Institute for War and Peace Reporting | Giving Voice, Driving Change

Kyrgyz Corruption Threatens Economic Ruin

Corruption in Kyrgyzstan is now so endemic it is threatening to bring down the entire economy.
By Almaz Kenenbaev

Organised crime, fraud and embezzlement have reached such a level in Kyrgyzstan that if action is not taken soon, the economy could collapse under the strain. Attempts to stem the tide of corruption are being hampered by a ruling elite who not only benefit hugely from economic crime, but also control the judiciary, civil service and law enforcement agencies.

Corruption began to seep through the Kyrgyz political scene when the privatisation of state property began. Most of the population had no funds to buy any state property leaving a small elite to secure ownership at knockdown prices. Volga cars, for example, were sold off for as little as five or ten dollars. At a stroke, a rich and powerful minority was created, which has sought to protect and expand its interests ever since. Last year Kyrgyzstan was nominated the 87th most corrupt country in the world by respected international organisation Transparency International.

In the early years of independence, foreign investment also provided fertile ground for corruption. The first private investments in the Kyrgyz economy were not only misconceived, they were guaranteed by the state, creating a national debt which now totals around $1.5 billion.

The bulk of those original investments have simply been plundered. According to Chingiz Aleskerov of the Kyrgyz General Prosecutor's Office, only 20 per cent of the one billion soms of credit guaranteed by the Kyrgyz government has been returned to state coffers. The remainder is unlikely ever to be recovered, as loans to agriculture were written off against bad harvests and many firms went bankrupt before paying off their debts.

While the Kyrgyz economy does have sectors whose revenues could bolster depleted state coffers, these are now controlled by a close knit cabal. The lucrative trade in oil by-products and spirits is monopolised by companies with close links to the ruling elite. To give just one example, the former Kyrgyz prime minister now runs TAIS, which dictates prices for petrol and other hydrocarbon by-products.

Corruption reaches within state companies as well. Shalkhar Jaisanbaev, director of oil and gas company Kyrgyzgazmunaizat, went into hiding after the security services accused him of using ancillary companies to launder and steal $18 million.

Political considerations often determine the outcome of corruption cases. M Aibalaev, the former director of the Kadamjaisky antimony metal factory, was arrested, charged with fraud and widely castigated in the state-controlled media. But when the new management at his factory failed to match his production figures, he was quickly reinstalled in his old job and soon after named governor of the new Batken municipality.

Similarly at the beginning of this year, out of 17 bureaucrats brought before the courts on fraud charges, 11 were released and all charges dropped despite protests from the police.

As well as sidestepping anti-corruption measures, the ruling elite also exploits the corruption issue to further their own political ends. Shortly after he assumed the leadership of the Ar Namys opposition party and announced his candidacy for the presidency, former Minister of Internal Affairs Felix Kulov was charged with a whole catalogue of crimes. While Kulov waits for his case to be heard in court, his political opponents are maximising the opportunity to further discredit him by dredging up other charges which have already been thrown out by the Constitutional Court.

Government posts are routinely bought and sold, most notably in the customs and tax inspectorates. In several cases, top jobs have been given to men with criminal records and bogus credentials.

The activities of corrupt bureaucrats have even threatened the social and political stability of the country. Major unrest shook a number of cities including Bishkek, when gas supplies from neighbouring Uzbekistan were cut off because the Kyrgyz authorities were unable to pay their bills. It later emerged the shortfall in funds stemmed from massive unpaid debts run-up by Kyrgyzgazmumaizat against the Kyrgyz state budget.

The various bureaucrats who control business often amass more money than the entrepreneurs themselves. In contrast to Soviet times, no attempt is made to conceal the fruits of corruption. Many have built themselves vast mansions, flaunting their wealth in the face of poverty, which - according to the UN figures - now affects over 50 per cent of the population.

State monopolies have become hothouses where corruption can flourish unchecked. As senior figures establish their own illegal operations, struggles break out over spheres of interest. Yusup Kolbaev, head of Lukoil Kyrgyzstan, the main player on the local oil market, was murdered in a turf war of this kind.

So long as the General Prosecutor and the presidents of all the top courts are appointed by presidential degree, there can be little prospect of serious corruption investigations beginning against the ruling elite.

The first step to defeat corruption must to establish a more balanced system of state control. Top civil servants must be appointed for their professional skills, not their loyalty to the ruling elite, and there must be an independent judiciary.

A body of international observers might even be necessary to review cases where local judges make decisions which seem arbitrary. The various state law enforcement bodies, many of which perform identical roles, should each be assigned distinct responsibilities and incentives should be offered to those rooting out corruption. Tax inspectors, for example, could be paid a portion of the proceeds from successful prosecutions of tax evaders.

Such measures could begin to tackle Kyrgyzstan's endemic corruption. Without such measures the economy could simply collapse, bringing the state down with it.

Almaz Kenenbaev is a regular IWPR contributor in Bishkek.