KYRGYZSTAN’S ENERGY SECTOR LOSES INVESTMENT OPPORTUNITIES DUE TO CORRUPTION

When Kyrgyzstan became independent in 1991, the energy sector signified a rare hope for the country’s future economic development. Today, Kyrgyzstan’s hydro-energy sector represents a significant part of the country’s economy. It also remains a significant source of corruption. After the March 24 Tulip Revolution in 2005, corruption in the energy sector became even more pervasive, leading to a sharp decrease in foreign investment. Moreover, according to Kyrgyz experts, Bishkek’s mismanagement encouraged the rise of energy sectors in neighboring states. These developments have long-term implications for Kyrgyzstan’s economy and its geopolitical standing in the Central Asian region.

At a June 22 roundtable organized by the Bishkek-based Institute for Public Policy (IPP), the institute’s head and former foreign minister, Muratbek Imanaliyev, commented that Kyrgyzstan today has to compete with neighboring Tajikistan and Afghanistan, for foreign investment. Kyrgyzstan is becoming more and more isolated from the emerging regional energy networks. The country has already lost its export markets in China and Kazakhstan.

Another speaker at the IPP conference, parliamentarian Tayirbek Sarpashev, claimed, “Money that should have been invested into the Kambarata-1 and Kambarata-2 hydroelectric stations [in Kyrgyzstan] flew away to Tajikistan.” The energy sector in Kyrgyzstan is deeply politicized, and positions are allocated according to political loyalties. Top government officials resort to help from criminal leaders to pursue their own economic interests. The level of professionalism has also decreased: out of nearly 20,000 people working in the Kyrgyz energy sector, “Policies are dictated by 2-3 persons,” said Sarpashev. The lack of a comprehensive state energy policy, according to Imanaliyev, creates tremendous losses, up to 42%, a level comparable with some African states.

One World Bank employee in Washington, DC, told Jamestown that today the Tajik government is much more prepared to work towards developing the energy sector compared with Kyrgyzstan. Although corruption persists in Tajikistan as well and the country lags behind its regional neighbors because of its civil war in 1992-97, its legislative base is better developed for international cooperation. The current Kyrgyz legal system lacks sufficient guarantees and protection for foreign investors and international donors and does not have flexible laws and a coherent policy. As a result of these inconsistencies, several investment projects had been failed in the last five years.

President Kurmanbek Bakiyev’s family members are often suspected of being involved in the energy and communication sectors through informal control of the judicial branch and cooperation with leaders of the criminal underworld. Money from both sectors is laundered and invested in foreign markets in the Baltic states and Russia, rather than remaining in Kyrgyzstan.

The previous government, led by president Askar Akayev, is also to blame for the slow development of the energy sector. The current system of corruption was already in place under Akayev’s regime. In fact, most of the energy sector’s top administrative staff were recruited during the previous regime and were able to retain their positions after the March 24 revolution. Many current employees in the energy sector still have good connections with Akayev’s family. Some of them are also members of parliament or represent their own private companies.

Akayev, like Bakiyev today, promoted concessions in the energy sector. However, Akayev’s opposition, which included Bakiyev, resisted the idea. Sarpashev explains that Bakiyev’s current opposition is using the same tactics and is blocking the government’s wish to place the energy sector under concession. Opposition forces argue that energy has a vital place in the national economy and control should remain in Kyrgyzstan. Such anti-concession arguments are tinted with nationalist undertones, rather than economic calculation.

Meanwhile, the Kyrgyz parliament voted against the legitimacy of Bakiyev’s political partnership with Prime Minister Felix Kulov. This indicates the parliament’s dissatisfaction with the government, which further provokes the legislature’s resistance to governmental reforms, including any in the energy sector. The parliament itself realizes that although a legal system is in place, informal connections often play a bigger role in Kyrgyzstan’s business life. As it stands now, the problem of the underdevelopment of Kyrgyzstan’s energy sector is more political than economic.

(IPP.kg, 24.kg, Akipress.kg, June-September)