by Anders Aslund, Peterson Institute for International Economics
Op-ed in the Moscow Times
April 28, 2010
© Moscow Times
Kyrgyzstan is one of the most attractive post-Soviet countries and the only country in Central Asia that is free. The population is warm and well educated, civil society and openness have been thriving as nowhere else in the former Soviet Union, and the natural beauty with the snow-capped mountains is astounding.
In the early postcommunist transition, Kyrgyzstan surprised observers when it emerged as an early reformer thanks to Askar Akayev, who served as president from 1990 to 2005. Far-reaching deregulation and simplified taxation made small-scale business take off. An early land reform and low, fixed taxes for small peasants boosted agriculture. Moreover, Kyrgyzstan was the first country in the Commonwealth of Independent States to enter the World Trade Organization in 1998, which has facilitated extensive trade with China. Healthcare reform has been excellent, and male life expectancy is surprisingly four years longer than in much richer Kazakhstan. Naturally, Kyrgyzstan has a low and flat income tax system and a profit tax of 10 percent.
Nonetheless, Kyrgyzstan remains very poor, and economic growth has been frail because corruption is horrendous even by post-Soviet standards. For the past five years the dominant problem has been former President Kurmanbek Bakiyev and his family, who have monopolized big state-owned and private enterprises, devastating the economy (although the Akayev family did the same thing during their reign).
The enlightened Kyrgyz people have had enough of corruption and nepotism. The Tulip Revolution in March 2005 was a protest against the Akayev family. The 2010 revolution is directed against Bakiyev, his family, and clan.
The bloodshed was appalling, but the determined action of the Kyrgyz people is to be welcomed. They had more than sufficient reasons to revolt. Today, it is vital that the violence stops, and the next question is how another repetition of presidential family outrage can be hindered.
Kyrgyzstan's key problems are its mildly authoritarian presidential rule and massive, top-level corruption, which kills most big investments and enterprises. With its many and good reforms and educated, democratic population, Kyrgyzstan is a place where a few silver bullets can work wonders. The simple prescription is full-fledged democracy, a parliamentary system and honest privatization of the large enterprises.
The country consists of high mountains, and it is geographically divided into two equally large parts. Regionalism is reinforced by strong clans. Akayev came from the north, Bakiyev from the south. The new group is mixed but predominantly northern. Interim leader Roza Otunbayeva was born in the south, but she comes from a northern family. President Dmitry Medvedev has talked about the danger of a division of Kyrgyzstan between north and south and the risk of a civil war. Yet the differences should not be exaggerated. The Kyrgyz are all one ethnic group with one language and one religion.
Power needs to be shared and decentralized. This is the essence of democracy. And the country needs democracy to survive; otherwise one half of the country will always revolt against the ruling half. Decentralization should lead to real regional self-governance. Kyrgyzstan looks a lot like Switzerland and should be ruled like Switzerland by powerful communes.
Kyrgyzstan needs to become a fully parliamentary republic to escape excessive presidential powers. Interim deputy leader Omurbek Tekebayev has produced such a new draft constitution that will be put to a referendum on June 27. Next, the new rulers promise to hold both presidential and parliamentary elections on October 10, exactly as needed. This time, international bodies such as the Organization for Security and Cooperation in Europe need to intervene forcefully to make sure that the elections are free and fair.
When the Akayev family left, its net wealth was estimated at from $500 million to $1 billion. The Bakiyev family has probably accumulated even more, and it reportedly transferred $200 million when departing. These families sat on the big state companies and tapped them dry. Such corruption is cured through privatization and democracy.
The popular view in Bishkek is that Aidar Akayev and later Maxim Bakiyev, the presidential sons, made fortunes by selling fuel and other supplies through affiliated companies to Manas Air Base at exorbitant prices. Apparently, the Pentagon has not objected to bankrolling both presidential sons in schemes that it knew fueled corruption. This business should be subject to an audit by the US Government Accountability Office. Transparent and open bidding are vital in state procurement. It cannot be in the US interest that the United States is perceived as a major source of corruption in Kyrgyzstan.
Most of the new rulers are a promising group of liberal professionals. They received their education in Moscow and Leningrad in the 1970s and 1980s and surged with Akayev 20 years ago, but today they are in their late 50s. There are quite a few well-educated young Kyrgyz, but they prefer to stay abroad because they are appalled by corruption. They are alien to the clan system, and there is no demand for them at home. Yet a few work at the American University of Central Asia in Bishkek, which is supported by George Soros and the US Agency for International Development (USAID). This is the time to recruit a new elite of young Kyrgyz to return to their home country and help build a democracy and free-market economy. President Mikheil Saakashvili was able to do this in Georgia.
The new government should learn another lesson from Georgia: how to fight corruption through radical deregulation and government reform. The population is ready for this. Akayev actually made many attempts to accomplish this, simplifying regulation and taxation for small enterprises, abolishing inspections and minimizing police checks on the roads, but then his family interfered.
A new, honest, and democratic Kyrgyz government should be given substantial assistance, and many young Kyrgyz should obtain scholarships abroad. Russia immediately recognized the new democratic provisional government and committed $50 million in emergency help. The West must follow, but it has been slow to do so. Kyrgyzstan, the only country where both Russia and the United States have air bases, could become the stage of unique cooperation.
All of Kyrgyzstan's authoritarian neighbors, including China, Kazakhstan, and Uzbekistan, hate to see a corrupt authoritarian regime being toppled and replaced by budding democrats. Kyrgyzstan must be congratulated on its democratic endeavors and fight against corruption, but this can be a make-or-break time for Kyrgyzstan. Therefore, democrats must offer the nation timely support.
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