Kyrgyz Government Faces Grilling on Economy

As the Kyrgyz government prepares for a rough ride when it reports to parliament on economic performance over the last year, First Deputy Prime Minister Joomart Otorbaev is accentuating the positive. 

In an interview for IWPR ahead of the May 23 parliamentary hearing, Otorbaev pointed out that the economy had grown, inflation kept under control, and bureaucratic obstacles to business had been slashed.

On economic policy matters, Otorbaev said the government was taking steps to mitigate any negative effects of entering a customs union with Russia, Kazakstan and Belarus, and was hoping to use the end of a United States military airbase as an opportunity to re-energise the civil aviation industry.

On the downside, attempts to renegotiate a deal with the Canadian company running the Kumtor gold mine have yet to bear fruit as parliament’s June 1 deadline for a new agreement draws closer.

But as Otorbaev made clear, the very fact that a diverse parliament is able to hold ministers to account and even give them a hard time is unique for Central Asia.

IWPR: How would you rate the government’s efforts to improve people’s lives over the last year?

Joomart Otorbaev: The year 2012 saw improvements in the business and investment environments. Last year we abolished 113 types of licences and permits, so that there are now fewer than 300 of them.… The number of inspecting agencies has been cut from 21 to 12. Routine inspections have been reduced from 30 to 15 for legal entities and to five for individuals.

IWPR: The government is due to report to parliament at the end of May. Judging by the mood among opposition legislators, the report might be deemed inadequate, and there may even be calls for the prime minister to resign.

Otorbaev: It’s an entirely healthy process, We ourselves ask members of parliament to criticise us and point out shortcomings so that we can improve…. There has been criticism, and there will continue to be. That comes from the fact that we live in a democracy….

But we do have things to tell the legislators. We have carried out a number of positive reforms that have laid the foundations for future progress.

We’ve achieved a huge amount on economic growth, curbing inflation and attracting investment. Gross domestic product has risen by 8.2 per cent [year on year] over the last four months, and inflation by just one per cent.

IWPR: The Kumtor issue has prompted a lot of discussion between government and parliament. What progress has been made there?

Otorbaev: The current contract with [Canadian] Centerra Gold was signed in 2009, and like it or not, this clearly states that it is governed by international law.… The unilateral steps which some politicians are pressing for, for instance denouncing the agreement or nationalising the mine, would result in large number of international lawsuits against the government… [entailing] a fall in profits and reputational risk. That would be very dangerous.

The government has already hired legal and financial consultants to conduct negotiations on revising the contract…. They are looking for ways to resolve matters as amicably as possible. 

IWPR: Will the government be able to renegotiate the contract as legislators are demanding?

Otorbaev: I am hoping we’ll able to do that. A project on this scale cannot operate without a consensus among the public and the government. If neither of them is happy, a project can never progress in a stable manner…. Hence, we need to convince Centerra and above all its shareholders that the current arrangements aren’t going to be sustainable.

IWPR: One foreign policy development that everyone is following is the future of the United States base known as the “Transit Centre”, at Manas Airport close to Bishkek. Has the government made a final decision not to extend the current lease when it expires in July?

Otorbaev: A decision has been taken that now that the war on terror is over, the contract for the transit centre also ends. As our leadership has pointed out repeatedly, we are prepared to continue, but with the military component removed. We’re still willing to help and participate in the logistics of transporting non-military freight in and out of Afghanistan.

IWPR: How does the government plan to compensate for the fall in budget revenues when the airbase closes?

Otorbaev: Fourteen new air routes were launched last year, and 2012-13 has seen a 25 per cent increase in passenger numbers. We are working with the big Turkish carriers Turkish Airlines and Pegasus Air, and I was recently in Istanbul and had talks with a third airline, Atlas Jet, which is ready to set up a large operation in Kyrgyzstan. We are also hoping to see large freight transport companies come in.

We have an advantageous location, in a fast growing region between three of the BRIC countries. We need to be able to offer high quality planes and low costs and taxes.

IWPR: Is there a date for Kyrgyzstan to join the Customs Union.

Otorbaev: This year, we will work with member states to design a road map for accession, and next year, we will put it into practice…. We are part of the World Trade Organisation [WTO] and we can’t breach the obligations that come with that. Russia is also a WTO member… [but] it has asked for several years’ grace in implementing certain commitments, and we need to do the same.

IWPR: Is there a risk that Customs Union membership will increase prices and impoverish the traders who used to re-export imported Chinese goods to other Central Asia countries?

Otorbaev: We are talking about vulnerable groups here, and that’s why we need to watch food prices.... We export more agricultural produce than we import. So rising prices will mean our farmers… can sell their produce for more.
As for the re-export, this sector does employ a lot of people….We will be negotiating with Customs Union members about the possibility of preferential terms for a certain period… we hope they will be understanding.

Interview conducted by Gulnura Toralieva, a senior lecturer in media and communications at the American University of Central Asia, based in Bishkek.