BACKGROUND: Kyrgyzstan’s new, post-revolutionary government has turned out to be less strong or united than people had hoped. After Bakiev’s inauguration in mid-August, cracks have appeared. Some icons of the March revolution – very popular with the people – lost, or were dismissed from, their posts. Most important of all, prosecutor-general Beknazarov was fired by Bakiev in September, and later that month, acting foreign minister Otunbaeva failed to get parliamentary confirmation for her post when candidates were considered for the new cabinet. In parliamentary by-elections in late November in the southern Aksy district and in Bishkek, Beknazarov managed to win a seat while Otunbaeva failed to win hers. This second defeat might well mean the political end for her. This only leaves Felix Kulov, the prime-minister, of strong, independent-minded politicians in the cabinet. He is very popular – especially in the northern part of the country – partly because of his incarceration under the previous President, Askar Akaev. Hence even if he wanted to, Bakiev might find it too dangerous to get rid of Kulov as well. But thus far, in his function as prime minister, Kulov hasn’t received as much power as was promised earlier. Kulov did not participate in the July presidential election, instead supporting Bakiev on the condition of gradually changing Kyrgyzstan’s presidential system into a parliamentary one. The prime minister’s post would be given to Kulov under the deal and would receive the right to appoint ministers and heads of local government, leaving the security forces under presidential control. But a transfer of power from the President to the prime minister is unlikely to happen soon. The Constitutional Council, headed by Bakiev, has not yet adopted the necessary changes to the constitution. And when appointing new ministers to the cabinet in September, Bakiev and Kulov both tried to get their allies in. For example, in early September, Kulov’s ally Almazbek Atambaev was appointed minister of economic development, trade and industry. But at the end of September, Atambaev had lost the economic portfolio to Akylbek Japarov, who is closer to Bakiev and who became minister of economy and finance. Atambaev remained in charge of the less powerful ministry of industry, trade and tourism. While the authorities are still struggling to find a power-sharing compromise, insufficient attention is paid to economic plans made before the election. During Askar Akaev’s regime, corruption and nepotism were major problems. During his inauguration, Bakiev said his main goal was to combat corruption and, as a result, to fill the state budget with more money. But a sincere fight against corruption (which is considered to be the country’s most negative characteristic by investors) has not been effectively started yet. Beknazarov, when prosecutor-general, was responsible for combating corruption. He reportedly believes that a reason for his dismissal was that certain people feared he was becoming too effective in that job. Indeed, his successors do seem less zealous. Kulov, as Bakiev, has promising plans to improve the business environment. They include simplifying regulations for businessmen, reducing the rates of taxes and change the tax system, and improving the court system. So far, however, these are mostly still just plans. And as long as the political situation remains unstable, it will be difficult to implement them.

IMPLICATIONS: The unity of the revolution has been shattered, and the choir of voices suggesting that Bakiev prefers to have allies and subordinates rather than potential rivals around him is growing. By now, in effect, a new opposition has been formed by Beknazarov and Otunbaeva. The latter however failed to gain a parliamentary seat in November’s by-elections and it remains to be seen how effective she can be in future. But Beknazarov is in the parliament and could prove a magnet for unsatisfied people to rally around. Kyrgyzstan’s political problems are added to its economic problems to make the country less attractive for investors. But investments are direly needed to increase the country’s low level of life. Heavy-handed attempts at re-privatization, unlawful seizures of land, conflicts over property ownership, and even several assassinations linked to business interests did their bit to frighten both local and international businessmen. There are some fears that corruption has progressed so much that criminal figures are powerful enough to dictate their terms to the authorities. Recent unrest in prisons in October, which may have killed 20 inmates, shed some light on the affluence and influence that criminal leaders even in prisons still seem to enjoy. Economic disputes have also had negative consequences. The seizure of the Kara-Keche coal mines, the country’s most important ones located in the center of Kyrgyzstan in June 2005 by local groups resulted in a sharp decline of coal production. As a result, coal prices have increased, especially now that snow has fallen. And this dispute still remains unsolved. Gold production has also dropped because of problems at the country’s main, Canadian-owned Kumtor gold mine which is the main source of the state’s annual income. Here, locals several times blocked the road to mine, demanding compensation for a 1998 cyanide spill near the site. Compensation had been paid earlier but, critics say, corrupt officials made sure little of the money reached the people affected. Overall, industrial output fell by 8.3 percent year-on-year in January-August 2005. Instability in Kyrgyzstan was reflected in the World Economic Forum’s Global Competitiveness Index, published in late September. It put Kyrgyzstan on place 116 of 117. The most problematic factors indicated for doing business in Kyrgyzstan were corruption, its tax regulations and tax rates, bad access to financing, a non-effective government bureaucracy, and unstable politics. According to a survey for the fourth quarter by Kyrgyzstan’s International Business Council (IBC) “investors think that the investment climate is actually worse today than immediately after the revolution in March”. The IBC further says that now is the first time that investors have been negative about the future in Kyrgyzstan since its survey began, in December 2000. In June, investors had still been confident there would be “significant improvement” by December 2005.

CONCLUSIONS: The best way to lure investment into Kyrgyzstan is to assure investors there will be no future upheavals. Just maintaining stability could help a lot. According to the IBC, stability in Kyrgyzstan would help the country multiply its wealth thanks to its favorable location between two economic powerful and rapidly developing countries, Kazakhstan and China. In such an environment, writes the IBC, “The Kyrgyz government only has to maintain civil order and keep borders open, in order to have 5 percent annual growth.” Of course, with neighbors reaching 9 percent annual growth rates, a 5 percent growth rate is not necessarily a sign of success. So far, experience does not suggest that the government is very good yet at maintaining order and preventing unrest. Tensions between Bakiev and Kulov might still come to the open, which could cause serious conflict. On November 28, Bakiev told the Russian news agency Interfax that combining the posts of President and prime-minister (in effect: abolishing the post of prime-minister) would most likely have a positive effect. He added, though, that the current political situation called in fact for keeping the prime minister as a guarantee for stability. Perhaps this assessment is open for change?

AUTHOR’S BIO: Zoya Pylenko is a freelance writer based in Bishkek, Kyrgyzstan.