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Tajikistan is asking creditors to defer debt payments and simultaneously is applying for the new loans. Experts doubt that the authorities will be able to find sources to repay loans.
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Tajikistan is unable to pay off its external debt due to the deteriorating economic situation in the country after the coronavirus outbreak in 2020 and the decline in migrant remittances.
First Deputy Prime Minister of Tajikistan Davlatali Said wrote in his address to the Asian Development Bank (ADB) that due to the coronavirus pandemic, the Tajik economy is in a ‘force majeure’ situation and the country needs assistance.
Tajikistan’s request to defer external debts appeared amid reports that the government plans to borrow another $562 million from foreign countries and organisations in 2021; partially, the loan will be allocated for Rogun Hydropower Plant construction.
The World Bank December Update stated that Tajikistan has a high risk of debt distress. The World Bank believes that “any new non-concessional borrowing adds to the pressure on public debt sustainability”.
The World Bank reported that Tajikistan joined the group of countries that recently applied to the G20 Debt Service Suspension Initiative (DSSI) created to help developing countries.
“The DSSI’s objective is to support low-income countries by suspending official bilateral debt servicing through mid-2021,” the World Bank Update notes.
According to the World Bank, by now, only China agreed to Tajikistan’s request to defer the external debt payment until mid-2021.
After the World Bank Update publication, on January 19, the Ministry of Finance of Tajikistan issued a statement – it commented the undisclosed media’s publications about Tajikistan being on the verge of default.
“The main goal of the Republic of Tajikistan joining this initiative is to mitigate the consequences of the crisis by concentrating public expenditures on countering COVID-19 pandemic, and not relieving the debt burden on the country’s financial situation, as those published articles claimed,” the Ministry of Finance stated.
The Ministry of Finance assured that “the funds freed up after suspension of external debt servicing were allocated to the country’s healthcare sector”.
As part of this initiative, on September 3, 2020, Tajikistan signed a corresponding memorandum with the Paris Club.
“As a result, the parties came to the agreement to suspend payments on debt obligations to China’s Export-Import Bank (Eximbank) and Kuwait Fund for Arab Economic Development for $43 million and the German KfW Development Bank for €363 thousand,” the statement said.
According to the Ministry of Finance, as of October 1, 2020, the total amount of Tajikistan’s external debt is $3 billion 163.2 million, or 36.9% of the country’s GDP. $149.2 million was allocated to servicing the country’s external debt for 9 months of the last year.
At the same time, according to the global analytical organisation Transparency International, corruption is widespread in Tajikistan. According to the 2019 ranking, Tajikistan ranks 153 out of 180 countries by corruption level. The disproportionate wealth and large foreign assets of Tajik officials are highlighted in a number of studies and investigations by international think tanks and media. The Organized Crime and Corruption Reporting Project (OCCRP) published the latest investigation on this topic in June 2018.
Another major problem associated with the scarcity of the state budget is smuggling. Various reports and studies on Tajikistan also mention it.
The experts say the coronavirus pandemic is not over yet, and it is unlikely that Tajikistan will be able to pay off its foreign debt in the second half of 2021.
Economic expert Abdumannon Sheraliev said that after the second half of 2021, Tajikistan is unlikely to be able to pay off its external debt. According to him, the impact of the pandemic on the economy will continue at least until the middle of this year, when the economic crisis will reach its peak.
“The chances of repaying loans are very low not only in the first half of the year, but even in the second. The only way is to use gold (gold reserve), but considering the rate at which the government spends it on domestic needs, the prospects for debt repayment are very remote,” said the Tajik expert.
According to Sheraliev, the external debt’s growth will lead to default on credit.
“This means that in the near future, most financial institutions and countries, except for China, will not provide loans to Tajikistan,” Sheraliev said.
With the external debt’s growth from year to year, the country’s budget expenditures on interest payments and the loan amount increase. In particular, in 2021, Tajikistan will spend $213.5 million from its budget to pay off the external debt and interest, in 2022 – $238.2 million, and in 2023 – $243.3 million.
According to Doctor of Economics Khojimuhammad Umarov, the government’s plans to pay off external debt after the first half of 2021 are too optimistic and difficult to implement.
“The Tajik government should work on the strategy in case if these plans fail,” Umarov said.
He believes that Tajikistan can start paying off the loans no earlier than in the second half of 2021.
Can China Cooperate?
The main Tajikistan’s creditors are the government and banks of China, which account for half of the country’s external debt. Kyrgyzstan, a neighbouring state with Tajikistan, announced fundraising from citizens to pay off its external debt. However, this initiative did not find support and raised the criticism against corrupt officials and irresponsible authorities’ actions, which caused a sharp increase in external debt.
Rising debt to China increases the risk of country’s dependence, raising concerns among Tajik civil society activists. They believe that China, in exchange for repayments of debts, may demand taking control of deposits of gold or other minerals from Tajikistan.
Tajik economist Firuz Saidov believes that considering the political motivation, China can play along with Dushanbe’s plans, and either prolong the loan payments or discharge part of the debts.
“Excessive debt makes the country more dependent on the creditor state. This is part of the strategy of relations between the states: the way they cooperate and, most importantly, from whom they take loans,” added Saidov.
Economic observer Zulfikor Ismoiliyon says the only way to pay off Tajikistan’s external debt is to borrow from China again and pay other creditors.
“China realizes that Tajikistan will not be able to repay the debt, therefore, in exchange for the debt payments, the provision of the precious metals mines or part of Tajikistan’s territory will be required,” Ismoiliyon said.
According to him, the country needs to become independent of the migrant funds and develop its own economy in order to pay off external debts.
“Tajikistan is living off the migrants’ remittances for more than twenty years. Migrants cannot send money today. As a result, people do not know how to earn for a living,” concluded the Tajik economist.
This article was prepared as part of the Giving Voice, Driving Change – from the Borderland to the Steppes Project implemented with financial support from the Norwegian Foreign Ministry. The opinions expressed in the article do not reflect the position of the editorial or donor.
In early November, the Parliament of Tajikistan adopted amendments to the Tax Code, according to which various global online corporate giants, such as Google, Apple, Microsoft, Facebook and others providing paid services in the country, must pay the Value Added Tax (VAT) to the Tajik budget. In CABAR.asia interviews, the digital market experts say the measures could destroy the internal online services market.
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Speaking in Parliament, Finance Minister Faiziddin Kahhorzoda said amendments on imposing taxes on foreign companies providing digital services in Tajikistan would be introduced in a separate chapter of the Tax Code. The Minister stressed that according to Article 193 Paragraph 1 of the Tax Code, foreign individuals providing digital services to individuals in Tajikistan directly or through intermediaries are recognized as taxpayers.
“In addition, according to Article 193 Paragraph 2, a foreign individual must submit an online application to the authorized state body and register as a VAT payer no later than 20 days from the date of the beginning of the digital services provision in the Republic of Tajikistan,” the official website of the Parliament quotes the Minister.
According to him, Article 193 Paragraph 5 explains the taxable types of digital services and lists 16 cases based on international experience.
According to the Minister, the introduced amendments will contribute to the further improvement of the tax legislation of Tajikistan and increase revenues to the state budget.
In 2017, the Chairman of the Tax Committee Nusratullo Davlatzoda addressed the government with a proposal to tax a number of popular global online services, including Google, Apple, Microsoft and Facebook.
Davlatzoda noted that the Internet is used not only to provide information, but also a number of paid services. These include the sales of games, movies, books, music, air tickets, hotels, housing, and travel programs. Mainly foreign companies provide such services, but, due to ‘imperfect legislation’, they do not register with the tax authorities and do not pay taxes.
Experience of Russia and Uzbekistan
Russia was one of the first post-Soviet countries to impose a tax (known as the “Google tax”) on large online companies. This type of tax is in effect in this country since 2017.
At the end of 2019, the Federal Tax Service of Russia reported that in the three years since the introduction of this tax, the country’s budget would receive about 82 billion rubles ($1.02 billion). Currently, the same tax is introduced in Belarus and Uzbekistan.
In Uzbekistan, the amended version of the Tax Code introduced on January 1, 2020 includes a separate Chapter 39 that defines the taxation on income of foreign legal entities providing digital services in Uzbekistan.
Currently, there is no exact information about the funds received by Uzbekistan from this tax, but in April 2020, the press service of the State Tax Committee of the Republic of Uzbekistan told the media that Google Commerce paid the Uzbek government €85 thousand of VAT during the first quarter of this year.
Last summer, Kazakhstan also decided to tax foreign online companies. The decision came into force on January 1, 2021.
The amendments to the tax legislation of the Republic of Kazakhstan suggest that starting from January 1, 2021, foreign online companies will be required to pay VAT. The new tax will not affect goods’ sales online, but will be imposed on, for example, the purchase of e-games and e-books, as well as online advertising and domain names purchase.
Introducing these amendments, the Kazakh tax authorities plan to replenish the budget by about 2 billion tenge ($4.6 million).
Violators Will Be Fined
An anonymous representative of the Tax Committee of Tajikistan told CABAR.asia that if the Tax Code were amended, the foreign companies providing digital services would register with the tax authorities in the taxpayer’s personal account. These services primarily include paid online games, audio and text e-books, and advertisements on the platforms of e-service providers. The source said that these companies would pay VAT – an indirect tax on the supply of services. The companies will also have to pay to place their ads on online platforms.
“Thus, the company providing e-service will have to include VAT in the service price and pay it to the budget of Tajikistan,” the source explained to CABAR.asia.
According to the tax officer, it does not matter where the seller providing e-services is, but it is important that the customers pay tax at the place of purchase.
He added that the amendments would not affect the work of stores selling goods online, as they sell products, for which VAT is paid when they are transported via the customs points.
Our source said that in case of non-compliance with the law, these companies would be subject to administrative fines and restrictions on the right to provide services.
“Everything that can be downloaded online for free will not be taxed. Only paid services will be taxed,” he explained.
The Tax Committee’s representative did not specify the volumes of the digital services market in Tajikistan.
Experts Doubt the Amendments’ Effectiveness
According to Muhammadi Ibodulloev, the Head of the Civic Internet Policy Initiative NGO, the proposed amendments could create problems in using digital services and purchasing goods online.
“Currently, online technologies facilitate many areas of activity. Therefore, any restrictions in this area will affect other areas,” Ibodulloev said.
According to him, the Tajik consumers will be limited in obtaining services such as purchasing software, antivirus software and e-books, in taking international exams online or distance education.
In case the consumers lose access to these services, they will not be able to maintain their equipment or will lose access to demanded information.
Ibodullev also doubts the economic effectiveness of these amendments.
“A question arises: what will the government gain from the adoption of these amendments? It will take a lot of time and effort to manage such a tax. Even if it brings financial benefit in the near future, the damage to the country’s development is possible in the long term,” Ibodulloev said.
Other experts also paid attention to the fact that the Tajik citizens will actually pay VAT.
The Advertising Market Will Be Affected
Another expert on information and communication technologies Asomiddin Atoev believes that the implementation of this project may create problems for the development of the country’s advertising market.
“This project will significantly affect the internal online advertising market. The amounts that the tax authorities are expecting to receive from the taxation of e-service companies are unrealistic,” Atoev said.
The expert underlined that the Tajik market is not very attractive for large e-service companies such as Google, Microsoft and Facebook, and they will not make much effort to keep working in Tajikistan.
“On the contrary, we need e-service companies. This will allow us to develop internal online content faster,” Atoev said.
Asomiddin Atoev considers it wrong to follow the example of Russia and other countries, where VAT was imposed on the e-services.
“The online market is more developed in those countries, so such comparisons are illogical,” Atoev said.
This article was prepared as part of the Giving Voice, Driving Change – from the Borderland to the Steppes Project implemented with financial support from the Norwegian Foreign Ministry. The opinions expressed in the article do not reflect the position of the editorial or donor.
Since 2017, Kazakhstan has had a programme of voluntary migration from densely populated southern regions to labour-scarce northern regions. The migrants receive social package, namely, employment and accommodation assistance.
The experts assess this initiative differently: some believe that citizens will have more opportunities and their rights will be better protected, while others believe that the Uzbek authorities’ attempts will not have impact on the established migration flows.
Every year, Kyrgyzstan records dozens of financial pyramid schemes, while losses of citizens amount to millions of soms.
According to critics, the election of Zhaparov as a president does not mean the settlement of the political crisis, which Kyrgyzstan has faced since last autumn.
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The victory of Sadyr Zhaparov who had been in prison just three and a half months ago serving his 10-year term, has not been a surprise. The figures published by the Central Election Commission, 82 per cent, were a surprise. This is the number of voters, according to preliminary data, who voted for this contradictory politician. This record was demonstrated by Kyrgyzstan back in 2005 – when Kurmanbek Bakiev came to power after popular unrest and won 88 per cent of votes. But five years later, he had to flee the country just like the first president Askar Akayev because of the widespread corruption, poverty and persecution of his critics.
Sadyr Zhaparov promised not to repeat the mistakes made by his predecessors, and firmly believes that we must return to the presidential government, which was ten years ago, in order to fight corruption, develop economy and contribute to overall development efficiently. At the referendum that was held on January 10 along with the presidential extraordinary election, 84 per cent voted for the presidential government.
It means that a new draft of the constitution with the presidential government will be proposed to the citizens of Kyrgyzstan in a few months and it will be obviously approved. Speaking on the Sunday press conference after the announcement of the first results of the election, Zhaparov said the authorities were going to hold both the referendum and parliamentary election before summer begins.
In early October, the authorities in Kyrgyzstan were changed after the unfair parliamentary election. The protesters who were dissatisfied with the election results seized the buildings of the parliament, government and presidential administration on the night of October 6, and also freed some politicians from prisons, including Sadyr Zhaparov, who was serving his 10-year term in prison since 2017 on a charge of organisation of mass disorders and hostage taking in 2013. Amid the political crisis, the new government headed by Sadyr Zhaparov was formed in October 2020, and a week later President Sooronbai Zheenbekov suddenly resigned office and Zhaparov became the acting president.
Zhaparov immediately declared the need to hold the constitutional reform and to return to the presidential government instead of the current parliamentary presidential system. He initiated the creation of the Constitutional council that drafted the new version of the constitution. The new draft of the constitution suggests the elimination of the post of a prime minister, a transfer of all executive powers to the president, the right of initiation of draft laws and restriction of the parliament’s supervising function. According to Zhaparov, this constitution will let the president carry out special reforms and be responsible for their outcomes.
His critics and opponents fear the restoration of the authoritarian regime, which was during the presidential rule of Askar Akayev and Kurmanbek Bakiev. Both fled the country after mass riots in 2005 and 2010, respectively. According to Zhaparov, there will be no authoritarianism in Kyrgyzstan and he will listen to his critics.
In October 2020, Sadyr Zhaparov came to power under controversial circumstances, and a range of key foreign political partners of Kyrgyzstan, including the United States, Russia and European Union, were in no hurry to admit he was legitimate. Now Zhaparov can feel relaxed – one of the first to congratulate him were the president of Russia Vladimir Putin, and leaders of neighbouring Kazakhstan and Uzbekistan. The embassy of the USA and the European Union issued a statement welcoming the election and the referendum results.
“Trending populism”
In general, the public of Kyrgyzstan, local and international observers have no doubt about the results of the election and referendum. At the same time, local and international observers noted the facts of intimidation of observers and voters at some polling stations in the regions, restriction of work of independent local observers at some polling stations, as well as the prejudiced position of the key state TV channel KTRK regarding the opponents of Sadyr Zhaparov.
Local and international observers have noted a low voter turnout at this election. Nearly 39 per cent of all voters came to polling stations. Almost 56 per cent of voters came to the parliamentary election held in autumn last year. According to the experts, it happened due to the elimination of the so-called form No. 2, which allowed internal migrants to vote at a place other than their registered address, as well as to the poor use of administrative resources and vote buying.
According to political analyst Emil Dzhuraev, low voter turnout can be explained by winter and tiredness of politics.
“After three months of active processes, the country feels some tiredness of politics,” the political analyst said to IWPR. “Also, we felt that the election results were predetermined. Those who were against Zhaparov and the presidential government did not attend the election.”
According to Dzhuraev, the majority of people who voted for Zhaparov also supported the presidential form of government. Now the hardest thing, according to him, is to make people accord and to consolidate public opinion.
Political analyst Chinara Esengul noted that the results of the past election is the result of low political culture and divided public opinions. Also, she said, the world, including Kyrgyzstan, sees a trending populism.
“For me, the election results are not surprising because most people who voted elected Zhaparov,” she said to IWPR.
A phenomenon of Sadyr Zhaparov
Before last October, the country did not take Sadyr Zhaparov as a republican-level politician. His political career started in 2005, when he was elected in his native district in the east of Issykkul region as a member of the national parliament under the single member constituency. In 2007 to 2010, he was an unremarkable mid-tier official during President Kurmanbek Bakiev.
After the regime of Bakiev was overthrown in autumn 2010, he returned to the parliament as a member of Ata Zhurt party, where he raised the question of nationalisation of the gold field Kumtor. He became known to the public in autumn 2012 when he was arrested together with his party fellows Kamchybek Tashiev and Talant Mamytov. After the rally at the central square regarding the Kumtor issue, he and the crowd got over the fence of the ‘White House’ where offices of the president and the parliament are located. A few months later, all three party fellows were released on bail.
In 2013, Sadyr Zhaparov again organised a rally for the nationalisation of Kumtor in Issykkul region, in the vicinity of the gold field. The rallies turned into mass disorders and the governor of the region was taken hostage for some time. The law enforcement bodies reported that Sadyr Zhaparov was the organiser of the riots but failed to arrest him as Zhaparov left the country. Until spring 2017, Zhaparov had lived at Cyprus, Poland and for a short time in Moscow. In March 2017, he decided to come back to the country to take part in the presidential election, but was immediately arrested and then sentenced to 11 years and 6 months in prison.
In his recent interview to the Russian newspaper ‘Kommersant’, Zhaparov explained his success by his active work on social media while being in exile and then under arrest and by delivering his ideas and views to the fellow countrymen.
According to the experts, Zhaparov is a typical populist and came to power by using all options of populism.
According to political analyst Chinara Esengul, the phenomenon of Zhaparov is that the people take him as a victim as he served time in prison. The Kyrgyzstanis follow the politics and make their choice based on their emotions, not cold math. Therefore, now the people want to trust the person who was suffering.
Political analyst Elmira Nogoibaeva said that people have high hopes for Zhaparov.
The people take Sadyr Zhaparov as a kind of a mythological hero who represents neither officials, nor former elite,” Elmira Nogoibaeva said. “Many people take him as their own, a victim of political repression and a martyr. Regional identity is also significant here. Although he was born in Issyk-Kul, he has many followers in the south of the country, plus he’s religious, moderate, has no political enthusiasm, and a big credit of trust.
People will wait for results
Kyrgyzstan is one of the poorest countries in the world with the annual budget amounting to as low as 2.5 billion dollars. Out of 6 million people, one third are officially below the poverty line, and nearly 1.5 million citizens have left the country to earn money. Corruption and inefficient work of state bodies is one of acute problems. Kyrgyzstan has a large state debt for 5 billion dollars, the majority of which is owed to neighbouring China. Despite numerous requests, Beijing has refused to grant a grace period. Last year, coronavirus has aggravated the tough situation in the country and increased the debt amount by 150 billion dollars taken by the country from the International Monetary Fund (IMF).
During the election campaign, Sadyr Zhaparov promised to eliminate the roots of disaster in the country and settle down to a course of steady development.
According to Elmira Nogoibaeva, Sadyr Zhaparov has many challenges to respond as he has come at a difficult period. Now the important issue is the budget deficit and the expected crisis – new sources of budget supply have to be found and the country’s foreign debt has to be repaid. The second, equally important aspect, according to the political analyst, is the regaining of public trust to the authorities.
“What’s important here is how he will form the team. Now most managers are unprofessional. It is also important how he will pursue foreign policy. It is a key issue for migrants,” she said.
“Now it’s time to work. In coronavirus times, when lockdown was announced since last March, the economy has been in recession. I want to wish luck to his team,” said political analyst Chinara Esengul.
According to Nogoibaeva, Zhaparov promoting the presidential government takes control of all powers and refuses from the parliamentarianism, i.e. legal delegation of power.
“I’m afraid his next steps will be taking control of powers. First of all, of security and economic agencies. This is the logic of fear. It is effective, but not in Kyrgyzstan,” said Elmira Nogoibaeva.
His victory does not mean stability, according to Chinara Esengul.
*IWPR-trained journalist contributed to this report.
This article was prepared as part of the Giving Voice, Driving Change – from the Borderland to the Steppes Project.
Specialists in economy make downside forecasts regarding the economic situation in the republic for the year to come.
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Due to the coronavirus pandemic announced in early 2020, the economy of Kyrgyzstan became stagnant and suffered bad losses. Actually, such situation developed almost in all countries of the world. Since March, the country introduced strict lockdown measures that were lifted a few months later. Almost all sectors of economy, but food producers, were in stagnation at this period.
Now, the budget shortfall is predicted at 35.6 billion som, and GDP is 4 per cent lower than the expected level because of the pandemic and political events in the country.
The economic crisis has had a direct impact on the welfare of people and their purchasing power. Those people who worked in service industry and lived on daily earnings and were employed in the small and medium-sized businesses were hit so hard.
World Bank’s assessment and forecast
According to the World Bank in Kyrgyzstan, the poverty rate in 2020 can increase by 5-6 per cent in average compared to 2019. According to the pessimistic forecast, the growth can amount to 17.5 per cent.
According to the World Bank, their optimistic forecast failed. According to them, food prices make up 60 per cent of all factors.
According to the World Bank, the main sources affecting the poverty rate in Kyrgyzstan due to the pandemic are: labour income, transfers from migrant workers, and rise in food prices. Thus, the rise in food prices leads to the increased number of people living in poverty. For example, if food prices rise by 5 per cent, the poverty rate rises by 3.5 per cent.
The reduction in money transfers is related to the lockdown measures in Russia and Kazakhstan, where the bulk of Kyrgyzstanis work. In particular, the sectors of construction and service were suspended. The reduction in money transfers will have its impact on Batken, Osh and Dzhalal-Abad regions.
“34 per cent of people in Batken region and 23-24 per cent in Osh and Dzhalal-Abad regions live on money transfers. These factors will affect the growing poverty rate. It is worth mentioning that in the last 10 years, money transfers in these regions have played a significant role in the reduction of poverty,” according to the World Bank.
As to the labour income, according to the World Bank, 70 per cent of employed population work in the high-risk sphere during the crisis.
“It’s obvious. The economic activity was suspended. Then, economic activity slowed down. We have outlined three groups of economic activities that are highly exposed to the crisis due to the Covid-19 pandemic: average risk – sectors that continued to work at the same level, and even increased production of services, and high risk,” according to the WB experts.
High-risk sectors are retail industry, hotel business, restaurants, construction. These are the industries that employ the majority of poor population. In fact, this leads to the growth of poverty and children are the most vulnerable group.
“Our forecasts show that the child poverty rate will increase depending on economic consequences at least by 36 to 55 per cent. This is quite a high child poverty rate,” according to the WB.
Expert opinion
Experts predict a sharp increase in the poverty and extreme poverty rates in Kyrgyzstan in 2020.
According to expert Denis Berdakov, a sharp increase in the poverty rate will be faced by Bishkek, Chui region and Osh, where the majority of economic activities are concentrated. In particular, service industry, retail industry, and small businesses.
Naryn and Batken regions, where previous poverty rates were high, won’t see a sharp gap.
“0.5 per cent of our people live in extreme poverty, according to the statistical data. These people live on less than a dollar per day. According to the latest data, the poverty rate in the country is 20 per cent. Dzhalal-Abad, Naryn and Batken regions are the regions with the poorest population groups,” he said.
Based on the 2020 results, Berdakov predicts a rise in the poverty rate in Bishkek, Osh and Chui region up to 30-35 per cent.
According to the official data of the National Statistical Committee of Kyrgyzstan, in 2019 20 per cent of people in Kyrgyzstan live in poverty. The poverty rate in Bishkek was 11.9 per cent, in Chui region 19.1 per cent, in Osh 14 per cent.
Speaking about extreme poverty, according to the 2019 data, 35,836 citizens belong to this category in the republic. The majority of citizens living in extreme poverty reside in Osh region – 12,050 citizens, in Naryn region – 7 thousand people, in Dzhalal-Abad and Issyk-Kul regions – 6 thousand people each. Last year, no one in Bishkek, Osh and Talas region belonged to the category of extreme poverty.
The expert in economy Adilet Mamatov added that high poverty rates are expected in 2020 because of the suspension of the service and retail industries, which makes people run into debts.
He said that a massive number of people would slip into poverty, and the middle-class people would fall into poverty.
“The poverty rate will grow up to 15 per cent,” Mamatov said.
According to experts, the situation would be somehow improved by money transfers from migrant workers, but no big contributions can be expected as many Kyrgyzstanis abroad were left unemployed or had to come back to the home country.
According to Denis Berdakov, the countries of the region rely mainly on remittances from migrant workers today, so no significant growth of the poverty rate is expected in Naryn and Issyk-Kul regions.
Coronavirus and coup consequences
According to ex-deputy chair of GKNB of the Kyrgyz Republic Artur Medetbekov, street robberies and looting tend to increase in 2020. He noted that in times of crisis, crimes both at the street and national levels, namely, corruption and smuggling, become most frequent. This is the trend seen in Kyrgyzstan. He specified that small and medium-sized businesses involving the majority of population suffered the most because of the pandemic and political events.
According to the General Prosecutor’s Office of Kyrgyzstan, 92,430 cases were filed in 9 months of 2020 with the Unified Register of Crimes and Offences (ERPP). In the same period of 2019, 73,619 cases were filed.
According to the Ministry of Interior Affairs of Kyrgyzstan, crime rates tend to decline, but they failed to provide any information or figures to prove their statement.
What will be with migrant workers?
The lion’s share of migrants from Kyrgyzstan work in Russia. Their money transfers support the significant part of the population of Kyrgyzstan, especially rural citizens. However, coronavirus has affected this sector. The Russian economy, just like in other countries, suffers a crisis, which has reduced the total amount of remittances.
According to the director of the Institute of Social and Economic Studies at the Financial University of the Russian government, Aleksei Zubets, Russia coped with the crisis easier than it was expected. He explained that the economy of Russia would be better than in other countries because after autumn the national government did not introduce a hard lockdown, whereas other countries still have partial or full lockdown.
“On the other hand, we should understand that we won’t see rapid development either. By results of the year, GDP can rise by 2-3 per cent after all fallouts. Next year, we’ll manage to make up for time lost in 2020 and to see a minor growth. Thus, the economy will be developing at a slower pace,” he said.
According to Zubets, unemployment in Russia has risen 3-4 times since the beginning of the crisis. It can cause some irritation towards migrants. In other words, the national government will prefer its citizens when employing. The director of the Institute said that some segments of the labour market can be fully blocked for migrants. For example, the taxi industry in Moscow.
“Migrants were already unwelcome in this sector before the crisis. Russian citizens are very angry over the number of migrants in this industry. The same refers to the construction industry,” he said.
Aleksei Zubets acknowledged that there are no good news for the migrants from Kyrgyzstan so far. According to him, the Russian labour market will be more unavailable for the migrants. The exception is made for qualified specialists such as physicians and teachers.
How to solve the problem?
In the mid-run, according to Denis Berdakov, more emphasis must be placed on creating jobs within the country. By 2022, the world will not need unskilled workers. But the majority of migrants from Kyrgyzstan are unskilled workers.
“We’ll have to give jobs to hundreds of thousands of such workers,” he said.
The expert predicts a large outflow of skilled workers, programmers, physicians, teachers, and others.
“In the short term, it’s the launch of serious projects in Kyrgyzstan that can utilise this workforce. We’ll see a good scenario if we re-launch projects, construction of roads, dams, substations, tunnels, etc. We can pay little money and work for one and a half or two years,” he said.
Besides, the expert said that we needed to train specialists who will be in demand abroad. In particular, we should restore vocational training schools.
“We need to give our citizens an opportunity to find jobs within their specialty in South Korea, Turkey, Japan, Dubai, etc.,” he said.
According to Adilet Mamatov, in the short term, loan repayment holidays must be announced to support people in this situation. People took out loans for their businesses, but businesses are now suspended, and no loans can be repaid. He said that almost all sectors suffer. It affects the purchasing power of people. For example, nearly 800 cars used to be sold and bought on the car market each week, but today this number has fallen down to 120-150.
In the long run, Mamatov suggested to drive up demand for goods and services, create new jobs, and start implementing state and national projects. He admitted that this is a hard yet possible task to implement domestically.
“We should start building new housing, thus creating jobs and raising the product demand. The added value will work here,” he said.
According to Adilet Mamatov, the emphasis should be placed on already available markets for migrants, namely, Russia, Kazakhstan, Dubai, South Korea. However, only skilled workers must seek jobs there.
This article was prepared as part of the Giving Voice, Driving Change – from the Borderland to the Steppes Project.
President’s party wins again as pressure grows on independent observers and opposition forces. (more…)
The reform of the law enforcement system is discussed in Kazakhstan for a long time, but the process is not moving ahead. Experts say the changes should start not with the Interior Ministry, but with the political system as a whole.
The lack of systemic approach to problem solving in cattle industry and meat production does not allow the country to take its niche in the global export of meat.