: / Strategies / National Poverty Reduction Strategy (2003-2005)

Kyrgyzstan Review, 10 years ago

I. Bishkek City

605. Bishkek city is the capital of the Kyrgyz Republic, its political, administrative, scientific, technical and cultural center. A majority of large enterprises and higher educational establishments of the Republic are located there. Sixteen percent of the total population of the Republic lives in Bishkek but given the existing degree of internal migration, this figure may be somewhat higher. The poverty level in Bishkek City during recent years has remained practically unchanged and in 2001, it comprised 29.5 percent, which is 18.1 percent lower than the average republican level. Per capita income is the highest in the Republic; in 2001 it increased by 16.4 percent and totaled 25,248.5 soms, which is 2.5 times more than the national average.
606. Social Sphere and Social Mobilization
There are only 1.3 percent of families in Bishkek who receive the state benefits allocated to the poor. Various types of benefits are granted to 18 categories of citizens. Among the poor, 73 percent are people of active working age, as a rule, employees of budget funded instrumentalities, while the rest are pensioners and disabled. In order to provide social assistance to budget funded workers who receive low salaries, the Mayors Office of Bishkek City, jointly with the city of Kenesh, made a decision on establishing supplements to salaries at the expense of the local budget. Pensioners have been granted the right to travel by city public transport for free. On the whole, more than 40 types of benefits are provided as a social support for pensioners and disabled. Given large expenses related to the payment for housing and utility services in Bishkek, poor citizens are provided with assistance in the form of allocation of housing subsidies. Social passportization of poor people was carried out in the city by the end of 2001 in order to clarify the scale of poverty; as a result, more than 35 thousand needy families have been identified and included in the database.
As of the beginning of the 2001/2002 academic year there were 88 secondary schools in Bishkek attended by 99,200 children. In order to ensure access to education for children, in particular from poor families, a survey has been conducted to identify the reasons for dropout. The survey review indicated that the major reasons for drop-out are: low family income that does not provide for the necessary conditions for the children to attend school and forces engagement of children in income-generating activities; lack of interest on the part of parents to educate their children, in particular, due to alcohol abuse; internal migration. More than 12 thousand schoolchildren from Bishkek schools have been registered as those in need of social support. Free meals have been arranged for junior schoolchildren from poor families.
Schools are repaired, equipment and computers are procured at the expense of the local budget, sponsors, contributions payable by parents for education, textbook lease, contributions for repairs. In May 2002, 169 computers were installed in 29 schools at the expense of the local budget. Within the framework of the project, Educational Sector Development, supported by the ADB, 28 titles of textbooks with a circulation of 90,200 copies have been published and disseminated among the schools in Bishkek; computers, furniture and equipment are being procured.
At the same time, 40 percent of schools are equipped with personal computers of the first generation that are obsolete and almost cannot be repaired, while textbooks are available to only 84-87 percent of school children. Equipment in the physics and chemistry classrooms has not been renewed for a long time due to insufficient financing. A low level of teachers salaries results in high personnel turnover, forces qualified pedagogues to go to other sectors of economy looking for better-paid jobs.
The system of healthcare of Bishkek city is represented by 11 hospitals and 27 out-patient clinics, of which 22 establishments work under the MMI scheme. There are a number of specialized medical establishments operating in the city an orphanage for 110 beds, a tuberculosis hospital and a tuberculosis dispensary, and so forth.
The healthcare reform conduced in Bishkek city is aimed at improving the quality of services provided to the population through rational use of financial resources and introduction of new methods of financing health facilities, and creation of incentives to be interested in the output. At present, certain preparatory work is being carried out: estimates have been prepared, two options for health facilities restructuring have been developed, including the one on transformation of groups providing medical services into Centers of Family Medicine and establishment of in-patient diagnostic units within hospitals. Training has been provided for medical workers. To improve the quality of medical assistance, FGP physicians are being retained in family medicine; clinical protocols are being introduced.
In order to improve access to primary medical and sanitary assistance for the population living in newly constructed areas in the city, where a majority of migrants from other regions of the Republic have settled, 7 outpatient medical facilities have been established. They have been equipped with necessary implements and medical equipment. Under the project, Healthcare Reform-2, financed by the World Bank, 9 medical establishments are being restructured and repaired.
At the same time there are problems related to:

- insufficient resources when estimating financial requirements for providing medical services because of high internal migration;

- low salaries of medical workers that result in high personnel turnover, resignation of highly qualified specialists;

- untimely and insufficient financing within the mandatory medical insurance scheme and delayed transfer of resources from the Social Fund;

- reduced access of students to medical services, especially to the services provided by hospitals, as students are not included into the category of insured citizens; and

- poor condition of the infrastructure of health facilities in Bishkek that does not support an improvement of the quality of medical assistance.

At present, the city is supplied with drinking water from 33 water supply intakes located at the Orto-Alysh and Ala-Archa deposits of underground water. There are 276 water wells in operation of which 160 are subject to liquidation due to expiry of the normative operation period. Given growth of the population in the city and appearance of new residential districts, it is necessary to construct a new water intake to provide the townspeople with high-quality drinking water. At the same time, the condition of water pipeline and sewerage networks require annual capital expenses for repairs and rehabilitation in the amount of not less than 4.0 million soms. As a result of an increase in the citys population, construction of new residential districts, it is necessary to resolve the issue on extension of the sewerage and treatment facilities network. At present, the northern parts of the city and newly built residential districts have no sewerage, which has a negative effect on the environment.
As of August 1, 2002, the number of unemployed citizens registered with the employment services as those looking for a job totaled 13.8 thousand people, of which 70 percent have an official status of the unemployed. As of the beginning of 2002, 979 unemployed were for training, 1,291given paid public work and 6,733 provided with employment. The ESF allocated micro-credits for the total amount of 3.3 million soms to 353 unemployed. In 2001 micro-credits were allocated to 2.1 thousand people in Bishkek for the amount of 84.1 million soms. In addition, micro-financing was also expended to unemployed by non-governmental organizations, including the International Mercy Corps, FINCA, Crossroads Asian Company, etc.
607. Real Sector
Bishkek produces 19.7 percent of the national GDP. A major share in the structure of value added is contributed by the services sector. Industry mainly consists of food and processing (40.6 percent of gross industrial output of Bishkek city), electricity (10.8 percent), machine building and metalworking (14.0 percent), light industry (8.9 percent). The FEZ Bishkek produces 17 percent of industrial output. In recent years, industrial development is mainly based on foreign investment. Many joint ventures have been established with participation of foreign capital. The most significant foreign investments have been made when establishing the JSC Reemtsma-Kyrgyzstan (construction of a factory for production of cigarettes with a capacity of 8 billion cigarettes a year), restructuring of the JSC Bishkek-Syut (production of new types of dairy products frosted cake cheese, yogurts, sour dairy products, fruit juices). A number of enterprises with participation of foreign investors have been established on the basis of the JSC Avtomash. It is planned to establish joint ventures with the Phillips company at the JSC Elektrotekhnik and the Kiev Factory Traktordetal at the enterprise, Usta. The issue is being considered on establishment of a joint venture on the base of the JSC Auto Assembly Plant with participation of Belorussian factories to produce mini-tractors for the agricultural sector of the Republic. It is planned to open a trading house of the JSC Oremi, JSC Dastan in Kiev city to solve the issue of selling the products of these companies. With participation of the German company Crones the JSC Arpa, LVZ Ltd., carry out reconstruction of the beer production line and installation of equipment for bottling liquid products. By using the credit resources allocated by the KAFC, the JSC Tattuu has reconstructed its production line and started producing new products. A production line for production of iodized salt is being assembled at the JSC Bishkek-Nan.
Many enterprises produce export-oriented products. But there are tariff and non-tariff barriers, high fees for cargo transit, which significantly reduce exports of goods. There are also problems related to a low level of marketing and management skills at certain enterprises, high level of tear and wear of equipment, inefficient production processes that result in high costs and non-competitiveness of the goods produced.
In the short-term, the volume of industrial output will be increased by means of food and processing, light industries, machine-building. Production of foodstuffs, liquors, tobacco products, woolen fabrics, knitted items, garments, shoes, vehicle radiators, electric ovens, will be increased, as well as production of new products will be developed - iodized salt, juices, drinks, coat fabrics and plaids.
A dominating position in economy of the city belongs to SMEs and individual entrepreneurship that produce more than 50 percent of industrial products and provide more than 70 percent of services to the population. A liberal external trade regime is attractive for development of wholesale commerce. At the same time, exiting administrative barriers, such as numerous duplicating and unjustified inspections on the part of supervisory bodies, tax and customs services, high fees for services provided by various government bodies impede further development of SMEs and individual entrepreneurship. Long-term bank credits are still not affordable for SMEs due to high interest rates.
One of the potential directions of entrepreneurship is tourism. The number of tourists coming to the Kyrgyz Republic increases by 12-14 percent each year. At present there are 150 private tourism companies operating Bishkek alone. In recent years, infrastructure has been improved significantly the Manas airport has been reconstructed, several hotels have been built in accordance with international standards. Shops, restaurants, cafes appeared which provide high-quality services, roads are being rehabilitated, communication means, including mobile communication, are being developed.
Bishkek absorbs 50 percent of all the investment in the Republic, as well as a half of all direct foreign investment. External financial assistance received under the Governments guarantee from donor countries and international financial organizations is mainly allocated for reconstruction of the Manas airport, rehabilitation of highways, electricity and heating supply networks, gas pipelines, development of telecommunications, as well as procurement of equipment of educational and health facilities, and support of SMEs. Financing provided by the Government of Germany supports a project for the transfer to the use of electricity for cooking purposes in order to reduce natural gas consumption.
Direct foreign investment is used in construction of hotels, facilities in the sphere of services and establishments of joint ventures. A significant degree of assistance in attracting direct investment is provided by the EBRD that provides advisory and financial support to private enterprise and for construction of a number of large facilities in Bishkek. Although Bishkek absorbs a major share of the investments made in Kyrgyzstan, it remains insufficient for developing the citys potential and resources in full. Investments are necessary for further development of SMEs and a higher degree of processing of agricultural products. One of the major directions is development of export-oriented production. In this direction a significant assistance can be provided by a new EBRD credit line, under which the loans will be extended to private enterprises through commercial banks without a government guarantee.
One of the problems that remain, is a lack of municipal housing, in particular, for poor families. In the last three years, 277,500 square meters of housing or 2,400 flats have been constructed mainly by the private sector. To solve this problem, the Office of the Mayor of Bishkek envisages an allocation of resources from the city budget to provide finance for construction of new dwellings for poor families as well as for completing construction of buildings that have not been completed due to various reasons. In addition, the Mayors Office buys apartments to be allocated to poor families in accordance with an official waiting list.
A significant problem is internal migration from other regions to Bishkek. More than 83 percent of the total internal migration in the Republic over the last decade has flowed into Bishkek. This has necessitated creation of communication and social infrastructures necessary for migrants settlements that have appeared in the vicinity of the city. Resources allocated from the budget permit the satisfaction of only the minimum needs. Because this problem is growing, it is necessary to take radical measures related to employment of migrants, ensuring access to high-quality educational and healthcare services.
An interim version of the Citys Strategy on Poverty Reduction has been prepared within the CDF/NPRS and the Program of Poverty Alleviation for 2002 has been developed, which envisages a series of specific measures, the implementation of which will decrease the poverty level by 5 percent in the current year and lift about 10,000 people out of poverty. Taking into account that the problem of poverty cannot be solved without development of the real sector, the efforts of the Mayors Office and rayon administrations will be focused on creation of favorable conditions for and support of SMEs, individual entrepreneurship, attraction of investments, and promotion of educational and healthcare reforms. Active measures will be continued in providing targeted social support for poor inhabitants of the city.
With the aim of attaining the major goals and objectives of the CDF, the Mayors Office has developed programs aimed at development of food and processing industry, production of consumer goods, small and medium business, attraction of foreign direct investment, development of communal utilities of the city, and so forth. The major development priorities in these programs are as follows:

strengthening targeted social assistance to the poor, conducting annual social passportization, preparation of poverty maps, expanding the micro-financing network;

social support for homeless children;

continuation of education and healthcare reforms;

improving the system of local self-governance in Bishkek;

promoting development of small and medium business;

tourism development;

development of infrastructure and communal property;

increasing inflow of investments by creating a favorable climate;

development of the financial sector; and

support and promotion of export-oriented and import-substitution industries.