The Country Development Strategy

Need for Country Development Strategy

1. The Country Development Strategy (CDS) is a very important concept document that outlines a medium-term vision for the Kyrgyz Republic, determining the major directions of development activities for 2007—2010. The overall goal of the CDS is to improve the level and quality of people’s life by ensuring sustainable economic growth, creating opportunities for employment and earning high and sustainable incomes, and improving access to a wide range of social services to achieve high living standards in a sustainable environment.

2. The need to prepare and obtain approval of this new medium-term vision of Kyrgyzstan’s development is based first on the socio-economic and political changes and reforms that we have experienced recently. Following the events March 24, 2005, the Kyrgyz population views the new government as the embodiment of its hopes and expectations, opportunities and prospects for the country’s development. In addition, the need for this document is linked to the completion of the first National Poverty Reduction Strategy (NPRS-1), 2003—2005.

3. During NPRS-1 implementation, several reforms have been undertaken. They have ensured macroeconomic stability; average annual economic growth of 5%; increases in real incomes of the people; and, improved health and education services according to a number of indicators—all of which reduced the poverty level from 52% to 44%.

4. However, the events of 2005 also revealed gaps and shortcomings that have been accumulating for years, of which the major ones include: a weak political system; growing corruption in government institutions and a lack of transparency in making strategic decisions for the country; and, setbacks in equality and in the status of women, children, disabled citizens and other vulnerable groups. Weak and inefficient public administration has slowed economic growth and resulted in an unfair distribution of its benefits.

5. Economic growth is improving yet is far from being fully sustainable and strong.  The privatization of strategic enterprises is still underway.  Energy reform policy has been ineffective. Kyrgyzstan’s investment climate is inefficient and unpredictable.  Almost all sectors of the economy operate in the shadow.

6. Earlier key sources of economic growth have recently started losing their significance—for example, gold deposits at Kumtor are being depleted, and agriculture is facing a serious production crisis. Therefore, it is crucial for Kyrgyzstan to diversify its economy to ensure its long-term sustainability.

7. Despite a reduction in the overall poverty level, the living standards of most of the population remain low. This problem is especially visible in the countryside and remote mountainous regions where over half of the people do not have access to basic public goods, including housing. Large scale and increasing labor migration is evidence of the high level of unemployment. As in the past, the country’s ability to supporting social sector reforms will depend mainly on funding from international financial institutions.

8. Therefore, there is a clear need for preparation and implementation of a new and effective CDS that aims to overcome obstacles in the current situation. The CDS’ paradigm implies the need to move towards increased employment of domestic resources and enhancement of the country’s competitiveness. Planned reforms cover a broad range of issues in four major areas: (i) accelerating economic growth, (ii) combating corruption, (iii) human and social development, and (iv) environmental sustainability.

9. Only those countries with strong economic and production capacity that generate sufficient income and with ability to effectively and fairly distribute and manage resources are able to build high quality socially oriented state policy. Implementation of some of the measures set forth in the Strategy will first of all allow creating and improving relevant institutions, infrastructure and mechanisms that ensure competitiveness of the economic entities both inside and outside the country; secondly it will improve efficiency of public administration, lead to better quality and conditions for providing Government services; thirdly, will create conditions and encourage human capital development; and fourthly, to fix public governance, supervision and expertise format and procedures legally.

10. A particular characteristic of this CDS is its differentiated approach to priorities in the regions. Therefore, objectives will be set and attained differently in each region. However, major perspective of involvement of all territories of the country in Strategy implementation shall be determined as implementation of decentralization reforms in economic, financial and social aspects.

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