Kyrgyz Divisions Over Kazak Investment

The forthcoming official visit of Kazak president Nursultan Nazarbaev to neighbouring Kyrgyzstan is seen by the Kyrgyz leadership as an opportunity to follow up investment pledges.



Kazakstan is one of the leading investors in Kyrgyzstan’s fragile economy, which relies heavily on foreign capital.



But critics of the Kyrgyz government say there is a risk that growing investment from Kazakstan could lead to its economic dominance over its smaller neighbour.



They also argue that the corruption inherent in the Kyrgyz government means there is a possibility that Kazak investors may begin to wield political as well as economic influence, by lobbying Kyrgyz politicians.



President Nazarabev’s visit - which is set for mid-April - follows a meeting with Kyrgyzstan president Kurmanbek Bakiev in Astana last year, at which the two sides agreed to cooperate on investment.



Bakiev promised to create the most favourable conditions for Kazak business, while his Kazak counterpart pledged to invest 2.5 billion US dollars in the Kyrgyz economy.



But many claim that the Kyrgyz leadership - keen to secure political support from Astana - is giving too much and asking little in return.



Kanybek Imanaliev, a Kyrgyz deputy, believes the Bishkek authorities should not place a desire to acquire Kazak investment over their own national interests.



He argues that that while creating favourable conditions for Kazak investors, the Kyrgyz leadership should ask for certain concessions in return - such as improving the living and working conditions for tens of thousands of Kyrgyz labour migrants in Kazakstan.



According to political analyst Mars Sariev, Kazakstan’s financial expansion into Kyrgyzstan is seen as particularly threatening because it has chosen to invest in sectors of strategic importance, such as energy, banking, and tourism.



Already, there are several successful Kazak banks working in Kyrgyzstan - including Kazkomertsbank, Alyans Bank, and Energo Bank.



Sariev says that the corruption inherent in the Kyrgyz government means there is a real danger that Kazak investors could sway politicians.



“There’s a danger that the level of corruption in the government will lead to representatives from the top echelons of power driven by their material interests, to offer stakes in large strategically important enterprises,” he said.



Kyrgyz businessman Omurbek Abdrakhmanov says that once they’ve established a dominant position in the Kyrgyz economy, there will be little to stop Kazak executives from using their influence.



“Kazak businesses can finance their representatives in parliament and in other state bodies. They may also finance political parties in Kyrgyzstan to get their own representatives into parliament. After this, it will be easy for them to lobby not just their economic interests, but their political interests as well,” he said.



Kyrgyz deputy Azimbek Beknazarov agrees, and says there are unscrupulous government officials eager to lend support to Kazak investors, even at the expense of national interests.



Economic expert Sapar Orozbakov warns that a dominance of investors with links to Kazakstan’s current authorities may have implications for Kyrgyzstan’s stability, particularly if power changes hands in Astana.



“As far as I know, the investment in Kyrgyzstan is linked to people at the top of the political world in Kazakstan. If they were to leave, they might want to withdraw capital from the region,” he said.



But Kazak analyst Eduard Poletaev says the fear that Kazak businesses will force out Kyrgyz ones is unfounded, and is being used as a tool by some politicians to manipulate voters.



“The same happened in the Baltic countries, where politicians scored a lot of points by scaring people with the claim that Russian business would buy out everything,” he said.



He also points out that the areas in which the government would welcome investment are not always seen as viable, or attractive to investors.



“It could be that Kyrgyzstan wants Kazak investment to go into the collapsed manufacturing sector, into industry,” he said.



While others maintain that with Kyrgyzstan’s ailing economy in need of a cash injection, it should welcome investment from any source.



“We need to be open to all foreign investors. The political situation in the country should also help to attract investments. Both the government and the opposition should be interested in this,” said political analyst Orozbek Moldaliev.



Sapar Orozbakov, an expert on economic issues, agrees, “For as long as Kyrgyzstan requires foreign investment, we cannot restrict the investment of Kazak capital in our economy.”



Economist Jyldyz Sarybaeva shares this view, and argues that Kazakstan has much to offer its neighbour.



“There are objective reasons - such as geographic vicinity, its level of economic development, and amassed capital - for Kazak investors bringing their capital to us, “ she said.



Sarybaeva dismisses the notion that there is a hidden political agenda behind Kazak investment. “Their only interests are economic benefits - the profit they can make in Kyrgzstan,” she argued.



While her colleague Gani Abdyrasulov points out that Kyrgyzstan cannot afford to be choosy, “With the unstable situation in the country, Kyrgyzstan does not have a great choice of investors. We should give Kazak investors credit for continuing to invest in our economy despite the political conditions here.”



He believes that it is up to the Kyrgyz authorities to ensure that investment is properly regulated to avoid investors becoming too powerful.



“The government should make sure that the influx of Kazak capital into various sectors of the economy is properly controlled,” he said. “The foreign investor should not be given the controlling stake.”



Aziza Turdueva is an IWPR contributor in Bishkek.