Problems of economic sectors of the kyrgyz republic

Journal of Environmental Treatment Techniques

2019, Volume 7, Issue 4, Pages: 613-622

J. Environ. Treat. Tech.

ISSN: 2309-1185

Journal web link: http://www.jett.dormaj.com

Problems of Economic Sectors of the Kyrgyz

Republic

Tolobek K. Kamchybekov *, Kobogon A. Atyshov , Bakhtyiar Bakas uulu

Doctor of Economic Sciences, Professor, Kyrgyz Economic University named by M. Ryskulbekov

Doctor of Economic Sciences, acting Associate Professor, Kyrgyz Economic University named by M. Ryskulbekov

Received: 19/05/2019 Accepted: 27/08/2019 Published: 29/08/2019

Abstract

At present the Kyrgyz Republic’s key task is the transition to a model of the dynamic, stable and steady economic growth, which

is based on enhancement of the state’s role, economic competitiveness. Those problems are the most important due to exceptional

significance of a correct choice of the strategy and tactics of the social and economic development of the country in the mid-term and

long-term prospects, a depth of transformation changes in the economy. In view of this, it is important to determine the problems in

sectors of the economy, which impede the country’s dynamic development. The first part of the article examines theoretical aspects

related to a definition of the economic growth. The second part covers an analysis of problems in different economic sectors of the

Kyrgyz Republic. On the basis of the developed plan the research’s main goal is to analyze the strategic development of the country’s

economy. The research used the combination of quantitative and qualitative approaches, the use of a method of system analysis,

classification and generalization. The article deals with the main working tools. Firstly, the use of an institutional approach in the

research added a significant synergetic effect to it. Secondly, the processes of transformation of the social and economic system are

considered by means of the basic notions of the economic growth very logically and regularly. Thirdly, acknowledgement of

institutional changes in the market production relations in the economy being reformed as the dominant idea made it possible to sort

out pressing issues, which address the tasks of optimizing the market transformation of the economy. The outcome of this article is

revelation of the major problems in the key economic sectors of the Kyrgyz Republic and formation of theoretical and practical

measures to solve them, which, in the long run, could exert its positive influence upon the political and economical situation in the

republic.

Keywords: institutional changes, economic growth, economic sectors, structure of production, corruption.

conducted in Kyrgyzstan and in the member countries of the

common economic space.

Introduction

The Kyrgyz Republic is the former Soviet republic, which

The problem of sustainable economic development of the

Kyrgyz Republic is mainly researched within the conducted

scientific and practical research in the country. It is necessary

to particularly note the papers of such great Kyrgyz scientists

as М.B. Balbakov, Т.К. Koichuev and А.U. Oruzbaev, who

researched the sources of economic development. The

economic growth issues and various related aspects were

considered by А.N. Ayupov, T.K. Kamchybekov, E.V.

Samigullin, Zh.Т. Chuburova and other authors in their papers.

The deep scientific developments of the Kyrgyz scientists,

their scientific views, ideas and approaches to studying the

laws of social and economic development, and the

characteristics of the process of reforming of the domestic

economy are a valuable scientific heritage, which served as a

theoretical and methodological basis for studying the

complicated processes of the society development. In spite of

is located in the Central Asia, belongs to the emerging

economies. The material wealth is the main characterizing

indicator in the capitalist coordinate system, and in terms of

the income level, according to the World Bank’s classification

the republic is ranked among the poor countries. In spite of

that, in the first instance the country is proud of its highly

educated human capital, which seeks to accept and to adapt to

challenges of the global competitive environment.

Materials and Methods

The republic became independent as a result of the USSR

breakup and, by now, the republic holds an insignificant place

in the world economic relations. In this connection, only the

partner-countries take interest in the political, economic and

social problems in the republic. The same is true of attitude to

the scientific constituent part, the main scientific research is

Corresponding author: Tolobek K. Kamchybekov, Doctor of Economic Sciences, Professor, Kyrgyz Economic University named by

M. Ryskulbekov.

Journal of Environmental Treatment Techniques

2019, Volume 7, Issue 4, Pages: 613-622

a great number of the papers on the economic growth in the

world science, those problems continue to hold a rightful place

in the research conducted by modern scientists. Up to now the

scientists and economists have been holding heated

discussions about interpretation of the term “economic

growth” and the related economic categories. “Although the

notion of economic growth goes back to the papers by

economists of the XVIIIth and XIXth century (Zh.- B. Sea, I.

fon Tutena and others), only since the end of the 1930-s this

problem was studied within an independent theory” (1). The

practice of comparison of the growth and an associated but

broader notion “economic development” was spread in order

to more deeply substantiate the essence of the notion

Results

The economic growth in the Kyrgyz Republic during the

independent development took place mainly through the

uncontrolled use of many natural resources. The growth and

structure of the Kyrgyz economy was based mainly on the

anthropogenic extensive and nature-intensive development. In

this respect the country fully depends on the state of natural

ecosystems. The risks of dramatic worsening of the economic

indicators are created in the event of the natural resources

depletion and the environmental pollution. In prospect it is

necessary to consider that historically “raw material” economy

runs its course, as it showed the problematic character of

development in a stable balance with the environment and the

inability to assure the quality of human development. In spite

of the abovementioned strategic vision of the Kyrgyz

Republic in the long term, this is a strong and independent

state, which is included in developed countries, comfortable

for the people’s life, with assurance of protection of their

rights, freedoms and safety, multilingual and benevolent

internal environment, compliance with the laws, high level of

education, healthy environment, social stability, international

image of a wealthy country, sustainable economic growth and

high attractiveness for investors. The authors believe that, in

order to achieve the said goals, it is necessary to take the

following measures:

“

economic growth” in modern research covering this

phenomenon. The economic growth is the midpoint in the

economic development, but it does not reflect the bottom line

of a notion of the “development”. Development is a multi-

aspect process leading to radical changes in social structures,

behavior of people, social institutions, and to the speedup of

economic growth, the reduction of inequality and the

liquidation of unemployment. The World Development

Report, which the World Bank published in 1991, proclaims

as the economic development goal “the life quality

improvement, not the economic growth” (2). In a simplified

way, correlation of the notions «development” and “growth”

can be described by the following way: when somebody “is

growing”, its quantitative parameters are changing, when

somebody “is developing”, it is getting qualitatively other. As

a matter of fact, here the logic of J. Shumpeter, which he used

to determine the essence of economic development, can be

applied. When thinking about the development phenomenon,

the scientist understood it only as such internal changes, which

violate a positive equilibrium and bring the economic system

to the qualitatively other level (3). In light of this many

scientists consider it necessary to theoretically substantiate a

model of the sustained economic growth. The problem of

economic sectors, which is set in the task, demands a deep

methodological and theoretical research to be conducted in

connection with its complicacy, multifacetedness and

dynamism, as the existing level of the analysis remains

underdeveloped: categorical diversity of interpretations and

definitions is preserved, the issues of revelation of problems of

the economic growth, and their contribution to the national

to acknowledge the institutional factors as the key conditions

of achieving the stable and sustainable economic growth;

to revise the regulatory and legal framework of the civil laws,

the governing title, by means of transition from the property

economic conception to the legal essence;

-to hold the preliminary public hearings of the bills affecting

the legal interests and rights of the economic entities in a

mandatory manner;

development of the manufacturing sector, to amalgamate the

agricultural enterprises, to implement a mechanism of

compensation for expenses for a water resource in reservoirs

in the energy sector;

to carry out the reforms in the industry with focusing on

to actively demonopolize the political and economic spheres

of the activities, to form the efficient competitive environment;

to implement the institution of the public private partnership

as an alternative to a method of privatization in the branches,

which are of strategic importance to the country;

economic growth are developed insufficiently. As

to toughen up the anti-corruption laws by means of increasing

methodology of the analysis the paper uses the abstract,

logical, statistical, and structural and level methods and a

method of the comparative and system analysis. The main

sources of the work were official reports of the state authorities

of the National Statistical Committee of the Kyrgyz Republic,

the National Bank of the Kyrgyz Republic and the Ministry of

Finance of the Kyrgyz Republic, the laws of the Kyrgyz

Republic, the theoretical research, in the sphere of the

economic growth as well as the practical papers covering the

problems of development of the Kyrgyz Republic. This article

is aimed at assessing the processes of transformations, which

take place in the Kyrgyz economy, and revealing the key

problems. The crucial thing is an idea of substantiating the

theory of development of a separate reformed national

economy in modern conditions on the basis of determining its

essence and content, nature and specific character, tendencies

and factors.

the legal, property and moral responsibility of all the

participants in the economic relations;

to legalize and formalize the shadow economic activities by

means of simplifying the licensing system and to improve the

regulatory framework regulating the activity of the small and

medium-sized business;

to reduce the state bureaucratic apparatus with simultaneous

increasing incomes for the state employees, who are

acknowledged as honest;

to implement an indicative planning tool into the government

regulation system as a method of the guiding state influence.

Discussion

.1 Economic potential

In 1991 after the Kyrgyz Republic became independent,

while choosing an economic system the Kyrgyz Republic

placed a priority on the mixed (convergent) systemе, whose

main principles are as follows: free business, free pricing

Journal of Environmental Treatment Techniques

2019, Volume 7, Issue 4, Pages: 613-622

system, free competition, minimum state regulation and, of

course, private property. So, the Kyrgyz economy was formed

during the deep crisis, which is related to transition from the

planned economy to the market system.

The years of 1991- 1995 for the republic is a stage of

destruction of the command government system, which is

characterized by the disastrous fall in the GDP (in 1995 the

negative value was minus 20.1% to the previous year). The

years of 1995- 1999 are a stage of forming the market

infrastructure, where it is possible to mention the years of 1996

and 1997 which witnessed a significant improvement in the

economy, while a growth of the real gross product was 7.1 and

model of management of the economic growth and forming a

new policy of the economic growth.

The source is the National Statistical Committee of the

Kyrgyz Republic (4). The economic growth rate in the Kyrgyz

Republic is influenced by various internal and external factors.

The country’s peculiarities include significant reciprocal

influence of the political and economic factors: the political

pressure by other countries leaves its imprint on the economic

stability, which, in its turn, influences the political background

in the Kyrgyz Republic. In accordance with theoretical views

of the economists of the 18th century, the economy-policy

interaction plays a crucial role in the society development. Carl

Marx believed that the state and political relations are

determined by the nature of economic relations and a level of

the productive forces development. “In social production of

their life, - Carl Marx wrote – the people enter into certain,

necessary relations, which do not depend on their will, the

production relations, which correspond to a certain stage of

development of their material productive forces. The

aggregate of those production relations is an economic

structure of the society, a real basis, on which there is a legal

and political superstructure and to which certain forms of the

social consciousness correspond” (5). Then this idea was

elaborated by Vladimir Lenin, who defined the politics as “a

concentrated expression of the economy” (6). In total, all of

that leads to close interweaving of various determinants:

negative development in one sphere leads to negative

consequences in another sphere, giving rise to a multiplicative

effect in the whole society. So, when considering the economic

problems, it is necessary to consider the issues, which exert the

greatest influence upon the Kyrgyz Republic’s economic

situation. To begin with, let’s consider the GDP production

structure in the context of the branches. So, according to the

National Statistical Committee of the Kyrgyz Republic, a

share of production of the goods and services relative to the

economic sectors is as follows (Table 1).

9.9%, respectively. In the newt years of 1998-1999 the Kyrgyz

economy experienced some shocks, when the economic

activity declined up to 2.1% in 1998 and 3.7% in 1999, which

became a consequence of economic crises, which broke out in

Russia and East Asia. Since 2000 the economic growth has

taken place in Kyrgyzstan, and in 2004 an indicator of the real

growth achieved 7.1%. However, in 2005 and 2010 the society

experienced two significant political and social shocks, which

resulted in the economic slump. So, in 2005 the GDP declined

by 0.2%, and in 2010 the GDP declined by 1.4%. A peaceful

transfer of power as a result of election of the President of the

Kyrgyz Republic in 2011 had a beneficial effect on the

economy, which increased by 6 %. However, in 2012 in

connection with the worsening of the situation with the mining

sector, the Gross Domestic Product declined to minus 0.1%. In

2013-2018 the republic saw the positive growth rate, which

was varied from 3.6 to 10.5%.

In summary, it is possible to note that over 27 years of the

reforms, in 9 cases the GDP in the republic declined (the

greatest decline took place in 1995 - minus 20.1%), and in 18

cases the GDP grew (the greatest growth took place in 2013 –

10.5%) (Figure 1). The conclusion about “ostensibility” of the

economic growth in the Kyrgyz Republic for the whole period

of the independent development is the most important. So, at

present there is a growing demand for forming an efficient

Figure 1: Economic growth in the Kyrgyz Republic in 1991-2018 (in billions US dollars and %)

Table1: Production structure (in % of the GDP)

990

1995

2000

2005

2010

20.7

2015

16.7

2017

18.2

Industry

26.4

11.9

23.3

17.3

Agriculture

32.7

7.7

4.9

40.5

6.1

4.2

34.1

3.8

3.4

16.4

28.5

2.7

6.6

17.8

16.3

17.5

5.5

8.6

21.5

14.0

8.4

8.2

18.8

33.9

12.3

8.2

7.5

17.9

35.9

Construction

Transport and communications

Trade

Other services

21.7

The source is the National Statistical Committee of the Kyrgyz Republic

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2019, Volume 7, Issue 4, Pages: 613-622

Table 2: Gold mining on Kumtor

996-1999

2000-2004

102

2005-2009

75.1

2010-2014

82.2

2015-2018

Gold mining (tonns)

54.8

Mined gold cost (in millions US dollars)

The source is data provided by Kumtor (7)

529.9

1 070.9

1 842.9

3 674.9

2 581.3

The major problem is a significant difference of the

economic structure of the Kyrgyz Republic from the economic

structures of the developed countries. As to the economy the

primary sector – the agriculture is developed intensively, while

the secondary sector – the industry is on the decline. The

agriculture continues to prevail in the total output volume,

which shows that the Kyrgyz economy has a distinct

agricultural orientation.

Table 1 shows that the industry’s share in in the GDP

reduced from 26.4% in 1990-s to 18.2% in 2017. It is

necessary to take into consideration that the main share in the

industry itself falls on the production results in the mining

industry, in particular, this is gold mining on Kumtor field.

Trying to build an economy based on the natural resources

is not successful too. The project of developing the Kumtor

field is an excellent example that the natural fields in the event

of total corruption cannot be a source of the economic growth,

and what is even worse, they are getting places of

environmental and chemical pollution. The main item – the

foreign trade, gold exports, brings the country next to nothing,

all the products belong to the concessioners and they are taken

abroad, while giving the appearance of serious foreign

economic activities.

when believing that there is much water. It is false. The water

is not free of charge, and there is not much water... The fresh

water accounts for only 3% out of the total quantity of the

water. So, with account take of the fact that the world

population increases by about 90 million persons per a year, a

crisis is approaching. The water is getting a serious constraint

factors...”(8)

According to the forecasts, by 2025 the glaciers’ areas in

the republic will have reduced by 30-40%, which will lead to

the water content decrease by 25-35%. According to the

Institute of Hydropower Engineering of the National Academy

of Sciences of the Kyrgyz Republic, at present the glaciers

recede three times as quickly as in the 1950-s. Some research

said that the glaciers recede by 50 meters a year and if this rate

is preserved, all the small glaciers will disappear fully and

some large glaciers will remain. The peak of thawing and,

therefore, flow of local rivers will fall approximately on 2020-

2030-s and the flow volume can decrease by 40%. So, the

agenda must contain an issue of rational, economically

substantiated, with account taken of the environmental

constituent part, a mechanism of the use of water resources. In

this connection, it is impossible to manage without the

economic calculations of the water cost. In spite of the fact that

the water as well as the air are generally recognized as

invaluable, when their volume is decreased, there is a question

about the economic assessment of the water in monetary terms.

The researcher O. Boyarkina gave the overall

characteristic in relation to the water, she writes: “Kyrgyzstan

and Tajikistan consider the water as the goods, which have

their cost. They bolster their approach with a sovereign title to

the natural resources within the international private law. The

countries of flow consumption area consider the water as “a

gift of nature” and they appeal to the fundamental standard of

the international water law – a principle of reasonable and fair

use of the water of international watercourse and “an equal

access” to the water resources, according to which the

transboundary waters are the general resource, and, therefore,

free of charge” (9).

From 1997 to 2018 367.21 tons of gold were mined at the

mine. The total cost of the gold mined in that period at annual

average world places was more than 9.1 billion US dollars

(

Table 2.). Meanwhile, as a result of the project

implementation, considering the mining of, on the average, 5

grams of gold per a ton of the rock, the country received 87

million tons of the poisonous processes ore, which is on the

tailing dump with a designed volume of 40 mln. m . There is

a risk that in the event of the existing tailing dam, the cyanides

and still more toxic salts of heavy metals can get to the Naryn

river, and while causing a heavy environmental disaster they

will go about the whole Central Asia.

It is also necessary to take into account that in the republic

there are 92 facilities placing 250 mln. cubic meters of toxic

and radioactive waste of the mining production. The total

quantity of places for the toxic waste increases year on year,

and according to the results of performance in 2017 the total

volume of the toxic waste reached 120 million tons. Those

factors indicate the worsening of the environmental situation

in the country, which appeared as a result of operation of the

harmful mining production.

The international law on necessity to determine the water

cost by the beginning of the 21 century is in the making. But

for the Kyrgyz Republic, the statement, which the President of

Turkey Suleiman Demirel voiced in July 1992 about the water

resources, will be true: “Neither Syria, nor Iraq can pretend to

Turkey’s rivers more than Turkey can pretend to their oil. This

is an issue of sovereignty. We are entitled to do what we want.

The water resources belong to Turkey, the oil resources belong

to them. We do not ask them to share their oil resources with

us gratuitously and they cannot demand that we should share

our waters with them” (10).

In this century those climatic changes are the most

disturbing when water is getting the most valuable product

even on comparison the oil and gold. Experts believe that the

water is turning into the formation center as a seat of tension

and a seat of the growth center.

Of course, the water is a depleting resource. In this

connection the deputy director of the Global Center of the

Environment at the United State Agency for International

Development David Foster Hail voiced the following opinion:

Promotion of an idea of assessment of the monetary

equivalent of the water is not a new subject, it was also

broached by the republic’s leader in the Soviet period - Т.

Usubaliev. He wrote: “The Toktogul reservoir with a volume

of over 19 billion cubic meters of the water increased the areas

“

The majority of people believe that the water is free of charge,

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2019, Volume 7, Issue 4, Pages: 613-622

of irrigated lands by 400 thousand hectares in Uzbekistan and

Kazakhstan, and significantly enhanced the water supply of

other more than 900 thousand hectares of their existing

irrigated lands. In the period of operation of the Kyrgyz inter-

republic irrigation facilities, Uzbekistan and Kazakhstan

received a net profit of 7.6 billion US dollars. In the post-

Soviet period Uzbekistan and Kazakhstan’s governments sell

Kyrgyzstan the gas, the oil products and coal for a currency.

Only in 10 post-Soviet years Kyrgyzstan sent 670 million US

dollars to purchase those energy resources ” (11).

Therefore, formation of a policy of paying money for the

water платности за воду must serve as a basis for mutually

advantageous use of the resource of the transboundary waters.

Political and economical understanding that any land resource,

including the water, has a monetary equivalent, must lead to

the economically efficient and environmentally reasonable use

of such a depleting natural resource as the water. In this case,

it is appropriate to cite a quotation of the researcher A.

Likhacheva: “Many economist often define the water as a

normal economic welfare and they have certain grounds for

that: as a matter of fact, the water is a resource, its price can be

calculated, and a volume of this welfare and a demand for it

can be assessed quite exactly” (12).

Another major source of incomes, which feed the

development of the country’s economy, is the money transfers

of migrants from abroad, which became the greatest in 2017-

2 billion 482 million US dollars (Figure. 2.). In terms of the

volume of the coming money transfers relative to the GDP, the

republic ranks second in the world, and such transfers exert

great influence upon the population’s daily living as well as

upon the country’s macroeconomic indicators.

001

2003

2005

2007

2009

2011

2012

2013

2014

2015

2016

2017

2018

500

000

500

000

001

2003

2005

2007

2009

2011

2012

2013

2014

2015

2016

2017

2018

Figure 2: Money transfers of labor migrants (billion US dollars)

The source is the National Bank of the Kyrgyz Republic

13). In the present period of development the most topical

imply the creation of the engineering-oriented branches. The

industry also has disproportions in territorial placement of the

productive forces, since the industrial enterprises are mainly

concentrated in the Chui valley and in Bishkek. In terms of

efficiency, the Kyrgyz industrial enterprises cannot compete

with the Chinese consumer goods. This is influenced by many

factors including the cost of the electrical power and labor

force and the corruption, the expenses for which have a great

share in the pricing.

In order to analyze the industry’s prospects, it is necessary

to understand the competitiveness of the manufactured

products. This can be done with using the comparative costs

law showing the advantages of what Torrens successfully

called the territorial division of labor (14).

It is possible to imagine three kinds of correlation of the

costs for producing the same couple of the goods in various

countries: equal, absolute and comparative advantages. Each

country will produce the goods whose opportunity costs are

minimum, where the opportunity costs are a number of units

of the goods, which it is necessary to refuse in order to produce

a unit of the other goods. This way of formulating a doctrine

covers any possible configuration of costs.

(

problem is consequences of the outcome of joining of the

Kyrgyz Republic to the Eurasian Economic Union. The

scientists did not research advantages and disadvantages of

this decision, in light of this there are no substantiated

calculations on the economic reasonability of the project for

all its participants. It is evident that the country’s participation

in the Eurasian Union as a matter of priority is a political

project. But for the Kyrgyz economy such changes is another

economic shock. When making analogies it is possible to note

that the same situation takes place in the republic as was the

case in 1991 before the USSR breakup. The authors believe

that having joined the Eurasian Economic Union the Kyrgyz

Republic must reconstruct and change the whole structure of

its economy for the second time, which is difficult, painful and

long process.

4.2 Key problems in branches

During the period of the reforms the Kyrgyz economy lost

an industrial component, it has significant disproportions in

the branch and territorial structure. The existing economic

structure is mainly oriented to the agricultural production, the

mineral output, the production of services and the re-export of

Chinese products. The structure is not innovative, it does not

The competitiveness analysis on the basis of aggregating

some food and nonfood goods in the republic shows that

garments, dairy products, cement and filament lamps has a

Journal of Environmental Treatment Techniques

2019, Volume 7, Issue 4, Pages: 613-622

positive degree of competitiveness. The soft drinks, flour and

sugar has a lower degree of competitiveness. In recent years,

various spheres of food industry come to have the enterprises,

which become leaders and drive up production in the

competitive environment through improving the management,

the marketing, the modernization of production with a focus

on the advanced technologies.

If to consider the manufacturing of the major kinds of the

industrial products in quantitative terms, it is possible to see

the following picture. In 1990 the Kyrgyz manufacturers

produced 1263 electrical machines (for comparison in 2015 no

such machines were produced), 275 thousands alternating

current motors (в 2015 no such motors were produced), 1342

metal-cutting machines (in 2015 no such metal-cutting

machines were produced), 23 400 baling machines (in 2015 no

such machines were produced), 24 300 trucks (in 2015 no such

trucks were produced), 48 500 impeller pumps (in 2015 no

such pumps were produced). In comparison with the output in

reproduction. The branch preserves a high level of the small

commodity production, which cannot compete with the import

products and implement the modern technologies and

equipment. In addition, they could not make connections

between the agriculture and the processing industry properly,

where the government must play a key role. Through deeper

processing of the agricultural products the Kyrgyz Republic

could turn into a center of manufacturing the ecologically

clean products. However, the lack of the relevant infrastructure

impedes the solution of this task.

The agriculture, which was ideally expected to assure the

food security, continues to be inefficient sector. The

agricultural sector has a low production potential, low

efficiency and low adaptability of the branch’s members to the

situation change. Even here the Kyrgyz agricultural products

are partially supplanted by the import agricultural products.

The agricultural production is characterized by a low added

value, and the most part of the fresh raw materials is processed

in Russia and Kazakhstan as before. Structurally the

agricultural products attained its maximum, which is related to

natural restrictions on using the land, which are aggravated by

its low productivity.

1990 (319.8 thousands electric lamps) in 2015 167.3 thousands

lamps were produced (Table 3).

On the basis of Table 3 it is possible to state that a structure

of the industrial products manufacturing continues to have

negative tendencies, the main one is the change of correlation

between the extractive and manufacturing branches in favor of

the former. The growth is particularly significant in the mining

branch and the energy complex. The other negative tendencies

are the significant reduction of a share of the machine building

and other branches, which produce the consumer goods, in

other words, the increase in a proportion of the traditional

setup and reduction of a share of advanced technologies. The

manufacturing industry is reduced more than the extractive

industry is, the machine building and the metalworking

production are removed from the industrial sector, the

contribution of this branch to the industrial output fell to less

than 3%.

In summary, it is possible to note that the real sector is the

weakest link of the Kyrgyz economic system. Neither the

industry, not the agriculture became the basis of an enlarged

reproduction process in the economy and the foundation of the

rapid economic growth. In the republic, the service sector

dominates, where the large-scale re-export foreign trade

operations play the key role.

During the period of reforms, the economic

restructurization and cessation of direct infusions from the

central union budget influenced the significant total decline of

the GDP. The issue of subsidies in the Kyrgyz economy is one

of the key issues for understanding Kyrgyzstan’s potential. As

a Soviet republic, The Kyrgyz Soviet Socialist Republic

received high subsidies from the union budget for developing

its national economy. The German researchers H. Halmrot, Т.

Rem, Е. Schenger and H. Ufer made the following

assessments: “Kyrgyzstan is one of the poorest republics of the

former USSR (in1992 the annual income per capita was 810

US dollars). The Kyrgyz economy was highly integrated

within the USSR and the republic’s dependence on the former

USSR was still stronger, due to the transfers from the union

budget. At the end of 1980-s they made up 10-12% of the gross

product” (15). In 1989-1991 13% of the gross national product

were equivalent to 600- 700 million Soviet rubles, which were

equal to 350- 400 million US dollars at the exchange rate.

Another key branch, energy sector, is also in the crisis. The

lack of investments, a high level of corruption and commercial

losses, and the system problems have put the energy sector on

the edge of survival. An excellent example of the energetic

problems is the accident in the Bishkek Combined heat power

plant, which occurred during the anomalous cold weather in

2018.

After the Kyrgyz Republic became independent, the

agriculture and the food industry remain some of the most

problematic spheres. In spite of some infusions made by the

government and the foreign credit facilities, the Kyrgyz

agriculture does not show the dynamic development for a long

time, when coming to nothing more than

a simple

Table 3: Production of the major kinds of industrial products

1263

275 000 49 192

990

1995

2000

868

2005

2010

2015

Large electrical machines, units

Alternating current motors, units

Electrical lamps,

319.8

137.7

232.4

198.9

166.9

167.3

Thousand units

Metal-cutting machines, units

Baling machines, thousand units

Impeller pumps, units

Trucks, units

1342

23 400

48 500

24 300

12 097

740

2 835

794

1 729

TV sets, units

48 302

The source is the National Statistical Committee of the Kyrgyz Republic

Journal of Environmental Treatment Techniques

2019, Volume 7, Issue 4, Pages: 613-622

In the contemporary period of its history the country

depends on the foreign infusions by 40%.

bought. Doctor Engvall said that the standard political theories

cannot explain the essence of the things going on in this

country, since the corruption, as he believes, became just a way

of governance. “Today Krgyzstan is not a particularist, or clan

or congeneric state. Here the money is the main factor in

appointing persons to the majority of administrative or

political posts” (17).

The country does not have a real strategy of fight and of

an effort to eradicate this negative phenomenon. The

misunderstanding about the corruption arises because the

corruption is considered to be as a source of the problem, while

a phenomenon is the eventual result. A source, which gives

rise to it, is, first and foremost, the state apparatus represented

by the bureaucracy and officials.

The shadow economy analysis, which is performed by the

National Statistical Committee of the Kyrgyz Republic,

indicates a permanent tendency of the activities growth in the

informal sector. If, in monetary terms, in 1995 it made upл 1.4

billion soms, then in 2017 it reaches 116 billion, and in

percentage terms to the GDP it grow to 24.5% (Fig. 4). A high

level of the shadow economy and corruption in the Kyrgyz

exerts common negative influence upon all the spheres of the

state activities. This favors the inefficient macroeconomic

management, when leading to the slowdown of the GDP

growth rate. More than that, it gives rise to serious social

consequences – the society loses its respect for the state

institutions, legal acts and, eventually, to the state itself. A

deep driving force, which favors the shadow economy

development, is the capital’s pursuit of maximum profits, in

the fight for which, as Carl Marks said, it is impossible to stop

the capital. The following statement made by Carl Marks say

about that very expressively: “…the capital flow passes all

bounds” (18), “…the capital has the only one life aspiration –

the aspiration to increase” (19) and “…the development of the

capitalist production necessitates a permanent increase of the

capital invested in an industrial enterprise, while the

competition imposes the immanent laws of a capitalist way of

production as the external compulsory laws on each individual

capitalist” (20).

In spite of a dispersion of assessments in the subsidies

level, on the whole it is possible to recognize that up to now

the republic has been unable to independently solve its

domestic political and economic issues without foreign

infusions. In light of this, the foreign debt, which reached the

figure of 4.4 billion US dollars (Figure 3), is a serious problem

for the country. Since 2014 the foreign principal debts have

been paid, which will increase to 2020. In the republic, where

there is a budget deficit permanently, the problem of a lack of

additional sources of forming the government incomes leads

to the unstable situation in the macroeconomic sphere. The

development of the national economy is significantly

influenced by the external factors, which weakly depend on the

efforts made within the country. This is a great dependence of

Kyrgyzstan on the political and economical situation such its

main partners as Russia, Kazakhstan and China. In the event

of violation of a favorable external situation, the problems

appear in the economy automatically, there are fewer

possibilities to fulfill the government’s social obligations, the

som exchange rate falls, etc. This is confirmed by a correlation

between the problems in the Kyrgyz Republic and the crisis

in the Russian Federation, which started at the end of 2014.

The shadow economy and corruption, which cover all the

economic sectors, remains a global problem for the country. In

accordance with the Ministry of Economic Development and

Trade a share of the shadow economy is, according to the

different estimates, from 18 to 70% and reaches a volume of

about 4 billion US dollars. Corruption is the most important

problem of the republic. When in 1990-s the Kyrgyz Republic

launched a large-scale reforming of its economic and political

systems, it faced serious problems of corruption in business

and the government.

The Swedish political scientist J. Engvall, who defended

the doctoral dissertation on the subject “State as the investment

market: analytical base for understanding the policy and

bureaucracy in Kyrgyzstan” в 2012 году, believes that

Kyrgyzstan is an extremely corrupted country, where all the

posts, and above all the government posts, and sold and

5,000

4,000

3,000

2,000

1,000

Figure 3: The foreign debt of the Kyrgyz Republic (billion US dollars) (The source is the Ministry of Finance of the Republic of

Kyrgyzstan (16))

Journal of Environmental Treatment Techniques

2019, Volume 7, Issue 4, Pages: 613-622

Figure 4: Volumes of the informal sector of the economy of the Kyrgyz Republic (The source is the National Statistical Committee of the Kyrgyz

Republic)

The statement in the English journal “Quarterly

Reviewer”, to which Carl Marks referred, is characteristic:

inflation, unemployment and boundaries of the general

government expenditure to be studied.

“

The capital is getting more and more courageous when

In any social system a certain consensus concerning the

society’s goals must exist. However, the economic policy is

almost always the means of achieving the goals, which are not

clear; more than that, some of them can contradict each other

(22). So, A. Illarionov says: “The economic policy is one of

the most important factors, which influence the economic

growth rate, and therefore, predetermine the economic security

state” (23).

In light of this: “The economic policy is the general line of

economic actions, which is pursued by the state or the

country’s government, giving of wishful orientation to the

economic processes, which are implemented in the aggregate

of measures taken by the state, by means of which the

determined goals and tasks are achieved, the social and

economic problems are solved. As expected, the economic

policy is designed to express and to implement goals, tasks,

interests of the country, state and people”(24).

Considering the strict requirements for the forms and

methods of the state interference, it is possible to say that the

state is only able to influence the goals by means of one or

another tool. So the economic policy’s goals have a number of

parameters: firstly, only the goals, whose implementation

cannot be assured by the market, must be set, secondly, a goal

must be measurable quantitatively, thirdly, it is necessary to

have a set of efficient political tools, fourthly, it is necessary

to have an idea of efficiency of the tools’ influence upon the

goal. The eminent economist Ya. Tenbergen wrote: “On the

whole the economic policy’s logic is determined by the content

and volume of the correlations between various types of

variables, which characterize it” (25).

receiving higher and higher profits – “with 100 percent it

violates all the human laws, with 300 percent it would commit

any crime even under threat of a gibbet”.

In the market economy the state’s regulating potential is

limited, so the most reasonable thing is to clear sour out the

goals in terms of their importance and to build a target

preference function. The main thesis is that the state functions

must include the maintenance of stable legal and

macroeconomic conditions, in which the economic activity

can develop successfully, in other words, the state is forming

the conditions, order and rules of the actions in the economic

environment.

A dilemma of the policy choice consists in the fact that it

appears where there are more goals of the economic policy that

there are tools, through which they can be achieved. For

example, the anti-inflation measures can be aimed at defeating

the inflation, but they can lead to the employment growth,

since one of the tasks of the inflation control is a reduction of

the government expenses. In this case, it is very appropriate to

cite the following quotation by S. Fisher: “Adoption of

political decisions, which influence the economic growth, is a

political problem, which is solved by the political means” (21).

In the case of this country, the government must start with

itself, with the institutional reforms. It is necessary to

strengthen the institutionalization standards: to strengthen the

judiciary system, to control the applicable laws execution, to

efficient enforce the state financial flows. The institutional

conditions in question have the maximum effect, and the

macroeconomic factors have a lower potential. For all that,

while considering the economic growth problems, the

economic science demands the issues of savings, investments,

In the market economy, the state’s regulating bias is

limited, so the most reasonable thing is to clearly sort out the

goals in terms of their importance and to build a target

Journal of Environmental Treatment Techniques

2019, Volume 7, Issue 4, Pages: 613-622

preference function. The main thesis is that the state functions

must include the maintenance of stable legal and

macroeconomic conditions, in which the economic activity

can develop successfully, in other words, the state is forming

the conditions, order and rules of the actions in the economic

environment.

expected to be among the countries, which will be oriented to

successful implementation of the sustainable development

strategy with the improved management institutions, the

efficient laws, the progressive staff potential, which is ready to

strengthen the basis of the country’s sustainable development,

with the developed environmental and economic thinking of

the population and the improved social and economic ratings

in the world development.

“

The economists have called upon to analyze the

regulation activities in terms of costs and benefits for a long

time. As the economists gain experience in analyzing the costs

and benefits and receive more and more information about a

price, which the people set for the risk during their everyday

conscious choice, a conflict will increase about a value of

regulation between those supporting the regulation, which is

efficient in terms of the costs and those saying that some values

are higher than the economic calculation” (26).

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Conclusion

The potential economic growth in 1991-2018, which was

measured as a growth of fixed assets with account take of the

depreciation, was in the Kyrgyz Republic negative on the

whole, so, it is unfair to say that the republic has an economic

or even cyclical growth. Such economic growth can be

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