Kyrgyzstan: Revolution Revisited
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Economic Growth: The instability that followed the Tulip Revolution severely handicapped Kyrgyzstan's struggling economy, making economic development a key campaign promise for President Bakiyev. But, one year later, little relief is in sight. Unemployment and labor migration rates remain high, and political pressure for an economic revival is growing.


Since Kyrgyzstan's economy largely depends on foreign investment, one of the new authorities' initial priorities was to ensure stability and the protection of property rights. On April 25, Acting Deputy Prime Minister Daniyar Usenov promised that "there will be no re-privatization, nationalization or any other forced change of property rights in Kyrgyzstan - both for foreign and local investors. [...] We will not ask what you did yesterday. Start your business afresh - honestly, openly and in accordance with the law," media outlets reported.

In mid-October 2005, President Bakiyev ordered the newly appointed government to ensure a three percent GDP growth by year-end and to half the 20 percent Value Added Tax (VAT); the tax was to be abolished altogether for large agricultural producers. After the GDP forecast failed, President Bakiyev set a new target for 2006: growth of at least seven percent. "This year, our republic will make major strides in industry and construction," the president promised in January. "There are reasons to believe that the task I gave the government of increasing GDP growth to eight percent this year can be achieved."


For 2005, Kyrgyzstan reported negative (-0.3 percent) GDP growth. By September 2006, that trend appeared to have been reversed, though not as robustly as the government had forecast. The National Statistics Committee reported year-on-year growth at 3.1 percent for the first half of 2006.

Despite a surge in the budget surplus (up by 190 percent in the first five months of 2006 compared with the same period in 2005, according to official data), the country's fiscal woes continued. In March 2006, Kyrgyzstan officially applied for the World Bank's debt-relief program for Heavily Indebted Poor Countries (HIPC).

The country's main economic hope, the Kumtor gold mines, have dwindling capacity and are not expected to let Kyrgyzstan benefit from high gold prices for long. The Bakiyev government revoked the license of the British company Oxus to develop another mine, Jerooy, arguing that the company had not met its contractual obligations. In July, an Oxus representative in Bishkek was badly wounded in a mysterious shooting. The government, a one-third shareowner in the project, seized control of the mine in early September 2006, and ordered miners and engineers to leave.

In the coal industry, however, the Bakiyev administration managed to establish some degree of stability with the May 2006 arrest of Nurlan Motuev, a populist leader who, after the Revolution, had seized control of one the country's largest coal mines.

Yet little clarity exists with the government's pledge not to redistribute property. Aside from Oxus, the government has transferred control of Kyrgyzstan's main cell phone carrier to a Russian company, and made no known progress on the redistribution of properties allegedly owned by the family of ousted President Askar Akayev. Rumors persist among the Kyrgyz business community about the Bakiyev family's own business interests. Signs at opposition protests decrying the "Maksimizatsia" (Maksimization) of Kyrgyzstan -- a reference to Bakiyev's son, Maksim -- are common.

Construction booms in Bishkek, but an industrial revival looks far off. In February 2006, a Kyrgyz-Chinese paper factory that was idle for two years is opened 60 kilometers from Bishkek. The construction of two cement plants in the south of Kyrgyzstan also began, but the government proposed to move one of them outside the region, citing "ecological considerations." Media reports have alleged that the second plant is linked with State Chancellor Daniyar Usenov.

Revision of the tax code in February 2006 also registers mixed reactions. Income and corporate taxes are slashed to between 10 and 20 percent, but some businessmen however, say the new tax code does not do enough to fight corruption. Demands for bribes from tax officials and others have only increased since the Tulip Revolution, many claim.

Watch a News Broadcast of This Promise:
March 24, 2006 press conference by President Kurmanbek Bakiyev
Credit: NTS Television

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