BACKGROUND: At 3 p.m. on March 24, around 20 thousand people gathered on the Ala-Too Square to demand the resignation of Askar Akaev. After several clashes, demonstrators stormed the police and entered the White House, throwing portraits of Akaev out of the windows and waving the flag of Kyrgyzstan. Akaev had left 30 minutes before protestors entered his office. Other government officials left through a side door. Those who were still inside were beaten mercilessly. A short while later, Kurmanbek Bakiev, one of the opposition leaders, addressed the crowd, saying that the government is in the hands of the people. Demonstrators also freed Felix Kulov, a leader of the “Ar-Namys” opposition party, who had been in jail since 2000. Kulov urged Akaev to peacefully transfer his power. The sentiment of excitement was felt both inside and outside of Kyrgyzstan. While the presence of overwhelming excitement was felt during the revolution, the following events brought trepidation and fear. Protesters started to loot nearby supermarkets and businesses. The new government scrambled to restore stability but this proved a hard task in the absence of police and given a broken chain of command. Volunteers tied yellow ribbons around their arms to serve as street patrols. They prevented many of potential lootings, but most businesses in Bishkek’s downtown had been wrecked. At least three people were killed and a hundred were hurt in different incidents. In the aftermath of looting, some people were desperate, while others were still optimistic of the revolutionary events. In any case, the initial joy at best gave way to skepticism and an overall mixed picture. The Soviet Union collapsed fifteen years ago, leading analysts to trumpet the global triumph of liberal democracy. Echoing such sentiments, Kyrgyzstan’s relatively new President Askar Akaev became the champion of democratic reforms unparalleled in his authoritarian neighbors in Central Asia. Indeed, Kyrgyzstan was briefly called the “Island of Democracy” and received more foreign aid per capita than any of its neighbors. However, since 1996, Akaev began turning increasingly autocratic, influencing the judicial and legislative branches to control his political opponents. To get reelected for his third term in 2000, Akaev violated the constitution and initiated criminal prosecutions against key challengers. Feliks Kulov and Topchubek Turgunaliev ended up in jail and criminal charges were slammed on Daniar Usenov, barring him from standing for election. Akaev and his family became more powerful and opulent. His son and son-in-law owned profitable businesses using government channels. Akaev and his wife Mairam’s clans (Sari-Bagish, Saru and Kutchu) and regions (Kemin and Talas) were overrepresented in the government while the most populous Southern region was underrepresented.

IMPLICATIONS: In the recent parliamentary elections, Akaev went too far, filling up the Jogorku Kenesh with pro-presidential candidates as well as his own son and daughter. The blatant exclusion of political heavyweights such as Kurmanbek Bakiev and Roza Otunbaeva and the general apprehension that Akaev was preparing yet another trick to remain in power added fuel to the fire. Meanwhile, corruption, rural poverty, unemployment and Akaev’s alienation from ordinary people severely diminished his popularity. All these factors put together, coupled by the struggle for power and outside support, culminated in the revolution. In view of fifteen years of Akaev’s reign, the dramatic changes witnessed in Kyrgyzstan does represent a hope for a better future and the triumph of popular democracy. Now Acting Foreign Minister, Otunbaeva in a meeting with the foreign ministers of Georgia and Ukraine expressed that “Our choice is for democracy.” The revolution is also a lesson for the new government to create a system of governance based on checks and balances. For instance, Kulov has already stressed the importance of the independence of the judiciary to avoid future revolutions. Marat Tazabekov, director of the Economic Policy Institute, contends that a presidential form of government leads to the regime of one person and that Kyrgyzstan should have a parliamentary form of government. While conditions for the further development of democracy are present, the real concern is the country’s ubiquitous corruption. If the government does not fight with the cancer of corruption, most efforts could turn out to be futile. Cholpon Baekova, Chair of the Constitutional Court, announced that the new chapter in Kyrgyzstan’s history should start with the establishment of transparent government without corruption and tribalism. Bakiev, Otunbaeva and others accused Akaev’s clan of widespread corruption but have kept their silence on what they intend to do to address the problem. Whereas the political benefits of the upheaval are yet to be realized, economic costs are already present. The full cost of the destruction of state property remains to be estimated. According to member of parliament Timir Sariev, the budget lost one million dollars, while the Ministry of Finance estimates losses of half again as much. Still, the main costs are in the private sector. Major stores such as “Beta,” “Dordoi Plaza,” “Silk Way,” “Narodnyi” and many others were looted completely. As a result, three major owners committed suicide and many others are under heavy stress. Middle class salespeople rented most of the counters and shops inside these supermarkets, and they were the most hurt by the looting. David Grant, director of the International Business Council (IBC) in Bishkek, announced that the damage amounts to roughly US$100 million. The IBC represents investors in Kyrgyzstan, totalling investment of over US$ one billion. One of its members, the BITEL cellular phone company, lost US$500,000 when its head office was marauded. To cap it all, BITEL has started to experience what some experts call the beginning of the redistribution of property rights. On March 30, the Sverdlovsky district court arrested its property upon a law suit initiated by Fellowes (a company affiliated with Russia’s Alpha group), claiming ownership of BITEL. BITEL has 300,000 clients and is valued at $150 million to 200 million. At the moment, the issue seems to be in the process of resolution along legal and contractual channels, it is very likely that amidst the chaos, some individuals and entities will want to grab stakes in such lucrative businesses. For instance, Ruslan Sarymsakov, president of JSC “Ak-Keme”, claimed the ownership of “Pinara Hotel” previously owned by a Turkish company, “Muhendislik.” Disputes over the ownership of Sanatoriums and other properties in the Issuk-Kul tourist zone have begun as well. The consequences of insecure contracts, dubious claims and incentives to redistribute property rights can stagger Kyrgyzstan’s investment climate and slow down economic growth.

CONCLUSIONS: While the new government is in a unique position to fundamentally alter the way Kyrgyzstan will move forward, the potential risks in the form of insecurity and redistribution of property rights are very real and can harm the business investment climate in the country for years to come. The new leaders have promised to protect property rights; for example, Bakiev does not expect major reprivatization and redistribution. The prosecutor general, Azimbek Beknazarov, promised to investigate all illegal actions aimed at business people. Daniyar Usenov, a principal investigator of Akaev’s wealth and recently appointed interim deputy prime minister for economic issues, argues for fair rules of the game for all businesses. While promises are high, incentives to renege on promises are even higher. Therefore, it is essential for the new leaders to understand that the people granted them power with genuine hope to build democratic and prosperous Kyrgyzstan. This is possible only if the government manages the state accountably, combats corruption, protects property rights and improves the quality of life of the majority. This is not an easy task, but the necessary one for the new government to make a difference.

AUTHOR’S BIO: Maks Kobonbaev is a Ph.D. candidate in Political Science and holds a Master’s degree in Public Policy Administration, at the University of Missouri-St. Louis.