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KYRGYZSTAN


 

 

In-depth Business Intelligence

Key Economic Data 
 
  2002 2001 2000 Ranking(2002)
GDP
Millions of US $ 1,632 1,500 1,400 143
         
GNI per capita
 US $ 290 280 280 179
Ranking is given out of 208 nations - (data from the World Bank)

Books on Kyrgyzstan

REPUBLICAN REFERENCE

Area (sq.km) 
198,500 

Population 
4,892,808

Principal 
ethnic groups
Kyrgyz 52.4%
Russians 21.5%
Uzbeks 12.9%

Capital
Bishkek 

Currency 
Kyrgyz Som 

President 
Askar Akayev

  

Background:
A Central Asian country of incredible natural beauty and proud nomadic traditions, Kyrgyzstan was annexed by Russia in 1864; it achieved independence from the Soviet Union in 1991. Current concerns include: privatization of state-owned enterprises, expansion of democracy and political freedoms, inter-ethnic relations, and terrorism. 

Update No: 283 - (26/07/04)

The wooden spoon
There has long been a debate among economists as to whether resource-rich countries really have such an advantage over those without, or with few, resources. There are plenty of instances of oil riches ruining countries and few of them benefiting more than a small elite, usually highly corrupt. The exceptions, Holland and Norway, were highly advanced and sophisticated.
The argument goes that certain countries without resources have done very well, Japan and Singapore recently. What is forgotten here is their location as countries with an insular geography near to huge land-masses. They have the inestimable advantage of excellent natural transport, of greater and greater importance as one industrialises. The idea that modern industry is 'footloose' is just not true. Who would want to set up large export facilities in Kyrgyzstan, given its extreme remoteness?
Kyrgyzstan has inherited the wooden spoon among countries in Eurasia. Only certain countries in Africa are worse endowed by reason both of their resources, and location. 

Kumtor recovers; so does Kyrgyzstan
Nevertheless, the country is not a complete basket-case, because it does have one natural resource, people with brains, moreover the beneficiaries of a good educational system, the one boon of communism. The president himself is a prime instance of this.
The Kyrgyz economy is doing rather better than in 2002 when it suffered a severe downturn due manly to disruption at its key gold company, Kumtor. Last year GDP rose by 6.7%, which it also did year-on-year in Jan-April of this year. Kumtor, although not one of the world's largest gold operations, dominates the Kyrgyz economy. It recovered last year.
If one leaves out Kumtor, then GDP is rising by about 5-6% per year, as is industrial production. With Kumtor included, industrial production is rising by over 11%. That shows quite how important the gold industry is to Kyrgyzstan.
But naturally it doesn't employ many people or have 'knock-on effects.' Almost unbelievably, the Central Asian state's jv with the Canadian company, Cameco, employs just 1,650 people, but contributes 10-14% of GDP. So important is it that the report of its GDP is always made both with and without Kumtor's output. "There can be few countries in the world that report their GDP with or without a company," says Kumtor President Andrew Lewis.

Akayev's reforms persist
Lewis is of course a Canadian. To paraphrase him, there can be few countries in the world where the leading company by far is run by a foreigner. This is due to a remarkable man, the president of Kyrgyzstan, Askar Akayev. He is despotic, like all the Central Asian leaders, but is, one might say, not exactly the most enlightened of them, rather the least unenlightened. 
Margaret Thatcher spotted him early on, although she had already left power, as someone with whom the West "could do business." This proved a providential endorsement and the world's financial community bent over backwards to lend Kyrgyzstan money.
This has been a mixed blessing. But the banks are rolling over the debt and debt repayments of course. As Keynes said: "If you owe your bank 10,000, you have a problem; if you owe it 10m, the bank has a problem."

The World Bank in town
The World Bank has approved a US$6.9 million grant to Kyrgyzstan in support of a disaster hazard mitigation project. The project aims at minimising the exposure of humans and livestock to nuclear waste associated with abandoned uranium waste dumps in the southern Mailuu-Suu area and improve response by national and regional authorities and local communities to disasters. 
Uranium waste dumps in the area are vulnerable to landslides and floods, posing a potential threat to the densely populated Ferghana Valley, shared by Kyrgyzstan, Uzbekistan and Tajikistan and home to some 10 million people. Kyrgyzstan joined the World Bank in 1992. Since then, the Bank's commitments to the country have exceeded $649 million.

An interesting interview
All this is corroborated by an interesting interview with an involved Westerner upon the spot.
Jerzy Skuratowicz is the United Nations Development Programme (UNDP) Resident Representative in Kyrgyzstan. An economist, he spoke to IRIN in the capital, Bishkek, about the development achievements the country has made since independence in 1991, as well as enhancing emergency response in this disaster-prone Central Asian republic.
QUESTION: What are main development priorities identified by the government of Kyrgyzstan that UNDP is supporting?
ANSWER: I would say, today one of the main sectors that UNDP is addressing in line with the priorities of the government relates to poverty alleviation. Over the past five to six years, UNDP has been present in all seven provinces of the country. It has been quite successful, operating through community mobilisation work. After the collapse of the Soviet Union and the collective and state farms it was necessary to show people different ways of building up their livelihoods. UNDP programmes were very successful in this regard, helping people to move into credit unions and marketing cooperatives, as well as helping to establish small and medium enterprises, mainly in the rural areas.
The second big priority is governance. There are two main areas here. One is to support the main democratic institutions on a national level, related to strengthening the parliament, including building up the democratic practices of parties and party politics. Next year, parliamentary elections associated with the transition from a bicameral to a unicameral parliament will take place in February. This change will require a lot of support and advice.
Another important area of governance reform is the administration. Here obviously a lot is being done by other organisations, like the World Bank and DFID [UK Department for International Development]. UNDP supports the rationalisation of government institutions and fiscal decentralisation. Building democracy at a grass roots level, including local self-governance and capacity building are also important aspects of UNDP's work here. 
Kyrgyzstan is in the centre of Central Asia, [and so] the question of ethnic relations is extremely important. After the creation of five states [in Central Asia] out of one Soviet Union it became obvious that ethnic Uzbek, Kyrgyz, Kazakh, Tajiks and many others were scattered throughout the region. So in Kyrgyzstan we have around 80 ethnic groups. Quite obviously the largest are Uzbek and Tajiks and Uighurs, along with sizeable numbers of Russians and Ukrainians. So there are real differences in culture and different political choices that those groups have made in the past 13 years. 
This creates a situation where inter-ethnic harmony and collaboration based on citizenship rather than ethnicity should create peace in the region. Here you have a minority in one state being in the majority just across the border. That's why good ethnic relations have to be based on good relations between neighbouring states.
Yet another priority UNDP is addressing is regional cooperation. For a small, landlocked country like Kyrgyzstan, with few natural resources, trade, exports, transit rights and cooperation with neighbours is a matter of long-term survival. Cooperating within Central Asia is of paramount importance for all the nations to access other markets in Asia, but also to the north, like Russian markets.
Q: Kyrgyzstan is prone to natural disasters. We've seen growing numbers of landslides in the south for example this year. What is UNDP doing to coordinate national and external responses to these emergency situations?
A: Yes, landslides happen every year, and there is often substantial loss of life and assets. There is a lot of effort from the government to cope with these situations. The UN and UNDP respond quite efficiently to these crises, working together with OCHA [Office for the Coordination of Humanitarian Affairs]. We received excellent support from OCHA Geneva last year, we had a mission from OCHA to assess and advise the UN system on building response mechanisms. We received US $35,000 from OCHA for immediate humanitarian relief. A mission is coming to help strengthen the government's response capacity to deal with emergencies and disasters, especially in southern Kyrgyzstan.
Q: Why is it important for UNDP in Kyrgyzstan to be involved in conflict prevention in places like the Ferghana Valley?
A: UNDP is perhaps best suited to carry out this kind of work because it works with government as well as civil society and local community groups. UNDP has wide global experience of working in many pre and post-conflict countries. This helps us to build an impartial position, within different ethnic groups and interests, which is recognised and respected.
Q: Kyrgyzstan appears to be one of the more progressive Central Asian republics from a social and political stand point. Have lessons been learnt here that could be heeded by some of the other republics?
A: The country is a pioneer in the region in terms of economic and democratic reforms. The process does not go without problems. The collapse of the Soviet Union for Kyrgyzstan has meant that for the first time in its history it is building its own statehood. Therefore it's not just about changing the system, but also building it from the beginning. 
The only institutional memory is [of] the old Soviet institutions that allowed this country to move into the modern world several decades ago. Kyrgyzstan is one of the poorest [states] in the region. The neighbours, like Kazakhstan and Uzbekistan have their natural resources - gas, oil and cotton. Kyrgyzstan has none of these, so openness and cooperation with the other countries in the region is the only option. 
The experience of reforms in Kyrgyzstan may show that democracy and openness is something that pays off and gives good results. From this point of view, the Kyrgyz experience, as a principle of transformation from an authoritarian to a more liberal system, can be looked upon by other countries, particularly to avoid some of the mistakes this country has inevitably made over the past 13 years.

Akayev to step down next year
As preparations get underway for Kyrgyzstan's 2005 presidential and parliamentary elections, attention is increasingly focused on how President Akayev will choose to transfer power to an elected successor. Kyrgyzstan's leader since 1990, Akayev has stated that he does not plan to run for re-election. Instead, the 59-year-old president has told Western observers that his goal is to use next year's elections to make Kyrgyzstan a model for regional democratic development. 
Given widespread criticism of Akayev's record for democratic reform, that could prove an ambitious goal. Presidential elections held in 2000 were roundly condemned by international observers as rigged. 
While Akayev has dismissed criticism of his commitment to political pluralism, the lack of a clear presidential favourite for the October 2005 presidential ballot has fuelled speculation that this onetime academic might still opt to retain his post. The Union for Fair Elections, a pro-opposition election watchdog formed in May 2004, has given rise to hopes that next year's polls will be freely contested, but suspicions persist that the group doubles as a front organization for Akayev confidantes intent on retaining power. Aggressive grassroots campaigning by the pro-presidential organization Alga, Kyrgyzstan! (Forward, Kyrgyzstan!) has further spurred concerns on this count. 

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BANKING

EBRD to up investment in Kyrgyz banking sector 

The European Bank for Reconstruction and Development (EBRD) is looking to increase its investments in Kyrgyzstan's banking sector by buying into banks and with credits, head of the EBRD financial institutions group, Kurt Geiger, said after the international conference 'Measures for increasing trust in the banking system.' 
This conference was organized by the EBRD and SECO, Switzerland's state economics committee, and was held July on 1-2 in Bishkek. 
Geiger said the EBRD will help Kyrgyz banks introduce new banking instruments, particular mortgage loans and leasing. "We are ready to work in a more extensive sphere," he said. 
Head of the EBRD offices in the country, Daniel Berg, said that the overall volume of EBRD investment in the Kyrgyz banking system has reached 10.2 million euros. The bank works with Kyrgyz banks in the fields of trade financing (4.2 million euros invested), direct investment (2.7 million euros) and financing tiny and small enterprises (3.3 million euros), Interfax News Agency reported.

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FINANCIAL NEWS

Foreign investments in Kyrgyzstan soar 47% in Q1 - Akayev 

Kyrgyzstan is continuing efforts to improve the investment climate, President Askar Akayev said while opening the fourth Issyk-Kul investment summit recently, Interfax News Agency reported. 
"The annual summit and the adoption of investment patterns aimed at improving the investment climate allowed Kyrgyzstan in 2003 to draw direct foreign investments on the 1996 scale, when it launched the Kumtor project," he said. 
In the first quarter of 2004, foreign investments soared 47% year-on- year, he said. 
Akayev said that capital flows are going to different spheres, while in the past they were concentrated mainly in the extraction of minerals. 
Considering capital flight in 2003 net, investments grew by US$53m, he said. Business is expanding, and fewer companies are closing down or diverting their capital abroad, he said. 
"Businessmen have chosen Kyrgyzstan," the president said. "Since 2001, the share of investments covered by government guarantees has dropped from 35% to 18%, while the share of direct foreign investments has grown from 7% to 12%." 
In 2003, GDP grew 6.7%, and in the first half of this year, it grew by 8%, Akayev said, quoting early reports. 

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TELECOMMUNICATIONS

Fixed, cellular Kyrgyz phone users could reach parity soon 

The number of regular and cellular phone users in Kyrgyzstan could reach equality in the near future, Transportation and Communications Ministry official, Abdykalil Tokoyev, announced at a cellular communications conference, Interfax News Agency reported. 
"According to official ministry figures, the republic now has roughly 300,000 cellular communications subscribers. The number of those that use [regular telephones] is around 400,000. It is highly likely that the number of cellular and 'fixed' communications subscribers in Kyrgyzstan will even out in the near future," Tokoyev said. 
Ministry data indicate that the country's telecommunications market contains 188 operators, including three cellular communications providers. But the cellular network only covers 10% of Kyrgyzstan, home to around 5 million people.

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