Weary Kyrgyz Sceptical of “Economic Miracle”

Declarations by the leader of Kyrgyzstan, one of the poorest states in the former Soviet Union, that an economic breakthrough is just around the corner have been met with incredulity in many quarters.



President Kurmanbek Bakiev has said that the eight per cent economic growth rates and the massive rise in the government budget seen in the last two years show the economy is on the right track.



Bakiev, who came to power after street protests toppled his predecessor Askar Akaev in March 2005, also holds Kyrgyzstan up as a model of political stability since the December 2007 election awarded the pro-presidential party Ak Jol most seats in parliament.



“The recent parliamentary election… has turned a new page in our country’s political development,” Bakiev boasted in a national address in late December.



“We were able to resolve a number of important social and economic issues... and I’m convinced the successes we achieved will form the basis for strengthening the foundations we have already laid.”



Few would question the fact that Kyrgyzstan now appears fairly calm following three years of political turmoil.



After the street riots of 2005 that brought Bakiev to power, the new president himself came under pressure from recurrent demonstrations in 2006 and early 2007. However, he has regained momentum, getting a new constitution passed by a national referendum last autumn and then calling the election which left his supporters in Ak Jol in control of the legislature.



Murat Shaimkulov, who works in the presidential administration’s department for economic and social policy, says the new balance of power between parliament and executive will pave the way to economic progress.



“Now that we have achieved political stability in society, a new era of coordinated work between all branches of government – the legislature, executive and judiciary - has begun,” he said.



“The foundations for an economic breakthrough have been laid, and the eight per cent real growth of gross domestic product points precisely to this.”



Economy Minister Akylbek Japarov cites gold mining as another likely source of prosperity, given the marked rise in world gold prices. He predicts that hydroelectric power will become an additional money-spinner for Kyrgyzstan, saying that only a tenth of the country’s potential to generate power had been exploited so far.



Outside the world of government officials, however, economic predictions are far less rosy.



Analysts point out that Kyrgyzstan’s growth rates will depend not only on political stability but on the success of privatisation policies, especially in the energy sector.



The Kyrgyz government is currently launching the last phase of privatizing several major energy companies including Kyrgyzgaz, Severelektro and carbon fuel-fired power plants in the Bishkek, Osh and Jalalabad.



Experience has also made ordinary people far less optimistic about the future than government officials.



Anara Abisheva, a teacher from Bishkek, said that even if economic growth rates proved healthy, she doubted it would make any difference to her family as rising inflation was devouring their savings and more than canceling out salary increases.



Even the official figures concede that inflation hit the 20 per cent level in 2007, making basic foodstuffs much more expensive for shoppers and hitting the poor hard.



“I haven’t noticed any economic growth,” said Abisheva, 55. “My salary is only enough to buy food, and sometimes I can’t afford so much as a sausage.



“All I see is that some people are getting richer and that there are many expensive cars in Bishkek, whereas honest folk like us can hardly make ends meet.”



Most economic indices paint a fairly dismal portrait of endemic poverty, inefficiency and corruption.



Kyrgyzstan has one of the highest levels of labour out-migration of any of the Central Asian states, and remains unable to attract significant foreign investment because of perceptions that its business climate is unwelcoming, its tax legislation opaque and its legal system far fromtransparent.



A recent World Bank study placed Kyrgyzstan near the bottom of a ranking of countries by tax regime and ease of starting a business, while the watchdog Transparency International rated Kyrgyzstan 145th out of 163 countries in terms of corruption, for the year 2006.



Former finance minister Taalaibek Koichumanov says it is absurd to make optimistic predictions on the economy given the unfavourable investment conditions in the country.



“As for the investment climate, the situation here is still quite wretched,” Koichumanov told IWPR. “This is connected to the poor potential of most state institutions, the lack of transparency in decision-making, and corruption.”



Ishenbay Abdrazakov, who heads Project for the Future, a political think tank, says that if Kyrgyzstan is to escape the economic doldrums, it needs to do more than achieve a minimum level of political stability.



He identifies the key challenges as introducing modern technology into industry, recruiting people with higher skills across the economy, and establishing cast-iron legal safeguards for business.



“We just don’t have any of those things here,” he said. “And without them, I can scarcely believe we are on the verge of an economic breakthrough.”



Encouraging qualified graduates to remain in Kyrgyzstan will remain difficult as long as the brain drain continues to suck the most enterprising people out of the country to Russia, Kazakstan and beyond. About a million Kyrgyzstan nationals – a fifth of the population - now live abroad as labour migrants.



Opposition politician Ravshan Jeenbekov says a country that cannot keep talented young people at home is doomed to stagnation.



“The whole point is that our system has not created any competition of ideas, people and business,” he said.



Sapar Orozbakov, director of the Bishkek Centre of Economic Analysis, offers an equally bleak view of Kyrgyzstan’s prospects.



“My forecast for the near future is quite grim,” he said. “Our economic growth last year was achieved mainly… as a result of unusually high economic growth in neighbouring states, Kazakstan in particular.”



Because Kyrgyzstan’s prospects were dependent on the knock-on effects of prosperity in other economies, Orozbakov said it was unwise to take its current growth levels for granted.



Gulnara Mambetalieva and Tolkunbek Turdubaev are IWPR contributors in Kyrgyzstan.