Economic Strategy Sets Over-Ambitious Goals

Kyrgyzstan’s development strategy for the next three years sets out ambitious economic goals that will not be met unless the government carries out radical constitutional and administrative reforms, say NBCentralAsia observers.



On May 17, President Kurmanbek Bakiev signed off on the national development strategy for 2007-2010 whose principal target is to boost the annual growth rate of gross domestic product, GDP, to eight or nine per cent.



Bakiev set a target of eight per cent for GDP growth for last year, but the actual figure was only 2.5 per cent. GDP was around 430 US dollars per capita last year in nominal terms, and the government hopes to double that figure by 2010.



The strategy is geared towards attracting domestic and foreign investment and developing small and medium-sized businesses, electricity generation, mining, and agricultural processing.



On the government budget, the plan is to focus spending on various development priorities while ensuring the social sector is well-funded, and to reduce the tax burden.



NBCentralAsia analysts say the strategy will not meet its ambitious targets unless constitutional and administrative reforms are put in place first.



The director of the Centre for Economic Analysis, Sapar Orozbakov, doubts the strategy will even get off the ground unless a more efficient system of managing the state is instituted, and unless laws that currently stunt market mechanisms are changed.



“Constitutional reform to deconstruct the current political system should become a major factor in strengthening state management,” said Orozbakov.



He argues that weak political systems fuel corruption and allow the shadow economy to prosper. He estimates that the grey economy is worth about 40 per cent of GDP.



Economist Jumakadyr Akeneev says the investors Kyrgyzstan is relying on to boost its economy are scared off by the level of corruption.



“Investment flows could help secure the country’s development strategy for 2007-2010," he said. "But to make this happen, we need political stability and decent conditions for investors, and this is not the case now.”



Avazbek Momunkulov, a member of parliament and former head of the tax inspectorate, agrees that major political reforms are needed before the economy can be turned around.



“The main goals of political reform should be to make the authorities more accountable for their actions, to ensure that the different branches of power monitor each other’s activities, and to establish an effective system of checks and balances. This could allow economic reforms to happen,” he said.



The government’s monetary and tax policies, which are guided by international financial institutions, should be geared towards assisting the real economy rather than at ensuring macroeconomic stability at any price, Momunkulov added.



(News Briefing Central Asia draws comment and analysis from a broad range of political observers across the region.)