Poor Kyrgyzstan

Poor Kyrgyzstan

Mini Teaser: A snapshot of how well-intended but misguided development assistance has failed one of America's new Central Asian partners.

by Author(s): Richard A. Slaughter

There are two primary cultural threads at work. The first, nomadic
and tribal, harks back to the Mongol invasions of the 13th-14th
centuries, when prior civilizations were either eliminated or driven
westward to Turkey. There is little architecture in the region
(except in Samarkand), no art, and no cultural descendants left from
before that time. Both the Kazakhs and the Kyrgyz are descended from
the invaders, speak similar Turkic languages and share many customs.
The other cultural thread is Persian, which spread into the Central
Asian vacuum over the past several centuries. Persian influence is
strongest in Uzbekistan and Tajikistan, the latter being the only
Central Asian country whose main language, Dari, is closer to Farsi
than to Turkish. The Kyrgyz look down on the Uzbeks as "market
people" in the same way that most English aristocrats viewed someone
"in trade" in the 19th century. The difference is that the Kyrgyz are
not aristocrats but horse traders and nomads. They discount the
future at a much higher rate than do the Uzbeks (or than did
19th-century English aristocrats), and are much poorer as a result.

Both Turkic/nomadic and Persian threads were overlaid by the Russian
Empire in the 19th century, and the country has been much affected by
both that overlay and its recent recession. Today, for example, the
Kyrgyz, as the governing ethnic group (now become again a small
majority as many Russians and Germans have left), hold the public
positions formerly held by Russians, who still make up 18 percent of
the populace. These public positions, including most police, military
and ministerial jobs, provide the best opportunity for extra income
by charging under-the-table access fees. These opportunities are
unavailable to the Uzbeks,who number 14 percent of the total
population nationally but over 40 percent in the southwest. This is
producing growing ethnic friction.

Geography also mixes cultural differences with economic problems.
Southerners see northerners as leeches living off their labor,
because the south is the country's food basket and the northern
industrial base collapsed in the early 1990s. While southerners
detest the "parasites" in the north, northerners look with disdain on
the more traditional south. Among our project staff, the Bishkek
people almost invariably start a conversation in Russian, the
colonial language; those from Jalal-Abad speak first in Kyrgyz or
Uzbek, the languages of emerging nationality. Many conversations will
contain all three languages, frequently with a healthy sprinkling of
English. The differences find many expressions. On one flight to
Jalal-Abad, my flatmate (tall, blond, pale and obviously American)
was seated next to a Bishkek woman who, practicing her English,
inquired where he was from. He said "Jalal-Abad." She pressed
further: "I mean, in what city do you live." He answered, in Russian,
"Ya iz Jalal-Abada" (literally, "I am from Jalal-Abad."). Her
immediate response, accompanied by a look of deep concern, was "Oh, I
am so sorry."

In many ways, however, life in the more rural Jalal-Abad has its
attractions, at least for sojourning foreign technical specialists.
Unlike Sovietized Bishkek, Jalal-Abad is truly Central Asian. It
evinces the Uzbek-Kyrgyz mix and feels more like a large village than
a city. The predominant housing is the traditional Central Asian
communal compound. Roosters crow and dogs bark from sunrise to
sunset; mullahs call the faithful to prayer several times a day,
women sell by sing-song their butter and eggs in the morning, and the
neighbors' sheep drop scented marbles in one's path in the afternoon.

Life seems juxtaposed between centuries. Rural housing is primarily
adobe, with an average structural expectancy of about six years.
Ninety percent of the population live in their own homes and have
electrical power, but outages are both random and frequent. Voltage
is usually below standard; gas pressure is extremely variable, and
since there are no safety valves, it is possible for a gas burner to
go out during the afternoon with the flow resuming during the night.
Schools and hospitals are largely built of mud and straw or Soviet
concrete slab construction; most roofs, of compressed asbestos, leak.
Hot water for sterilization in a hospital might consist of an
electrified coil dipped into a bucket. Donkey carts, side by side
with cars and trucks, transport everything from asbestos roof tiles
to television sets. While installation of a telephone land line ($1 a
month) might take six months, a cell phone can be had in a half hour
(at international prices, and one must pay in cash for air time in
advance). While internet servers are not dependable, they and the
phone system work well enough that business can be conducted around
the world at any time of day or night, power or no. I have arranged
dinner meetings in Boise, Idaho with speakers in Virginia or Texas
and staff in Washington using e-mail in the dark at a hall table in

Life centers on small-scale economic activity; most businesses are
small retail operations, ranging from old women selling candy and
cigarettes from a TV tray in front of their homes to kiosk-like
stalls on the street, in the bazaars or in pedestrian tunnels under
main streets. While the population is 98 percent literate and higher
education is prized, there is no demand for educated workers, leading
to downward pressure on wages and massive underemployment. The
primary driver for our ADB assistance crew was formerly an assistant
factory manager; our translators, with college degrees, were happy to
be paid $250 a month, our Jalal-Abad cook and housekeeper $15 a week.
Our Jalal-Abad driver charged $10 a day for himself and his car,
including gas, which sells--like everything else imported--at world
prices. At that rate, he was subsidizing us.

The picture one gets from a close-up view of Kyrgyz politics is
similarly mixed and colorful. In the beginning there was great hope
for democracy in independent Kyrgyzstan. President Askar Akaev made
democratic-sounding noises, the press was mostly free, and the
republic acceded to the WTO in 1998. These impressions, however,
belied deeper problems. The 2000 presidential election was largely
determined in advance through language proficiency tests, the
imprisonment of political challengers for alleged corruption, and
other means of eliminating serious opposition to Akaev's third term.
The irony was not lost on the people; when I asked my Bishkek driver
and good friend how long it had taken to count the ballots, he
replied that "the results were known months ago."

The Origins of Kyrgyz Poverty

Poverty is unevenly distributed in Kyrgyzstan, and is particularly
endemic in the Kyrgyz countryside. A 1997 survey conducted jointly
between the Kyrgyz statistical agency and the International
Development Association (IDA) determined that, according to IDA
criteria, almost two-thirds of the rural population was poor, while a
bit more than one-quarter of urban residents were so situated. The
study also found that population had been shifting from urban to
rural areas. GDP has declined by over 60 percent since 1990 due to
the disruption of old Soviet trade patterns. The 1998 Russian
economic collapse further set back what had been a satisfactory
recovery to that point. In Bishkek, however, the streets are full of
cars and people have money to spend, even as elderly widows beg
because inflation has undermined their survivors' pensions.

The finding that Kyrgyz poverty is most prevalent in rural areas--and
this, of course, it has in common with much of the Third World--has
had a bracing impact on the international aid agencies active in
Kyrgyzstan. These include the aforementioned European Bank for
Reconstruction and Development (EBRD), but also the Swiss
Coordinating Committee, the U.S. Agency for International Development
(USAID), the U.S. Treasury Department, and the Asian Development Bank
among others. Deploying their input-output model, they have focused
on rural poverty: agricultural aid, school and hospital
rehabilitation or construction, and modification of subsidies to
target them more specifically to the poorest in society. The strategy
is not likely to succeed for the simple reason that the assumptions
underlying it are wrong--on two critical counts.

First, the source of Kyrgyz poverty is fundamentally urban (not
rural) and is political (not economic) in origin. Second, raising
agricultural productivity on a fixed land base will reduce, not
raise, agricultural wages. Since there is little value-added food
processing and Uzbekistan interferes with shipments to external
markets, higher production translates into lower market prices. This
latter point is economically obvious, or should be, and there is no
reason to belabor it. The first point, however, is critical, and
illustrates, among other things, the utility of the institutional
model of economic development.

The Kyrgyz poor are in the countryside partly because the private
response to economic collapse in 1993 and again in 1998 was for
urbanites to move to villages where there was family support and
where one could engage in subsistence farming. So while nominal
incomes declined sharply on the national level, the rural population,
household production, and barter trade rose. Few people went hungry.

Economic growth tends to occur in cities, and for good reason. Rural
areas are frequently poorer than urban areas because low population
density and the greater distance to markets raise transportation
costs and inhibit economies of scale. The residents of mountainous
areas are doubly affected by this fundamental economic fact of life
because, by definition, they are low-density populations with little
arable land that suffer very high transportation costs. Appropriate
technology in rural villages and micro-credits help, but are not
sufficient. Large-scale subsidized infrastructure investment, in the
absence of supportive legal and financial institutions, is not the
answer either, having led Kyrgyz debt from zero to more than 150
percent of GDP in less than ten years. Because social infrastructure
investment must be paid for from general economic gain, the new
infrastructure--whether improved transportation or better
schools--must help to generate those gains. Too often this is wishful
thinking because institutional structures inhibit the economic
activity that the infrastructure would otherwise support, while
public works corruption diverts up to 90 percent of the capital into
private pockets. If the anticipated growth does not occur,
expenditures on infrastructure perversely weigh down the rest of the

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