asiaNet Eurasia Insight
Now that donor agencies have started pouring massive aid into Central Asia, private investors are being encouraged by local and Western governments to step up their activities inasmuch as economic development is the best weapon for fighting poverty, seen as the underlying cause behind many of the latent and open conflicts in the region.
In an effort to attract investors from abroad, Kyrgyz President Askar Akayev recently ordered the creation of a Coordination Council for Attracting Foreign Investment. The council focuses on removing barriers in priority sectors - hydroelectricity, mining, tourism, agro-industry, service and information technology, which are seen as Kyrgyzstan's main economic assets.
"Only foreign companies can afford to bring money, but also technologies and human resources which will serve to establish a real market in Kyrgyzstan and build new capacity for our specialists," Dzhoomart Otorbaev, head of the council, explained to IRIN.
Observers from the NGO sector, however, indicate that investment by itself is not enough: transparency is essential to guarantee that civil society benefits from this renewed attention from the West.
"We know Kyrgyzstan lacks internal resources and needs foreign investment. But for 10 years all we have achieved is a huge foreign debt which is turning our country into a banana republic," Asiya Sasykbaeva, member of the newly-formed Monitoring and Advisory Group of NGOs monitoring foreign investment in Kyrgyzstan, told IRIN on Tuesday.
A landlocked country and, unlike its neighbours, devoid of oil and gas resources, Kyrgyzstan lost most of its industry in the transition period towards a market economy, and now relies heavily on foreign aid. Today the country's foreign debt equals its gross domestic product.
A general lack of political will to implement transparency in economic reforms is a regional problem. The European Bank for Reconstruction and Development, which plays a key role in the region, recently warned that it would reconsider its operations in Turkmenistan and Uzbekistan if the governments failed to change their policies in this context.
Central Asian governments are now talking about the emergence of a new obstacle, saying that the Afghan crisis is burdening their budgets and frightening away potential foreign investors. Yet the real problem is the absence of regional integration, which constitutes the only way out of the current massive unemployment and economic stagnation.
"We are going into a world economic recession that will have an impact on Central Asia, where regional political and economic cooperation has a very poor record. Actually, the Afghan crisis is a good chance to overcome division and work at a regional level," the US ambassador to Kyrgyzstan, John O'Keefe, told IRIN.
Kyrgyzstan and China are now the only two member-countries of the World Trade Organisation in the region. In the context of the current "second chance" being given the Central Asian states, this potential needs to be used properly and not attenuated by corruption or political apathy.
"I don't want to be over-dramatic, but Kyrgyzstan stands at a crossroads: if it is not able to remove barriers and create a favourable investment environment, it will miss a unique chance for economic growth," stressed O'Keefe.