CAPR Volume 2 issue 1

Tian Shan Policy Center

CENTRAL ASIA POLICY REVIEW

Volume 2

Issue 1 1

March 2016

CENTRAL ASIA POLICY REVIEW

EDITOR Franco Galdini

EDITORIAL COMMITTEE Daniele Rumolo, Nicholas J. Mazik, Kanat Sultanaliev

CONTRIBUTORS Paul Christian Sander, Arzuu Sheranova, Zhanetta Zhakypova, Nazarbek Zhuzupbekov, Medet Tursaliev

MISSION The Central Asia Policy Review is an English-language on-line publication of the Tian Shan Policy Center of the American University of Central Asia dedicated to promoting dialogue and raising awareness on relevant issues in Kyrgyzstan and Central Asia on human rights, good governance, sustainable development, migration and social protection.

Contributions to the Central Asia Policy Review are encouraged from local, regional and international experts, professors, students, as well as alumni of the American University of Central Asia and other Universities of or with a focus on Kyrgyzstan and Central Asia.

Representatives of local institutions, civil society organisations, regional and international organisations are also encouraged to contribute.

The Central Asia Policy Review aims at addressing issues of public interest with the aim of furthering support for the democratic development of Kyrgyzstan and neighbouring countries, as well as for enhanced compliance with human rights obligations and principles in an inclusive manner.

SUBMISSION GUIDELINES Contributors shall submit articles to the following email address: capr@auca.kg. An article’s ideal length will be between 1,000 and 2,500 words, including a 100 word abstract. The articles should include a brief introduction to the subject at hand, an analytical section, and policy recommendations to foster dialogue and discussion. The Editor and the Editorial Committee reserve the right to decide whether to publish or edit the article in accordance with the internal publication guidelines of the Tian Shan Policy Center. By submitting the article, the author agrees to its publication and to relinquish his/her copyrights to the Tian Shan Policy Center.

Unless otherwise stated in written form by the Editorial Committee, no honorarium will be paid for the contributions.

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CONTENT OF THE ISSUE Page #4 March 2015 - March 2016: One year in Review By the Editorial Committee Page #5 China’s “Piece of Cake?”: A quest for strategy and tactics in Sino-Central Asia relations

By Paul Christian Sander Page #11 The role of clan politics in informal bottom-up political relationships in Kyrgyzstan

By Arzuu Sheranova Page #16 Improving accountability in programme-based budgeting in Kyrgyzstan

By Zhanetta Zhakypova Page #21 The citizens’ registration system in the Kyrgyz Republic

By Nazarbek Zhuzupbekov Page #24 Kyrgyzstan’s accession to the Eurasian Economic Union: An overview

By Medet Tursaliev

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MARCH 2015 - MARCH 2016: ONE YEAR IN REVIEW

By The Editorial Committee

Dear Readers, The Central Asia Policy Review turns one.

We would like to open this editorial piece by sincerely thanking you for your support, suggestions, criticism, and for your help distributing the CAPR to a growing number of readers.

A special thank goes to all our contributors for submitting a variety of stimulating articles on a wide range of topics relevant to Kyrgyzstan and Central Asia.

During this first year, attention has been given to the advancement of human rights in the region with specific focus on the promotion and protection of the rights of women and other vulnerable sectors of the society. We explored issues related to corruption, independence of judiciaries, countering violent extremism, and economic development, including the Eurasian Economic Union enlargement and the role and influence of actors such as China and Japan in Central Asia. We also made recommendations for the inclusion of youth and minority communities in decision and policy-making processes in Kyrgyzstan.

In this issue, Paul Christian Sander provides an in-depth look at China’s expansion into Central Asia, and Beijing’s possible goals for the future.

The influence of traditional clans on modern Kyrgyz politics is discussed

by Arzuu Sheranova. Zhanetta Zhakypova details changes that have been made to the accounting practices of the Kyrgyz national budget, while providing guidance for further improvements.

Nazarbek Zhuzupbekov analyses the failings of the Soviet era propiska system of residential registration in Kyrgyzstan, and pushes for reforms.

Lastly, the economic effects of Kyrgyzstan’s entry into the Eurasian Economic Union are dissected by Medet Tursaliev.

Issue 2 of Volume 2 will be published on June 30, 2016. We therefore would like to invite you to submit your articles by May 31, 2016.

Guidelines for submissions can be found here.

The Editorial Committee remains available for further discussions and clarifications at the new campus of the American University of Central Asia in Bishkek (office 235), or via email at capr@auca.kg.

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CHINA’S “PIECE OF CAKE”? A QUEST FOR STRATEGY AND TACTICS IN SINO-CENTRAL ASIA RELATIONS

By Paul Christian Sander

In September 2014, China’s President Xi Jinping announced the creation of a “Silk Road Economic Belt” running through Central Asia to European markets. This initiative seeks to help re-connect Central Asia to China, and many Chinese and foreign observers view the “Belt and Road” as a grand Chinese strategy to extend its economic and geopolitical influence on the Eurasian continent and beyond. Chinese companies and policy banks, they argue, worked towards a transformation of the region – “from one which is wired to Moscow to one which is increasingly wired to Urumqi – and Beijing.” Beijing, however, has explicitly refused to present the vision of “One Region – One Belt” as a strategy, and, indeed, there are good reasons why one should not overestimate its significance.

At the economic level, China has positioned itself among the largest traders and investors in Kazakhstan, Kyrgyzstan, Uzbekistan, Tajikistan and Turkmenistan. This growing Chinese presence has “drastically challenged the traditional influence of Russia and weakened that of the United States and Europe.” However, China has not issued an official document specifically outlining its diplomatic strategy and giving a systematic explanation of its objectives, priorities, and methods. The idea of a “Silk Road Economic Belt” is the closest thing in terms of an articulation of a Chinese strategy. So far, it offers more questions than answers, and is linked to various political and commercial risks.

As the present article argues, despite China having macro-conceptions and specific tactics, they do not constitute a comprehensive strategy that would demonstrate “a deliberate plan of actions that aim to achieve specific goals.”

China’s understanding of Central Asia, its interests therein, and its policy and strategy toward it are still in a process of evolution, and do not belong to its overall foreign policy priorities. Hence, China’s engagement has been overwhelmingly based on bi-lateral ties with the Central Asian republics. Moreover, the varying perceptions of the “Chinese question” among Central Asian elites have elicited controversy amongst the five republics, and additionally complicate the formation of any coherent Central Asia strategy for China.

China’s growing involvement in Central Asia is not a new phenomenon. For more than a decade, concerns have been expressed about the extent to which China has made inroads into the region’s economy and political life, as well as the motives behind this policy. China has since been accused of perceiving Central Asia as its legitimate “Lebensraum,” a suspicion further fuelled by statements like General Liu Yazhou’s of the People’s Liberation Army, who in 2011 claimed Central Asia to be “the thickest piece of cake given to the modern Chinese by the heavens.” When the five independent Central Asian republics first appeared on the map in 1991, however, Beijing only very cautiously made space for itself in this new neighbourhood. And it was not until the start of the 2000s, that China became an increasingly important player on the Central Asian scene, both diplomatically and strategically, in particular through the Shanghai Cooperation Organisation (SCO).

China in Central Asia – A Rising Hegemon?

Chinese Diplomacy towards Post-Soviet Central Asia – An Overview 5

When in 1978, Deng Xiaoping ushered in China’s gradual economic expansion, he admonished his cadres to “cross the river by feeling for the stones.” This oftenquoted saying captures the careful manner in which Chinese policy towards the independent Central Asian republics evolved. Of the five Central Asian countries, three (Kazakhstan, Kyrgyzstan, and Tajikistan) border directly on China, and Uzbekistan and Turkmenistan are proximate neighbours. The 3,000kilometre border in China’s northwest is particularly vulnerable and historically has been the site of significant events.

and structural shifts in energy use in the lead up to and following China’s accession to the World Trade Organisation (WTO) in December 2001 was responsible for this rapid growth in energy demand.

Over the course of several years ending in 2011, China’s share of global energy use nearly doubled. It had surpassed the United States to become the world’s largest energy consumer by 2010. While energy demand per se constitutes a motive, China’s turn to Central Asia is one of strategic significance, too. The current main transit route for energy imports (~80%) from the Middle East to China leads through the Malacca Straits. This is an extremely vulnerable transit point for China as a cut off would lead to much of t h e c o u n t r y ’s o i l s u p p l i e s b e i n g inaccessible. In the event of conflict, it would be easy for potential rivals to disrupt China’s energy supplies by imposing a naval blockade of the straits.

As China does not possess sufficient expeditionary naval capacity, it would simply be unable to resist such a move militarily. Hence, the diversification of supply routes is an important strategic goal for China.

Moreover, Sino-Soviet negotiations on border demarcation had only been half completed by 1991. Hence, with the aim to foster an “amicable neighbourhood,” border security and stability were the main focus of China’s diplomacy towards the newly independent Central Asian states in the early 1990s. This focus coincided with the rise of an alleged “East Turkestan terrorist movement” in the Xinjiang Autonomous Region. After 1991, calls for the liberation of East Turkestan from China began to surface a g a i n a m o n g s t t h e Tu r k i c U i g h u r population of Xinjiang. Approximately half a million Uighurs live in Central Asia, many of them immigrants from Xinjiang to Kazakhstan and Kyrgyzstan. Beijing has claimed that Uighur separatist movements are supported by international terrorist organisations such as al-Qaeda in Afghanistan.

Second, China became concerned over the increased military presence of the United States after 9/11 and the subsequent intensification of geopolitical competition. More specifically, China feared the US “might aim at using [Central Asia as] the springboard to control the Caspian region, manipulate the stability of northwest China, curb, or even exclude, Russian and Iranian presence in Central Asia, and set up a pro-American alignment in the region and a pro-American regime in Afghanistan.”

A second major Chinese interest in Central Asia is energy. While it had certainly been on China’s diplomatic agenda earlier, only after 2001 did energy become an important strategic interest.

This shift can be attributed to: (1) exponential growth in China’s domestic energy demand; and (2) the change in the international system after the events of 11 September 2001. First, in 2000, China’s oil imports increased sharply, rising to 70 million tons annually. A combination of sustained high rates of economic growth

But how exactly has China sought to respond to these challenges? China’s concern about its energy security and the need to diversify its supply chain has been reflected in the vast amount of Chinese investments and energy deals with the Central Asian republics during the past 10 6

years. In 2005, China National Petroleum Corp International (CNPC) acquired PetroKazakhstan for 4,2 billion USD, then the largest overseas acquisition ever made by a Chinese company. The following year China bought up Kazakh oil assets worth nearly 2 billion USD in the Karazhanba oil and gas fields (which has proven reserves of more than 340 million barrels), and committed 210 million USD to oil and gas exploration in Uzbekistan.

provincial towns is viewed by Beijing as a cornerstone in the country’s political stability.

C h i n a ’s e c o n o m i c a n d d i p l o m a t i c involvement in the region has been mainly based on bilateral ties. However, simultaneous institutional developments within the multilateral SCO bore witness of Beijing’s first attempts to operate within a multilateral setting. After 2002, the SCO started moving beyond its initial focus on regional security. While its economic and commercial planning is still in its early stages, by expanding its scope beyond regional cooperation the SCO took an important step towards increasing its long-term viability.

In September 2013, President Xi Jinping’s visit to Kazakhstan led to the signing of energy deals worth 30 billion USD, including CNPC’s acquisition of an 8.3 per cent stake in Kashagan, the largest oilfield in the world outside the Middle East. In 2014, China’s trade with the region reached 50 billion USD, a figure that exceeded that of Russia for the first time. According to Wang & Yampolsky’s calculations based on figures published by the Heritage Foundation, total Chinese investment in pipelines, oil and gas exploration, power plants, and even electric grid construction in Tajikistan reached 30.5 billion USD between 2005 and the first half of 2014. The new ChinaCentral Asia network of pipelines could supply up to 55 billion cubic meters of natural gas to China every year, or more than half of China’s total gas imports.

Yet, China’s reinforced engagement within the SCO framework has been driven first and foremost by geopolitical considerations. On the one hand, China enabled Central Asia to set limits to Russian policy, as Beijing was more willing to accept the recently terminated US military presence in Kyrgyzstan than was Moscow. At the same time, Chinese– Russian rapprochement has continued, with the solving of border disputes and the interstate deal on the ESPO pipeline.

This has made the Chinese–Russian overlay in the SCO more visible, but it does not necessarily boost SCO multilateralism.

China also has an interest in developing infrastructure and new transportation routes through the region. Not only are new transit routes essential for the growth of bilateral trade with the five republics, but they also provide an alternative trade route to Europe that is nearly 1,000 kilometres shorter than the one through Siberia, with corresponding savings in time and cost. It is in Tajikistan that the Chinese presence is most visible in terms of transportation. China’s 900 million USD loan enabled the construction of the Shar-Shar tunnel on the DushanbeKulyab road, and another one at Shakhristan on the road leading to Khujand. In both cases, the junction between the capital and the large

Russia’s ambivalence on Afghanistan, and the SCO member-states’ reluctance to pool resources, have impeded the development of a genuine SCO security profile. Internal disagreements on future members also reveal that the SCO is looking for a purpose, wavering between being regional or becoming global. Short on real integration, the SCO provides some regional coordination, but crucially it offers a vicarious legitimacy to Central Asian political leaders who find difficulty in establishing this on the wider international stage.

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Another way to present China’s embrace of Asian multilateralism is as a “regionalist narrative.” China is “intensely preoccupied with creating a narrative for itself as a responsible and rising great power, and since regionalism is part of what great powers do, it is necessary for China to have a narrative for this also.” The SCO establishes a narrative framework for a region in which China has little tradition and with which it has little in common. The narrative of emergence as a responsible regionalist power precedes and “creates a space in which mission and purposes can later be developed.”

financing. What these two institutions, even in conjunction with other international financial institutions, can supply, however, will be no match for the scale of demand, which is estimated to be $8 trillion for the next decade.

Central Asian perceptions of China’s engagement in the region Another factor that complicates an overarching and long-term strategic design, besides the geopolitical volatility of the region, are the different interpretations of China’s role in the region amongst the five Central Asian republics. Each Central Asian state has a “Chinese question” that is specific to it.

Against this background, the Belt and Road Initiative could be considered a “call for action.” It includes two elements, a Silk Road Economic Belt and the 21st Century Maritime Silk Road; the aim is to create a northern road corridor and a southern maritime corridor to connect China with Europe. China is openly pushing with its plans in Central Asia.

However, every initiative relies on voluntary participation and faces the so called “collective action problem.” Close association is usually institutionalised through explicit rules and procedures, Tao argues. Voluntary participation makes an initiative a loose association of interested parties who can join or quit at any time.

Bi-lateral trade agreements can’t compensate for the absence of any binding multi-lateral framework or structure. Sustainability and success of the Belt and Road, therefore, depends on C h i n a ’s a b i l i t y t o f o r g e s t a b l e transnational networks.

First, the three border countries of Kazakhstan, Kyrgyzstan, and Tajikistan have experienced significant private enterprise trade flows and migrations from China, whereas Uzbek and Turkmen economic relations with Beijing are mostly limited to official agreements between large companies, and involve practically no private trade exchanges, and no back-and-forth cross-border migratory flows of Chinese.

Within the three border countries, further lines of division can be observed. The two poorest and most fragile countries, Kyrgyzstan and Tajikistan, understand the Chinese presence as a globally positive element, even if it also provokes anxieties. It is a guarantee of additional stability, since Beijing is the only great power to devote so many means to the development of transportation infrastructures. Furthermore, neither Kyrgyzstan nor Tajikistan has an efficient industrial or agricultural sector and they already import most of their goods from Russia, Kazakhstan, Iran and Turkey.

“China’s arrival is therefore not viewed as jeopardising but as dynamising because its prices are competitive.”

On the other hand, Kazakhstan has more structured reservations about Chinese involvement, in particular in the

Beyond that, China’s challenge of juggling a changing domestic economy at home while pushing forward with the Belt and Road Initiative outside its borders could not be understated. The envisioned infrastructure network requires trillions of dollars of investment. Two Chinese initiatives, the Asian Infrastructure Investment Bank and the Silk Road Fund, constitute a significant source of 8

economic domain. The key accusation, as Kazakhstan is mainly worried about the diversification of its economy, is that China restricts the Central Asian economies to the role of producers and exporters of primary resources. Local experts even complain that there is a lack of small- and medium-size Chinese companies, which could play a key role in domestic industrial development via the joint-venture-system.

changes, and national narratives. Beijing has made it possible to act as a catalyst for indirect political debates on the choices made by governments; it fosters a reorganisation of the social fabric by giving rise to new professional niches in which are engulfed all those who present themselves as “go-betweeners” between China and Central Asia; it is an object of academic knowledge, and of expertise, and has “entered into the popular imagination.”

With regard to China’s ability to improve regional security, opinion also remains largely divided. In a survey conducted in 2006 by Abdrakhmanov and Kaukenov among thirty Kazakh experts, only 20 per cent thought that Beijing was going to be a major player in Central Asian security; 44 per cent declared that over the short term it would not even have the least interventionist capacity. The one Central Asian state that might share China’s level of concern with the so called “three evils” – terrorism, extremism and separatism — is Uzbekistan. Yet, Central Asia’s strongest military power has presented itself as an unreliable security ally to Beijing. Uzbekistan has been more interested in manoeuvring a path through the Moscow–Washington rivalry in Central Asia than in forging any close partnership with Beijing.

Conclusion China entered the contested geopolitical space of Central Asia without making waves, as it was not seen as an assertive geopolitical actor and it makes every effort to dispel the idea that it seeks to eject and replace any foreign power in the region. Beijing’s objectives during the 1990s involved settling the borders, confidence building, economic cooperation, and ensuring that Uighur separatists did not find support in Central Asia. Towards these ends, China aligned itself with Russia, which helped to downplay fears that it was seeking a hegemonic sphere of influence.

China’s successful diplomacy efforts between 1991 and 2001 laid a strong foundation for building closer relations with the Central Asian republics. When the US stepped up its regional engagement following the attacks of 9/11, China did not attempt to influence the participation of the Central Asian s t a t e s i n t h e w a r o n t e r r o r.

Simultaneously, China created space and platforms of operation, such as the SCO, which set out the framework for a more consistent and deeper involvement within Central Asia. However, this framework is yet to be filled with a long-term, strategic agenda.

Eventually, the Chinese question in Central Asia is not limited to changing the international environment of the new states, or structuring their economic development, but is also part of domestic evolutions. This domestic dimension, largely unknown, is nevertheless fundamental: the countries are in a phase of nation-building that implies significant processes of myth-making; the selfrepresentation of their place in the world is still shifting; and the social fabric is being fully recomposed. In such a context China cannot be regarded as solely an external actor that is absent from the domestic evolutions of the Central Asian states. On the contrary, it partially structures the domestic orders, social

In discovering neighbouring China and interacting with it, the Central Asian societies have entered into the twentyfirst century. Like others all over the 9

world, they have to manage the advantages and disadvantages afforded by the globalisation of markets; undergo often painful transformations of the social fabric; articulate their security and economic imperatives; project themselves as fully-fledged participants in global affairs; and preserve a collective identity founded on myth-making and everyday social intercourse.

The Central Asian elites, although unambiguously closer to Putin’s Russia than to the Chinese elites, have had no need of any model per se to decide upon the trajectories of their regimes. They agreed to be slowly ‘socialised’ by Beijing, and even decided to borrow Chinese ideological narratives such as that of the “three evils.” Nevertheless, their alliance with Beijing seems to be primarily an axis of convenience, a collective solidarity against regime change, but no political rapprochement whatsoever is envisaged. As Konstantin Sеrezhkin has succinctly put it, the SinoCentral Asian alliance is “cold politically, and scorching economically.”

Paul Christian Sander holds a BA in Slavonic Studies and Political Science from the University of Bamberg, Germany, and an MPhil in Russian and East European Studies from the University of Oxford, UK. His research interests include the international politics of security, conflict and peace, as well as Eurasian politics, nationalism and identity studies.

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THE ROLE OF CLAN POLITICS IN INFORMAL BOTTOM-UP POLITICAL RELATIONSHIPS IN KYRGYZSTAN

By Arzuu Sheranova This study presents an alternative analysis of the controversial issue of clan politics in Kyrgyzstan (in Kyrgyz, uruuchuluk). I claim that research concentrates on the phenomenon of uruuchuluk politics via the prism of (topdown) elite control, while (bottom-up) non-elite control is understudied. Based on this hypothesis, this paper analyses bottom-up clan politics, including internon-elite uruuchuluk politics, and tests this assumption in the field. My research shows that bottom-up uruuchuluk is an important component of clan politics in Kyrgyzstan and needs further study to enhance our understanding of its role in informal politics in the country.

identification of a person, a family or a neighbourhood based on their affiliation to uruu, as well as the identification of a person, a family or a neighbourhood by other people based on their affiliations to uruu.

Theoretical framework Uruu has played an important role in the development of Kyrgyz society. Historians such as Djenish Djunusaliev and Vladimir Ploskih believe that a nation “could maintain its ethnic independence and unity” through a tribal system, and thus preserve its statehood (2000). The sharp divisions among scholars on the role of uruu and uruuchuluk in modern Kyrgyz politics testify to the crucial role these phenomena play in political and democratisation processes in society.

Many domestic and foreign political scientists and historians, such as Baktykan Torogeldieva, Nur Omarov, Evgeny Borodin, David Gullette, Scott Radnitz and Pauline Luong have explored uruu and uruuchuluk from different perspectives.

A note on terminology Clans and tribes constitute the traditional social structures in Kyrgyzstan, and are an important element to explain contemporary political processes in the country. In this paper, I refer to original Kyrgyz term uruu as ‘clan’ or ‘tribe,’ though scholars interpret its meaning in different ways. For instance, Kathleen Collins describes a clan as “an informal organisation comprising a network of individuals linked by kin-based bonds” (2004: 231). Meanwhile, Azamat Temirkoulov calls it “a patrilineal unit in which the members of the clan descend from a common known ancestor” (2004: 95). He adds that “clan members usually include all descendants in the male line from a forefather seven generations back.”

Most domestic experts believe that clans are a driving force in the political life of the country. For instance, Temirkoulov argues that clans “compete with each other” in order to access state resources at three levels, “national, regional and local” (2004: 95). He also points out that the majority of political parties in the national parliament “do not have any definitive ideology or clear political programme, but do have a narrow electorate, which is often limited to a certain region [clan or uruu]” (2004: 96).

Similarly, Torogeldieva claims that political parties in Kyrgyzstan were consolidated by regionalism and tribalism, rather than political ideology (2010).

I use the original Kyrgyz term uruu to mean an informal organisation with a common ancestor in the male line not limited to seven generations. In other words, contrary to Temirkoulov, I suggest that seven forefathers should not be set as limitations, because uruu can include more or less than seven forefathers in the paternal line. Additionally, I define the Kyrgyz term uruuchuluk as both the self-

Meanwhile, other political scientists claim that clan politics do not play a 11

central role in the political and democratic processes of Kyrgyzstan, but are preserved as a tradition. For instance, Radnitz believes that regions or clans are not enough to explain political mobilisation; what matters more are political economies and patronage (2010). Radnitz explains political mobilisations such as riots and demonstrations through economic rationality, which prevails over kinship relations. Gullette argues that contemporary Kyrgyz society has a “genealogical imagination” constructed via “the dialectic between memory and representations of history.” Tribalism, instead, carries negative connotations related to corruption, thus discrediting the significance of clans (2007). Similar to Radnitz, Gullette believes that elitecommunity mobilisation results mainly from elite manipulation of communities.

Finally, Wolters observes the decline of clans in contemporary Kyrgyzstan, stating that “an on-going process of groupidentity dissolution” has been at work “since the breakup of the USSR” (2007: 1).

the electorate, informal leaders – such as aksakals (literally meaning ‘white beards,’ they are the male elders or informal leaders in a community) and imams (religious leaders) – and community members.

As Figure 1 suggests, there are four possible relationships in uruuchuluk politics between these two classes of actors. Existing research on uruuchuluk focuses on top-down kinship relations (a) as it develops in political processes. In other words, it mainly covers the topdown interaction between elites and their population via patronage. Gullette calls this model elite manipulation, while Radnitz frames it in economic rationale.

Collins also examined inter-elite kinship relations (c) as practiced in post-Soviet Central Asia, including Kyrgyzstan.

According to her, clans made “pacts” with each other during the post-Soviet transition, and they explain a regime’s stability or instability during the transition (2002). In this perspective, bottom-up (b) and inter-non-elite relationships (d) appear to play a lesser role in Kyrgyzstan’s contemporary politics. However, the increasing role of informal leaders in many traditional rural areas of Kyrgyzstan, especially imams, indicates the opposite to be true.

Elaborating on Collins’ assertion that a “clan is a network represented by horizontal and vertical kin-based relations” (2003: 174), I differentiate four approaches to this phenomenon depending on horizontal and vertical relationships between the actors of uruuchuluk politics (Figure 1).

I shall test the level of uruuchuluk among non-elites, especially in rural areas, and explore the potential role of informal leaders in forming uruuchuluk politics.

Then, I shall look into how bottom-up (b) uruuchuluk influences political processes today. I investigate whether loyalty to uruu and observance of uruu dignity are more important for non-elites than other factors, such as economic concerns.

Finally, the paper explores public attitudes toward uruuchuluk and its future developments. I examine whether public attitudes toward uruuchuluk are positive and it is likely to be preserved due to the rising ethno-nationalist mood.

Elite Non elite (a) Top-down uruuchuluck politics Elite Non elite (b) Bottom-up uruuchuluck politics Elite Elite (c) Inter-elite uruuchuluck politics Non Elite Non Elite (d) Inter-nonelite uruuchuluck politics There are elite and non-elite actors.

Elites represent those who rule through positions of power, while non-elites are 12

Methodology

Uruuchuluk’s influence on current political processes

A series of random field surveys were held in two communities in Osh region (Russian: oblast), namely Mady ayil okmotu of Karasuu Rayon, and Microdistrict Tuleiken of Osh City. The surveys were delivered in Kyrgyz and consisted of a total of eight open-ended and close-ended questions. Since surveys were done during working hours both in rural and urban areas, it was difficult to balance the gender of respondents, so female house-keepers dominated.

In total, 27 respondents were surveyed, 17 females and 10 males.

Responses by the majority of those surveyed point to the fact that uruuchuluk has only a minor influence on the current political processes in Mady.

Respondents rejected the idea that nonelites prefer to support electoral candidates based on uruu or regional affiliation. On the contrary, the surveys show a high rate of loyalty to political parties. Almost all respondents stated that they would vote for a candidate from the political party they support. However, some mentioned that those candidates who have more representatives in uruu win during elections to regional kenesh (council) or ayil okmotu (local selfgovernment).

Survey findings from Mady, Karasuu Rayon Level of uruuchuluk among non-elites

Public opinion on uruuchuluk Responses collected in this rural area suggest a high-level of uruuchuluk in the community. According to one respondent, “around 80% of things today depend on uruu. In our village there are 600 families which group per uruu.” Others note that divisions by uruu are evident during wedding parties, when big crowds of guests gather per uruu and sit at one table. Similarly, at funerals or weddings, according to another respondent, “people say these uruus came and these did not,” instead of identifying people by villages or by surnames.

Re s p o n d e n t s f r o m M a d y p e r c e i v e uruuchuluk as a legacy of Kyrgyzness, saying that “it is in our blood,” or it is the “essence of being a Kyrgyz.” They believe that after independence uruuchuluk has increased and will continue increasing in the future. They explain this rise with the growing nationalist mood following the collapse of the Soviet Union. Moreover, respondents argued that people became more ethnic-centric following the June 2010 events, in which the Kyrgyz and Uzbek communities clashed in the country’s south. They noted that national costumes, songs, dances, and uruuchuluk have been revived or increased in popularity among many Kyrgyz since the June events. Some interviewees added that people hold their own clan in very high esteem. Data suggests that people, on the one hand, respect uruuchuluk as something spiritual or even sacred, while, on the other hand, they see it as a dividing factor vis-à-vis Kyrgyz unity.

Some mention uruu to be a legacy of descendants, while others claim it to be more prominent in those areas where one uruu dominates over another. While informal leaders such as imams aren’t very influential in Mady, the potential role of aksakals in affecting uruuchuluk politics should not be underestimated.

They continue to maintain a leading role in forming public opinion in Mady and to influence local politics in general, for instance, on allocation of resources and prioritisation of local issues to be addressed by the local government.

Survey findings from Tuleiken, Osh City Level of uruuchuluk among non-elites

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Interestingly, responses from Tuleiken, an urban area, show higher levels of uruuchuluk in comparison to the rural area surveyed above. This contradicts the hypothesis that rural areas are generally more traditional than urban areas. In Osh, some community members perceive uruuchuluk as “an ancient form of religion,” while some see it as a root cause of regionalism and the north-south divide in Kyrgyz society.

supporting uruuchuluk believes that people should not leave or forget relatives in good times or in hard times.

The other side, instead, argues that it has a negative impact and does not allow for transparency in politics.

Re s p o n d e n t s t o t h e q u e s t i o n o f uruuchuluk’s future developments are also divided in two camps. One side believes that with time uruuchuluk will disappear, while the other states that nothing can eliminate it, unless Kyrgyzstan improves its current system of governance. In other words, without an inclusive and transparent government, people will keep falling back on ethnonationalism. To support their point, they explain that Kyrgyzness is experiencing a re-birth: for example, most wedding parties are held in Kyrgyz style and costumes with Kyrgyz ornaments are becoming popular among residents in Osh.

Nevertheless, respondents also mentioned that “people build relationships based on one’s uruu” or “people support each other based on uruu during a dispute.”

The majority claimed that uruuchuluk currently is everywhere. They stated that, “one cannot finish any kind of business if he or she does not have any taanysh-bilish [kinship ties].” However, some argue that people only remember about uruuchuluk during elections.

Similar to Mady, only a small number of responses in Osh mentioned the potential role of informal leaders in forming uruuchuluk politics.

Conclusion This study shows the presence of high levels of uruuchuluk among non-elites.

The field research reveals that uruuchuluk is strongly preserved among non-elites, in both rural and urban communities. However, the study did not find strong evidence to support the working assumption that bottom-up uruuchuluk politics have a strong influence on political relationships in Kyrgyzstan, though some respondents mentioned that this bottom-up dynamic exists.

Uruuchuluk’s influence on current political processes Similar to findings in Mady, there is also a weak influence of uruuchuluk on the current political processes in Osh. Respondents rejected the assumption that non-elites prefer to support candidates based on uruu or common region in local and national elections. To the contrary, responses demonstrated a high rate of loyalty to political parties. All respondents mentioned that they would vote for a candidate from the political party they support, as long as there is a competent candidate in the political party.

The idea that non-elites during local or national elections prefer to support candidates based on uruu or common regional origin was rejected by the respondents. On the contrary, responses demonstrated a high rate of loyalty to political parties. Almost all respondents mentioned that they would vote for a candidate from the political party they support, revealing their strong affiliation to political parties. Still, there is a need for further research to establish whether

Public opinion on uruuchuluk Perceptions of uruuchuluk by respondents from Osh are broadly split into two groups, one with a positive and the other a negative attitude to it. The side 14

political parties have a narrow electorate limited to a certain region or uruu. The research findings also didn’t support the assumption that informal leaders, such as aksakals or imams, play a potential role in shaping uruuchuluk politics. Some data, however, suggests that in some cases this has happened.

The field research revealed that public attitudes toward uruuchuluk are split equally between positive and negative.

The data suggests that people respect uruuchuluk like something very spiritual, sacred or intimate. Still, they also see it as a dividing issue in Kyrgyz society, which prevents national development and results in corruption and disputes between regional clans for access to resources. The assumption that the current ethno-nationalist trend will further boost uruuchuluk was confirmed.

F i n a l l y, t h e p a p e r e x p l o r e d t h e phenomenon of uruuchuluk in Kyrgyzstan via an analysis of bottom-up uruuchuluk politics (b) and inter-non-elite uruuchuluk politics (d). Initial field data from Mady and Tuleiken (Osh) communities did not indicate a strong presence of such dynamics. Still, this area of research should be further explored, with a bigger survey sample that covers a wider geographic scope.

Arzuu Sheranova is Community Security Project Coordinator for Saferworld’s Central Asia programme based in Osh. She has been working in the NGO sector in Kyrgyzstan for several years, focusing on conflict mitigation, negotiation, good governance and programme development. She holds an MA in Politics and Security from the OSCE Academy in Bishkek.

15

IMPROVING ACCOUNTABILITY IN PROGRAMME-BASED BUDGETING IN KYRGYZSTAN

By Zhanetta Zhakypova

In recent years, Kyrgyzstan has made significant progress in transitioning from line-item budgeting to programme-based budgeting in the majority of state funded agencies. The goal of this reform is to improve the efficiency of state funded agencies, to increase the connection of the budget with achieving strategic goals for development and to connect expenditures with performance outcomes of state departments (adapted from the website of the Ministry of Finance of Kyrgyzstan). However, several challenges including deficiencies in implementation and reporting, lack of efficiency controls and inconsistent legislation impede achieving these goals.

number of documents: the forecast of incomes and expenses in the state budget; the strategy for managing the state debt; the frame and the limits for external financing; the budget for development; and the planning of expenses for different sectors.

This document is developed and updated annually by the Ministry of Finance (MOF), reviewed by the Coordination Council for Macroeconomic and Investment Policy of Kyrgyzstan, and approved by the President. The main principles of interbudgetary relations are: distribution and fixing of incomes among budgets, long term division of expending authorities between the central government and local municipalities, and the provision of minimal budget security for local budgets via grants and transfers.

This policy brief provides an overview of the budgeting system in Kyrgyzstan, analyses these issues and suggests policy options that will improve accountability in budgeting and contribute to the government’s anti-corruption measures.

Due to the overall importance of the first policy option presented, namely the revision of programme indicators and the introduction of more efficiency indicators, the Ministry of Finance should c o n s i d e r i t a p r i o r i t y. S u c c e s s f u l implementation of this option should increase the accountability of state agencies and contribute to reducing corruption in state-funded programmes.

The items of the state budget are classified according to administrative units: ministries, committees, agencies and municipalities. Certain line items in the budget – salaries of public servants, pensions, the judiciary and healthcare systems – are classified by law as ‘protected’ and cannot be decreased without prior approval from Parliament.

Ministries, state committees and major municipalities have to present their budgets to the Budget Committee of the Parliament based on control amounts (or ceiling amounts) approved by the Council for Macroeconomic and Investment Policy of the government.

Overview of the budget system in Kyrgyzstan According to the budget calendar of the Ministry of Finance, the national budget, which includes the budget for the next fiscal year and the forecast for two following years, must be approved by the Jogorku Kenesh (Parliament) by the end of November. The three-year budget forecast in Kyrgyzstan is in line with the M e d i u m - Te r m F r a m e w o r k ( M T F ) recommended by the International Monetary Fund (IMF). It contains a

Introduction of programme-based budgeting In 2011, the MOF began a transition to programme-based budgeting with a pilot programme in six ministries. By 2014, the number of ministries and administrative units applying programme-based budgeting increased to 28, and in 2015 there were about 70. The Budget Code 16

project approved by several parliamentary committees requires that budget execution be based on budgetary programmes. However, this kind of budgeting did not replace administrative or traditional budgeting: state agencies are still required to prepare administrative line item budgets supplemented by the programme-based classification of expenditures.

semi-annual reports on budget execution published by the MOF are prepared according to administrative units and line-item expenditures. Most of the indicators in the reports of ministries do not connect the outcomes with the efficient use of budget funds. The semiannual report on budget spending in the first half of 2014 by the State Agency for Geology and Mineral Resources has only quantitative indicators, such as the number of licenses disbursed or the number of geological studies, and doesn’t have any qualitative or efficiency indicators. A reader of these reports could be interested in knowing how many officers or man hours are planned for one particular task, and thus how the funds were allocated and reported for human resources in this agency, but this type of indicators is missing.

In its guidance to develop programme budgets, the MOF provides seven main steps for each state funded agency: 1) defining strategic goals and purposes for the ministry or agency; 2) defining programmes to achieve these goals with specific outcomes; 3) describing specific budgetary measures (activities, projects, functions and purposes); 4) calculating the costs of budgetary measures and programmes; 5) specifying non-financial performance indicators for programmes; 6) providing continuity of programmebased budgets according to mid-term strategic budgeting, and; 7) classifying programme budgets. While the Ministry has been providing trainings for the staff of state funded agencies for the transition, there persist a number of acute problems that challenge this transition.

Many performance indicators for other state agencies (the State Registration Service, the Ministry of Transport and Communications) are of a similar quantitative character, with some even more poorly defined. For instance, one of the indicators in the report of the Ministry of Transport is “Improving professionalism and quality of secured service by the state enterprise for air navigation,� but it is not clear how this indicator will be measured and reported. Another questionable performance indicator in the same report is the percentage of the population satisfied with road maintenance. The report for the first half of 2014 stated 85% satisfaction as a goal, and the actual figure is exactly 85% without any explanation of how this figure was reached. The deficiencies in reporting are closely correlated with the next issue in budgeting, namely the lack of efficiency controls in the public sector.

Three problems in budgeting An analysis of the laws and budget reports shows that there are several issues that impede the effective implementation of programme-based budgeting in Kyrgyzstan. They are related to the quality and reporting of performance indicators, lack of efficiency controls and inconsistencies in legislation.

1. Deficiencies in implementation and reporting

2. Lack of efficiency controls in ministries and state-funded agencies

Reporting on budget execution is still heavily centred on traditional line-item administrative budgeting with supplementary information on performance indicators. For example,

In the 2009-2014 period, state expenditures for public order and defence were doubled. In 2014 alone, the budget 17

of the Ministry for Internal Affairs was increased by 25%. However, neither the number of crimes nor the crime detection rates have changed. According to the National Statistics Committee, the crime detection rate was 64.8% in 2009 and 66% in 2014. Moreover, in the same period the number of fatal car accidents doubled.

The lack of transparency in this sector amplifies accountability issues: it is notable that the published versions of the state budget do not include the expenditure breakdown of the Ministry for Internal Affairs.

and evaluated. This creates space for corruption in state-funded agencies.

3. Inconsistent legislation Despite the fact that the majority of ministries and agencies now operate on programme-based budgets, according to the existing law, if the government forecasts a decrease in income and decides to cut the budget for a particular unit, this administrative unit has to decrease its expenditures throughout all types of expenditures, except for the protected lines of the budget. In other words, the current decision making on budgetary changes is based on traditional line-item budgeting and is not linked to the evaluation of state-funded programmes.

The healthcare system is another case in point of inefficient budget increases. The budget for the healthcare system was also doubled over five years, beginning in 2009. Despite this increase the system remains underfinanced with outdated facilities and low salaries for doctors (average of $80) and medical staff (average of $40). Several indicators have actually deteriorated. For example, the number of child deaths (0-14 years) has doubled, reaching 7,857 deaths in 2014.

A c c o r d i n g t o t h e Wo r l d H e a l t h Organisation, the neonatal mortality rate slightly decreased from 17 per 1,000 births to 12 per 1,000 births (2014), but the country has the highest maternal mortality rate in Central Asia with about 71 cases per 1000 births. The share of out-of-pocket expenditures in total private expenditures for healthcare hasn’t changed and remains very high (88%), which indicates widespread corruption in this area. All of this implies that the state funding to improve the healthcare system is failing its goals of providing more and better care for citizens.

Specifically, Article 104 of the Budget Code requires that certain programmes and budget lines are protected from budget reductions, but it does not describe the principle for cost reduction for all other programmes. Some experts have raised this point, noting that the performance evaluation of state funded programmes is not adequately described in the Budget Code. The current version of the Budget Code has a number of other deficiencies, including the absence of regulations on how budget priorities are to be introduced (Tulundieva, 2014).

Policy options In order to address these issues, the following policy options are available to the Ministry of Finance: 1. Revising programme indicators and introducing more efficiency indicators

C u r r e n t l y, t h e r e a r e i n e f f e c t i v e mechanisms in place to monitor and report on budget use efficiency, and these should be strengthened. As the annual audit of state agencies by the Chamber of Accounts of the Kyrgyz Republic is mostly focused on financial auditing, issues of efficiency are not adequately monitored

While some scholars (Axelrod, 1995) argue that programme and performance budgeting are the same type of budgeting, others (Folscher, 2005*; Schick, 2007) differentiate them and highlight the strengths of the latter.

Folscher, for instance, states that 18

performance budgeting is “like programme budgeting except that it adds an emphasis on targeting and measuring outputs and performance with data analysed against aims and standards” (Folscher, 2005).

within the Ministry of Finance, or by the Chamber of Accounts.

Internal monitoring in state departments needs to include not only a review of general budget use by each administrative unit (e.g. whether it is within its budget limit or not), but also an analysis of how efficient this unit was in using budgeted funds to perform its functions. A comparative analysis of similar indicators within each department, along with a baseline comparison and cross country analysis would help to define areas where to improve cost efficiency and performance in general. For example, a decision maker could be interested to know the regional differences in the quantity of time needed to process a license to open a business, as well as the causes of any differences. This would not only allow for the provision of services in public offices to be improved, but also to combat corruption in the use of budget funds.

Given the purpose of budget reform formulated by the MOF, we can assume that the budgeting method in Kyrgyzstan is a combination of programme and performance budgeting. Therefore, the existing programme indicators for state departments should be carefully reviewed for relevance and linked to the strategic goals of each department. They should clearly explain how the budget funds were planned and reported for each specific activity.

Adding more efficiency indicators (e.g. the number of man hours per task or the cost per kilometre of road repair) and outcome indicators (e.g. reduction in crime rates) will increase the transparency of budgeting and decision making. Periodic monitoring of these indicators will show whether a state agency is improving the efficiency of its workflow and use of budgeted funds. In order to avoid reporting inaccuracies, the process of collecting information could be specified in the MOF guidance documents as well as explained in the actual reports.

3. Revisions of the Budget Code according to programme budgeting principles For the effective implementation of programme budgeting, several changes have to be introduced to the current version of the Budget Code of Kyrgyzstan.

In particular, decision making on changes in budget for programmes and departments has to be made consistent with programme budgeting. The procedures to evaluate the efficiency of state funded programmes should also be improved. Specifically, Article 104 of the Budget Code should be complemented with a clause that the decision on cost reduction for a particular programme should be based on an evaluation of its performance. Moreover, Article 100 of the current Budget Code should be modified to specify which agency should be responsible to monitor efficiency indicators in state programmes.

2. Improving monitoring and evaluation mechanisms of state departments according to programme-based budgeting As Axelrod (1995) argues, the concept of ‘contract’ – where an administrator is funded in return for a commitment to perform at a certain level – is a key aspect of programme and performance budgeting. Measures for the monitoring and evaluation of performance are crucial for this type of budgeting, but are still underdeveloped for state funded programmes in Kyrgyzstan and must be improved. For major state programmes, that could be done either by the Department for Monitoring of Budget 19

Conclusion The three policy options described above address different accountability deficiencies and are complementary.

However, the second and third options would be more effective with the prior implementation of the first option – namely the revision of programme indicators and the introduction of more efficiency and outcome indicators – which should be deemed a priority by the MOF. Since the issue of efficient and transparent use of public funds is closely connected to the issues of corruption and accountability of state departments, the process for their evaluation should be improved. This should include both the revision of performance indicators as well as mechanisms for the monitoring and evaluation of state funded programmes.

These measures are particularly important for current anti-corruption strategies initiated by the government, such as the National Strategy to Combat Corruption adopted in 2009. In order to ensure the sustainability of these reforms, several articles of the Budget Code should be amended to be consistent with the ultimate goal of budget reform.

Overall, successful implementation of these measures will contribute to i m p r o v e m e n t s i n a c c o u n t a b i l i t y, transparency and more efficient allocation of funds in the public sector. *Folscher, A. Budget Methods and Practices in Shah, A. ed. (2005), Public Expenditure Analysis.

Washington, D.C.: World Bank, pp. 109-35.

Zhanetta Zhakypova is an MPA candidate from the School of Public Policy at the Central European University (CEU). Her research interests include the political economy of energy, fiscal and anti-corruption policies, and evaluation methodologies.

20

THE CITIZENS’ REGISTRATION SYTEM IN THE KYRGYZ REPUBLIC

By Nazarbek Zhuzupbekov

The registration, or propiska, system in Kyrgyzstan infringes upon basic human rights and creates many individual, social, and political problems. According to Article 13 of the Universal Declaration of Human Rights, “[e]veryone has a right to freedom of movement and residence within the borders of each State.”

However, the system practiced in Kyrgyzstan violates this basic human right, as it ties a person to one place.

without proof of temporary registration.

If one does not have a residence permit at all during the elections, he/she should register in the electoral centre to vote.

All these conditions discourage many potential voters. Although the Constitution grants the right to vote, the system discourages it through bureaucracy, thus infringing upon the basic political rights of Kyrgyzstan’s citizenry.

A residence permit should not dictate where one lives: it should simply track one’s movement within the territory of a state, as is the case in the European Union. The law clinic Adilet argues that freedom of movement, although seemingly not very important, is in fact one of any individual’s fundamental rights. It enables a person to find a job, start a family and receive healthcare, among many other benefits.

The importance attached to residence permits and the complexities of obtaining them create obstacles to freedom of movement and encourage corruption. A residence permit is a prerequisite to many other legal documents such as a marriage contract, an ID card, a military ID, and a passport. Many people without a long-term residence acquire temporary (one year) permits registered to the home of a relative or friend.

The Soviet government used the propiska system to track citizens’ whereabouts and to control the flow of rural dwellers into urban areas. After gaining independence in 1991, Kyrgyzstan has at least partially liberalised this system. For instance, migration from rural areas to the cities isn’t limited any longer. According to Article 9 of the Law on Internal Migration of the Kyrgyz Republic, citizens should register where they are actually residing, even temporarily. Such residence permit grants the holder basic rights. Without registration, one becomes a ‘half-citizen,’ a condition that carries legal and socioeconomic detriments, some of which are broached here below.

Adilet analysed the process of obtaining a valid residence permit and concluded that it is an unnecessarily long process. First, when renting, one needs to obtain permission from the house’s owner. Next, he/she has to obtain another permit (‘spravka’) from the House Committee (‘domkom’) to register. Finally, they need to submit these papers together with their IDs to the passport desk (‘pasportnyi stol’) at the State Registration Service.

The same process applies when changing the place of registration, too. As a consequence, few actually modify their initial registration after moving: instead, when needed, people keep going to the hospital in the part of town where they were first registered. This complicated system encourages corruption, as in order to avoid unending queues and trips to multiple city offices, some people simply offer money or gifts to expedite the process.

Real problems In Kyrgyzstan, a voter’s registration is based upon one’s permanent residence. If on election day a voter is not in his or her home precinct, he/she cannot vote 21

The propiska system gives rise to a series of socio-economic problems, too, including the difficulty or inability to access healthcare, pensions, courts, education and other similar services, as a citizen in Kyrgyzstan needs a residence permit to receive such services. Actually, a citizen may only enjoy these rights in his or her territory of registration.

school and receive medical care. As a result, cities have overcrowded schools and clinics. Government funding for schools is calculated on the numbers of citizens officially registered in a district, while schools are serving an untold number of additional students. Medical facilities are similarly overwhelmed. Such issues affect every single service user, whether registered or unregistered. While such issues are obvious to everyone in the country, politicians have long been ignoring the problem.

This system is very inconvenient. For example, the children of internal migrants cannot attend local schools because they are registered in some other district or region. People have access only to medical services in a particular clinic or area, and must pay for services from other providers. The elderly and the disabled who have moved from their place of registered residence must travel for miles to receive their pensions. Legal claims are brought to the court of the district where the defendant or offender is registered; some must travel to sue someone, while others have to travel to defend themselves. These bureaucratic rules not only create inconveniences for the citizen, but also open the door to fraud and corruption.

Possible solutions Experts have suggested a series of possible solution to the problems raised by the propiska system. Adilet director Cholpon Zhakupova believes that registration should be a matter of a simple written declaration. For example, if an individual registered in Osh moved to Bishkek, he/she should be required to simply declare it to the authorities. One should not need to gather a whole ‘bunch of documents’ just to get his or her children into a new school or to continue receiving a pension. According to her, the requirement to have a stamp on one’s ID about the registration of residence is illogical, since every citizen is allowed to move to any place, “and the fact that one moved to a different place does not mean that he/she is not a citizen anymore.” Ms Zhakupova is not against a registration system, but is against the need to obtain a permission to be registered in a new area.

Internal migrants are the most affected, as they often have to travel across the breadth of the country to complete a simple task such as renewing a passport or obtaining a marriage contract.

Additionally, people without proper registration documentations lack the ability to receive basic city services in many cases. During the last ten years, many more people have been affected by such issues due to the rise of illegal settlements (called novostroiki) on the outskirts of Bishkek. Often, these illegal dwellers have no clean drinking water, no electricity, and no paved roads because they are considered squatters deserving of no governmental support.

Human rights activist and propiska system expert Tatiyana Kotova believes that it is futile to try to block the urbanisation process through administrative measures.

Internal migration is happening and will continue. Thus, it would be better to diversify the system in order to track the movement of the population and to allocate resources where they are actually needed. If the state recognises which schools and hospitals are overcrowded, and allows them to instead

Locally registered citizens are also greatly affected by the unregistered newcomers.

Though neglected by the government, unregistered people must still work, go to 22

use these services legally, this will not diminish the rights of registered citizens.

On the contrary, the new system will allocate resources according to the actual number of beneficiaries.

creating a system that delivers services to those people who need them most.

Recently, the Kyrgyz government acquired biometric data on large numbers of its citizens. This registration process was implemented to provide electoral safeguards. This provides an opportunity to address the issues with the propiska system, as the biometric registration can lead to a unified, single database which is a crucial step towards creating an efficient system of government services allocation. Via biometric registration in a common database, citizens could simply record their chosen place of residence and have full freedom to relocate, in which case documents and registrations could be quickly updated online. These may seem like small improvements, but they would have an enormous impact on the quality and efficiency of service delivery to the average citizen.

Unfortunately, it is non-governmental organisations, news agencies, research groups and individual experts who raise the issue on behalf of those who are deprived of basic services such as healthcare, education and voting rights.

Policy makers seem uninterested in addressing the widespread problems created by this anachronistic and unworkable system. It is high time that the government find a solution to this issue. The existing biometric data collection system offers a timely opportunity to gradually but profoundly reform the propiska, with the aim of

Nazarbek Zhuzupbekov is a senior student of International and Comparative Politics at the American University of Central Asia (AUCA).

23

KYRGYZSTAN’S ACCESSION TO THE EURASIAN ECONOMIC UNION: AN OVERVIEW

By Medet Tursaliev

On December 23, 2014, the Supreme Eurasian Economic Council signed an agreement on the Kyrgyz Republic’s accession into the Eurasian Economic Union (EEU). This agreement came into force on August 6, 2015, leading to the elimination of customs controls at the Kyrgyz-Kazakh border.

will boost trade and competitiveness between member states.

Moreover, all the collected revenues from customs duties are divided among the member states. According to the agreement on Kyrgyzstan’s accession to the EEU, the country will receive 1,9% of the total share of EEU customs revenues, which is estimated at around 450 million USD (with import volumes at 2013 levels).

The main objectives of the union are: - to create conditions for the stable development of the economies of the member states in order to improve the living standards of their people;

Kyrgyzstan’s accession will also allow duty-free and preferential imports of strategic goods such as oil, gas, grain, chemical products, ferrous and n o n f e r r o u s m e t a l s , a n d t i m b e r.

Additionally, as EEU members are former Soviet states, they share common cultures and speak the Russian language, making it easier to trade with each other and build reliable networks.

- to build a single market for goods, services, capital and labour within the union; - to modernise their respective national economies for them to have a competitive edge within the global economy.

EEU Accession’s Advantages The EEU is the largest existing customs union by geographic area, comprising five countries – Russia, Belarus, Kazakhstan, Armenia, and Kyrgyzstan – with a total population of 183 million people. For a small country like Kyrgyzstan, with a population of only 6 million, the EEU is a large market for trade. Joining the Union is an opportunity to develop the production of specific goods like garment manufacturing, agricultural and livestock products, which can then be sold within this common territory.

Table 1.Kyrgyz Republic’s trade with the EEU Countries in 2013

Table 1 shows Kyrgyzstan’s trade volume with Russia, Kazakhstan and Belarus. Oil and gas from Russia, coal and wheat from Kazakhstan, and machinery and equipment from Belarus make up almost 45% of the country’s total imports.

Kyrgyzstan’s total trade with Russia amounts to 1,886.8 million USD; with Kazakhstan it amounts to 174.3 million USD; and with Belarus to 104.1 million USD. In general, Kyrgyzstan has a negative trade balance with all EEU

Membership can encourage specialisation of countries according to their comparative advantages. One of the main aims of any economic union is to promote trade between their members by eliminating tariff barriers, and this is the case for the EEU: it is hoped that the reduction of tariff and non-tariff barriers 24

countries, with the value of imported goods greatly exceeding that of exports.

tariffs. Although experts argue that the country’s commitments to the WTO principles already limit its sovereignty, the WTO sets the maximum possible tariff rates, but still allows a country to introduce lower tariffs. In accordance with the provisions of the WTO, should tariffs be raised, Kyrgyzstan would have to negotiate with WTO members who feel that they have suffered losses from changes in tariffs. In such instances, Compensation could be granted in the form of reducing other tariffs. Following K y r g y z s t a n ’s E E U a c c e s s i o n , s u c h negotiations can only be conducted with the participation of the other EEU member states, as any change in the EEU Common Customs Tariff requires their consent.

Joining the EEU could possibly raise Kyrgyzstan’s attractiveness for investors looking for access to the EEU market.

According to the World Bank, net Foreign Direct Investment (FDI) inflow to Kyrgyzstan rose from 4.4% in 2012 to 10.5% in 2013, but dropped to 2.8% in 2014 as a percentage of GDP, in line with a global decreasing trend. It will be crucial to trace this index in the coming years in order to rate how EEU accession has affected Kyrgyzstan in terms of investment attractiveness.

EEU accession may also reduce the unemployment rate in Kyrgyzstan. It is hoped that more jobs will be created due to economic specialisation, as well as by the free movement of labour between the member states. According to the National Statistical Committee of the Kyrgyz Republic, in 2013 there were between 800,000 and 1 million Kyrgyzstanis working abroad, or nearly one sixth of the country’s population, most of whom are working in Kazakhstan and Russia. EEU membership means that Kyrgyzstani migrants no longer need to obtain a work permit in other member states.

EEU tariff rates were set on the levels existing in Russia, which were much higher than in Kyrgyzstan. The latter’s average tariff used to be 5.1%, and has now been more than doubled to the average EEU tariff of 10.6%. Income from re-exports was a large source of government revenue both in the form of re-export activities and customs duties.

Data obtained from the Customs Service of the Kyrgyz Republic shows that in 2014 revenue from custom duties amounted to 42.5 billion Kyrgyz soms.

It also guarantees simplified procedures for employment, longer term stays in the country of migration and improvements in living conditions for labour migrants and their families. Based on World Bank data for 2014, 30.3% of Kyrgyzstan’s GDP is comprised of migrant remittances.

Surveys among labour migrants indicate that 44% and 33% of migrants in Russia and in Kazakhstan, respectively, have long term employment plans, while 6% and 9%, respectively, plan to reside abroad permanently.

As 33% of Kyrgyzstan’s imports come from China, the old tariffs for imported Chinese goods were close to zero. But with EEU’s accession, the increase in prices on all goods imported from nonEEU member states is causing people to lose their jobs in the trade sector. Out of a total population of 6 million, the livelihood of about 800,000 people in Kyrgyzstan is connected to bazaars, 90% of whose business was directed to Kazakh and Russian consumers.

EEU Accession’s Disadvantages

Dordoi market in Bishkek alone employs more than 100,000 people. Prices of imported goods are expected to rise between 10% and 100%, including imported medicines by 10%, leather

Joining the EEU will lead to some loss of economic sovereignty for Kyrgyzstan, as it will no longer have a right to set external 25

products by 20% and foodstuffs by 15%.

Increased tariffs will cause a decrease in trade with non-member states as their goods will be less competitive. In addition, there will be a decrease in revenues coming from the major wholesale markets (Dordoi, Kara-Suu and Madina), where current tax payments from Dordoi alone are about 700 million soms per year.

exports from Kyrgyzstan much less lucrative than expected.

One of the most important disadvantages of EEU membership is the likely outflow of skilled and unskilled human resources.

The EEU promotes free movement of goods, services, capital, and labour. Since Russia and Kazakhstan are two large and economically developed states, Kyrgyzstani citizens regularly migrate to these countries looking for employment opportunities, higher wages and better living conditions. However, as the Russian rouble has depreciated dramatically during the last year, and since most remittances are sent in roubles, a decrease in remittances as a share of GDP has been already observed. In 2014, remittances represented 30.3% of total GDP, down from 31.1% the previous year.

The automobile market is closely linked to customs tariffs. Customs costs for cars will increase two to four times depending upon the model year and the size of the engine of each vehicle. Since 2014, when it was announced that Kyrgyzstan would join the EEU, massive imports of used cars began for future reselling in Kazakhstan and Russia. For a 10-year-old car with a 2,400-cc engine, the former Kyrgyz tariff was 960 USD. Under the new rules, the import tariff has risen to 7,440 USD in 2016, will be 8,640 USD next year and 9,840 USD by 2018.

A slowdown in economic growth due to the changes in tariffs is expected. The higher tariffs will have an impact on the cost of living, the costs of doing business, mortgages, corporate and government bond yields, and every other facet of the economy. Experts predict that the slowdown in GDP growth will average 0.6% per year in 2016-2019. In monetary terms the 0.6% inflation equals nearly 60 million USD in budget losses per year, keeping all other factors constant.

Agriculture production has likewise fallen and is unable to take advantage of EEU accession. Prior to joining the EEU, Kyrgyz producers were forced to pay high tariffs to access the EEU market, which led to a decline in Kyrgyz agricultural exports. In the period of January through March 2013, the agricultural, food and processing industries’ production for export amounted to 43.7 million USD, which represents a 28.7% decrease from the previous year. The agricultural and processing industries constituted 14.4% of the total share of imports for 2013, down from 15.8% in 2012. This trend is set to continue since there was another fall of 0.6% in agricultural output in 2014, and no significant efforts have been made to develop the agriculture, livestock and agro-processing industries. Now that Kyrgyzstan is an EEU member, the depreciated buying power of the Russian rouble and the Kazakh tenge, along with bureaucratic food certification procedures, have made agricultural

Economic implications Kyrgyzstan has an under-developed agricultural industry and lacks processing industries and large export-oriented producers. The budgets of EEU member states are generally formed by tax and customs revenues from exports, while in Kyrgyzstan a considerable part of the budget consists of import and internal revenues such as migrants’ remittances and gold mining. In other words, the economies of the EEU bloc are exportoriented, whereas Kyrgyzstan’s exports from garment manufacturing, agricultural and livestock products are much more modest.

26

According to the data of the National Statistical Committee of the Kyrgyz Republic, the country imports 45% of its goods and services from EEU countries and 55% from the rest of the world.

Kyrgyzstan is highly dependent on Russian oil and gas, with refined petroleum making up almost 60% of total imported goods from Russia. Another EEU member country, Kazakhstan, supplies Kyrgyzstan with energy: Kazakh coal and natural gas account for 25% of Kyrgyzstan’s total imports. Moreover, almost 2% of all annually imported wheat comes from Kazakhstan.

these goods. If agricultural products from Kyrgyzstan are sold in Russia, this could lead to rising prices in the domestic market, opening the door to potential social tensions.

Economic growth in Kyrgyzstan is excessively dependent on the inflow of direct foreign investments, especially from Russia. Western sanctions will, at best, lead to an even greater slowdown of the Russian economy and, at worst, to recession in Russia. In turn, this may lead to a decrease in trade between Russia and Kyrgyzstan. A decrease in trade, especially in durable goods, will negatively affect the growth of the Kyrgyz economy and will lead to a decline of revenues in the national budget.

Western sanctions against Russian banks and state corporations will strongly complicate their access to capital in western markets, affecting liquidity.

Shortages of funding and decreasing oil prices will likely lead to delay or cancellation of major projects, as it happened with the 2 billion USD investment in the Kambar-Ata and the Upper Naryn hydropower plants. The completion of these infrastructure projects would have created jobs as well as brought additional tax revenues to the budget.

Source: National Statistical Committee of Kyrgyz Republic

Official statistics indicate that Kyrgyzstan’s trade turnover with the EEU countries (mainly Kazakhstan and Russia) is 45% of imports and 28% of exports.

However, goods produced by Kyrgyzstan’s light industry, such as the garment industry, are widely exported to Russia and Kazakhstan, while raw materials and equipment are imported from China.

Conclusion Kyrgyzstan’s accession to the Eurasian Economic Union has both positive and negative impacts on the country.

Political implications of sanctions against Russia

Among the advantages are access to the EEU market of goods and services, the introduction of simplified procedures for migrants, and the elimination of quotas and work permits for its citizens.

Kyrgyzstan will have a chance to develop its own industries as the EEU is creating favourable conditions for local businesses and reducing competition by introducing high tariffs for non-member countries.

In response to the sanctions that Western countries imposed against Russia because of the events in Ukraine, Moscow announced a total ban on the supply of beef, pork, fruits, vegetables, fowl, fish, cheese, milk and dairy products from the EU, the USA, Canada, and Norway. This has provided an opportunity for Kyrgyz farmers to supply Russia with some of 27

Moreover, as Kyrgyzstan is highly dependent on Russian oil and gas, EEU accession will maintain the duty-free and preferential import of strategic goods.

Finally, it is expected that Kyrgyzstan become a more attractive investment market for foreign investors.

However, joining the EEU comes with disadvantages, too. Kyrgyzstan will lose the right to set external tariffs rates, and the rise of tariffs in line with EEU standards will impact trade, with dire consequences for employment in the country. The elimination of labour quotas in Kazakhstan and Russia will likely translate in the outflow of skilled and unskilled human resources from Kyrgyzstan to its northern neighbours. As a consequence, remittances should become an even bigger share of Kyrgyzstan’s GDP, but given the recent dramatic depreciation of the rouble, the opposite may be the case. The possibility of a slowdown of the Kyrgyz economy is therefore very real.

Additionally, sanctions against Russia will lead to a decrease in the trade turnover between Russia and Kyrgyzstan, which will negatively affect economic growth and budget revenues. The loss of foreign direct foreign investments from Russia will have long term effects, such as the cancellation or freezing on the implementation of huge investment projects, with negative knock-on effects on the budget and employment.

Medet Tursaliev graduated from the department of Business Administration at the American University in Central Asia. His main research interests include international development studies, regional integration, sustainable development, and public policy.

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Tian Shan Policy Center

The Tian Shan Policy Center (TSPC) is an innovative nonprofit, public interest organization focused on research, analysis, and implementation of appropriate and effective public policy in the nations and communities of Central Asia.

The TSPC specializes in the critical fields of strategic development policy, human rights, and sustainable environment programs, and through its efforts strives to strengthen good governance as the bedrock for efforts to better the lives of the peoples of our emerging countries.

Contact details: Tian Shan Policy Center American University of Central Asia 7/6 Aaly Tokombaeva St. Bishkek, Kyrgyz Republic Tel: +996 312 915 000 tspc@auca.kg www.auca.kg/en/tspc

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