Democracy and Governance in Kyrgyzstan
The Development Challenge:
With both Parliamentary and Presidential elections scheduled for 2005, the primary development challenge in Kyrgyzstan remains to discern and support those seeking a true democracy and an open, market oriented economy. Small, landlocked, and with limited natural resources, Kyrgyzstan is still the most progressive country in Central Asia, with a more free press and open civil society. While very poor, it at least is holding its own economically, with gross domestic product (GDP) growth for 2004 estimated at 6.8%. High debt levels and inadequately maintained infrastructure, however, make this growth fragile. Kyrgyzstan leads the region in both local government and health care reform. Civil society and media are, at times, able to influence government policy and legislation. Parliament is increasingly active and responsive and often provides a check on the Executive Branch, although this could change after 2005 parliamentary elections. The budget process is one of the most transparent in the region. The collected national budget in 2004 was 100% of the planned figure, the best performance since independence. Kyrgyzstan is the only country in Central Asia in which a majority of local government officials is elected, and more than 40% of incumbents were ousted in 2001 local elections. Nevertheless, corruption, stemming in part from very low government salaries (many below the poverty line) and a powerful ruling oligarchy has become a primary concern of donors. Poverty-level wages and deteriorating infrastructure in the education sector are jeopardizing an entire generation. The Government's control of important media, and its harassment of critics, is generating increasing cynicism. Essential social services are still inadequate, but growth was such that from 2002 to 2003 poverty fell from 44% to 41% of the population. Extreme poverty fell from 14% to 9% over the same period. About 12% of the rural population is in extreme poverty, compared to only 5% of the urban population. Hard independent data on poverty levels, however, is outdated. Kyrgyzstan will have a busy elections cycle in 2005, with parliamentary elections in February, presidential elections in October, and elections of heads of local governments in December. Parliamentary elections are expected to be hotly contested. President Akayev has publicly declared that he will not run for office again, perhaps setting the stage for the first democratic transition of power in Central Asia.
Government data show that annual per capita income for 2003 was $367. The average monthly salary was equivalent to approximately $50, an increase from last year's monthly rate of $40. There was a slight increase in the volume of exports to $523 million, but imports grew by 25.6%. External debt was $1.9 billion at the end of the first quarter of 2003, a 7.8% increase over the same time in 2002. Tax collections increased by about 11.8% and inflation is projected to be 4.5% for the year. The currency has remained stable against the dollar at 42-43 soums to the dollar. Trade barriers such as the border closure with Uzbekistan, protectionist measures from Kazakhstan, and corruption continue to be formidable. Many lucrative businesses and investment projects have been monopolized by a small group of politically well-connected entrepreneurs. A maze of uncodified "fees" continues to constrain free enterprise. Banking deposits increased by 32% in 2003 and the average interest rate on loans decreased to approximately 25% per annum. Foreign Reserves were approximately $180 million on October 1, 2003. Although many laws promoting free enterprise activity have been passed, implementation of these reforms has stalled due to a lack of demand on the part of the private sector.
Kyrgyzstan is a firm U.S. ally in the Global War on Terror, and its support in the form of the vital coalition airbase in Manas and over-flight rights were essential to successes in Afghanistan. Kyrgyzstan's reform agenda directly advances U.S. national interests in ensuring stability by promoting economic and democratic reform. Its location at the headwaters of major river systems in Central Asia also enables it to affect critical issues such as irrigated agriculture, power generation, and flooding in the downstream countries. The challenges described above and protectionist measures from neighbors are potential sources of conflict that could threaten regional stability and U.S. economic and political interests in Central Asia.
(Excerpted from the 2006 Congressional Budget Justification for Kyrgyzstan)
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