Helvetistan: Switzerland's Arabia?

As regards the police state and self-enrichment, some Central Asian rulers can rival Ben Ali, Mubarak, King Abdullah or Assad. They even outdo them when it comes to state failures, disintegrating infrastructure or corruption.
Small wonder therefore that this elicited critical comments during the spring session of Parliament. Senator Dick Marty found it unacceptable for the Switzerland's IMF voting group to be «legitimising» these regimes. House of Representatives member Carlo Sommaruga called for the composition of the group to be reconsidered, whilst Hans-Jürg Fehr tabled a motion for the Federal Cabinet to reset the strategy on the «autocratically governed» Central Asian countries. The Federal Cabinet moved to have the motion rejected. Parliament has the last word.

Heterogenous voting group

It is public knowledge that the IMF has decided to reform its voting system over the next two years so as to give greater weight to emerging countries and reduce the over-representation of European countries on the Executive Board. The correction will trigger major realignments amongst the voting groups. As recently as last October, former Federal Councillor Merz had announced that Switzerland's seat on the Executive Board was not in danger – that US Finance Minister Geithner had promised him as much. The new Finance Minister Widmer-Schlumpf has taken leave of Merz’s wishful thinking. On the sidelines of the 2011 World Economic Forum she announced that Switzerland had to get ready for a newly composed voting group or a rotating chairmanship. Other small European countries like Belgium or the Netherlands were looking into merging their groups.

Swiss IMF voting group 2011

*) Uzbekistan left and Kasachstan joined the group in 2010.

The IMF has 187 Member States. The most influential ones are those with a seat on the 24-member Executive Board. Eight «heavyweight» countries have individual seats.  The remaining 16 Directors are at the head of voting groups comprised of the 163 members without a seat on the Executive Board. Theoretically then, these 16 also represent the interests of the vast number of remaining countries. Some voting groups correspond to regional economic areas and are considerably cohesive: there are two each for Africa, Asia and Latin America, and one each for Northern Europe and the Middle East. Other voting groups are more heterogeneous, and often serve to enable smaller rich countries like Belgium, Holland, Italy, Switzerland, Canada or Australia to secure seats on the Executive Board. The Swiss voting group is by far the most heterogeneous.

The price of the voting group

The question therefore arises as to why the countries joined the voting group and the price to Switzerland. Only some elements are public knowledge. Poland left the Italian group for the Swiss one because as Alternate Director it could improve its status. Besides, according to a US study, countries that are entitled to World Bank loans (as was Poland until it joined the EU) can expect about twice as much if they are represented in the Executive Board of the World Bank as Directors or Alternate Directors.  The Central Asian countries became independent at a time when Switzerland was seeking voting group members. Under no circumstances did they wish to join a Russian group and were keen on direct contacts to European donor countries. After protracted resistance, the USA then gave its blessing to their admission, for geopolitical reasons.  Serbia joined the Swiss group in 2000. It was the only European group in which no NATO member was setting the tone – which was important to Serbia in the wake of the Yugoslav wars.

As for the price, we have no more than fragmentary information. It was said in 1992 that Switzerland had paid the IMF membership fees for the Central Asian republics. That was officially denied. But the Federal Cabinet did promise modest loans.4 The new members did in fact receive substantial net payments from Switzerland in the first half of the 1990s. In the case of Serbia, Switzerland provided loans to cover that country's accumulated IMF and World Bank obligations and held out the prospect of further aid. The leading Swiss newspaper NZZ complained that «Belgrade wanted to be paid the highest amount possible for membership in the group» (9./10.12.2000).

What is beyond doubt is that Switzerland then launched development cooperation in Central Asia. It is an open question as to whether it would also have extended its aid to these countries had they not joined the voting group. That development cooperation peaked for the first time during the first half of the 1990s. Thereafter the Federal Cabinet became somewhat tight-fisted. This seems to have garnered harsh criticism during the then Finance Minister Villiger’s tour of Central Asia in 2000. He said afterwards that Switzerland should «reinforce its credibility as ‚Godfather‘ by means of bilateral aid as well» (NZZ, 7.11.2000). This meant that it was not enough for Switzerland merely to advocate for World Bank loans to its voting group members. In 2001 the Federal Cabinet gave its blessing to an agreement between the Foreign, Economy and Finance Ministries under which cooperation with Azerbaijan and Central Asia was to be stepped up and annual spending increased to 44 million. «Generous» support was also decided on for Serbia (see table).

«We can’t please everybody»

The Federal Cabinet's Central Asia policy began to draw criticism precisely during those years. The question raised by politicians and the public was whether the Cabinet was attempting to influence the human rights situation in these countries or whether it remained silent because preserving the voting group was more important. The criticism was strongest in 2005, when the Uzbek Government brutally crushed a popular uprising in Andijan with live fire. The Finance Ministry tried to sound conciliatory, stating that the voting group «afforded otherwise impossible access to government agencies as well as the possibility, via that channel, also to address policy issues of reform, democratisation and human rights, in addition to major economic and developmental topics» (Seco/SDC Newsletter, 19.9.2005).

Officials at the time were clearer. Pietro Veglio (World Bank Director) said: «We don’t have a link with human rights issues. The World Bank is a rules-based institution. We can’t please everybody.» His IMF colleague Fritz Zurbrügg had this to say: «I'm here, to represent eight countries. I am not a Swiss speaking about Turkmen issues. It's a matter of me defending Turkmenistan. I don't tailor my reactions to Swiss priorities. I have to deal with my conscience and follow 'best practice', of course» (Swiss News, 1.2.2005). Under the federal law on collaboration in the Bretton Woods Institutions, however, these are not matters of conscience. It prescribes that in the IMF the Federal Cabinet must be mindful of developmental principles and goals, which also include promoting human rights.

Table: Central Asia and North Africa compared

1) Source: World Development Indicators
2) One reading of the table: Tajikistan's 2009 per capita product was just 57 per cent of the 1989 figure. Source: OECD database. (in constant 2000 dollars).
3) Human Development Index 2010. 1 stands for the highest, 0 for lowest value. So-called medium human development values fall between 0.480 and 0.670.
4) Slot 1 is the least corrupt, slot 178 the most corrupt (Somalia)5) Aid by all western countries represented on the OECD Development Assistance Committee.
6) Azerbaijan's own oil/gas production no longer meets domestic needs.

As far as we can assess, despite the voting group constraints, Swiss development cooperation in the Central Asian countries is no different from that carried out in other countries. Neither is it better funded than that practised in the other countries, despite assertions to that effect by a US study last year.  Only the two poorest Central Asian countries of Kyrgyzstan and Tadjikistan received aid on a scale appropriate to a priority country. Operations in Uzbekistan and Azerbaijan are smaller, and no systematic work has ever been launched in Turkmenistan. Uzbekistan's departure from the voting group last year sparked discussions in the responsible federal bodies as to whether development cooperation should then be interrupted or continued. It would be in line with long-standing policy to continue it, as Switzerland does not practise development cooperation as a reward for political accommodation. But the officials were unsure about this. A new development cooperation strategy is now being worked out for the region, which effectively postpones the discussion about departures.

The Central Asia crisis and the donor countries

For the USA and its European allies, what was crucial in the 1990s was connecting Central Asia's oil and gas reserves to the world market via new pipelines that did not go through Russia; Russia's ambitions were the opposite. The Central Asian republics became of interest to the USA after 11 September 2001 because they border on Afghanistan. Besides, in almost all Central Asian countries there are armed Islamic opposition movements that are being violently suppressed by their governments. Brutal regimes like that of Uzbekistan thus became allies in the «war on terror» overnight. Western aid and military assistance has increased in the region since then.

The security focus of cooperation has done very little for the peoples of Central Asia. The International Crisis Group published an alarming report last February  stating that Kyrgyzstan and Tadjikistan were on the verge of a «catastrophic systemic collapse» of their infrastructure, and that in the case of the richer countries it was only a matter of time before they too reached that stage. The ruling elites were reluctant to tackle the problems and invest state funds in them. Donor countries and development banks, including the World Bank, were doing nothing to pressure the regimes into changing their ways and had also made no effort at effective coordination. Aid is «…often disbursed to fulfil annual plans or advance broader geopolitical aims». Representatives of development organizations were apprehensive about talking frankly with the governments. Besides, their efforts were being thwarted by the fact that senior USA and EU representatives would periodically pay court to the regimes during state visits. On balance, this could ultimately lead to the collapse of the Central Asian governments.

In short, it would be no luxury for Parliament to request the Federal Cabinet to provide an unvarnished analysis of the situation and a report on the policy objectives that should guide Switzerland's future activities in Central Asia. Before the outbreak of the widespread uprisings this year, the Arab countries were not worse but better off than the Central Asian countries.

Peter Niggli, Director Alliance Sud

Article published in: Alliance Sud News No. 68, Summer 2011