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Kyrgyzstan has gone through a number
of changes in the last few years. Could
you describe or brief us on the most relevant
ones, how the economy of Kyrgyzstan has
improved and the further improvements that
you expect?
If you allow me I will explain what our
actions are. In fact our country will be
celebrating the 11th anniversary of its
independence this year. And of course as
all other CIS countries we were born in
the socialist system, state type of property
and the government property and socialist
manufacturing relationships, and for the
previous 10-11 years we have been completely
converted into free market relationships.
In 1992 we started to introduce our local
national currency. In fact we mainly privatized
the state sector. In fact I cannot remember
now the exact percentage of companies with
the state ownership, but I can assure you
that there are only very few government
enterprises with the government property.
So we have some recreation, health resorts
or sanatoria, if I may say so, which are
located in a nice Issyk-Kul area, some of
which are still in the government property,
but we are planning to privatize all of
them till 2004. We will completely privatize
housing facilities. The land is already
in the private property, private hands.
As I know it has not yet been the case in
many other former Soviet Union countries.
We have completely and fully privatized
all companies or collective farms belonging
to the agricultural sector. We don't have
any collective farms belonging to the government.
The whole of the banking sector belongs
to private people. So the only things that
are still belonging to the government are
the buildings of the governmental agencies,
ministries, and agencies. The energy sector
started to be capitalized partically. So,
the economy of the Kyrgyz Republic, since
it acquired its independence has changed
from socialism to capitalisms. And I can
also tell what kind of difficulties and
challenges we have met. The first challenge
was that during the initial stage of denationalization
and privatization it was the lack of experience,
the absence of human resources who would
work in the market economy. Then it was
also difficult to break the mentality of
those people who have been living for the
period of seventy years in the socialist
economy, when the state was completely responsible
for the decision-making process in the past,
but when we were converted to the market
economy, people had to think on their own.
This is a long lasting process. For the
previous 11 years we have been completely
transferred to the market economy relations
and we are building our future on the basis
of market reforms. So what I can say that
some of the consequences of that lack of
experience lack of skills have resulted
in some challenges, shortcomings. Like,
for instance, we borrowed foreign loans,
international credits and loans and in some
places they were probably badly targeted,
as a result of which a huge economic debt
burden was created. Right now we have to
learn from our own mistakes. And our government
is undertaking at the current moment some
steps to be able to get rid of unnecessarily
existing burden, to be able to match the
revenues and expense of the country and
to develop the economy at the same time.
One of the major challenges for developing
the economy is diversifying it into different
sectors. Currently the economy of Kyrgyzstan
is very much dependent on the mining sector
and agricultural sector, while the industrial
sector has been lagging behind and has not
been able to catch up.
I would not say so. All sectors of the economy
are developing slowly, gradually and eventually
some of them provide more results, some
of them provide fewer results. And the gold
mining sector to what you referred doesn't
play a significant role in the economy yet
and the budget of the country. The reason
for that is because there are two gold mines
operating in the Republic. One of them is
named Makmal gold which was constructed
by us during the Soviet power in 1995, the
second mine is Kumtor was built up and we
installed the gold mine facilities there
using the credit proceeds jointly with the
Canadian company CAMECO in 1996. And till
the previous year we have mined gold, we
have sold this gold and repaid the loans.
Only starting from the previous year we
began to receive royalties. Last year it
accounted for 280 mln.som out of 11 billion
som in the budget. This year this amount
is going to increase a little bit. So the
indicators of the gold mining industry they
play, in my opinion, a very significant
role in the gross output, but not in what
you sell. So that's why at the moment we
may not say that our economy depends very
much on the gold mining, however we have
a lot of hopes for the future. This year
we are planning to start building from the
next year a new gold mine Taldy-Bulak Levoberezhny.
From the next year we plan to mine gold
there. The difficulties I can show in the
development of the industrial sector. We
have lots of that because in the past our
industries were completely orientated to
the supply and demand of the former Soviet
Union. And right now our objective is to
make the industry work for the export, which
is a very complicated process. It heavily
depends on the replacement of the obsolete
equipment in this companies and the availability
of the working capital in these companies.
But of course the industry is developing.
The agricultural sector plays a very important
role in our economy. It accounts for 37%
of our economy, which is a huge percentage.
All products which are grown locally they
are mainly consumed domestically in the
Republic, but the rest go for export. SMEs
(Small and Medium Enterprises) account for
a large niche as well.
In terms of attracting direct foreign
investments, which sectors designate relatively
the most, and what is the current Government
doing to attract foreign investments, are
you offering tax incentives, what other
methods of attracting FDI will you be using?
If you allow me I wanted to be pretty precise
and tell you everything in a sequential
order. I will cover everything. We are doing
the following things in terms of poverty
reduction, gradual improvement of the economy
and attraction of direct foreign investments.
First of all we are in the process of competing
the administrative reform. If I may say
that in the past we used to have about 50
ministries. At the point we are reducing
them abruptly and getting rid of unnecessary
structures. Right now we have 13 ministries
and 12 other structures in the country.
We have reduced ministries and agencies
by 30%. Inside the ministries and agencies
we have reduced the quantity of the headquarters
apparatus by 30%. This year we are planning
to make further reductions. By now we have
reduced them by 6.4%. We are in the process
of elimination of those agencies, ministries
that have some overlapping functions. We
are reducing bureaucratic barriers on the
way of development of entrepreneurship,
business. We have conducted a complete revision,
audit of the regulatory framework starting
from 1925. We have revised mainly all decrees
of the Government issued by the previous
Governments of the Kyrgyz Republic. I am
talking about documents the number of which
exceeds 4000. We eliminated them. We revised
and reformed the whole system of licenses,
whenever agencies are supposed to receive
licenses.
Even in the year 2000 we used to issue 470
licenses, at the moment we reduced the quantity
of licenses to 30. In October, the current
year we are planning to complete the reform
of the fiscal system. We recently introduced
the system of a one-stop shop; if an entity
is being created, like an agency, organization,
it can get registration, receive its licenses
and permits in one place. And right now
we are still going on with our administrative
reform. We hope to complete it this year.
In terms of the judicial reform being carried
out in the country. For the previous one
a half years, we have managed to bring 76
laws in compliance with our Constitution.
We introduced amendments to over 220 laws,
amendments we introduced for the purpose
of eliminating duplication in between laws.
And in the month of September we are introducing
the package of laws and regulations, which
prevent from development of favorable investments.
We are also carrying out the court reform.
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Recently the decree
of the President was issued in terms of creation
of the third party courts. In other words
we are working in the direction of eliminating
barriers for foreign investors. We are also
implementing some reforms in the banking sector.
Our objective in the banking sector is to
bring back the lost credibility of the banking
sector from the part of residents, this reform
is ongoing and I can't deny that it is going
with some problems and pain. The reason I
am saying all this is because there was the
crises of some commercial banks last year
and during the previous years. We need to
avoid and completely eliminate this situation.
To be back to administrative reform I would
like to add one thing that we have completely
changed the relationship of the structure
between the central government bodies and
the local government bodies. We have transferred
the major part of functions from the central
level of the government to the local level
of the government. At the end of last year
we conducted the elections to the local government
bodies and 467 heads of aiyl okmotus (local
village councils), which has never been the
case before. I was the Chairman of the working
group which dealt with the development of
Tax Policy in terms of the tax liberalization.
What we did we make some reforms in this sphere.
We left some taxes at the level of local governments,
to authorize local governments to decide on
their own what to do with those taxes collected
locally. In terms of industrial enterprises
and SMEs last year we introduced the amendments
to the Tax Code to reduce the tax burden on
entrepreneurs and agriculture. But of course,
everything what is done is in the framework
of what we can do. What was mostly important
among the achievements made by us last year
was the development of the country's development
strategy, the Comprehensive Development Framework
(CDF). That's a long-term program and within
the framework of this long-term strategy we
are completing the development of the mid-term
strategy named National Strategy for Poverty
Reduction (NSPR). So the reason why we proceeded
with the development of NSPR was that over
50% (57% to be precise) of our population
lives beyond the poverty line.
And naturally one of our most important
objectives is to solve the problem of poverty
in the country. When we developed this program
at the beginning we attracted the whole
of the population in the country to its
development: all entities and persons who
we could like public associations, the banking
sector, NGOs and international financial
institutions. As a result of all people's
discussion this program was approved at
the congress of all people of Kyrgyzstan.
The Government received the program, which
was approved by all people. During the period
of the 9-11 October we are going to present
the National Strategy for Poverty Reduction
to our donors and we hope to receive their
approval. In connection with a heavy burden
of external debt of our country as I already
mentioned, last year our representatives
made a trip to the Paris Club discussions
as a result of which we received the approval
for the restructuring of the Kyrgyz Republic
debt for three years. If we are in a full
compliance with those obligations undertaken
by the country during those discussions
in three years we expect that 67% of our
debt will be written off. The rest part
of our external debt will be restructured.
And to continue to reply to your questions
with regards to investments, we don´t
have any possibility to borrow loans under
the guarantee of the Government. That is
why our major objective right now is to
create favorable conditions for attraction
of domestic and foreign investments. Last
year the Coordination Council for Attraction
of Foreign Investments under the leadership
of the President was created. So members
of that council are as follows: the President
of the country, the Prime-minister, the
US Ambassador, the Resident Representative
of the World Bank and two leaders of the
companies who have been working for some
time in our country. The Secretariat of
the special representative of the President
on attraction of foreign investments was
created.
The matrix with regards to alleviation or
reduction of barriers to attraction of foreign
investments was created in which all barriers,
which impede from the attraction of foreign
investments, were included. And right now
we are finishing the work on this matrix.
Those things, which I enlisted before, like
the development and improvement of the banking
sector, judicial system, court system and
other are gradually included in the matrix.
And in June we conducted the investment
summit in Issyk-Kul in which we made the
results of our work. During the summit we
also received some remarks and proposals,
suggestions from the part of investors,
donors and those representatives to be further
included in this matrix, to refine it and
then to provide the final version of this
matrix in the end of the year with regards
to elimination of all those barriers. So
we can observe at the moment the first success
of all those things like in tourism sector,
housing construction sector, as well as
the manufacturing sector results. What is
mostly important for us is peace and quietness.
Do you think there's enough awareness
about Kyrgyzstan as investment destination
in terms of international investors? Do
you think when an investor thinks of a place
to inject his funds he considers Kyrgyzstan?
Is there enough being done to promote the
country and make investors are aware of
possibilities in the country offers?
Unfortunately I don't think they are yet
completely aware of this. To be very open
and frank Its in our country have left much
to be desired till a recent time. And only
since a recent time we have started to place
things like these on the Web site. Not the
whole regulatory framework is placed on
the Web in English. That's a great disadvantage
and I hope we'll manage to overcome it till
the end of the current year. The rest of
the things, which I mentioned, are included
in the portal of the Government, CDF and
the Council for Attraction of Foreign Investments.
The second point, which I would also call
a shortcoming, is that geographically the
Kyrgyz Republic is quite a small country
and people have not known a lot about us.
But in our opinion, of course it's a bad
part for the US unfortunately, and fortunately
for us is that after the events of the 11th
of September, the acts of terrorism in the
United States, people have become knowing
us better cause those events were connected
with the dislocation of the anti-terrorism
of countries and due to this he geography
of awareness of our country has been extended.
As I already mentioned we hope a lot for
the conduction of two very important events:
the CG (donor's) meeting which will take
place in October in our country, which usually
have taken place either in Paris or Tokyo
which was done on the initiative of the
President of the World Bank Mr.Wolfenson
who visited the Republic in April, the current
year who was very much impressed by what
has been done in terms of CDF and the National
Poverty Reduction Strategy. And the second
event, which will be very important for
us, is the World Global Summit conducted
in dedication to the international year
of mountains. The year of mountains was
declared to be the international year of
mountains by the President of our country:
UNESCO was very supportive of us, and then
UN was supportive. On all five continents
this year there were continental forums
conducted. This will be the resulting summit,
which will take place in November in our
country. We expect that Kofee Anan and the
General Secretary of UNESCO and the delegations-
representatives of more than 130 countries
will visit us. We hope those events will
provide us with the better ground to not
only policy-makers and decision-makers,
but also businessmen and tourists to know
more about our country.
Do you have any other comments you would
like to add or maybe a very brief message
to our readers and visitors to our web site?
The message is about our country. There's
no country in the world, which is more beautiful
than our country. I respect Switzerland,
but Kyrgyzstan is nicer. We have everything
available in the Kyrgyz Republic like mountains,
fields, forests, clean rivers, nice people,
hospitable people, we have quite an amount
of natural reserves, we have the place for
business development, we have the places
to invest money. And recently our President
proposed the idea to turn Kyrgyzstan into
the country of human rights. We are implementing
this idea now. I invite everybody to visit
our country. We meet investors as kings,
it's our task. And whish peace to all people
of all countries. Unfortunately this is
what is missing in many countries of the
world. We also need peace.
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V.I.P. INTERVIEWS
