KYRGYZ REFORMS: UNDER THE RADAR, BUT HAVING AN

C O N F I D E N T I A L SECTION 01 OF 02 BISHKEK 000832

SIPDIS

SIPDIS

DEPT FOR SCA/CEN (GEHRENBECK)

E.O. 12958: DECL: 06/27/2017
TAGS: PGOV ECON KCOR KMCA KG
SUBJECT: KYRGYZ REFORMS: UNDER THE RADAR, BUT HAVING AN
IMPACT

REF: A. BISHKEK 724


B. BISHKEK 542

BISHKEK 00000832 001.2 OF 002


Classified By: Ambassador Marie Yovanovitch for Reasons 1.4 (b) and (d)


1. (C) Summary: Against a backdrop of domestic political
wrangling, changes in government personnel, and heated debate
over the presence of the Manas Airbase, important reforms are
beginning to reshape Kyrgyzstan's economy, business
environment, criminal justice system, and media. While these
reforms take root, constitutional amendments adjusting the
balance of power between the executive and legislative
branches are being reviewed by the Constitutional Court.
Measured reflection on the political balance of power
combined with an appetite for reform could signal an
excellent opportunity for Millennium Challenge
Corporation-funded initiatives to have a lasting and
sustainable impact on Kyrgyzstan. End summary.

Rejuvenating the Economy
--------------


2. (SBU) Against the backdrop of political wrangling and the
continued focus on Manas airbase, the Kyrgyz government in
recent months has taken concrete steps to institute certain
reforms, especially with respect to the economy and business
environment. Both President Bakiyev and Prime Minister
Atambayev stressed such reforms during the recent forum on
the Country Development Strategy (reftel A). PM Atambayev
endorsed the reforms, including energy-related triggers,
outlined in the failed Heavily Indebted Poor Countries
initiative. The government has also streamlined resource
allocation by eliminating intermediate layers of
administrative budget control (reftel B).


3. (SBU) President Bakiyev has convoked a reconstituted
investment council that includes Kyrgyz and foreign business
representatives. A recent council session highlighted
problems with inspection procedures. President Bakiyev
subsequently signed a law, with business community support,
that reined in the inspection system and provided recourse
for businesspeople misled by contradictory laws and
regulations.


4. (U) With estimates, echoed by the International Monetary
Fund, of robust 9% economic growth in Kyrgyzstan this year
and a booming Bishkek real estate market, the parliament on
June 18 passed a government-proposed capital repatriation
amnesty. The government is also contemplating additional
measures to legalize the shadow economy.

Making Judicial Amends and Crafting Better Tools
-------------- ---


5. (SBU) While making progress in the economic and business
sectors, the government has also taken steps to reform the
Kyrgyz judicial environment. The Kyrgyz are looking to the
proposed Millennium Challenge Threshold Country Program to
push reforms in criminal procedure, the procuracy, and law
enforcement agencies, but this would not constitute the sole
impetus for change. Related reforms, such as an April 2007
law that updated sentencing options to permit fines instead
of incarceration and shifted some offenses and sentences to
less serious categories, are already underway. Additional
recent measures have decriminalized slander and libel. The
government added, and is training, 43 new judges to expedite

BISHKEK 00000832 002.2 OF 002


judicial proceedings. These actions complement other
significant steps such as the passage of the witness
protection and anti-money laundering laws during the second
half of last year.

Harmonizing the Balance of Power
--------------


6. (SBU) Economic, business and judicial reforms have
occurred amidst a dynamic political environment. The April
2007 protests, following the November and December 2006
constitutional revisions, yielded an agreement to submit
opposition-supported constitutional amendments to the Kyrgyz
Constitutional Court for review. The changes under
consideration would expand parliament to 105 members with
half elected from political parties, empower parliament to
select the prime minister, and require parliamentary approval
of the dismissal of the prosecutor general and governors.
These revisions were submitted to the Constitutional Court in
mid-April, and according to Kyrgyz law, the Court has up to
six months to issue its findings. The amendments would
require parliamentary and presidential approval before being
adopted.


7. (SBU) Using the Constitutional Court to validate these
revisions permits additional reflection and avoids the sudden
shifts that characterized the adoption of the two late 2006
constitutions. The changes would augment parliament's power,
but would also establish a more stable footing for the
relations between the executive and legislative branches of
the Kyrgyz government.

Media Reforms
--------------


8. (SBU) Developments on the constitutional front coincide
with President Bakiyev's agreement this spring to transform
state television into a public, non-partisan institution.
Kyrgyz public television's governing board will have 15
members with equal numbers being nominated by the president,
parliament and civil society. A parliamentary committee
reviewed all the nominations June 15, and the final
membership of the board should be established soon. In
addition, the decision to decriminalize libel and slander was
an important step forward for media freedom.

Comment
--------------


9. (C) Substantial reform has continued in Kyrgyzstan amidst
high profile political wrangling as well as the continued
focus on Manas airbase. While much more needs to be done,
the Kyrgyz have taken the initiative to pursue and institute
needed reforms. Given the appetite for reform, a positive
decision to fund the Kyrgyz Millennium Challenge Threshold
Country Plan could spur additional reforms outside the law
enforcement and judiciary sectors targeted in the Threshold
Country Plan.

YOVANOVITCH