Kyrgyz Republic

Politics:

• Analysis

  Kyrgyz Republic politics: Quick View - Kyrgyz nationalism: solvent or glue?

  Event

  In late March representatives of the Kyrgyz and Uzbek governments met for talks in Tashkent, the Uzbek capital, to try to resolve some of the issues around border disputes that flared into violence earlier in the year.

  Analysis

  Clashes between Kyrgyz border guards and ethnic Uzbeks in the disputed Sokh enclave in the Kyrgyz Republic in January seemed to hark back momentarily to the ethnic violence that erupted in the south of the country in mid-2010. This year, sporadic protests, calling for the release of nationalist leaders on trial on charges of fomenting a coup, have sprung up across southern cities. The politicians were arrested for storming parliament, with supporters, during a rally in the capital, Bishkek, in October 2010.

  Since 2010 a trend of growing nationalist sentiment in the Kyrgyz Republic has often appeared, or at any rate has been presented, as a recurring threat to political stability. However, a new report from Chatham House, a think-tank, argues that this is a misunderstanding of the nature of Kyrgyz nationalism.

  Instead, the report argues, controversially, the growth of nationalism should be seen as an inevitable-and not necessarily negative-aspect of nation-building. It suggests that the work of creating a basis for an inclusive national identity (mainly, one that does not estrange ethnic Uzbeks) remains to be done. To achieve this, the report recommends the promotion of Kyrgyz as the language of common public life (with changes in the school system to aid this) and the tackling of regional border disputes. By defusing concerns about possible threats to the country's territorial integrity from stronger regional states (such as Uzbekistan) and from a lack of commitment to the Kyrgyz nation-building project from some domestic social groups, the factors driving Kyrgyz nationalism-fear for the survival of the country and the Kyrgyz language-would be assuaged.

  However, it is not clear that policies of cultural assimilation will be accepted by non-Kyrgyz ethnic groups. Nor is it evident that such policies, when practised elsewhere, show an unblemished record of success.

  March 27, 2013

• Background

  Kyrgyz Republic: Political forces

  Parliamentary election, Dec 2007
  	Share of the vote (%)	Seats (no.)
  Ak Jol	61.7	71
  Ata Meken	11.3	–
  Social Democratic Party of Kyrgyzstan (SDPK)	9.3	11
  Communist Party of Kyrgyzstan (KPK)	7.0	8
  Turan	2.8	–
  Ar-Namys	2.2	–
  Others/"against all"	5.7	–
  Source: Economist Intelligence Unit calculations based on data from the Central Election Commission (CEC), as well as on elaborations by the Organisation for Security and Co-operation in Europe (OSCE).

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  September 10, 2008

• Structure

  Kyrgyz Republic: Political structure

  Official name

  Kyrgyz Republic

  Form of state

  The Kyrgyz Soviet Socialist Republic declared its independence in August 1991 and changed its name to the Kyrgyz Republic. A constitution was approved on May 5th 1993. The president's powers were enhanced by referendums held in February 1996, February 2003 and October 2007. The provisional government in place since April 2010 held a referendum on a new constitution restoring powers to parliament in June 2010; a parliamentary election under this new constitution was held in October 2010

  National legislature

  The Jogorku Kenesh is a unicameral chamber elected for a five-year term. Under changes approved by referendum in June 2010, the number of seats in the legislature has been raised from 90 to 120

  National elections

  October 10th 2010 (parliamentary) and October 30th 2011 (presidential); the next parliamentary election is due in 2015 and next presidential election is due in 2017

  National government

  If a party holds more than one-half of the seats in parliament, it has the right to nominate the prime minister, who must then be approved by the president (if no party wins a majority, the president will entrust one of parliament's parties with forming a coalition)

  Head of state

  Almazbek Atambayev won the election in October 2011 and took over from the interim president, Roza Otunbayeva, on December 1st

  Main political parties

  Ata-Jurt (Fatherland); Ak Jol (True Path); Social Democratic Party of Kyrgyzstan (SDPK); Communist Party of Kyrgyzstan (KPK); Socialist Party Ata-Meken (Fatherland); Alga (Forward), Kyrgyzstan!; Adilet (Justice); Ar-Namys (Dignity); Asaba (Banner); Democratic Party of Women of Kyrgyzstan; Erkindik (Freedom); Mekenim (Fatherland) Kyrgyzstan movement; Moya Strana (My Country); Progressive-Democratic Party Erkin Kyrgyzstan (ErK); Respublika; Party of Communists of Kyrgyzstan (PKK); Protection Party; Republican People's Party; Butun Kyrgyzstan (United Kyrgyzstan)

  Government

  Prime minister: Omurbek Babanov

  First deputy prime minister: Karash Aaly

  Deputy prime ministers:

  Gulnara Asymbekova

  Djoomart Otorbayev

  Key ministers

  Agriculture: Saparbek Tinayev

  Defence: Taalaibek Omuraliev

  Economy and competition policy: Temir Sariev

  Emergency situations: Kupatbek Boronov

  Energy & industry: Askarbek Shadiyev

  Finance: Akylbek Japarov

  Foreign affairs: Ruslan Kazakbayev

  Health: Dinara Sagimbayeva

  Internal affairs: Zarylbek Risaliyev

  Justice: Almambet Shykmamatov

  Labour, employment & migration: Aliyasbek Alimkulov

  Transport & communications: Kalykbek Sultanov

  Head of National Security

  Shamil Atakhanov

  Acting central bank chairman

  Baktygul Zheyenbayeva

  November 01, 2012

Economy:

• Background

  Kyrgyz Republic: Education

  The education system remains underfunded. For most of the 1990s spending on education was severely curtailed, falling from the equivalent of 6.5% of GDP in 1995 to a post-independence low of 3.5% in 2000, according to the IMF. Since then, spending has risen steadily, from 4.4% of GDP in 2002 to 5.6% in 2006, according to official figures. Nevertheless, the education system is hampered by low wages and a lack of investment in materials. The law requires nine years of compulsory education, after which students may pursue vocational programmes or university degrees. Enrolment rates rose to an average of 78% across all levels of education in 2005. Although this was high compared with countries in the same income group, the number of students dropping out of school was reported to have increased by 36% in 2000-05. In 2000-05 the number of institutions of higher education rose to 51 from 48, and student numbers rose by 11%.

  September 10, 2008

• Structure

  Kyrgyz Republic: Economic structure

  Economic structure: Annual indicators

  	2008a	2009a	2010a	2011a	2012b
  GDP at market prices (Som bn)	188.0	196.4	220.4	273.1	278.5
  GDP (US$ bn)	5.1	4.6	4.8	5.9	5.9
  Real GDP growth (%)	7.6	2.9	-0.5	5.7	0.5
  Consumer price inflation (av; %)	24.5	6.9	8.0	16.5	3.0
  Population (m)	5.3	5.4	5.5	5.5	5.6
  Exports of goods fob (US$ m)	1,874	1,700	1,779	2,331	2,120
  Imports of goods fob (US$ m)	-3,754	-2,814	-2,981	-3,959	-4,376
  Current-account balance (US$ m)	-750	-300	-467	-253	-739
  Foreign-exchange reserves excl gold (US$ m)	1,153	1,494	1,604	1,703	2,094
  Exchange rate Som:US$ (av)	36.57	42.90	45.96	46.14	46.99
  a Actual. b Economist Intelligence Unit estimates.

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  Main origins of gross domestic product 2009	% of total	Main components of gross domestic product 2009	% of total
  Agriculture & forestry	24.8	Private consumption	86.0
  Industry	23.1	Public consumption	22.8
  Services	52.0	Gross fixed investment	21.2
  		Change in stocks	0.9
  		Net exports	-30.9
  Principal exports 2010	% of total	Principal imports 2010	% of total
  Precious metals & stones	33.1	Mineral products	27.5
  Chemicals	8.2	Machinery & equipment	12.6
  Textiles	8.0	Chemicals	9.3
  Mineral products	6.2	Food, beverages & tobacco	8.3
  Main destinations of exports 2010	% of total	Main origins of imports 2010	% of total
  Switzerland	17.3	Russia	33.1
  Russia	12.7	China	17.9
  Uzbekistan	10.1	Kazakhstan	12.9
  Kazakhstan	3.1	Uzbekistan	4.4

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  November 01, 2012

• Outlook

  Kyrgyz Republic: Country outlook

  Kyrgyz Republic: Country outlook

  FROM THE ECONOMIST INTELLIGENCE UNIT

  OVERVIEW: The handover of the Kyrgyz Republic presidency to Almazbek Atambayev in December 2011 and the quick formation of a new government in September 2012 set positive precedents for future political development. In the short term policy will focus on recovering from the impact of a sharp economic downturn in 2012 and on maintaining political stability. Difficulties in raising revenue, as well as high levels of social and economic spending, produced a large budget deficit in 2012. This will shrink gradually as the economy strengthens in the 2013-14 forecast period. Economic growth in 2012 was badly hit by a reduction in gold output, a poor agricultural performance and a slowdown in the economies of leading trade partners. In 2013 positive growth will return, owing to a low base of comparison, a rise in gold production and modest growth in already high gold prices, but expansion could be restrained in 2014 by a fall in gold prices internationally. A drought pushed up year-end inflation in 2012, and the effect will carry over into early 2013. The current-account deficit is estimated to have widened dramatically in 2012, and will narrow only gradually.

  DOMESTIC POLITICS: A new three-party coalition government was formed in early September 2012, but with a smaller parliamentary majority. The previous coalition government had disintegrated following the departure of two of its four constituent parties owing to dissatisfaction over the handling of the economic crisis and allegations of corruption. The smooth handover of the presidency to Mr Atambayev in December 2011 set a precedent for the peaceful transition of political leadership, and the quick formation of a new government builds on this. Following the parliamentary election in October 2010, the country may be seen as having returned to a path of democratic development. However, the new political architecture does not remove any of the underlying factors-the complex interweaving of regional, clan, ethnic and class divisions-that have tended since independence to re-create social conflicts at a political level as a struggle between the parliamentary and presidential arms of government. Mr Atambayev's main support base is in the more urbanised north, but he also won significant backing among the ethnic Uzbek minority, who are concentrated in the south. Nonetheless, since ethnic clashes in June 2010, Uzbeks have been subject to prosecution in disproportionate numbers. In March 2012 the party of a mayor accused of stirring anti-Uzbek feeling won the municipal election in Osh, the country's second-largest city. In April Kyrgyz nationalist groups staged a large anti-government rally in Jalalabad. Most recently, in early January 2013, tensions flared up in the south-west, in the Sokh enclave, which is also claimed by Uzbekistan. A report by the International Crisis Group, a non-governmental organisation, indicated a commercial component behind some of the ethnic political tensions in the south, as shown by the seizure of some Uzbek businesses. Socio-economic divisions will thus remain a potential source of political disruption. The new government is made up of three of the five parties represented in the Jogorku Kenesh (parliament). It commands 69 out of 120 parliamentary seats, compared with 92 for the previous administration, and its position is therefore more precarious. Although the omission from the coalition of the nationalist Ata-Jurt (Fatherland) aids government cohesion, this is at the risk of stoking political unrest in the south, where the party has most of its support.

  INTERNATIONAL RELATIONS: In September 2012 the Kyrgyz Republic signed a deal with Russia on the extension of the lease on a Russian military base at Kant for 15 years, in return for economic support, cancellation of debt and military assistance. An agreement to sell Kyrgyzgaz, the national gas firm, to Gazprom, Russia's state gas monopoly, was reached at the end of December, on the promise of up to US$500m in Russian investment in the country's energy infrastructure. This approach should be seen as part of an intensification of Russian efforts to push ahead with the development of international structures across former Soviet space, which may have been spurred by the EU's decision in early September to open an investigation into Gazprom's activities. The impression of increased Russian action on this front was underscored in early December following a meeting of the leaders of the Commonwealth of Independent States in Ashgabat, the capital of Turkmenistan, at which it was decided to promote regional currencies and the Russian rouble, instead of the US dollar, in regional finance and trade. The Kyrgyz Republic is one of the countries that is too weak economically and politically to resist the Kremlin's mix of threats and incentives. Along with reliance on Russian money for some of the funding for Mr Atambayev's revamped medium-term investment plan, approved in January 2013, these developments will lock the country ever more tightly into Russian-dominated organisations. The Kyrgyz Republic now looks set to join the Russia-led customs union in 2015. Mr Atambayev has said that, when the Manas airbase agreement expires in 2014, he does not expect to renew it, but that civilian co-operation would be welcome. Russia's line on this is ambivalent: it would like the US to be aware that it remains at the facility on its forbearance, but is wary of the consequences for its own security, and for countries in its "near abroad", of any spillover from Afghanistan once the US pulls out. From the Kyrgyz perspective, this threat is one of the reasons behind the extension of the lease on Russia's military base. The influence of China is growing in Central Asia. This was shown at a meeting of the Shanghai Co-operation Organisation in June 2012, when the Chinese president, Hu Jintao, promised an additional US$10bn in loans to other members, including the Kyrgyz Republic. The main sign in the Kyrgyz Republic of growing economic links is in foreign trade, rather than in energy resources. However, at the conference China expressed concern over the need to develop a common approach to countering regional instability and extremism.

  POLICY TRENDS: In the short term policy will continue to aim at countering the impact of a drastic economic downturn in 2012, laying the groundwork for faster growth and making the country more attractive to foreign investment. An alarming widening of the external deficit will be another pressing concern. The Kyrgyz Republic has developed its policy programme with the IMF. A previous government agreed a US$100m, 18-month arrangement under the Fund's exogenous shocks facility in December 2008. In June 2011 the Fund reached agreement on a further three-year lending programme, equivalent to around US$106m, under its Extended Credit Facility. Approval of a first review saw the first instalment released in December 2011. A second followed at the end of April 2012 and a third was passed by the Fund board in December. In total, the Kyrgyz Republic has received around US$60m. The new administration has developed detailed anti-corruption plans to improve the investment environment. The president's medium-term project investment initiative for 2013-17 was relaunched in mid-January. It aims to accelerate development in strategic sectors, including energy and transport, at an overall estimated cost of US$13bn, although it is not yet clear where all the money is to come from. The sale of Kyrgyzgaz to Gazprom in late December is an important development, as it comes with large investment and debt-relief elements. However, for some investors, the country's image as an investment destination may have been tarnished by the persistent political struggles over ownership of the Kumtor gold mine. In 2012 foreign direct investment inflows remained depressed because of the financial turbulence in the euro zone. Despite a strong rise in government revenue, linked to GDP and trade growth, the state budget deficit was around Som13.5bn (US$284m) in 2011, equivalent to around 5% of GDP. In 2012 the budget came under strain as external demand and domestic manufacturing output slowed. At end-July the president passed a revised budget that widened the deficit target from 5.2% to 7.2% of GDP. In January-November a sizeable deficit (Som12.3bn) developed on the state budget, up from Som8.1bn in the same period of 2011. The Economist Intelligence Unit estimates the budget deficit at 6.3% of GDP in 2012. The deficit should narrow in line with economic recovery in 2013-14.

  ECONOMIC GROWTH: Real GDP grew by 6% in 2011 but contracted by 0.9% in 2012, according to the National Statistical Committee (NSC). Following a slowdown in December 2011, growth plummeted in the first quarter of 2012, reflecting problems in the important gold sector. Output from the Kumtor gold mine appears to have fallen by more than 40% for the year. As a result, industrial output declined by more than 20% in 2012 and export earnings fell by more than 17% in US dollar terms, according to official figures. Affected by a regional drought, agriculture was another important sector that performed weakly, growing by just 1.2%, following a fairly poor showing in 2011. In contrast, the rest of the non-gold economy, although broadly weakening compared with the recovery year of 2011, did not perform too badly. Industrial output (excluding Kumtor) grew by more than 5% in 2012. In the second half of the year, remittance growth rebounded, supporting strong growth in imports, and a pick-up in the construction and retail sectors. In 2013 a sharp acceleration in external demand does not look likely, but economic growth will be faster than previously expected owing to a lower base year, a rise in gold production and continued modest growth in already high gold prices. In 2014 external demand should begin to pick up more quickly, but the pace of expansion in economic activity could be restrained by a decline in gold prices internationally and by the base-period effect of rapid economic strengthening in the preceding year. In both years, growth could be supported by the government's anti-corruption and investment drives. A recent sharp increase in estimates for Kumtor's gold reserves should underpin the country's economic prospects in the medium term. We forecast real GDP growth of 5.5% in 2013 (up from 4% in our previous forecast), but a modest slowdown in the pace of expansion in 2014, to 4.5%, which is closer to the long-term average.

  EXTERNAL ACCOUNT: The current-account deficit narrowed considerably in US dollar terms in 2011, to around US$250m (4.3% of GDP), from US$467m in 2010 (about 10% of GDP). However, in 2012 the external account deteriorated alarmingly, with the deficit reaching 21% of GDP in January-September, according to the National Bank of the Kyrgyz Republic, from just below 8% of GDP in the same period of 2011. This reflects a series of labour and technical disruptions at the country's main gold producer, which hit gold earnings, despite high international prices, and weakened GDP. It also reflects the resilience of remittance inflows from Russia (which fed import demand for construction and consumption), and high fuel costs. Merchandise trade data suggest that this pattern continued into the fourth quarter. As a result, the deficit on trade in goods widened dramatically in January-November 2012, to US$3.3bn, from just under US$2bn in the same period of 2011. The full-year current-account deficit is therefore likely to have come in at more than 20% of GDP, which is dangerously high, and a considerable reversal of fortunes compared with 2011. In 2013-14 a recovery in gold and other export earnings, ongoing currency depreciation and continued respectable growth in remittances will see an improvement in the external position, but the gap will remain very wide, leaving the macroeconomy vulnerable to destabilisation.

  January 30, 2013

• Forecast

  World: Country forecast summary

  COUNTRY VIEW

  FROM THE ECONOMIST INTELLIGENCE UNIT 

  • The Economist Intelligence Unit forecasts a slowdown in global growth in 2008, reflecting the sharp deceleration in US growth and a weakening in a number of other industrialised economies in the year. In 2009 the weaker US economy will continue to depress global growth and (mostly modest) tightening measures in response to the recent surge in inflation in many emerging markets will start to have an impact on the real economy. Later, growth will firm but will not match the rapid rates seen in recent years.
  • The recent surge in inflation has become a major concern, but inflationary pressures will fade in the developed world, as slower growth leads to lower demand-side price pressures and commodity prices are expected to stabilise. The impact on emerging markets will be more prolonged, as limited credibility of monetary policy raises the risk of second-round effects.
  • The US economy will grow by only 1.2% in 2008 and 1.1% in 2009, reflecting the impact of the turmoil in the housing market, the turbulence in credit markets and the indebtedness of households. The recovery in subsequent years will be slow owing to continued consolidation needs.
  • Following a substantial weakening in 2007, the rate of expansion in Japan will remain well below the pace seen in 2004-06, as a strengthening currency, slowing business investment and faltering housing investment take their toll. The euro zone will slow down in 2008 and 2009, affected by the US downturn and the financial market turmoil. UK growth will slow in 2008, partly reflecting the impact of financial market turmoil and an exposed housing market.
  • The emerging world will continue expand rapidly, although there will be a deceleration from the extraordinary pace in the last five years. Chinese growth will slow, partly owing to slower foreign demand and official measures to prevent overheating. India will also weaken as a result of increasing resource constraints, but the pace of growth will still be strong.
  • Uncertainties about the US outlook is the biggest risk to the global outlook in the short term. Our core forecast assumes that monetary and fiscal policy action will prevent a severe recession, but the extent of financial market problems and of prior imbalance means the risk is high that these measures will prove insufficient.

  Key indicators	2007	2008	2009	2010	2011	2012
  World GDP growth (%; at PPP)	4.9	3.9	3.6	4.2	4.3	4.2
  OECD	2.7	1.7	1.5	2.4	2.5	2.5
  Non-OECD	8.3	7.2	6.6	6.7	6.6	6.1
  World inflation (%; av)	3.4	4.9	3.8	3.3	3.2	3.1
  World trade growth (%)	7.3	6.1	6.3	7.3	7.6	7.7
  US$ effective (2000=100)	80.8	74.2	75.4	76.4	77.2	77.9

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  August 01, 2008

View detailed map

Country Briefing

Total area

198,500 sq km

Population

5.48m (end-2010 official estimate)

Main towns

Population in '000 (end-2004 estimates):

Bishkek (capital): 804

Osh: 228

Jalalabad: 78

Kara Kul: 63

Climate

Continental high mountain

Languages

Kyrgyz and Russian are the official languages

Weights and measures

Metric system

Currency

The som was introduced on May 10th 1993

Time

Five hours ahead of GMT

Fiscal year

Calendar year

Public holidays

January 1st (New Year), January 7th (Orthodox Christmas), February 23rd (Defenders' Day), March 8th (International Women's Day), March 21st-23rd (Noruz), March 24th (National Revolution Day), May 1st (Labour Day), May 5th (Constitution Day), May 8th (Remembrance Day), May 9th (Victory Day), August 19th (end of Ramadan), August 31st (Independence Day), October 26th (Feast of Sacrifice), November 7th (October Revolution Day)

February 01, 2013