches; to effect international money transfers, with and without the opening of bank accounts; to transfer, import and send to the Republic of Uzbekistan, as well as to transfer, export and

send from the Republic of Uzbekistan of currency values in accordance with a procedure established in the law;

to use currency values independently as specified in Uzbek law; to enjoy other rights in keeping with the legislation of the Republic of Uzbekistan. At the same time, the purchase and sale of foreign exchange may be carried out: by legal entities – through authorized banks; by physical persons – through authorized banks, their branches and exchange offices.

All these processes were reflected in a given period of development of the home market for banking and financial services in different ways. One can easily trace this with the help of government documents approved in the period under review. Experts observed that the January 21. 1994 Presidential Decree, “On measures to further intensify economic reforms, to ensure the protection of private property and to develop entrepreneurship” had a special role to play in the tourist industry of Uzbekistan. In a move to boost the development of the home foreign exchange market and to raise the level of efficiency, with which cash currency resources are used, the document commissioned the National Bank for Foreign Economic Activity of Uzbekistan to accomplish the following:

to create all conditions nationwide for individuals to open accounts in foreign currency, with appropriate interest being paid on such accounts in accordance the norms accepted in international banking practices;

to step up the issuance of debit and credit cards, Visa International, as well as to ensure their servicing both within and outside the Republic of Uzbekistan;

to ensure the centralized servicing of banking operations in cash foreign currency, using a system of its own correspondent accounts. To remove limitations on the import and export by citizens of the Republic of Uzbekistan and foreigners alike of foreign currency and banknotes of the CIS member states, with the exception of provisions that are at variance with the national legislation.According to experts’ estimates, all these measures will allow to somewhat ease certain

tension in the exchange market for domestic and foreign tourists. Later on, the Central Bank of the Republic of Uzbekistan , in its Letter No 1316/840 as of April 15, 1994, informed that “for the future, local exchange offices will buy freely convertible currency, Russian rubles and other national currencies of the former Soviet republics at the exchange rate fixed by the Central Bank of the Republic of Uzbekistan.” It should be mentioned here that foreign currency funds are sold at the rate of exchange that is 10 per cent higher than that at which foreign currency is bought.

In the period under review, freely convertible currency was sold only to persons going abroad on business and only on conditions that they have foreign passports with a valid visa. At the same time, those going on an official journey were allowed to buy foreign currency right from the bank to the tune of no more than US $500. The amount of Russian rubles that might be bought by each person upon presentation of traveling and some other documents didn’t exceed 150,000. When transacting foreign exchange operations, a special seal was attached to the traveling documents to certify the fact that Soum-coupons were exchanged for Russian rubles. However, in 1995, the Government of Uzbekistan deemed it expedient to abolish, since July 1, the provision, under which the fact of exchange should not be indicated in the passport of an Uzbek citizen or a residence permit, by affixing the seal.

In keeping with the Resolution of the Cabinet of Ministers of the Republic of Uzbekistan, “On measures to precipitate the putting into circulation of the Visa debit and credit cards” dated April 25, 1994, the country started servicing Visa cards issued by foreign banks. On June 14, 1994, the National Bank for Foreign Economic Activity of the Republic of Uzbekistan issued and put into circulation Visa cards on the country’s territory and abroad.

It was stipulated that in order to prevent the import of false foreign banknotes, domestic enterprises and organizations, under all types of ownership, as well as individuals had to use Visa cards when paying and settling their accounts in foreign currency. The ministries, state committees, concerns, associations, banks, enterprises and commercial organizations were commissioned to ensure the transition to the cashless system of business trip-related expenditures. Those going abroad on a permanent basis had to use Visa cards emitted by the National Bank for Foreign Economic Activity of the Republic of Uzbekistan. Without doubt, the introduction of such a system of mutual account settlement facilitated the development of tourism.

The March 20, 1998 Presidential Decree No УП- 1979 charged the State Customs Committee of the Republic of Uzbekistan, with the assistance of the Uzbekistan Khavo Yullary National Air Company, with establishing a simplified procedure for registration of customs documents and control over the import and export of cash foreign currency by non-residents of the Republic of Uzbekistan transiting the country’s territory by air.

In addition, the document specified a range of cases where cash foreign currency might be accepted in settlement for goods and services in Uzbekistan. These include:

when goods (works or services) are exported by small and medium-sized enterprises; when tourist services are rendered to individuals – non-residents of the Republic of

Uzbekistan, as well as when passengers are conveyed by air and rail transport.According to the Resolution of the Cabinet of Ministers of the Republic of Uzbekistan, “On

the introduction of amendments and supplements into the Regulations on the procedure for receipt of foreign currency as payment for goods and services on the territory of the Republic of Uzbekistan”, the services rendered by domestic enterprises to foreign tourists for cash foreign exchange included:

stay in hotels and tourist complexes (including all additional hotel services); transport services; excursion services.

It should be noted that later on, when the economic situation in the country changed for the better, this document was abolished.

State and public bodies of tourism administration. One of the first steps taken by the Uzbek Government was the establishment of a single body designed to control and to implement the state policy in the tourist sector. This step made it possible to concentrate the industry’s resources and efforts on the resolution of economic, social, organizational and legal problems arising in the sector in the course of its development. In the first years of its operation, it was a monopolistic structure. Later on, commercial activity was excluded from a list of Uzbektourism’s basic functions, whereupon the National Tourist Company could direct its efforts at coordinating the performance of all sector participants. Mush attention was devoted to the development of servicing standards, as well as licensing and certification procedures. In length of time, several non-governmental organizations joined the process, thereby creating a professional environment for the tourist business, entrenching the confidence of domestic entrepreneurs in the sector’s administrative system. Another fact worth mentioning is that the Republic’s NGOs became increasingly involved in making decisions that were crucial for the Uzbek tourist industry as a whole.

The National Tourist Administration was set up in accordance with the Presidential Decree No УП- 447, “On the establishment of the Uzbektourism National Company” dated July 27, 1992. The February 15, 1993 Resolution of the Cabinet of Ministers of the Republic of Uzbekistan No 82 approved its charter, which specified Uzbektourism as and economic organization, which is authorized to perform state administrative functions and to carry out foreign economic activity. The main tasks to be addressed by the company were outlined as follows:

to implement a unified policy in the tourist sector, including the development of infrastructure based on the national concept of priority directions;

to carry out all types of foreign and regional tourism, to raise the quality of tourist services up to the level of internationally accepted standards and to significantly increase the sector’s contribution to the state budget;

to create legal, economic and organizational frameworks and pre-requisites for the development of all types of tourism;

to develop a network of hotels, campings, tourist centers and holiday homes across Uzbekistan;

to attract overseas credits and investments needed to set up joint venture enterprises, to elaborate long-term programs of cooperation with foreign countries and the CIS member states, as well as with different companies and firms, both domestic and overseas;

to establish and maintain bilateral international relations with foreign countries and the CIS members in the field of tourism;

to coordinate and regulate activities carried out by ministries, departments, public organizations, small enterprises, private firms and foreign companies, associated with the reception, transportation and servicing of tourists, as well as to preserve the historical, natural and ecological diversity of the Republic’s regions;

to ensure the rational exploitation of tourist centers countrywide, as well as to effect control over the performance of local tourist enterprises, foundation of new and re-organization of operational companies;

to popularize the historical and cultural heritage of Uzbekistan, as well as a wide range of opportunities afforded by the domestic tourist industry, including through its own representative offices and bureaus abroad and the CIS;

to restore historical and architectural monuments covered by a variety of tour and excursion programs;

to create and use reserve, insurance funds, including those associated with insurance of tourists in keeping with international principles;

to develop and implement personnel-related programs and to organize a system of continuous staff training for the nation’s tourist infrastructure;

to represent the interests and to protect the rights of enterprises and organizations specializing in tourist and excursion activities, in legislative bodies, court, arbitration tribunal and the Office of Public Prosecutor, both abroad and in the CIS.Since its inception, the Uzbektourism National Company incorporated 37 organizations, of

which 18 were state-run operators, 22 – joint-stock enterprises, 3 – joint ventures, 30 – collectively-owned structures, 2 leased facilities and 20 limited liability societies. Additionally, the Association of Private Tourist Operators was also part of Uzbektourism at the time.

On September 25, 1996, the Cabinet of Ministers of the Republic of Uzbekistan issued a resolution on the creation at the Ministry of Foreign Affairs of the Directorate of International Cooperation in Culture, Science and Tourism. This new structure was tasked with developing and coordinating international linkages between the Republic’s ministries and departments and foreign countries and international organizations in the areas of culture, science and tourism.

A corporate professional non-governmental organization appeared in the Republic a few years after the establishment of the Uzbektourism National Company. It was designed to reflect the interests of the tourist business, as well as to provide active assistance to the Government in running the tourist industry on behalf of private firms. In 1998, several tour operators, including AO Sairam Tourism, OOO Sogda Tour, OOO Dolores Tour, OOO Orient Star Hotel, FE Sitara International, JV Movaro-Un-Nahr etc., initiated the creation of the Association of Private Tourist Organizations of Uzbekistan. Their initiative was backed up by the Government. In its August 8, 1998 Resolution , “On the improvement of organization of activities carried out by tourist agencies”, the Cabinet of Ministers of the Republic of Uzbekistan obliged the Uzbektourism National Company to render methodical and legal assistance to the Association in addressing the issues that surround the organization of efficient activity in the home tourist sector, marketing, training and re-training of personnel and observance of laws governing the tourist activity.

In 2005, the Association of Private Tourist Organizations of Uzbekistan numbers some 60 members, which were granted the following privileges in different periods:

a 10 per cent discount on accommodation of tourists in all hotels across the Republic (this privilege was in effect till the year 2000);

free extension of the licence to carry out tourist activities (this privilege was in effect in the period 2000 to 2002);

a 10 per cent discount on the price of air tickets for groups of 10 and more tourists on the domestic air lines serviced by the Uzbekiston Khavo Yullary National Air Company (this privilege was in effect in the period 2002-2003);

a 10 per cent discount on the price of railway tickets for groups of 10 and more tourists on the domestic routes;

a 25 per cent discount on the cost of participation in the Tashkent International Tourist Fair TITF;

a 25 per cent discount on the cost of training within the Uzbektourism’s system (including attestation of guides, tour operators and hotel personnel; a range of seminars and courses, including refresher courses, which are considered to be obligatory for all tourist organizations operating in Uzbekistan. Macroeconomic functioning of tourism. Formal procedures used to effect economic

calculations play a special role in the macroeconomic assessment of tourist activity. Regulations on the record-keeping of exports (imports) of goods (Form No 22-RER)” approved by the State Committee on Forecasts and Statistics of the Republic of Uzbekistan in its October 14, 1995 Resolution No 27, were designed to govern the foreign economic activity carried out by domestic enterprises, which enjoyed the right to independently conclude contracts and sign agreements.

The situation the field of export-import of tourist services has always been of pre-eminent concern to the Uzbek Government. For instance, export is defined as expenditure spent by visitors arriving in a country other than the country of their permanent residence, for the purposes of rest,

business etc. Export includes payment for tours, provision of services to foreign tourists in a country of stay and accommodation in hotels and other tourist facilities, as well as receipts derived from the sale of souvenirs and international freightage. Receipts earned by hotels comprise payment for rooms, meals and other associated services; receipts derived by restaurants, bars and night clubs, as well as payment for the organization of conferences and banquets, provision of means of transport, sale of theatre tickets, souvenirs and other services. Import in the tourist sector is specified as the amount of consumer expenses associated with the departure of a country’s citizen abroad for different purposes, whose term of stay there doesn’t exceed one year. These indicators also include expenses relating to the preparation for a trip abroad, the execution of the trip itself and associated expenditures spent by the citizen in a foreign point of destination and in the native country on his return.

Services that bear directly on infrastructure of the tourist industry are also worthy of note here. In particular, one should mention transport services, which, in turn, encompass both freightage and passenger conveyance by all means of transport.

Communication services include two major categories of international communication operations: telecommunications covering the transmission of sound, image and other information by telephone, telex, cable, satellite broadcast, e-mail etc., as well as postal and courier services.

Insurance services comprise insurance of life, goods (both exports and imports), transport company etc. All data on insurance operations are furnished by underwriters engaged in insurance operations with the country’s residents.

Financial services include commission and duties charged for accreditation, crediting, leasing, exchange operations and operations in traveling cheques, as well as services associated with the provision of consumer and commercial credits, brokerage operations, issuance of bonds etc.

Forecasts of tourism development in Uzbekistan. The Republic of Uzbekistan occupies the central part of the Great Silk Road, with its ancient cities of Samarkand, Bukhara and Khiva being the real pearls on this centuries-old transport route known all over the world. They continue to inspire the same amazement that travelers might have felt many centuries ago when visiting them. Uzbekistan has much to offer foreign and domestic tourists, who are fond of traveling. To succeed in today’s highly diversified tourist business, the national tourist administration should focus on creating and promoting the country’s image as an attractive tourist destination in the world market for tourist services. It is high time to combine efforts of all tour operators and tourist agencies of Uzbekistan, regardless of their type of ownership, in showing a wide variety of national tourist products to full advantage. By uniting the merits and exotics of our ancient cities with romanticism of the Great Silk Road, whose rebirth is presently in process, on the one hand, and pragmatism of a market-oriented economy, a single national tourist brand could be created to the benefit of the Republic’s tourist industry. Statistical data give every reason to single out tourism as an independent sector, with an entire technological cycle of production, distribution, sale and consumption of tourist products and services. At a time when the latter’s nature and content are undergoing a radical transformation in response to global changes, the tourist industry should re-orient itself towards a completely new direction that is fully consistent with the standards and norms of international tourism. This will enable the national tourist sector to develop at a sustainable pace, while keeping abreast with the times.

To ensure the prosperity of Uzbek tourism, the National Tourism Administration should exert every effort in a move to overcome fragmentation of the domestic market for tourist services. As well as that, measures should be taken to learn how to show the country’s unique tourist products to full advantage. The services of all sorts of specialists, including journalists, artists, designers, brand-makers and advertising experts, should be enlisted to achieve this goal. The work in this direction may take a variety of forms, such as training seminars, national contests etc. In addition to the step-by-step implementation of all these measures, comprehensive marketing research should be conducted, which is aimed at identifying ways and means to attract to the

Republic as many tourists as possible, and to develop a modern system of tourist infrastructure facilities, including comfortable motor roads and ramified communication networks.

Among other measures that may lead to the achievement of a tangible success in the development of tourism in Uzbekistan is the simplification of entry and departure procedures, as well as the legislation regulating tourist activity in the country. Besides, more specialists of high caliber should work in the national tourist sector. Knowing all the peculiarities of national tourist products as a book, they should be able to accurately assess the available resources and to fashion, on the basis of such an assessment, an efficient strategy of their rational use.

In addition to the creation of new jobs, generation of foreign exchange receipts, introduction of new technologies and modernization of public utilities, tourism contributes to the development of the nation’s foreign economic linkages, attraction of overseas investments to the Republic’s economy, as well as to improvement of relations between the countries.

Bugbears of uzbek tourism. The Uzbek tourism industry makes for as little as 0.1% of the country's GDP. Having probably the richest tourist resources in Central Asia, Uzbek tourism has not yet become a leading sphere of the national economy. The reasons are as follows: administrative mistakes, a lack of investment, unfavorable business environment, ambiguous legislation, political problems inside Uzbekistan and in its relations with neighboring countries, and the absence of professionals in local tourist companies and the state agencies responsible for tourism development.

Border problem. Uzbek landmines along the Uzbek-Kyrgyz and Uzbek-Tajik borders impede tourism in the border areas. Landmines kill and injure local civilians, military who patrol the border, domestic and even wild animals. Large natural areas are not used for tourism due to the Uzbek government's fear of outside extremist invasion. (Over the past four years since the landmines' installation, no one extremist has suffered from this weapon.)

Travel guidebooks tell that some Uzbek territories with a rich tourist potential (natural and cultural attractions, ethnography, and ecological tours) are closed for tourists for political reasons. As a result, many ecological tourists and folklore lovers have to choose different routes and often refuse from visiting Uzbekistan. Those who like trekking, mountaineering, and rafting have to take routes that bypass the borders between Central Asian states. In 2002 Uzbek border guards detained and deported from the country Russian sportsmen who rafted down the Pskem River from Kazakhstan. Sergey Shiryayev, director of Asia-Raft tourist company, thinks that tourists would avoid Uzbekistan because such border problems prevent travel and sport in this country.

Visa and other formalities. It's difficult for foreign tourists to get Uzbek entry visas because Uzbekistan has consulates in few countries. Europeans can obtain Uzbek visas within 7 days, whereas this procedure for the citizens of Arab and Asian countries lasts for up to one month and longer. An Uzbek tourist visa for up to 30 days costs US $60, for up to three months US $80, for up to a year US $160. A transit visa costs US $20-$40. A group visa for up to 15 days costs US $15 per person. Visa prolongation for 24 hours costs US $15, for up to 30 days US $50. According to experts, these are too high rates for a transitional country whose tourist market is still little known in the world.

There are also problems with the Uzbek customs. If tourists have lost their customs declaration, they are prohibited to take their entire cash out of Uzbekistan. Buying antiquarian things in shops or bazaars, tourists do not know about the prohibition to take such things out of the country. Tourists must also obtain the Culture Ministry's permission for the export of pictures by local painters and handicrafts. They must also show the customs the contents of audio and video materials, documents, and literature taken from Uzbekistan to abroad.

The most difficult procedure, however, is the registration with Uzbek police. Foreign citizens staying in Uzbekistan must register with local police within three days upon arrival. Tourists staying at Uzbek hotels are registered automatically, but it is very difficult to register for foreigners living in private houses or apartments. Sometimes police officials intentionally delay registration to impose a fine on foreigners or take a bribe. But what about foreign tourists making a bicycle tour across Uzbekistan without staying in hotels or those who stay in a tent in the mountains?

Crime hazard. Crimes against foreigners are not rare in Uzbekistan. Foreign tourists might be robbed, deceived while exchanging currency, or sold bad quality goods everywhere, but these happen more often in large cities. Unfortunately, Uzbekistan does not have tourist police (like in Turkey, Thailand, or Egypt) that only deal with crimes against foreign visitors.

Prices. To enter historical monuments in Samarkand (Ulugbek's observatory, Tamerlane's mausoleum, Registan Square), foreigners must pay by 9-11 times more than locals. The same situation is with hotel and transport services.

With the prices of the Uzbek national airlines company, Uzbekiston Havo Yullari, foreign tourists spend less money on flying from Europe to Southeast Asia, not to Uzbekistan. In particular, an economy class air ticket from Paris, Frankfurt, or Rome to Tashkent costs 695 euros, whereas tickets from these cities to Bangkok or Kuala Lumpur cost 640 euros, although Thailand and Malaysia are twice as farther from Uzbekistan. Of course, foreign tourists would prefer a cheaper flight from Frankfurt to Seoul for 615 euros or to Dacca for 560 euros.

There are problems with buying tickets of the Uzbek national airlines. Local travel agencies complain that it's very difficult to get from the national air company information about available tickets for this or that flight. So tourists often choose other air companies, as Aeroflot, Transaero, British Airways, and Turkish Airways.

A similar situation is with rail tickets: a tourist can not buy them without showing his/her passport (passport photocopies are not accepted). This complicates group trips, since rail tickets must be purchased in advance.

As to motor transport, there are almost no regular bus service between Tashkent and major Uzbek cities. Traveling by private cars (taxi) guarantees no safety and comfort. In chase of earning, private taxis often ignore elementary safety requirements.

Local tourist companies, facing no competition in the domestic tourist market, often overestimate their prices. So, one-day tours of Tashkent sell for US $45-$75, whereas similar tours in Vietnam cost US $3-$8.

Currency exchange. Very recently the difference between the official and black-market exchange rate of the Uzbek soum to the US dollar was five times, and foreign tourists had to pay for services much more than locals. This caused legitimate discontent. Foreigners exchanged cash in the black market, thus breaking the Uzbek law. Today, after accepting many requirements of the IMF, Uzbekistan has simplified the currency exchange procedure for private individuals. Today, however, there are still very few exchange offices in Tashkent and the country, and many banks do not exchange currencies of the next-door countries - Kazakhstan, Kyrgyzstan, and Tajikistan.

Leisure infrastructure. Uzbekistan has an underdeveloped leisure and entertainment infrastructure. In particular, nightclubs close at 22:00 o'clock in winter and at 24:00 in summer. Billiard salons are prohibited. There are no casinos and strip clubs and few clubs offering slot machines, bowling, and discotheques. In large cities (Tashkent, Bukhara, Samarkand, and Khiva) there are problems with public toilets, and those that function do not meet sanitary and esthetic norms.

Tourism education. Uzbekistan has tourism and hotel business colleges, tourism and foreign language departments at high schools, and courses organized by the national company Uzbektourism, hotels, and travel agencies. The country still lacks professionals in hotel and restaurant businesses and tourism. In small hotels the personnel do not speak foreign languages and fail to render international-class service. Tourism lecturers at local universities have never worked in the tourist industry and do not know its specifics.

The role of local communities. Local dwellers are practically not involved in the tourism industry, although foreign tourists use the resources of their territories. This causes the conflict between local communities, foreign tourists, and tourist firms. In this connection, some non-governmental organizations and travel agencies suggested creating a tourist product with the participation of local communities. The project, called Community-based Tourism, has been launched in the Ugam-Chatkal National Park in the Tashkent province. In neighboring Kyrgyzstan

local communities (as mountain villages) are already involved in the tourist industry, rendering services to foreign visitors.

HOW PEOPLE TRAVEL IN UZBEKISTANTourist operation volumes. As is generally known, the specificity of trade in commodities is somewhat different from that of trade in services. Services can be defined as “products”, which differ from tangible goods. These encompass transport, communication, construction, insurance, financial, computer and information services, as well as advertising, accounting, management consultancy etc. The base, on which their value is determined, is the market price agreed upon by the counterparts when arranging a deal. Tourism stipulates the rendering of services by providers of such services. It is accepted to distinguish between export and import items in international tourism. It should be observed in this context that in tourism, it is not the commodity that is delivered to the buyer. Quite the contrary, it is the service user that comes to a country to consume its product.

Service exports, thus, include expenses spent by visitors, who arrive in a country (other than his own country of residence) to recreate, to do business, to pursue their private objects etc. There may be other purposes behind a tourist’s intention to visit one or another destination. Tourist imports imply the amount of consumer expenses associated with the departure of a citizen outside his own country of residence with various ends in view for a term not exceeding a year. According to official statistics, in 2004, the tourist service import-export ratio was as follows: US $1 : US $21.2. In 2005, the ratio reached US $1 : US $23.8 (up 112 per cent from the 2004 indicator). However, when compiling a growth dynamic diagram, it can be noticed that the export and import of tourist services dropped by 14.7 per cent and 24 per cent, respectively, with the balance decreasing by 14.3 (See Table 1). In that way, the past two years have seen some negative changes in the Republic’s hospitality industry.

Experts, however, do not regard it as a tendency having an adverse impact on the sector, since this line of activity is subject to the influence of a combination of external and internal factors. This rule applies to all countries without exception. As a rule, these factors include:

- an unfavorable political situation (home and regional conflicts between governments and guerrillas, interstate clashes, introduction of economic and military sanctions, terrorism etc.);

- changes in the social environment (xenophobia, crime, fear of destruction of moral principles, traditions, loss of language and ethnic identity);

- deterioration of economic conditions for development (tax and customs policy, a legal framework for economic activity and business, banking and insurance restrictions and the like);

- technogenic catastrophes and natural calamities (including tsunami, earthquake, landslip, cold weather, accidents at nuclear power stations, oil-refining enterprises and chemical warehouses, ruptures of gas pipelines, ecological disasters etc.).None of these factors is of static character. Changes taking place throughout the globe may

contribute to the improvement or impairment of the situation in separate countries. As experts used to joke, tourists vote by their legs: if they dislike something in one or another destination, they introduce amendments in their travel routes.

At the present time, competition for tourist markets is rather fierce worldwide, as evidenced by an increasingly active participation of different countries in a variety of international tourist fairs. This is particularly true of the fairs staged in Berlin, London, Milan and Madrid. Experts emphasize one more tendency in the global tourist industry: more and more world tour operators start penetrating regional and local markets, where their heavy-weight status can easily exclude small and medium-sized companies from their niches, as was the case in Moscow, the Baltic states, Novosibirsk, Azerbaijan, China etc. This forces national tourist firms to intensify cooperation within the sector and to diversify the range of tourist products, creating new, while trying their best to cut expenses in a move to keep afloat, owing to price differentiation at least. Of course,

sometimes the latter measure leads to dumping, a phenomenon denounced in the civilized system of market relationships.

Inbound tourism in Uzbekistan. In world practices, inbound tourism is considered to include trips accomplished within a country in the space of a year. In keeping with the estimates presented by Yury Tsoy, who heads the Travelers’ Association, Rabat Malik, the proportion of such journeys varies from 70 per cent to 90 per cent of the total amount of inter-district and inter-province trips. What is interesting to note is that their number tends to swell in late spring, early summer and in autumn. The means of transport, to which inbound tourists show preference, are railway and motor vehicles as most affordable in price terms.

The inbound tourists prefer destinations, which characterize a region’s ethnographic, historical, cultural and natural peculiarities and potentialities most vividly. Among their preferable routes are also those, whose district image has been well promoted and advertised. Another important factor is the availability of corresponding infrastructure (including hotels, restaurants, transport communications, exchange offices, rest and recreation facilities etc.). It is, probably, for this reason that not al regions may boast enviable tourist numbers, notwithstanding the fact that many unique architectural, cultural and religious monuments are located there, not to mention unique natural and recreation areas.

From Table 2, one can conclude that foreign tourists are hardly willing to visit the Republic of Karakalpakstan and the Andijan Province of Uzbekistan. But such a conclusion is incorrect. Tourist firms and tour operators organize their trips to these regions, although these visits exclude spending the night in hotels or tourist centers. That’s why they are not included in local statistics on tourism. But the fact that they do take place can be certified by the number of tickets to theatre, cinema, exhibitions etc. sold there.

Experts opine that such a posture of affairs can be explained by the fact that the level of local infrastructure development leaves much to be desired. As a consequence, tourists, who have stumped a round sum for their trip to such destinations, are offered a modicum of services. For this reason, tour operators prefer to use these regions only as transit destinations.

It can be seen, at the same time, that the share of foreigners in the total volume of inbound tourism reached 50.7 per cent, meaning that practically a half of travelers arrive from abroad to use national tourist products. The greatest number of foreign visitors was recorded in Tashkent (50.1 per cent), Bukhara Province (19.1 per cent), Samarkand Province (15.4 per cent), Khorezm Province (8.94 per cent) and Surkandarya Province ( 3.88 per cent). It turns out that of all the tourists visiting the Navoi Province, 94.8 per cent were foreign citizens. In other provinces, the situation looks as follows: Bukhara – 73.9 per cent, Samarkand – 51.7 per cent, Surkhandarya – 84.2 per cent, and Khorezm – 50.1 per cent.

The statistics, thus, helps reveal the following tendencies:- there are well-established tourist routes, which have been functioning within decades.

Enjoying an attractive international image, they remain in popular demand (Tashkent – Samarkand – Bukhara – Khiva). In 2004, they accounted for 93.6 per cent of all trips;

- there are several specialized destinations, notably, Termez, Karshi and Navoi, which are visited by foreign tourists with certain purposes (archeology, ethnography, nature etc.). For now, these narrow-profile tourist products are not generally sought after;

- some regions, including the Ferghana Valley, Syrdareya and Djizak Provinces, are used only as transit regions, since their promotion requires far heavier investments than the promotion of already famous destinations. What’s more, tour operators sometimes recommend them not to mass consumers, but to individuals pursuing such specific objects as hunting, gastronomy, ecology, folklore and so on.

Foreign visits to the Republic. Analyzing the tendencies indicated in table 3, one can infer that the number of those visiting the Republic of Uzbekistan as tourists is rather small. What is meant is, most likely, is organized tourism, i.e. tourists, whose arrival in the country is organized by tour operators. Meanwhile, a significant percentage of people come as private visitors (on the invitation of their friends, relatives, colleagues etc.). They are also regarded as tourists, although they do not

fully realize this status. That is why inbound tourism volumes are larger by far, compared with relevant customs statistics. For instance, in 2005, 27 people arrived in Uzbekistan from Vietnam on the invitation of private persons (of 37 officially registered); Greece – 122 (181); Sweden – 32 (62); SAR – 39 (42) and New Zealand – 24 (79).

In addition, some of those who visit the Republic on an official journey or for business purposes, consume the services offered by tourist agencies: they order excursions, go hunting and visit national parks, museums, theatres, sports clubs and restaurants. In that way, they also can be viewed as contributors to the tourist sector, and their share of such contribution should be mirrored in the hospitality industry’s statistics. In 2005, for example, Uzbekistan was visited with business purposes by 26 citizens of Bangladesh (31), Israel – 618 (699), Denmark – 177 (187), Latvia – 22 (63), Lithuania – 46 (87), Malaysia – 127 (133), Poland – 104 (140), Singapore – 10 (14), Slovenia – 5 (11), Tailand – 19 (22), Finland – 58 (68), the Czech Republic – 57 (86) and Taiwan – 99 (122).

It should be pointed out that these figures are far from reflecting the full incidence of tourists, because it is economic agents, transporting material and financial values across the customs border, that are registered in the main.

The following figures are worth mentioning as well: in 2004, 145 people arrived in Uzbekistan from Belgium (in 2005, their number grew to 200); Australia – 251 and 477, correspondingly; Austria - 473 and 734; Denmark – 130 and 187; India – 353 and 368; Canada – 128 and 177; the Netherlands – 186 and 369; the United Arab Emirates – 123 and 139; Pakistan – 105 and 167. All these figures are indicative of an increase in foreign visitor numbers. Experts warn, however, against drawing hasty conclusions from this upward tendency. The reality is that Uzbekistan comes across a fierce competition in the world tourist markets, where tour operators struggle for each buyer of their tourist products. The chief thing is that to render quality services to the usual number of tourists, while being ready to augment it as far as local infrastructure is diversified and more tangible assistance is provided by the state. What is meant here is, first and foremost, the simplification visa formalities, procedures associated with registration with police authorities, customs declaration, currency exchange and the like, as well as a significant expansion of the scope of air communication with other countries, which represent attractive markets for potential tourists (Spain, Canada, Austria etc.)

Tourism in Khiva. The presentation of the tourist product, called “The Golden Ring of Khorezm” and the tourist fair, “Culture of Ancient Khorezm – Khiva-2005” have been recently held on the territory of Ichan Kala, an ancient fortress located in the oldest part of the town-museum of Khiva. Festivities and inauguration ceremonies were arranged by the UNESCO representative office in Uzbekistan, in conjunction with the German Association of Public Universities (IIZ/DVV), the Japanese International Cooperation Agency (JICA), the TACIS NCU Coordination Bureau, the Center for Business and Tourism Development and authorities of Khiva.

The aim of all these festive occasions was to capture the attention of the international tourist market, the system of tour operator services and hotel chains to massive opportunities available in the Khorezm Province and Karakalpakstan for the development of the hospitality industry. Elaborating a range of fascinating tours across the region will be crucial to supporting the local nascent private sector, which provides the necessary services to travelers and tourists. According to experts’ estimates, no less than 3,000 people were present at the Kunya Ark and the Allakulikhan Madrassah during the festivities, while the population of Khiva don’t exceed 50. A special flight was organized from Tashkent, with a number of buses delivering the project participants from the towns of Bukhara, Samarkand and Nukus.

“We are glad to welcome you in the ancient town of Khiva, at the very heart of the Great Silk Road and hope that these two days will be important for all of us” – said the town khokim, Davron Allikulov, addressing those who arrived to take part in the celebrations, numerous guests, tourists and the mass media. – The present festivities are dedicated to the revival of tourism in the Khorezm Province and Karakalpakstan, demonstration of our potentialities to preserve the region’s rich cultural and historic heritage, traditions, folklore and handicrafts. With tangible support from international organizations and active involvement of local entrepreneurs, solid prerequisites start to

emerge for fuller utilization of the huge opportunities for growth in the tourist business that exist in the region.”

Ichan Kala, the oldest past of Khiva, occupying 26 ha, is surrounded by mighty fortress walls 8-10 meters high and more than two kilometers long. By now, the restoration of almost all monuments of ancient culture is complete in this “museum under the open sky”, as Ichan Kala is often called. It comprises several hotel complexes, both newly built and reconstructed, restaurants, artisans’ shops, squares for dances and folklore performances, 13 museums and suchlike. There are four gates in the town, facing directly North, South, East and West. Of these, the Ota-Darvaza Gates are considered to be the chief gates, through which tourists and guests usually enter Khiva. The museum numbers 40,000 exhibits, including 1,000 archeological finds, 14,800 medals and coins, 2,300 hand-made articles, 1,800 ethnographic items, 4,900 manuscripts, 113 miniatures, 10 sculptures and 3,070 photographs.

Says Uve Gartenschleger, a representative from the German Association of Public Universities: “The tourist fair, called “Culture of Ancient Khorezm” is designed to highlight both the enormous tourist potential of the region and the dynamic development of small ands medium-sized businesses in its tourist sector. There are all signs to suggest that the tourist industry may play a leading role in the Republic’s overall economic development. As it gains a firm foothold and becomes a solid foreign-exchange earner, tourism may subsequently provide an important boost to the development of other sectors, thus playing a crucial role in addressing social problems, creating jobs and improving the population’s well-being. We are sure that our project as a whole and the fair in particular will be conducive to the achievement of these goals”.

The fair’s first day was devoted to the hotel services sector. All hotel facilities operating in Khiva were represented there. The most notable of these are Islambek, Arkanchi, Malika, Lolita, Khiva, Zafarbek, Mirzaboshi and Khorezm-Palace, which are based within the bounds or in immediate proximity to Ichan Kala. Restaurants and bars as an integral component of the hotel business, also demonstrated their potentialities, especially in the fields of gastronomy and services. A number of tour operators, both local and those from Bukhara, Samarkand, the Ferghana Valley and Kyrgyzia, presented their original tourist products. An information tourist center inaugurated during the fair to provide numerous guests and visitors with whatever relevant information they need is now functioning on a permanent basis.

The fair under discussion is the second regional event of this kind held in Uzbekistan. The first such event, organized with the assistance of the Regional Training and Support of Centers for Small and Medium-sized Business in Tourism Project , was convened in the town of Bukhara in 2004. The project was carried out by IIZ/DVV together with the European Institute for Culturology Tourism in Bulgaria (Eureka) and the Bukhara Center for Tourist Business Support. That fair created a furor in the national tourist market. A group of entrepreneurs engaged in the tourist sector were sent to Bulgaria to gain experience and adopt practical methods in the restaurant and hotel business. In addition, in cooperation with IIZ/DVV, excperts prepared and published training appliances for entrepreneurs who run restaurants and hotels. What’s more, they conducted a number of seminars on strategic planning and financial management in tourism and gastronomy. As some tour operators noted, one should not set off regional fairs against the Republican Fair, Tourism on the Great Silk Road, an annual event held in autumn since 1995. The regional fairs, whose local importance can hardly be overstated, are mainly oriented towards demonstration of tourist potentialities enjoyed by small towns and rural districts. Notwithstanding their predominantly local focus, they used to draw attention of both national and foreign tourist firms and international organizations. They display particular interest for trans-border cooperation in tourism. Those taking part in the “round-table” discussion held within the framework of the “Culture of Ancient Khorezm – Khiva-2005” Fair talked over the issues that surround the practical realization of the project, “Issik-Kul Initiatives for regional cooperation in the promotion of tourism in Central Asia”. Approved at a seminar held in the Kyrgyz town of Cholpon-Ata on July 12-13, 2004, the project envisages the creation of regional structures capable of fostering the promotion of joint tourist products and implementing joint development programs, such as the Central Asian Tourist

Association. Among the proposals designed to simplify entry procedures for tourists, the proposed introduction of the “Silk Road visa”, similar to the “Mekong Tourist visa” existing on South-East Asia, seemed the most reasonable and attractive. Such permitting documents allow tourists to unrestrictedly travel in countries involved in the implementation of joint tourist programs.

At the Cholpon-Ata seminar, some participants called for revision of laws regulating the tourist industry, in terms of providing more incentives to the private sector, notably in such aspects as the re-establishment of state ownership rights and privatization of rest and recreation facilities. It is also necessary to improve the collection and registration of statistical data on the effective WTO standards, which will allow to reflect the real posture of affairs in tourism, as well as to forecast new trends and development indicators. The “Issik-Kul Initiatives” attached great importance to the creation of new tourist products and routes, conduct of marketing research, training of personnel, restoration of local crafts and folklore etc.

The “round-table” discussion participants familiarized themselves with the findings of research conducted by Andrea Loinberger, a CIM expert, in May 2005. Having polled foreign and domestic tourists visiting the Khorezm Province, she compiled the following data: of 84 visitors, 14 per cent were from France, 9 per cent – from Germany and Israel, 12 per cent – from the UK, 7 per cent – from Australia, 15 per cent – from Uzbekistan, with other minor proportions of respondents representing other countries. 46 per cent of respondents were at the age of 50-70, while 21 per cent of visitors were in the 30-40 age category.

As Andrea Loinberger pointed out, 14 per cent of those polled arrived in Khiva for business purposes, 53 per cent - as members of tourist groups and 32 per cent – as independent visitors. Of these, 87 per cent came to Khiva for the first time and 12 per cent – for the second time. 30 per cent of respondents obtained information about Uzbekistan from their friends, 10 per cent – via the Internet, 19 per cent – through the mass media and 53 per cent – from tourist guide-books.

It appeared that 36 per cent of respondents arrived in Khiva on business, 44 per cent – through an agent in their countries, 19 per cent – through an agent in Uzbekistan, and 16 per cent – thanks to their personal contacts. In 96 per cent of cases, they made an initial inquiry via the Internet. As regards the quality of services offered by the Uzbek hospitality industry, 28 per cent of tourists wanted that elements of Oriental decorum be presented more widely in hotel interiors; 57 per cent wanted a sconce near the bed; 26 per cent – a bathroom, 76 per cent – showers, 24 per cent – hair-driers, 37 per cent – hall-stands, 22 per cent – a niche for suitcases, 26 per cent – tables, 32 per cent – means of personal hygiene and 9 per cent – a library.

67 per cent of those polled said that their guides were competent enough, 27 per cent – erudite, 31 per cent – skillful narrators and 19 per cent – considerate towards the needs of tourists. They also mentioned the following details as interesting and useful: live music (25 per cent), lectures ( 14 per cent(, folk dances (27 per cent), demonstration of cooking (6 per cent), teaching of handicrafts (8 per cent), visits to the theatre (8 per cent).

Asked “What do you think Khiva needs most of all?”, 33 per cent of tourists mentioned the improvement of advertising of the town’s immense tourist potential; 15 per cent – restoration of the town’s magic image, 10 per cent – better illumination of streets, 9 per cent – better signboards and road signs, 8 per cent – improvement of building preservation techniques, 19 per cent – a larger quantity of public conveniences. And only 15 per cent of respondents said that everything is in place. It also appeared that during their sightseeing excursions, 7 per cent of tourists would like to buy syuzane, 2 per cent – carpets, 1 per cent – antiques, 10 per cent - ceramics, 4 per cent – articles made of gold, 5 per cent – jewelry, 2 per cent – tyubeteikas, 24 per cent – silk scarves, 2 per cent – miniatures. At the same time, 43 per cent of those polled expressed their wish to stay longer in Khivam 5 per cent – to buy slides or films, 6 per cent – to buy the town’s map, 7 per cent – to use their credit cards.

According to Andrea Loinberger, these valuable sociological data will allow the local tour operators to substantially improve their activity, taking account of foreign tourists’ interests and wishes and customizing their services to concrete requirements.

The participants and guests of the events held in Ichan Kala were shown a 20-minute film, called “The Golden Ring of Khorezm”, prepared by the UNESCO representative office in Uzbekistan,. Its head, Barry Lane told how the preparations had been made for its shooting throughout the Khorezm Province and Karakalpakstan. Besides, the Allakulikhan Madrasah hosted an exhibition of works by a Greek photogtapher, Pavlos Konstantinos Politis, featuring the traditional mode of life of Central Asia’s inhabitants. Furthermore, there were organized several excursions to the historical and architectural monuments of Khiva, in a move to acquaint the participants with how nearby hotels, restaurants and museums work. An exhibition of craftsmen held in the Palvan Kary street attracted a lot of foreign tourists. A concert of folklore groups and a fancy-dress performance about the life of Khiva inhabitants many centuries ago was a great success.

Alisher Taksanov, Ph.D. (Economics)1998 - Senior Specialist of the National Company "Uzbektourism";2002-2004 - Senior Lecturer, Faculty of International Tourism, the Tashkent University of Economics;2004-2006 – Expert of Association Traveler "Rabat Malik".

Tashkent; Uzbekistan, 2006