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BISHKEK (TCA) — The month of August this year will mark a quarter century of so-called newly independent states following the implosion of the USSR. But transition to so-called market economy has not taken place as expected. The example of Kyrgyzstan, which is the first among post-Soviet Central Asian republics to mark its independence on August 31, demonstrates that the results are mixed.

In the Kyrgyz Republic the population has learnt remarkably well to adapt to the notion of a business-driven society, but weak state governance and the absence of long-term policies to revaluate national assets are among the main reasons of the present situation. Today the country has an economic overdependence on a global monetary framework with international organizations’ loans and grants, and Kyrgyz migrants working abroad.

Kyrgyz Republic background

The present Kyrgyz Republic started with trouble. Over the summer of 1989, an Uzbek political movement under the name Adalat started to send petitions to the Kremlin with the request to grant Osh the status of an autonomous "Uzbek" oblast of Osh, with the outlook of incorporating the territory into the Soviet Republic of Uzbekistan. In response, Kyrgyz groups which dominated the urban zones of Osh, while most Uzbeks were living in the countryside, formed a counter-movement dubbed Osh Aimagy. A rather banal quarrel over the right to exploit a number of cotton plantations was to trigger an onslaught in June the following year, with at least 320 killed, numerous estates and other property looted and burnt without much intervention on behalf of the authorities.

Just weeks after the Osh clashes of June 1990, the Kyrgyz Supreme Soviet adopted a “decree” declaring “sovereignty” of the republic within the USSR, allowing free elections of a President first, to be followed by a Parliament. After three rounds dominated by party secretary-general Absamat Masaliyev and another communist leader by the name of Ishenbay Kadyrbekov, a third candidate ended up winning the third round on October 27 the same year. That was Askar Akayev, who became the first President of the Kyrgyz Republic within the USSR and later of independent Kyrgyzstan in October 1991, thanks to his scientific achievements rather than his political profile.

Switch to a cash economy

Virtually all “newly independent states” started with high hopes to see their “nationalised” economies prosper and living standards improve. Getting it done, though, proved to get stuck by a number of factors interfering in the process. So what went wrong? Focusing on the case of Kyrgyzstan but much of it representing an overall trend in the ex-USSR, it can first of all be observed that political independence and economic independence are two different things, which was virtually ignored at the time. Kyrgyzstan abandoned all “socialist” principles overnight, rushing to apply for membership of the World Trade Organisation (which it obtained as early as 1997). On a macro-level the assumption, as though speaking for itself, was made that a switch from an asset economy to a cash economy would automatically mean more cash, and thereby more spending power for the population.

The opposite happened. Expressed in cash, year-on-year, Kyrgyzstan’s gross domestic product dropped by 8 per cent in 1991, by 14 per cent in 1992, by 16 per cent in 1993 and by 20 per cent in 1994. From there on, things started looking better, with a loss of 6 per cent in 1995 and the first economic growth of 7 per cent in 1996. But the economy never recovered. In 1995, GDP stood at 16.146 billion som. In 2000, it stood at 65.358 billion som. But the national currency had gone down from 10.80 to 47.77 som per US dollar in the same period – meaning that in “real” terms it had decreased by more than a quarter.

Opportunity, missed chance

Kyrgyzstan’s failure to capitalise on assets (leisure resorts and tourism, industries, mines, agriculture – just to name the most important ones) has led to a situation that has not changed ever since, revolutions or no revolutions: crumbling facilities, living standards varying from narrow survival to sheer poverty among an overwhelming part of the population, lack of economic governance. Independence, unfortunately, has been accompanied by overdependence on a global monetary order which has no sympathy for so-called emerging economies and prefers to keep them submerged.

For the Kyrgyz nation, what started as an opportunity has resulted in a missed chance, due to persisting nepotism, not adequate competence and other faults covered up by the Soviet system.

A new Kyrgyz society

Whatever society Kyrgyzstan is hoping to get, this can only be realized by working from fundamentals. Making prosperity less dependent on cash and more on material achievements is the only way out. Lack of proper asset valuation has led to a large part of the country’s “material capital” based on exploitation value rather than cash-and-carry value slipping under the control of newly formed corporate management without appropriate experience. On micro-levels things look a lot better, but even there financials often dominate business rather than remaining subordinate to it.

The need to industrialize the country, reduce in any possible way corruption and dependence of judges from political power in the  midst of terrorist threats, political polarization and other diseases in the surrounding world represents a formidable task indeed, but it seems to be the only way to a new Kyrgyzstan.

This is the first article of a series reviewing the post-Soviet period in Central Asian republics. The next article will feature Uzbekistan


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