Publication: Eurasia Daily Monitor Volume: 5 Issue: 69

Kazakhstan’s direct investment in the Kyrgyz economy has been rapidly gaining pace since the early 2000s. Today Kazakhstan’s economic presence is felt throughout northern Kyrgyzstan, from banks to small businesses, cars with Kazakh plates and numerous tourists. For the most, the Kyrgyz are welcoming these trends as both countries share a similar culture and traditions. Recent news about Kazakhstan’s ownership of four prestigious resorts on Issyk-Kul Lake and possible investment into the hydropower sector was, however, met with anti-Kazakh nationalist slogans.

A series of protests against Kazakh ownership of resorts will be staged by youth movements today, while newspapers regularly speculate about the Kazakh government’s strengthening political leverage over Kyrgyzstan, if Kazakh money is to continue flowing into the country. Special concern has been raised over Kazakhstan’s possible investment in Kyrgyz hydropower sector, a significant part of Kyrgyzstan’s economy. Kyrgyz Prime Minister Igor Chudinov recently announced that four different investors were interested in privatizing Kyrgyzstan’s hydropower sites. Nur Omarov, a Kyrgyz political observer, has insisted these will be predominantly Kazakh investors.

During his visit to Bishkek, the Kyrgyz capital, in April 2007, Kazakh President Nursultan Nazarbayev announced his country’s plans to invest in Kyrgyz hydropower sites. Negotiations over investments are likely to proceed later this year, after the Kyrgyz parliament officially votes for privatization of the hydropower sector.

Kyrgyz President Kurmanbek Bakiyev will visit Kazakhstan this month. Discussions are likely to center on trade and investment. Bakiyev will also be likely to raise the question of food security in Kyrgyzstan and the treatment of Kyrgyz labor migrants by Kazakh law-enforcement agencies. Nazarbayev’s Central Asia Union (CAU) initiative lays out the necessary institutional framework for bilateral cooperation with Kyrgyzstan. Meetings between both countries’ officials are conducted on a regular basis within the two countries’ High Interstate Council founded under the CAU.

Tourism between Almaty, Kazakhstan’s southern city, and Bishkek has been increasing every year. Almaty residents find Bishkek considerably less expensive for medical care and entertainment. For Bishkek natives, Almaty is an attractive city with greater variety of services, higher salaries, and better shopping. In 2007 Kazakh tourists represented over half the total of 1,2 million tourists in Issyk-Kul. Locals, Russians and Europeans make up the rest of the tourist market. Each year the Kyrgyz government seeks to increase the flow of tourists.

Meanwhile, over 200,000 Kyrgyz labor migrants work in Kazakhstan (see EDM, May 3, 2007). A combination of Kazakh tourists’ spending and Kyrgyz labor migrants’ remittances contributed to the hike of real estate prices in the past two years in Bishkek and the Issyk-Kul area.

Although cultural similarities encourage cooperation between both countries, they often lead to informal confrontations among Kyrgyz and Kazakh tourists. Small organized criminal networks are formed along routes connecting Kazakhstan and Issyk-Kul that selectively rob Kazakh tourists, and Kyrgyz policemen often seek higher fines from Kazakh drivers.

The issue of Issyk-Kul resort ownership reached presidential level a year ago, with Nazarbayev expressing his concerns over a prolonged decision by the Kyrgyz government. When the final decision to sell four Issyk-Kul resorts was unveiled this March, several members of the Kyrgyz opposition accused the government of receiving bribes from Kazakh investors. In response to public outcry, the Kyrgyz government made assurances that over 80% of employees on Kyrgyz resorts would be locals.

One Kazakh analyst from Kazakh-British Technical University, told Jamestown, that “Antagonism among the Kyrgyz public towards Kazakh investment is partly Kazakhstan’s own fault, because it shows a negligent attitude toward Kyrgyz neighbors. Economic cooperation benefits both countries.” To this a Kyrgyz businessman from Bishkek replied that while wanting to boost tourism, the Kyrgyz public still rejected the idea of letting its larger neighbor dominate the local market (, Bely parakhod,, March 1-April 9).