KYRGYZ PARLIAMENT VOTES TO PRIVATIZE KEY ECONOMIC SITES

On April 18 the Kyrgyz parliament voted to increase the government’s right to privatize public economic sites. The divide in the parliament on this legislative act was obvious: President Kurmanbek Bakiyev’s party Ak Zhol voted in favor of privatization, while two opposition parties, the Kyrgyz Communist Party and the Social Democratic Party of Kyrgyzstan, voted against. Eventually the vote was in 78 percent in favor and 21 percent opposed.

While the Kyrgyz State Committee on State Property (CSP) suggests that the recent legislative act is a logical development of the privatization process in the country, the opposition argues that previous privatization projects were not efficient, allowing for the few connected to the regime to collect the most gains. Furthermore, some opposition members argue that the decision is left de jure to the parliament, but the government will decide in practice how privatization proceeds and what investors are allowed to privatize. Today, according to CSP, over 70 percent of state assets have been already privatized.

Kyrgyz experts almost unanimously agree that the latest privatization bill will benefit mainly people allied with Bakiyev regime or directly representing it. Like the previous president Askar Akayev, Bakiyev is gaining the support of business elites by redistributing public assets. Potential investors in Kyrgyzstan’s hydropower sites and Kyrgyz Telecom (among the first sectors likely to be privatized), for instance, are already known inside political circles.

Already before the parliament’s decision, Prime Minister Igor Chudinov mentioned at least four investors in Kyrgyzstan’s hydropower sites. Shares of Kyrgyz Telecom increased several times a few weeks ago. In both sectors potential bidders remained unknown to the public, nor do parliament members seem to be aware of recent developments. Iskhak Masaliyev, an MP representing the Communist Party, complains that no professional hearings were carried out by the parliament on the potential benefits of privatization. He further questions why the privatization process is conducted in such a rush, without clear options at stake.

By building strong relations with the business community, Bakiyev is alienating the opposition from the economic process. Essentially, the rules of the game remain familiar: Only individuals and companies showing their support towards the ruling regime will be allowed to participate in privatization. The stark division in the parliament’s voting already speaks for the opposition’s acknowledgment that it will remain outside the new wave of privatization projects. Likewise, a number of important financial and economic institutions in the country such as the Ministry of Finance, the Ministry of the Economy, and the National Bank are also left outside of the decision-making process.

Bakiyev needs the support of most influential businessmen in the presidential elections in 2010. At present Kyrgyzstan’s political configuration remains fairly decentralized with influential figures in both the government and the opposition. But privatization processes should work in favor of centralization of the state apparatus. Several high-ranking political figures already share similar interests in the business area, among them members of president’s administration and the ministerial cabinet.

The president had fewer chances to endorse the privatization bill without major resistance in parliament during the previous parliament that was dissolved in October 2007 following Bakiyev’s constitutional reform. Bakiyev managed, however, to form the Ak Zhol political bloc before the snap parliamentary elections in December 2007, partly with the idea of being able to force privatization projects prior to presidential elections. Once again Bakiyev has demonstrated that he can sway the opposition’s demands, for instance, for constitutional reform and reform of the hydropower sector, to his own interests.

Besides local investors, Russian and Kazakh companies and individual businessmen might be interested in privatizing state assets in Kyrgyzstan. Plans for further privatization are taking place amid public dissatisfaction with Kazakhstan’s increasing economic presence in the country.

With the global inflation on food products, the Kyrgyz government should be especially careful in designing economic policies. Privatization processes lacking transparency will further increase the gap between rich and poor. Today, roughly 43 percent of the people live below the poverty line is, according to UNDP records.

Privatization of Kyrgyzstan’s state assets will increase centralization of capital in the hands of the few and attract more foreign investment, thus fueling public discontent with the regime (www.24.kg, www.akipress.kg, April 18-21).