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: / Strategies / Comprehensive Development Framework for the Kyrgyz Republic (2001)




Kyrgyzstan Review, 10 years ago




3. MATTERS FOR PRIORITY ATTENTION

It is clear from the foregoing that the situation in which the Kyrgyz Republic finds itself today poses a wide range of challenges. The following list of national priorities draws attention to only those matters that require immediate action.
 
3.1. Public Administration Reform
 
Inefficiency of the governance system hampers further progress of market reforms. This involves both institutional and legal reforms at all levels of state administration, including parliament, the government, the judicial system and the local state administrations. The states financial management needs to be thoroughly reviewed and reformed in order to achieve transparency and accountability. Consistent and targeted efforts must be made in eradicating the corruption.
 
3.2. Poverty Reduction
 
Poverty is unarguably one of the most pressing problem requiring immediate attention at the national level. Poverty directly affects over 52 per cent of the population of the Kyrgyz Republic and is becoming a socially and politically destabilizing factor. The National Poverty Reduction Strategy has been devised and is to be implemented as a major element of the first three years of CDF, with further phases in subsequent years.
 
3.3. Development of Rural and Remote Areas and Depressed Small Towns
 
Poverty is most serious in rural areas, depressed small towns and regions, with the poverty level substantially higher than the average level in the republic. In 2000, agriculture accounted for 36.8% of the nations GDP. In view of the fact that over 80% of the countrys poor people live in rural areas, development of these areas is of primary importance.
This includes not only technical and financial support for agricultural activities, but also the provision of a comprehensive range of community services, comparable to those available to the larger urban communities.
Of particular concern is the situation in which those who live in remote and mountainous regions, as well as in small towns, find themselves. Small and scattered though such communities may be, as citizens of the Republic, they are entitled to receive access to as full a range as possible of the community services and support mechanisms available to others.
 
3.4. Provision of Development Security
 
High priority of development security is based on the need to ensure national security of the state, as well as the personal and proprietary security of citizens.
Provision of secure development under conditions where both external and internal threats exist, must be based on mobilization of all available domestic resources and active partnership with other countries. Provision of secure development includes efficient resistance to the international terrorism, religious extremism, illegal drug turnover, and organized crime.
Preservation of ecological balance, prevention of man-caused accidents and elimination of negative impact of natural disasters are important factors of secure development.
 
3.5. Private Sector Development
 
Sustainable economic development must be based on free development of a dynamic, efficient private sector as the engine of growth. Development of business enterprises in the private sector, both urban and rural, is therefore a very high priority under CDF. The creation of an environment that is conducive to the continued and expanded development of the private business sector is essential. This includes reforms in the legal, supervisory and financial context within which private sector individuals and firms operate, as well as the development of adequate economic infrastructure needed to support them. The private sector is going to be involved in the development of transportation, telecommunication, power and construction sectors, as well as further development of potentially highly productive areas such as finance, tourism and agribusiness. Small and medium businesses have been a major source of productive employment throughout the transition period and should be the mainstay of private sector growth in the future.
 
3.6. External Debt Management
 
Official external debt reached 130 percent of GDP in 2001. Its servicing has become a major burden on the national budget. At the same time, the nation cannot progress without some further effective and subsidized assistance from major international financial institutions and donor countries. However, a balance needs to be struck in the management of external debt between the Republics ability to service its debt obligations and new financing of essential development needs.
 
3.7. Promotion of Foreign Private Direct Investment
 
Foreign private direct investment must to a significant degree substitute official borrowings against guarantees of the Government of the KR if the pace of development is to be sustained. The private sector, with the active involvement of foreign private investors, must assume a major share of the responsibility for economic growth. Foreign direct investments bring with it not only financial resources but also new technology, management know-how and access to external markets. The ongoing and future institutional and financial reforms needed in order to create the appropriate environment for encouraging local business development, will also encourage foreign private direct investment.
 
3.8. Strengthening the Financial System
 
The present situation in the financial system does not ensure mobilization of the financial resources required for sustainable economic growth. Savings of the population in the banking system dropped to 6 per cent of the GDP, while bank lending to the private sector amounts to less than 4 per cent of the GDP.
Development of the financial system is based mostly on rehabilitation and strengthening of the banking sector. Public confidence in the commercial banks system needs to be restored so that it is capable of efficiently mobilizing domestic saving and supporting the needs of individuals as well as local and foreign private business enterprises. Another urgent task to be accomplished is development of the non-banking sector, which includes equity market, private pension funds, insurance carriers, credit unions and micro-crediting institutions.
 
3.9. Strengthening External Trade
 
Pursuing dynamic foreign economic policy is a matter of priority that implies the best possible use of advantages of the countrys membership with the WTO, regional unions, bilateral and multilateral agreements. With a relatively very small domestic market, the Republic needs to focus attention on developing external markets first in the immediate neighborhood and ultimately throughout the world.
Considering some distinctive features of the countrys economy, the most immediate benefits are likely to result from import substitution for consumer goods, development of comparative advantages of the country's economy, agro-industrial and service sectors, promotion of competitive products, as well as development of export potential of energy sector.