SPECIAL ELECTIONS IN KYRGYZSTAN

1) Kyrgyzstan parliamentary election and lack of vision of the future (part 1)

Saturday, 05 September 2015 06:56 - Written by Giorgio Fiacconi, TCA publisher

BISHKEK (TCA) — The parliamentary election scheduled for October 4 is approaching in Kyrgyzstan. No much fanfare this time since pre-election advertising has been banned and the usual jungle of billboards is missing. President Atambayev’s SDPK party seems to be the main player everywhere, boasting this or that achievement at various public events. Regretfully very little is being said about future plans and strategy that may in some way provide a picture of where the country will go, its priorities, and general proposals in various sectors.

Migration, employment, agriculture, tourism, industrialization, investment attraction, housing, and other important internal issues seem all to be related to an arguable foreign policy based on the country’s recent accession to the Eurasian Economic Union (EEU). It looks like this membership should be able to solve all the problems of the country without any consideration of the present reality and internal problems resulting from numerous reforms that have never been implemented in an adequate way. There is a misinterpretation of what the Eurasian Economic Union is able to provide and generate for the Kyrgyz economy. Here in Kyrgyzstan everybody expects a miracle from the membership of the EEU, but it will take years before the benefits, if any, will be felt, and in the meantime the country should count on its own forces. On paper Kyrgyzstan is certainly an advanced country as far it concerns reforms but in reality those reforms have never been adequately implemented.

A few examples may give a better picture. Kyrgyzstan allows 100% foreign ownership of any company, but such foreign-owned companies are often haunted by the tax department whose inspectors would make the life of foreign owners miserable due to endless inspections, requests of documents, and attempts to create obstacles. Legally it is possible to create a 100% foreign-owned company in Kyrgyzstan, but the foreign investor is doing so at his own risk unless he has an influential high-ranking protector.

Another example is migration. The fact that Kyrgyz migrants now enjoy better conditions of employment and stay in other EEU member states is a good thing, but it should not exempt the country from finding ways and means to create employment at home. Like in the past Kyrgyzstan is now preoccupied with maintaining as much as possible the flow of money remittances sent home by the hundreds of thousands of Kyrgyz labor migrants in Russia without any real concern that those migrants are Kyrgyz citizens that are working abroad not for their own choice but for necessity and the lack of employment opportunities in their home country. Migrants are not only a source of income but also a source of know-how they have learned in the foreign host country. With the above in mind, a policy should be developed in Kyrgyzstan to attract them back offering special incentives for any investment they make to start their own small or medium business. This requires appropriate investment laws supported by adequate incentives and a national master plan for a proper balance of investments in various regions.

The agriculture sector in Kyrgyzstan has a tremendous potentiality but the quality control is poor, mechanization is obsolete, new equipment and technologies are not introduced, processing of products is very limited and consequently the country can export only raw products. But even here the lack of appropriate quality control penalizes prices and reduces the interest of buyers.

Investment in mining is suffering from continuous conflicts with local communities due to often unreasonable expectations as if the foreign investor providing technology and financial means is also supposed to replace the social task and duties of the State, acting as a benefactor to the local communities. In reality all investors, local and foreign, are looking for profit and stable decisions within existing laws, and should not be affected by erratic claims of local communities. It should also be clear that new investments can only come if profit and growth will exist, and that certain pre-conditions put forward by local communities before the business even starts will certainly make investors think twice, which will penalize any potentiality of new employment.

With economic growth slowing down worldwide, currencies devaluating, and consumption shrinking, Kyrgyzstan should come up with a master plan that will consider the ability and necessary means for its implementation, with a vision of the future development of its natural resources, agriculture, tourism, and an appropriate industrialization plan focused on small-size enterprises. The country’s policy-makers should realize that very few large companies will look to Kyrgyzstan, since the market is too small, the record of internal stability inexistent, finance very expensive, and legal compliance often unrealistic, not to mention the recourse to independent court.

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2) Kyrgyzstan’s election: an agenda for the new parliament (part 2)

The Hub: International Perspectives September 9, 2015 | 21:08 GMT Print Text Size

BISHKEK (TCA) — Kyrgyzstan is a net importer of everything; consumption at home is increasing but there is no production. Nobody seems to understand that consumption is not the driving force behind growth, but is the result of growth.

Thousands of apartments built in the last few years as a sort of shield from inflation, and often through grey money, stand empty with no buyers, while prices are still high representing a property bubble that eventually will leave many contractors in a difficult situation. Social housing is completely inexistent and while urbanization is increasing, the need for low-cost housing will increase but such demand is not met by the government policies.

Re-export of Chinese goods has more or less stopped, due to new regulations following Kyrgyzstan’s entry to the Eurasian Economic Union (EEU). Bishkek’s Dordoi, one of the largest wholesale markets in Central Asia, is losing buyers while growth is various other sectors is practically inexistent. Everybody is waiting for new investment, but Europe, America, and Japan stay completely away from Kyrgyzstan and there are plenty of reasons to understand their behavior. So, where the investments should come from? Russia, China, and Kazakhstan are all countries that have to face their internal problems and that certainly will not give priority to Kyrgyzstan, while China is active only in the infrastructure sector. Kyrgyzstan should count on internal resources, providing to potential investors a clear regulation and generous fiscal benefits. First of all, there is a need to take care of existing investors, and then attract new ones with additional incentives and local success stories. This demands a real, practical and concrete investment policy not only in the capital Bishkek but also in the regions such as Naryn or Jalal-Abad or Talas, which due to their remoteness and lack of infrastructure require a concrete and consistent package of incentives. A tax break for not less than five years from all taxes for new industries and investments in connection with location, size of investment and new employment generated is the minimum that can be offered. Export oriented facilities should receive additional benefits and so should those that are labor-intensive and employ a large number of people.

The challenge is to increase local productivity through new investment and appropriate reforms that would make it easier for private investors to operate in important sectors such as agriculture and mining, but also in tourism, food processing, social housing construction, and any type of manufacturing.

Investment forums and announcements of “new” investment policies are not new to the Kyrgyz election activities and the appointment of this or that new minister or Prime Minister. To understand the reason why such numerous announcements are rarely followed by real action and deeds we should go back to the essence of the political struggle between different parties and regional and private interest groups.

Kyrgyzstan has always had a lack of real State person interested in the wellbeing of the country, and political competition has never been based on an adequate vision but mainly on the individual capacity of various political leaders to attract followers by distributing favors and benefits. To exercise control over various regions, clans, and private interests that often have a different agenda from that of the Government has never been a simple task. We are not talking only of the difference of mentality and interest between the North and South but of the private interest of the many parliament members irrespective from where they come from. There is a struggle going on in which the private interest prevails over the State interest, and such struggle determines continuous change of high-ranking officials, delays and a non-coherent policy that affects the country’s interest in favor of the interest of a single person or a small group of players whose interests diverge from those of the Government.

Shaping a national policy has never been a simple task in Kyrgyzstan and the country is still living by the day, with the Presidential administration, Government and various official bodies making this or that decision without any advance planning and proper marketing information. An example is the absence of a suitable tourism policy that is generally determined not one year in advance while tour operators and international companies are preparing their catalogues and promotional campaigns, but during the tourist season. There is an urgent need to develop at least a five-year development plan for all sectors of the economy and social development. The lack of vision of where the country should go and what should be done as priority has always caused delays and difficulties and barriers or obstacles on the part of local officials. Add to this the allegiance to a foreign policy that instead of reflecting the interests of the country is rather the expression of the opinions and personal ties of this or that leader resulting from temporary contingences and quite often cultural background and private interest. Control of clans and regional interests is exercised only by authoritarian decisions without adequate consensus and local participation and consequent agreements between various parties. All this fails to guarantee proper implementation of whatever decision made, with frequent changes that bring often-poor results that are socially and politically destabilizing and fraught with potential unrest. Private business and investment suffer tremendously from such situation that determines continuous instability. Furthermore, the lack of reliable regulations and the need to find shortcuts toward temporary solutions are at the end not only costly and time-consuming but also fuel corruption. The worst of all is that everything is temporary and continues only due to personal contacts and favors.

Part 1 of this article, entitled “Kyrgyzstan parliamentary election and lack of vision of the future”, was posted on September 5

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