Kyrgyz Official Calls for Common Central Asian Market

With the world's eyes on Central Asia, Kazakhstan and Kyrgyzstan have set up an inter-parliamentary joint group to improve trade and customs procedures between the two countries. Kazakh television reported April 30 that the countries established this group in response to Kyrgyz accusations that Kazakhstan had refused to ratify various trade agreements. While Kazakhstan is courting Western and Chinese investors to its oilfields, Kyrgyzstan is desperate to boost its economy by increasing trade with its neighbors. Some officials have argued that Central Asia can only flourish if its nations develop a common market with open borders.

Kyrgyzstan in particular seeks more foreign revenue. One year has passed since Kyrgyzstan's government adopted a ten-year national development strategy, and that strategy still seems extremely ambitious. Known as the Comprehensive Development Framework (CDF), the strategy seeks to improve the well-being of society as a whole and the life of each citizen. It emphasizes a major shift from the country's current dependence on foreign loans and promotes increasing the country's private sector investment, via domestic saving and foreign investment in companies, projects and infrastructure. The country, in its Investment Guide for 2002, aims to increase the amount of foreign direct investment to at least 10 percent of its gross domestic product by 2010.

The largely agrarian country faces steep challenges in this effort. Recent civil unrest may make it look less stable than other developing nations, reported unemployment exceeds 50 percent in some areas, and Kyrgyzstan lacks the accessibility and natural resources that have attracted investors to other former Soviet republics. It has worked to get inflation under control and to keep its currency relatively strong.

But the country recognizes that it cannot turn around its economy by itself even in politically stable conditions. Djoomart Otorbaev, the country's Special Representative on Foreign Investments and on Economic Aid to Afghanistan, believes Kyrgyzstan needs open borders and a common market in Central Asia. Otorbaev, who like President Askar Akayev trained as a physicist and taught at a university before joining the government, made the case for a common market to EurasiaNet contributor Daan van der Schriek.

EurasiaNet: Last year, according to various reports, foreign investment into Kyrgyzstan declined by thirty percent even before the terrorist attacks in the United States. Has the situation with regard to foreign investment improved by now?
Otorbaev: Well, these data are thus far only preliminary. Another reason, however, why investors stayed away is because Kyrgyzstan's neighbors, especially Kazakhstan and Uzbekistan, don't open their markets for our products. Kyrgyzstan needs to export: its internal market is small and the country has low purchasing power, which isn't very attractive for [potential] foreign [businesses]. The protectionism of its neighbors thus lessens the opportunities for Kyrgyzstan.

However, there still are opportunities. China's accession to the World Trade Organization, in December 2001, created new possibilities. Kyrgyzstan is the only WTO-member bordering China in the north. And, since WTO-members aren't allowed to have tariff barriers between them, this offers entrepreneurial chances for our country. Kyrgyzstan is presenting itself as the gateway to China in this region.

A second opportunity comes from the developing situation around Afghanistan. In this respect, the presence of more than 3000 soldiers from 12 - and later perhaps as many as 16 - countries at Manas airport near Bishkek has created a market for our goods and services. We are also telling donor countries and the international financial institutions that our country is interested in serving as an intermediary in bringing aid to Afghanistan. We can deliver aid more cheaply than Western countries. And this would of course also help the Kyrgyz economy.

EurasiaNet: Do you think that the situation in Afghanistan offers, on the whole, more opportunities than dangers for Kyrgyzstan, with fighting in Afghanistan still going on?
Otorbaev: The situation with regard to Afghanistan can't be worse than it was in earlier years, when Taliban-sponsored Islamic Movement of Uzbekistan rebels [were at large in] our country. The fighting in Afghanistan is now mainly being conducted in the south. The north is relatively stable. So for Kyrgyzstan, problems posed by Afghanistan have lessened.

EurasiaNet: Recently, you accompanied President Askar Akayev to the Eurasian Economic Community summit in Almaty, Kazakhstan. Did this summit have any positive results for Kyrgyzstan?
Otorbaev: Yes, the meeting turned out very positive for Kyrgyzstan. The countries in the Central Asian region were pressured by the international donor community and financial institutions to really become a single market. And this can happen only when the region has transparent borders. Central Asia might be interesting for foreign investors - when it presents itself as a common market. Kyrgyzstan has been saying for years already that it wants unrestricted trade, not hampered by various tariffs, in the region.

EurasiaNet: And yet, after the terrorist attacks in the United States, the situation has become worse with Uzbekistan guarding its border with Kyrgyzstan in the Ferghana Valley. Has there been any change in this situation yet?
Otorbaev: Unfortunately, the borders in the Ferghana are still not open. Uzbekistan still claims the threat of incursions by Islamic extremists exists - some Islamists have returned to Tajikistan - and is unwilling therefore to reopen the borders.

EurasiaNet: Will the March 11 rescheduling deal with the Paris Club - under which Kyrgyzstan will have to repay $5.6 million instead of $101 million by 2004 - help Kyrgyzstan to further develop economically? [The Paris Club is a consortium of 19 creditor countries that specializes in restructuring poor countries' debts.]
Otorbaev: This will certainly help the country. Thanks especially to recommendations by the IMF, Kyrgyzstan was able to restructure its debts. Inflation is further also under control, while our exports are exceeding our imports and Kyrgyzstan is following a fairly tough fiscal policy. We are, on the whole, on track with IMF demands - hence its recommendations. I would say, therefore, that while internally the country is doing well, externally it is doing less so.

EurasiaNet: With regard to the March riots in the south of the country [for more information see the Eurasia Insight archive], did you notice any negative impact on the country's investment climate?
Otorbaev: This was clearly worsening the investment climate. But the impact of these events on the country itself was worse. It caused a rift in society, and destabilization. The reason behind the events is the absence of jobs and the poverty in the south. Poverty causes unrest. To improve the situation we need jobs in the south, and to create jobs, we need investment. And to attract investment, Kyrgyzstan has to show that it is an interesting destination for investment. But without a large market, this will be very difficult. Everything boils down to the same point: to develop economically, Kyrgyzstan needs a common Central Asian market.