POOR KYRGYZ OBLAST HIT HARD BY GROWING INFLATION

UNCLAS SECTION 01 OF 03 BISHKEK 001339

SIPDIS

SENSITIVE
SIPDIS

DEPARTMENT FOR SCA/CEN (GEHRENBECK)

E.O. 12958: N/A
TAGS: PGOV PREL KG
SUBJECT: POOR KYRGYZ OBLAST HIT HARD BY GROWING INFLATION

REF: BISHKEK 1200

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SENSITIVE BUT UNCLASSIFIED. NOT FOR INTERNET DISTRIBUTION


1. (SBU) Summary: On October 24 ) 26, Ambassador Yovanovitch
visited Naryn Oblast. Everyone she met, from local
government representatives in Naryn City to farmers in remote
villages, reported that the economic situation in the oblast
is dire. The region, already poor, has been especially hard
hit by growing inflation. End Summary.

Is this the "real Kyrgyzstan?"
--------------


2. (SBU) On October 24 ) 26 Ambassador Yovanovitch visited
Naryn Oblast, including the Oblast capital, Naryn City, which
lies 185 miles southeast of Bishkek. Naryn Oblast is mostly
covered by treeless rocks and mountains and possesses a
rugged beauty that resembles the American West. The Oblast
lacks industry and the primary product of the region is meat
and animal byproducts. The climate of Naryn Oblast is harsh
) hot in the summertime and bitterly cold in the wintertime.
The Deputy Governor reports that there are no transplants to
Naryn ) only natives of Naryn can survive the harsh,
unwelcoming climate and long winters. The Deputy Governor
characterizes natives of Naryn as "gorniye i gordiye," or
"mountainous and proud."


3. (SBU) Perhaps because of the isolation and desolation, the
oblast is composed almost entirely of ethnic Kyrgyz; official
statistics put the ethnic Kyrgyz population of Naryn Oblast
at ninety-eight percent. Unlike in Bishkek, Kyrgyz is the
primary language, and one can easily get by with no Russian.
Naryn residents take pride in being the "real Kyrgyz."

Globalization: A Near Miss in Naryn
--------------


4. (SBU) With the exception of meat and a few crops
(potatoes, wheat, carrots, and cabbage),there is no local
production in Naryn Oblast. Nearly all clothing, household
supplies, and food are imported to the region from other
regions of Kyrgyzstan or from abroad. Despite Naryn's
strategic location on the border with China and despite heavy
truck traffic by Chinese trucks carrying goods to Bishkek,
most goods are more expensive in Naryn than in the capital.
This is because the central government mandates all goods
must first go to Bishkek, where they are customs processed,
before being released for sale and shipped back to Naryn
Oblast. Locals, such as the Mayor of Naryn and the Deputy
Governor of Naryn Oblast, complain that they get no benefit
from trade with China, and to the contrary, they bear the
burden of repairing roads which sustain considerable damage
from the 80-ton Chinese trucks.

Bread Crisis: Buying Wheat by the Ton
--------------


5. (SBU) Naryn residents resoundingly report that the
so-called "bread crisis" has hit their oblast, already poor,
very hard. Although some farmers in Naryn Oblast, namely
those who raise wheat, actually made a profit this year for
the first time ever, the wheat produced in the region is
still insufficient to meet the needs of the population. In
fact, the region received 200 tons of wheat from the central
government to cover the emergency needs of the region's
poorest residents. On October 25th, President Bakiyev's
office reported that the Akim of Naryn Rayon, was fired for
attempting to embezzle 30 tons of wheat.


6. (SBU) A Peace Corps Volunteer reported that when the price
of bread hit 10 soms (almost 30 cents),his host-family

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literally bought a ton of raw wheat, which they plan to mill
into flour to bake homemade bread. He added that they were
among of the lucky ones who could actually afford to buy
wheat in bulk because his family has benefited from the
emerging business of community-based tourism. Other Naryn
residents confirm that store-bought bread is a luxury few can
afford.

Baby Boom Despite Tough Times
--------------


7. (SBU) Naryn authorities, NGO's, and political party
representatives cite internal migration, due to lack of
economic opportunity in the region, as a problem. There is
not as much external migration to Russia or Kazakhstan as
there is from other regions of Kyrgyzstan, but sources report
that nearly every family has a relative in Bishkek who sends
remittances. Despite internal migration to the capital, the
population of Naryn Oblast continues to grow due to a
relatively high birthrate (there are about 6,000 births per
year, in an oblast with a population of 35,000 adults). One
journalist explained that women keep having babies despite
hard economic times because of family pressure and Kyrgyz
tradition. She said, "Even a hungry mother will feel joy
looking at her newborn baby." However, statistics indicate
that some young families are exactly that ) hungry - and
having a hard time surviving in an economy with 80 percent
unemployment and where the average family income is 1,500 som
(approximately $42) per month.


8. (SBU) The Ambassador witnessed firsthand the baby boom in
Naryn when she visited the Naryn Oblast Hospital. There, she
saw the results of a USAID-funded program to reduce infant
and mother postnatal mortality and morbidity. In just six
months, and through small changes, such as encouraging women
to move freely during labor, allowing husbands and partners
to be present during birth, using new techniques to deliver
the placenta, and applying antibiotic ointment to a newborn
baby's eyes, the USAID-funded project has cut infant
mortality at Naryn Oblast Hospital by half and reduced
mothers' complications.

Not All is Lost
--------------


9. (SBU) Despite the dire economic situation of Naryn Oblast,
there are several opportunities for development and,
possibly, foreign investment. The Aga Khan Development
Network is constructing a new branch of the University of
Central Asia and is doing humanitarian work in Naryn. There
is a coal mine in Naryn Oblast, and local authorities point
to other natural resources, such as aluminum, gold, and
bronze. The Deputy Governor estimates that the village of
Jaltyn Jol has 10 billion tons of iron ore, which would make
it the largest deposit of iron ore in the world. The
extraction of Naryn's iron ore deposits is complicated by
lack of capital and lack of rail transportation to the
region. During Soviet times, there was a large horse farm in
Naryn Oblast, and with the average price for a horse at
nearly $1,000, there is potential in horse farming.
Likewise, alpine pastures could be exploited to raise
livestock, including beef, sheep, and yak. There was Chinese
investment in tanneries, but those ventures failed. Local
authorities complain that most meat is processed outside of
the region and suggest that one potential business could be
meat-processing and meat-packing.


10. (SBU) One USAID-funded project that is helping encourage
the development of agriculture in Naryn Oblast is the Land
Reform and Market Development Project, which works with local
government (Ayil Okmoty) to implement auctions for the use of
public land, making the leasing of public land transparent

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and providing a much-needed source of revenue for the local
government. The Ambassador's visit to one such site in the
village of Kazan Kuigan provoked lively discussions from
village residents, who were eager to explain the program's
successes. The Ambassador also attended a public hearing on
land distribution, which had a standing-room-only audience.


11. (SBU) The Ambassador also visited an EBRD-sponsored bank
that issues microcredit loans to small businesses. In five
months, the bank had already issued 107 loans which averaged
$1500. The Ambassador spoke with three entrepreneurs who had
recently received loans and visited a small business that
benefited from a microcredit loan. She met with journalists,
NGO representatives, political party representatives, and the
Naryn Mullah (septel). She dedicated a mentor program for
women, the third such program the Embassy has begun in
Kyrgyzstan. She was met with enthusiasm as the keynote
speaker at a women's conference, which was organized by Peace
Corps volunteers and covered such topics as women's
leadership, women's health, women in Islam, and balancing
career versus family.


12. (SBU) Comment: The economic situation, combined with a
general feeling of political disenfranchisement (septel),has
given residents of Naryn much cause for pessimism. However,
taking to heart the Deputy Governor's characterization of
Naryn residents as hardy and stalwart, there is hope for
Naryn. Thanks to remittances from abroad and maybe in part
thanks to the character of Naryn residents, Naryn is holding
on, albeit under dire circumstances.
YOVANOVITCH