GUEST POST: The Political Economy of Kyrgyzstan

Today we’re bringing you another guest post from Zack Kramer, the second in his five part series on the political economies of the former Soviet Central Asian countries: Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan. This time around we’re looking at Kyrgyzstan.

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by Zack Kramer

The Kyrgyz are a Turkic ethnic group first recognized as a distinct people by Chinese sources dating back to the second century B.C.E. The ethnonym “Kyrgyz has its origins in a Turkic root meaning “forty”, a reference to a legendary forty original tribes that made up the ancient Kyrgyz people. They appear to have originated in western Mongolia, but moved northwest to southwestern Siberia near modern-day Irkutsk, settling near the source of the Yenisei river. The Yenisei Kyrgyz Khaganate came to rule parts of what is now Russia, Kazakhstan, Mongolia and China between the 6th and 12th centuries, the peak of Kyrgyz power and territorial holdings.

The independent Kyrgyz kingdom disappeared with the arrival of Genghis Khan and the Mongols in the early 13th century. Buffeted by both their own nomadic movements and conflict with other ethnic groups in the region, many of the Kyrgyz eventually made their way south to the western part of the Tian Shan mountain range, which forms the geographical heart of their modern country. Despite its elevation and remoteness, the territory has little history of independence, as after the Mongol period it was successively occupied by the Kalmyks, Manchurian Chinese, Uzbeks, and finally Russians in the late 19th century. Despite intermingling to some extent with these various peoples, the Kyrgyz retained their Sunni Islamic faith, a distinct Turkic language, and a unique ethnic identitytied to their traditionally pastoral way of life. Like the rest of the Central Asian republics, Kyrgyzstan emerged as a modern independent state with the breakup of the USSR in 1991.

Since then, Kyrgyzstan’s ethnic Russian population has mostly emigrated, leaving a minority of only about 6% of the national population. They are largely concentrated in the capital, Bishkek, a city founded by Tsarist forces in the late 19th century, whose demographics only became predominantly Kyrgyz after independence. The largest ethnic minority in Kyrgyzstan is now Uzbeks at 15% of the national population, concentrated in the lowlands of the small Kyrgyz part of the Fergana valley along the Uzbek border. Relations between the Kyrgyz and Uzbeks have long been troubled, and have been especially strained ever since an ethnically-charged land dispute broke out into the Osh Riots of 1990, in which several hundred people were killed before the Soviet army took control of the city.

The conflict between the Kyrgyz and Uzbek populations is multifaceted, but some of the major factors are disputes over rights to the country’s limited fertile land in the historically Uzbek-dominated Fergana valley, Uzbek desires for official recognition of their language alongside Kyrgyz (and Russian), and a border dispute and other issues between the governments of Kyrgyzstan and Uzbekistan. These tensions once again came to a head in a series of ethnic clashes in 2010, in which roughly a thousand (mostly but not exclusively Uzbek) people were killed and hundreds of thousands of Uzbeks became internally displaced, with many ultimately emigrating to Uzbekistan. The 2010 conflict was part of broader political upheaval in Kyrgyzstan that year, which ultimately led to the resignation and exile of former president Kurmanbek Bakiyev, the establishment of a parliamentary system of government, and the first free elections in the country’s (and Central Asia’s) history. This parliamentary democracy has since been consolidated and Kyrgyzstan remains the only country in Central Asia to have held elections considered free and fair, though some have noted increased suppression of Uzbek cultural and economic life since the 2010 clashes.

Kyrgyzstan has the smallest economy in Central Asia and the second-lowest levels of income and human development, ahead only of Tajikistan. Given its geography, location, and small population, it was not a major target of Soviet industrialization initiatives like neighboring Kazakhstan. What little industrial output did exist in the Soviet era has mostly collapsed with the end of the planned economy and its system of inputs, networks, and subsidies. Many former industrial workers have returned to traditional subsistence farming, particularly herding of goats, sheep, and cattle in the mountain highlands and grain farming in the lowlands. The single largest export sector is now gold, followed by unworked mineral ores and scrap metal.

The lack of adequate employment opportunities has led as much as a quarter of the country’s population to seek work abroad, mostly in Moscow and other cities in Russia. Kyrgyzstan currently depends on remittances from abroad for 35% of its total GDP, the highest such figure anywhere in the world. With government services limited at best, remittances from family are the closest thing that most Kyrgyz have to a social safety net, especially in rural areas. The country has seen healthy if somewhat unsteady economic growth, averaging around 5% of GDP annually since 2000, but with such a small economic base to start from and few domestic alternatives to subsistence agriculture other than poorly-paid informal employment in towns, there is a great deal of uncertainty about the future of the Kyrgyz economy. This had led to concern for the sustainability of its state apparatus, which struggles to raise revenue sufficient for the basic expenses of statehood like a military, civil service, police, roads, and the provision of utilities.  

At around $600 million annually, foreign aid (about 10% of it from the US) constitutes over a third of government revenues. As such, expanding the tax base is a major priority for the Kyrgyz government, which runs regular deficits and must borrow from the IMF and foreign governments to finance its expenditures. The government currently holds sovereign debtamounting to over 65% of GDP, unusually high for a country at its income level. One important source of revenue for the Kyrgyz government was Manas Air Base, opened by the US Air Force in 2001 as a transit center for the war in Afghanistan. By 2010, annual rent for the base had risen to some $200 million annually, or over a tenth of the total Kyrgyz federal budget. But in 2013 the Kyrgyz government declined to extend the US lease on the base, and with this the last American base in Central Asia closed down in 2014. This was interpreted as a quid pro quo arrangement with Russia, which cancelled $500 million in Kyrgyz debt and agreed to invest $1 billion in hydroelectric development and other initiatives. In addition, Kyrgyzstan extended Russia’s lease on another air base just forty miles from Manas. 

Kyrgyzstan maintains fairly warm relations with Russia. Elected in 2017, current Kyrgyz president Sooronbay Jeenbekov is seen as relatively pro-Russian and has expressed a desire to make Russia the country’s “main strategic partner”. Kyrgyzstan is a member of the Russia-dominated Collective Security Treaty Organization, a regional military alliance, and is the newest member of the Eurasian Economic Union. Kyrgyzstan’s decision to join the EAEU is seen as largely motivated by a desire to tap into its “common labor market”, and specifically to improve access to jobs in Russia. Kyrgyzstani nationals have visa-free access to Russia, but an EU-style integrated labor market has so far not materialized, with a corrupt and overburdened immigration bureaucracy leaving many Kyrgyz workers in a legal grey area, vulnerable to exploitation and with limited employment opportunities. On the other hand, the Russian minority in Kyrgyzstan has had few complaints of discrimination or marginalization, and Russian remains the de facto official language in Bishkek. The Russian population continues to decline due mostly to emigration, but this appears to be motivated by economic rather than sociopolitical factors. Russia is an important supplier of oil, natural gas and some industrial goods for Kyrgyzstan, but in terms of overall trade it has taken a backseat to China for more than a decade.

It would not be too gross an oversimplification to describe Kyrgyzstan’s economy as one that works in Russia in order to buy goods from China. Accounting for as much as 70% of its total imports, Kyrgyzstan depends on China for consumer goods, electronics, machinery, and food. But the most important element of the trade relationship may be Kyrgyz imports intended for re-export to Russia and Kazakhstan, primarily clothing and raw textiles. The Kyrgyz government hasn’t recognized this activity in its economic statistics, as it is mostly conducted informally to avoid taxes and import-export bureaucracy. But the re-export of Chinese goods is estimated to bring an additional several billion dollars into the informal economy annually, a staggering share of aggregate economic activity in a country with reported total GDP of only about $7 billion.

This puts Kyrgyzstan into a potentially difficult position as a member of the EAEU, with many in the re-export business worried that Russia will push for high tariffs on Chinese goods in an effort to flood Kyrgyzstan and other countries with Russian goods instead. An EAEU Customs Code partly aimed at reducing undeclared imports from China was put into place in 2018, but its actual effects on the re-export trade are not yet known. China imports little from Kyrgyzstan, which lacks significant natural resources or manufacturing output. Given this, and the country’s poverty and small size, China isn’t likely to face down Russia over influence in Kyrgyzstan any time soon, but it will likely retain plenty of influence nonetheless through the sheer size of its economy. There have been some recent popular protestsagainst both Chinese immigration into Kyrgyzstan and Chinese detainment of ethnic Kyrgyz in re-education camps in Xinjiang, but the Kyrgyz government appears eager to put out the fire on both counts.

Two of the biggest questions for the future of Kyrgyzstan are: Will there be more violent conflict between the Kyrgyz majority and the Uzbek minority, or even between Kyrgyzstan and Uzbekistan? And can Kyrgyzstan really maintain its status as the lone democracy in the region?

On the international front, things are looking up for Kyrgyz-Uzbek relations. As of 2013 Kyrgyzstan is no longer heavily dependent on Uzbek natural gas, which had been a flashpoint between them for decades. And relations have been on an upswing ever since current Uzbek President Shavkat Mirziyoyev took office in late 2016. For his part, the new Kyrgyz president Jeenbekov is perceived as having done much to improve relations as well. The two countries have made substantial progress towards resolving their border dispute, and bilateral trade has increased significantly (though this may eventually be jeopardized by the EAEU customs regime, as Uzbekistan is a non-member).

The improvement in bilateral relations helps to smooth things out with the Uzbek minority on the domestic front as well, but is no guarantee against another flare-up of ethnic tensions. There is still a widespread perception among Kyrgyz Uzbeks that they are being systematically shut out of public administration and access to jobs in general in the country, though actual data about this is not readily available. Kyrgyzstan has moved to close many of the country’s Uzbek-language schools and has dropped Uzbek as an option for university entry exams. If the country’s overall economic situation remains weak, a sense of structural economic disenfranchisement may well be enough to bring about another round of riots and ethnic violence. And with a weak state apparatus, there is no guarantee that the government would not be forced to resign, as Kyrgyz governments did in 2005 and 2010.

In a region generally characterized by stable authoritarian governments backed up by repressive security services, the Kyrgyz government’s relatively weak hold on state power may be a mixed blessing for the future of democracy there. It makes violent suppression of protest and other political activity less likely, ensuring the government is limited in its capacity to enact repressive policy. But in an impoverished country where Uzbeks and other minorities appear the likely scapegoats for economic problems, the government will likely struggle to maintain order again at some point. The future of the Kyrgyz economy is uncertain, but given how closely bound up it is with Russia’s (and the value of ruble-denominated remittances), the horizon is not particularly bright. The one constant for Kyrgyzstan’s foreseeable future is that political influence there will remain cheap, a fact that Russia and to a lesser extent China and others will be keen to exploit. The greatest threat to Kyrgyzstan’s democracy may not be its internal dynamics, but rather its condition of severe economic dependence on authoritarian states with no interest in seeing a genuine democracy taking root anywhere near their borders. It has managed to strike a balance for the time being, but there just isn’t all that much holding it all in place.

Zack Kramer is a graduate student in international relations at Charles University in Prague.