C O N F I D E N T I A L SECTION 01 OF 02 BISHKEK 001293

SIPDIS

DEPT FOR SCA/CEN

E.O. 12958: DECL: 09/09/2018
TAGS: ECON PREL KG
SUBJECT: AMBASSADOR MEETS WITH NEW KYRGYZ ECONOMIC MINISTER

REF: BISHKEK 1199

Classified By: Amb. Tatiana Gfoeller, Reason 1.4 (b) and (d).


1. (C) SUMMARY: In a meeting with Ambassador Gfoeller,
Minister Jenishbek Baiguttiev of the newly created Ministry
of Economic Regulation said that he would like Kyrgyzstan to
develop a closer economic relationship with the U.S. He also
described Kyrgyzstan's concerns with the recent customs union
formed by Russia, Kazakhstan and Belarus. In an effort to
increase exports, Baiguttiev said that the Kyrgyz government
would like to establish laboratories that could certify that
Kyrgyz agricultural products meet international standards,
and requested USG assistance. It was clear from Baiguttiev's
remarks that his Ministry is still trying to establish its
area of responsibility separate from the newly created
Central Agency for Economic Development, Investment, and
Innovation, headed by Maxim Bakiyev (reftel). SUMMARY

Seeking A Closer Economic Relationship
--------------

2. (U) The Ambassador met on December 9 with Minister
Baiguttiev, who recently assumed his position at the Ministry
of Economic Regulation, created during the recent government
restructuring. The new Ministry has inherited some of the
responsibilities of the former Ministry of Economic
Development and Trade, but many of the former Ministry's
responsibilities have been assigned to the Central Agency for
Economic Development, Investment, and Innovation. Baiguttiev
comes to the Ministry from the private sector, having spent
many years in management positions at Toluby Bank, a small
Kyrgyz bank.


3. (C) Baiguttiev said that he thought there was great
potential for increased economic ties between Kyrgyzstan and
the U.S. He noted that President Bakiyev wanted to develop
Kyrgyzstan's relationship with the U.S., not only
politically, but also economically. Baiguttiev said that he
hoped that there could be increased formal bilateral dialogue
with the U.S. to achieve a closer relationship. He noted
that the Trade and Investment Framework Agreement discussions
were a good step, but that more bilateral discussions were
needed. The Ambassador explained that the U.S. government

had in fact initiated a process for greater dialogue through
the up-coming Annual Bilateral Consultations (ABCs). She
said that the ABCs would include all aspects of our bilateral
relationship, including economic issues.

Customs Union Troubling for Kyrgyzstan
--------------

4. (C) Baiguttiev said that the newly formed customs union
between Russia, Kazakhstan and Belarus would create trade
problems for Kyrgyzstan. He explained that if Kyrgyzstan did
not join the customs union it would make trade with Russia
and Kazakhstan more difficult. Products exported from
Kyrgyzstan, both Kyrgyz products and re-exported products,
had already experienced discrimination from these important
trading partners. However, the common external tariffs for
the customs union would in some cases be higher than
Kyrgyzstan's current tariff rates. Baiguttiev said the
Kyrgyz government was still analyzing its position on this
issue and had not yet made a decision.

Selling to Afghanistan and Reducing Debt
--------------

5. (C) Baiguttiev said that Kyrgyzstan hoped to diversify its
export markets, and in particular was interested in the
Afghanistan market and supplying the logistics materials for
the international reconstruction efforts in Afghanistan. He
noted that Kyrgyz products could include water, garments, and
agricultural products.


6. (C) Baiguttiev noted that Kyrgyzstan had reduced its debt
to a safe level, but that the level of debt could become a
problem again if there were further economic crises. He
requested U.S. forgiveness of some of Kyrgyzstan's debt. The

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Ambassador explained that the U.S. government did not hold
any Kyrgyz government debt and that the Kyrgyz government
would have to discuss its debt issues with the international
financial institutions, such as the World Bank and IMF.

Trying To Meet International Standards
--------------

7. (C) Baiguttiev said that in order to increase its exports
of agricultural products, Kyrgyzstan needed the capacity to
certify that its products met international standards. He
explained that the Kyrgyz government had plans for two
certification laboratories, one in Bishkek and one in the
South, and he requested U.S. assistance in creating these
laboratories. The Ambassador replied that perhaps funding
for these laboratories could come from the joint Kyrgyz-U.S.
Economic Development Fund, since the aim of the laboratories
was to support economic development.

Tension Between The Ministry And Central Agency
-------------- --

8. (C) Baiguttiev mentioned the Central Agency for Economic
Development, Investment, and Innovation numerous times during
the discussion making it apparent, though he did not
explicitly say so, that there is tension between his Ministry
and the new Agency. The Central Agency has assumed
management of many of the highest-profile economic issues, as
well as the lead on discussions with international donors.
In addition, it appears that the division of responsibility
and authority between the Central Agency and the Ministry is
not yet entirely clear.
GFOELLER