Kyrgyzstan Seeks More Aid For Economy
Kyrgyzstan it is desperate to tap into the expected increase of economic aid to Central Asia. But Kyrgyz leaders are finding that the country's already high debt is hindering their ability to attract new aid and investment.
Landlocked and surrounded by larger, more powerful neighbors - in particular Uzbekistan and Kazakhstan -- Kyrgyzstan has found itself overshadowed in Central Asia's economic equation. This is the case despite efforts by President Askar Akayev's administration to establish Kyrgyzstan as the region's most open economic environment. According to Anders Aslund of the Carnegie Endowment for International Peace, Kyrgyz leaders made earnest attempts at price liberalization and true democratic reform.
Those efforts, however, have stumbled, for several reasons: Kyrgyzstan's geographic location is not well suited for trade; and the country itself, while having abundant mineral and water resources, it lacks oil and gas.
In the mid-1990s, when Kyrgyzstan enjoyed the reputation as an "island of democracy" in Central Asia, Bishkek received relatively large amounts of Western assistance. That aid has now left Kyrgyzstan deeply indebted. At the same time, it has few sources of revenue with which to service its $1.4 billion foreign debt. Each of its 4.4 million citizens bears roughly $22 in debt service this year. Since the average wage is around $30 a month and half of the Kyrgyz live below the poverty line, this is not a sustainable economic system for the country.
Kyrgyz officials see more foreign investment as the solution. Prime Minister Kurmanbek Bakiyev make a case for more foreign assistance on December 10 at a New York forum sponsored by the Eurasia Group. Bakiyev said Kyrgyzstan was a source of "ecologically clean" products and a strong democracy. He pitched the country as a success waiting to happen, "blessed with mineral and natural resources" but short on financing. In fact, it is also short on infrastructure and demand. In telecommunications, for instance, the country has roughly 351,000 phones for its over 4 million people.
Although experts still praise Kyrgyzstan as a relatively open and business-friendly state, its debt woes and widespread poverty make expansion in any industry other than mining difficult. Meanwhile, foreign commitments to Kyrgyzstan's neighbors, such as the $50 million in credits the US Export-Import Bank pledged to Uzbekistan in early December, may damage Kyrgyz recovery efforts further. Some experts express concern that Uzbekistan will use the aid to prop up its ailing economy, rather than pursuing reforms that helped expand regional trade.
"Most neighbors are not liberalizing as strongly as Kyrgyzstan," said Alex Cooley, a professor of political science at Barnard College in New York. "Aid inflows without economic conditions [may] reinforce the regional status quo."
Kyrgyzstan's economic woes are connected with the blockade tactics carried out by its neighbors. Scott Horton, the board chairman of the International League for Human Rights, noted that the lack of robust trading rules and practices among Central Asian states is crimping its growth. "Central Asia was an integrated market for thousands of years," Horton noted, yet mistrust and border problems are making its divisions more brittle than ever.
This imbalance is especially acute in the area of water. Kyrgyzstan, an upstream state, now views water as a potential source of revenue, and Bishkek is seeking to make Uzbekistan and Kazakhstan pay for the resources they use. "They use our water practically for free," said Bakiyev, promising that the government would "shortly be considering issues of compensation."