The Effect of Color Revolutions on Economic Reforms: Comparing Georgia and Kyrgyzstan with their Neighbors
Part Two: The Central Asian Countries
(see Part One on the previous page)
Introduction
Did the two color revolutions in Kyrgyzstan make the country better off in comparison to its neighbors that never had color revolutions? What and who pulled the brakes in Kyrgyzstan’s road to democracy? How and why is the Kyrgyz experience different from that of Georgia?
As Part One shows, Georgia after the Rose Revolution became a different country in terms of economic outlook, compared to its performance before the revolution and to other countries of the Caucasus. The sections below explain why many similar reforms were not implemented in Kyrgyzstan and how economic integration with Russia affected the country compared to Kazakhstan and Tajikistan.
Reforms in Kyrgyzstan
After overthrow of President Askar Akayev during the Tulip Revolution of March 2005 in Kyrgyzstan that led to the the reign of President Kurmanbek Bakiyev, many expected the government that came to power to transform the country. Yet many new policies disappointed investors and pro-reform analysts. The government swung back and forth in its foreign policy. These irregularities led to its downfall.
The government of Kyrgyzstan did not develop a consistent reform program. Investors complained about widespread bribery. Members of Bakiyev’s family, especially his son Maxim, controlled strategic businesses. Furthermore, many government decisions warded off investors. For example, the Kyrgyz-Canadian joint gold venture Kumtor Gold reportedly accounted for 10% of GDP and played a key role in the national economy since 1991. Yet its capacity was declining. The government planned to develop other mines, such as Jerooy. In late 2005, it revoked a license for the British Oxus Gold company, arguing that the contract that the Akayev government had signed contradicts Bishkek’s alleged national interests. Global Gold, an Austrian company, received the contract instead, reports Gulnoza Saldazimova, of Radio Free Europe/Radio Liberty website.
Unlike Saakashvili in Georgia, who conducted pro-western foreign policies throughout his reign, Bakiyev bargained with the West for benefits. In 2001, the United States had set up a military base near the Manas airport in Bishkek to provide supplies for fighting in Afghanistan. After Bakiyev had come to power, he threatened to close the base, but the U.S. negotiated to keep it open. In 2009, Russia pledged $2 billion of aid and loans to Kyrgyzstan on the condition that the U.S. military base would be closed, reports Joseph Giordono, of Stars and Stripes, an newspaper of the U.S. Ministry of Defense. Instead of closing the base, however, the Bakiyev administration agreed to retain it on the conditions of increasing the rent from $17 million to $63 million annually, and of renaming it the Transit Center at Manas, rather than a military base, neglecting a vote by the Kyrgyz parliament to end U.S. Presence, reports Mark Thompson, of Time magazine. Corruption and inconsistencies in economic and foreign policy thus contributed to Bakiyev’s downfall.
After Bakiyev was overthrown in 2010, Kyrgyzstan experienced cardinal changes. Between April 7, 2010 and December 1, 2011, interim President Roza Otunbayeva ruled the country. Under Otunbayeva, a referendum on a new constitution that increased power of the parliament was conducted. That same year, the Government also eased starting a business, registering property and getting credit. These policies improved Kyrgyzstan’s ranking on the World Bank Ease of Doing Business, from 47th place (out of 183 economies) in 2010 to 44th place in 2011, reports the World Bank.
Almazbek Atambayev became President in December 2011. He strengthened the country’s ties with Russia and weakened those with the West. Atambayev had campaigned to shut down the United States military base near the Bishkek airport. In 2014, it was closed, with $30 million of leftover equipment that Kyrgyzstan’s authorities used to design a civilian transit hub that replaced the air base, reports Joshua Kucera, of EurasiaNet. Kyrgyzstan also joined the Russia-led Eurasain Economic Union (EAEU) in 2015.
The new EAEU policies implied additional restrictions. Being the first CIS country to join the WTO, Kyrgyzstan had levied relatively low import tariffs on other countries between 1998, the year of WTO accession, and 2015. As an EAEU member, Kyrgyzstan trades freely with other EAEU countries, but levies higher tariffs on outsiders, reports BTI Project. Thus, Kyrgyzstan benefits from trade creation with the EAEU, but loses from diversion with the rest of the world.
Table 1 shows that Kyrgyzstan is freer economically than Tajikistan, but less free than Kazakhstan is, as shown by both the Heritage Foundation Index of Economic Freedom and the World Bank Ease of Doing Business Index. Relative to other countries, corruption in all three countries increased from 2003 to 2009.
Economic reforms are also needed to modernize Kyrgyzstan. Recently, the country strengthened protection of minority investors, increased financial intermediation, and adopted better laws on contract enforcement and insolvency resolution. However, since the judicial system is corrupt, property rights are not well-enforced and the investment framework lacks transparency, reports Heritage Foundation.
Table 2 shows that real GDP grew faster in Kazakhstan than in Kyrgyzstan during the mid-2000s, but the Great Recession affected Kyrgyzstan’s real GDP less. Oil-abundant Kazakhstan benefited from rising oil prices more than Kyrgyzstan did during the boom. Yet mortgage market defaults, repayment of loans to foreign banks by Kazakh banks, and later, plummeting oil prices, slowed down real GDP growth in Kazakhstan. Kyrgyzstan experienced double-digit growth in 2013 that decelerated in 2014. Sanctions on Russia and plummeting oil prices in 2014-15 triggered rouble depreciation and the devaluation of the tenge in February 2014, decreasing remittances for Kyrgyz guest workers that worked in Russia and Kazakhstan. Between 2013 and 2015, personal remittances decreased from 31.05% in 2013 to 25.27% of GDP, or from 2.278 billion to 1.688 billion current U.S. Dollars. Remittances increased again with the economic recovery in Russia and Kazakhstan to 32.27% of GDP, or 2.486 billion current U.S. Dollars, in 2017, reports the World Bank.
Table 3 shows that inflation was higher in Kazakhstan than in Kyrgyzstan during the mid-2000s before the global financial crisis, but in 2007-2008, inflation in Kyrgyzstan surpassed that of Kazakhstan. Unlike the tenge, the Kyrgyz som always had a floating exchange rate to the dollar. On the other hand, during 2006-2015, the tenge exchange rate to the dollar was maintained within narrow corridors, with two devaluations, in February 2009 and February 2014. Though oil export revenues in Kazakhstan were increasing during the mid-2000s, the National Bank intervened to keep the tenge weak and support oil exporters.
Different exchange rate policies caused the two countries to perform differently during the global financial crisis. When the credit crunch began in Kazakhstan in August 2007, cheap loans were no longer available. Aggregate demand fell during late 2007-2008. Meanwhile, in Kyrgyzstan, rising world energy prices pushed supply-side inflation. Furthermore, unlike Kazakhstan, Kyrgyzstan has been maintaining a floating exchange rate policy. The Kyrgyz som monthly exchange rate depreciated 10.6% relative to the dollar from January to December 2008, compared with the Kazakh tenge depreciating 0.19%. In 2009, inflation decreased in both Kazakhstan and Kyrgyzstan, but the February 2009 devaluation must have been at least partially responsible for the higher inflation in Kazakhstan in 2009. Between December 2009 and January 2009, the monthly Kazakh tenge exchange rate depreciated 22.6%, compared with 10.6% for the Kyrgyz som. To devalue the tenge, the National Bank of Kazakhstan had to increase money supply. Yet since aggregate demand for goods and services decreased in both countries due to the recession, inflation slowed down considerably.
International financial institutions and most economists recommend a floating exchange rate policy. A floating exchange rate enables preserving monetary policy autonomy. If the central bank does not have to stick to a particular exchange rate of the national currency to some hard currency, it can impose rates on loans to second-tier banks, conduct open-market operations, and set reserve requirements on banks independently. On the other hand, if a country pegs its currency to that of another country, it is more likely to import inflation from that country. Seeking to pursue rapid monetary reforms and gain approval of international financial institutions, Kyrgyzstan adopted a floating exchange rate regime in the 1990s. Oil-rich Kazakhstan, on the other hand, maintained a floating exchange rate policy during much of the 1990s and the 2000s, but switched to fixing the exchange rate within narrow corridors in 2006 to avoid excessive tenge appreciation during the oil boom that would hurt oil exporters.
Inflation increased and real GDP decreased in Kyrgyzstan in 2010 when the second color revolution occurred. While most other countries of the world were recovering from the Great Recession, instability in Kyrgyzstan lowered aggregate demand and investment. Economic performance improved significantly only in 2013.
In 2014, Kyrgyzstan experienced another inflation acceleration. The tenge devaluation in February 2014 and the depreciation of the Russian rouble from falling oil prices lowered net exports of Kyrgyzstan, weakening the Kyrgyz som. Growing economic ties with these countries made Kyrgyzstan more vulnerable to foreign exchange market fluctuations there. To decrease money supply and combat inflation, the National Bank of the Kyrgyz Republic increased the discount rate from 4.16% on January 10, 2014 to 10.5% on December 30, 2014. Inflation slowed down in 2015, and in 2016, Kyrgyzstan experienced mild deflation. By the end of 2016, the National Bank of the Kyrgyz Republic decreased the discount rate to 5% and maintained it within the 4-5% range since then, reports the National Bank of the Kyrgyz Republic. Since 2016 and until the covid-19 pandemic in 2020, inflation in Kyrgyzstan was mild.
Table 4 shows that the unemployment rate as a percent of labor force in Kyrgyzstan in the 2000s and early 2010s was higher than in Kazakhstan, but lower than in Tajikistan. Increasing aggregate demand from the oil boom triggered more job creation in Kazakhstan. On the other hand, the over-regulated and underdeveloped economy of Tajikistan could provide fewer jobs than that of either country. After 2010, unemployment in Kyrgyzstan declined, but the unemployment rate has been higher than that of Kazakhstan.
Political reforms had mixed results in Kyrgyzstan. In 2016, a constitutional referendum, conducted to transform Kyrgyzstan from a semi-presidential to a parliamentary republic increased the power of the prime minister. Critics of President Atambayev accused him of intending to become prime minister after stepping down, reports Reuters. Nevertheless, ex-President Almazbek Atambayev was the first Central Asian President to leave office voluntarily upon completion of his second term. However, Atambayev was sentenced to 11 years and two months in prison on corruption charges in June, several months since he had been detained in August of last year after an armed conflict with his supporters, reports Reuters. Thus, the Kyrgyz Republic has not experienced a peaceful transit of power between presidents yet.
Reforms in Tajikistan
Unlike Kyrgyzstan, Tajikistan never experienced a color revolution. Nevertheless, power struggles caused a civil war that plagued the country from 1992 till 1997. During that period, the country had two permanent Presidents and one acting President. Rakhmon Nabiyev, the first President of independent Tajikistan, died on April 12, 1993, officially from a heart attack, but may have been killed or committed suicide, reports the Kommersant newspaper. Between September 7 and November 19, 1992, Abkarsho Iskandarov, previously Chairman of the Supreme Council of Tajikistan (then the country’s legislation) served as acting President. From then and until November 6, 1994, Tajikistan had no President and Emomali Rakhmonov (now Rakhmon) served as the Chairman of the Supreme Council and was the de-facto head of state. On November 6, 1994, Rakhmonov was elected President. He led his government in fighting the war against the Unified Tajik Opposition, consisting of Islamist and democratic rebels.
Tajikistan paid for stability with democratic freedoms. The war ended on June 27, 1997, with an agreement between the government and the opposition. According to the agreement, opposition representatives could hold up to 30% of positions in the executive branch. However, by the mid-2000s, there was no longer any opposition in the Tajikistani government, reports Galim Faskhutdinov, of the Deutsche Welle. The President assumed unlimited power. In 2016, 94.5% of 4 million voters supported a constitutional amendment that would allow President Rakhmonov to rule indefinitely. Furthermore, the minimum age for presidential candidates was lowered to 30, which would enable Rahmon’s son to run for the 2020 election, reports Gabriel Samuels, of The Independent newspaper.
Economic reforms in Tajikistan have been slow. All land in Tajikistan is state property. The government subsidizes losing state-owned and state-trading enterprises, bailing out the poorly performing banking sector. Over the last three years, government spending in Tajikistan has amounted to 35.4% of the country’s output, compared with 37.2% in Kyrgyzstan and 22% in Kazakhstan, reports Heritage Foundation.
Like Kyrgyzstan, Tajikistan is a member of the World Trade Organization (joined on March 2, 2013), but does not belong to the Eurasian Economic Union. Since 2015, the government has been considering EAEU accession and assessing its advantages and disadvantages by analyzing the examples of Armenia and Kyrgyzstan. The accession of Kyrgyzstan in 2015 affected the numbers of labor migrants in Russia from both countries: the number of Kyrgyzstani labor migrants increased 1.6%, while the number of Tajikistani labor markets decreased 13.7% in comparison with 2014, reports the Eurasian Development Bank.
Compared with Kyrgyzstan and Kazakhstan, Tajikistan depends less on Russian imports, but more on revenue from exports to Russia. As of 2019, Russia accounts for 37% of Tajikistan’s exports, but only 16% of Tajikistan’s imports. For Kyrgyzstan, the figures are 19% for exports and 29% for imports. Kazakhstan’s imports from Russia account for 37% of Kazakhstan’s imports, but exports to Russia account for 9.7% of Kazakhstan’s exports, reports Trading Economics, a database of economic indicators, exchange rates, commodity prices and financial market parameters for 196 countries.
Tajikistan is the poorest country in the Commonwealth of Independent States (CIS). About 31.5% of its population lived below the poverty line in 2016. The country ranks 192nd place in the world in terms of GDP per capita as of 2017, reports the CIA World Factbook.
The tables show that compared with Kyrgyzstan, Tajikistan has had more persisting real GDP growth. However, both inflation and unemployment have generally been higher there. No color revolution occurred that would temporarily slow growth in Tajikistan. Yet government regulations and ineffective monetary policy kept both inflation and unemployment relatively high. On the other hand, a more closed economy enabled macroeconomic performance of Tajikistan to be less affected by the Russian crisis of 2014 than those of Kyrgyzstan or Kazakhstan.
Reforms in Kazakhstan
Kyrgyzstan’s northern neighbor, Kazakhstan, preserves its authoritarian regime with a weak opposition, and a parliament, dominated by the ruling “Nur Otan” party, but has generally enjoyed better economic performance than Kyrgyzstan or Tajikistan. The country made considerable progress in economic reforms by CIS standards. For example, in 1997, the country initiated a reform that established competing private pension funds that invested portions of savings of future retirees. The reform thus replaced the old pay-as-you-go system with a system that included a fully funded component. In 2013, they were united into one state-owned Unified Accumulated Pension Fund, yet pension asset management remains the prerogative of private asset management companies. Kazakhstan also has a liberal tax policy. The overall tax burden as a share of total domestic income in Kazakhstan (12.8%) is lower than in Kyrgyzstan (19.7%) and Tajikistan (20.6%). Unlike Kyrgyzstan and Tajikistan, Kazakhstan does not depend on remittances: they amounted to only 0.28% of GDP in 2019, reports the World Bank. The country suffers from corruption, political influence on the judicial system (since the President directly appoints judges), and bureaucratic hurdles get in the way of enforcing property rights, reports Heritage Foundation. Unlike Kyrgyzstan, which had a floating exchange rate regime since the introduction of the som, Kazakhstan floated its currency in August 2015, and the central bank needed to intervene since then several times.
Growing commodity prices fueled real GDP growth in Kazakhstan during the early and mid-2000s. As of 2010, the oil sector accounted for 25% of GDP, 60% of total exports and 40% of total budget revenues. Availability of credit, especially mortgage loans, fueled the construction and real estate boom then. To finance credit, Kazakh banks amassed huge debt, amounting to 44% of GDP. Many loans were extended to borrowers who would ultimately default. Once capital stopped flowing into the country during the global financial crisis, real estate prices decreased and the share of non-performing loans increased. Between mid-2008 and 2010, the share of non-performing loans on a 90-day overdue basis increased from 3.5% to 26% of total loans, reports the International Monetary Fund. After 2010 and until oil prices plummeted and neighboring Russia faced sanctions in 2014, the economy of Kazakhstan was gradually recovering.
Plummeting oil prices and sanctions against neighboring Russia slowed down real GDP growth, accelerating inflation in Kazakhstan in 2014-2015. As investor confidence in the Russian rouble decreased, the rouble depreciated, lowering Kazakhstani net exports. The National Bank of Kazakhstan tried to defend the tenge in the beginning of 2014, but on February 11, 2014, it conducted a one-time 19% devaluation from 150 KZT per U.S. Dollar to 185 KZT per U.S. Dollar, with a corridor of +/- 3 KZT per dollar to protect domestic producers amid the increase in imports and the weakening of the Russian rouble 7.1% in 2013, reports Aidyn Temirbayev, of Astana Times. Later, in August 2015, the National Bank floated the tenge, announcing a transition to inflation targeting. Between July 2015 and January 2016, the average monthly exchange rate to the U.S. Dollar depreciated 95.84%, from 186.80 to 365.83 KZT per dollar, and then began to re-bounce, reports the National Bank of Kazakhstan website. As the tenge weakened, imported goods became more expensive.
During the 2010s, Kazakhstan strengthened economic ties with both Russia and the West. In 2010, Kazakhstan formed a customs union with Russia and Belarus. On May 29, 2014, the Presidents of Belarus, Russia and Kazakhstan signed a treaty on the formation of the Eurasian Economic Union in Astana. Armenia signed a treaty on Accession to the Union on October 10, 2014 and Kyrgyzstan signed a treaty on December 23, 2014. The treaty became effective on January 1, 2015, reports the Eurasian Economic Commission. Kazakhstan also expanded cooperation with the European Union. In 2015, Kazakhstan signed the Enhanced Partnership and Cooperation Agreement (EPCA) with the EU, which entered into force on March 1, 2020. The agreement includes: creating a better regulatory environment, facilitating judicial reform, strengthening the capacity of regional and local government, support of initiatives to improve the capacity of the public sector to introduce social and economic reforms. As of 2018, the EU accounts for almost 40% of Kazakhstan’s external trade, for 48% of Kazakhstan’s total gross foreign direct investment and for 60% of net foreign direct investment, reports the European Commission. In 2015, about 17 years after Kyrgyzstan, Kazakhstan also joined the WTO.
After both Kazakhstan and Kyrgyzstan joined the EAEU, they had conflicts of interest. After Kyrgyzstan joined the EAEU, Kazakhstan lost a huge amount of re-exports of Chinese goods that were now being transported through Kyrgyzstan. In the first half of 2016, 40,500 tons were transported through Kyrgyzstan, compared with 780 tons in the first half of 2015. Nevertheless, Kyrgyzstan earned no tariff revenue on this transit. As a result, trade barriers re-emerged between Kazakhstan and Kyrgyzstan. The two countries have imposed new customs procedures and limits on transporting goods, counter to the goal of economic integration, reports Ivan Zuenko, of the Carnegie Moscow Center.
On March 2019, after 28 years of ruling independent Kazakhstan, Nursultan Nazarbayev resigned as President, appointing Kassym-Zhomart Tokayev, previously Chairman of Senate, to be his successor. Nazarbayev retains the position of the leader of the ruling “Nur-Otan” Party and head of the Security Council. Early presidential elections were held in June of that year. Tokayev won by 70.76% of the vote and promised to continue Nazarbayev’s policies, reports Nazrin Gadimova, of Caspian News. The new government proclaims its intention to make the economy less dependent on hydrocarbons, increase the efficiency of the bureaucracy, and decrease the role of the state. Nevertheless, in 2019, the government increased subsidies for agriculture and energy in the face of worsening economic performance, reports Heritage Foundation. On the other hand, in December 2019, President Tokayev announced new reforms. Over 100 types of activities of state companies were to be cut. Peaceful rallies no longer require permission, only notification of authorities. Tokayev also stated his intention to increase the role of the parliamentary opposition and said that the law on parties and elections should be gradually changed, reports Assel Satubaldina, of The Astana Times newspaper.
Country | Index of Economic Freedom, Ranking (2020) | Ease of Doing Business Index, Ranking (2020) | Corruption Perceptions Index, Ranking (2003) | Corruption Perceptions Index, Ranking (2018) |
Kyrgyzstan | 81 | 70 | 118 | 132 |
Tajikistan | 155 | 106 | 124 | 152 |
Kazakhstan | 39 | 25 | 100 | 124 |
Sources: Heritage Foundation, The World Bank and Transparency International
Table 1: Most recent rankings of key indices of economic freedom and corruption for selected Central Asian countries
Country | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 |
Kazakhstan | 9.600 | 9.700 | 10.700 | 8.900 | 3.300 | 1.200 | 7.300 | 7.400 | 4.800 |
Kyrgyz Republic | 7.027 | -0.176 | 3.103 | 8.543 | 7.566 | 2.886 | -0.472 | 5.956 | -0.088 |
Tajikistan | 10.600 | 6.700 | 7.000 | 7.800 | 7.900 | 3.900 | 6.500 | 7.400 | 7.500 |
Source: The IMF World Economic Outlook Database
Table 2-1: Real GDP growth rate of selected Central Asian countries (2004-2012)
Country | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020F |
Kazakhstan | 6.000 | 4.200 | 1.200 | 1.100 | 4.100 | 4.100 | 4.500 | -2.530 |
Kyrgyz Republic | 10.915 | 4.024 | 3.876 | 4.336 | 4.740 | 3.459 | 4.468 | -4.044 |
Tajikistan | 7.400 | 6.700 | 6.000 | 6.900 | 7.100 | 7.300 | 7.500 | 1.000 |
Source: The IMF World Economic Outlook Database
Table 2-2: Real GDP growth rate of selected Central Asian countries (2013-2020)
Country | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 |
Kazakhstan | 6.700 | 7.600 | 8.400 | 18.800 | 9.500 | 6.200 | 7.800 | 7.400 | 6.000 |
Kyrgyz Republic | 2.764 | 4.921 | 5.098 | 20.094 | 20.028 | -0.040 | 19.226 | 5.708 | 7.495 |
Tajikistan | 5.732 | 7.125 | 12.514 | 19.846 | 11.857 | 4.915 | 9.804 | 9.315 | 6.444 |
Source: The IMF World Economic Outlook Database
Table 3-1: End of period inflation rates of selected Central Asian countries (2004-2012)
Country | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020F |
Kazakhstan | 4.800 | 7.400 | 13.600 | 8.500 | 7.100 | 5.300 | 5.400 | 8.093 |
Kyrgyz Republic | 3.970 | 10.475 | 3.352 | -0.503 | 3.656 | 0.486 | 3.056 | 11.985 |
Tajikistan | 3.707 | 7.381 | 5.082 | 6.067 | 7.100 | 7.300 | 7.500 | 1.000 |
Source: The IMF World Economic Outlook Database
Table 3-2: End of period inflation rates in selected Central Asian countries (2013-2020)
Country | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 |
Kazakhstan | 8.4 | 8.1 | 7.8 | 7.3 | 6.6 | 6.6 | 5.8 | 5.4 | 5.3 |
Kyrgyz Republic | 8.5 | 8.1 | 8.3 | 8.1 | 8.2 | 8.4 | 8.6 | 8.5 | 8.4 |
Tajikistan | 13.5 | 13.0 | 12.4 | 11.8 | 11.4 | 11.5 | 11.6 | 11.6 | 11.6 |
Source: The World Bank
Table 4-1: Unemployment, as a percent of labor force, in selected Central Asian countries (2004-2012)
Country | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 |
Kazakhstan | 5.2 | 5.1 | 4.9 | 5.0 | 4.9 | 4.9 | 4.6 |
Kyrgyz Republic | 8.3 | 8.1 | 7.6 | 7.2 | 6.9 | 6.0 | 6.3 |
Tajikistan | 11.7 | 11.6 | 11.5 | 11.4 | 11.3 | 11.1 | 11 |
Source: The World Bank
Table 4-2: Unemployment, as a percent of labor force, in selected Central Asian countries (2013-2019)
Summary and analysis
The government of Kyrgyzstan under Akayev was more committed to trade openness and political reform than that of Kazakhstan or Tajikistan. In the 1990s, Kyrgyzstan was the first CIS country to join the World Trade Organization. Yet transition problems, combined with relatively weak presidential power, made the 2005 Tulip Revolution possible. After the Tulip Revolution, real GDP growth temporarily slowed down, but having a flexible exchange rate enabled accelerating it and making it exceed in 2007-2008 that of Kazakhstan. Kurmanbek Bakiyev, the second President, strengthened ties with the West through military cooperation, but engaged in corruption and failed to reform. The Great Recession of the late 2000s impoverished Kyrgyzstan, triggering the second color revolution.
Foreign policies of Kazakhstan and Tajikistan remained stable for most of the 2000s and the early 2010s, but the foreign policy of Bishkek became more pro-Russian after the second color revolution. President Atambayev removed the NATO military base from the Bishkek airport and pushed for stronger economic and political integration with Russia. In 2015, Kyrgyzstan joined the Russia-led Eurasian Economic Union. The country benefited from increased trade and reduced barriers to entry for guest workers. Yet sanctions against Russia and falling oil prices triggered rouble depreciation in 2014. Kazakhstan devalued the tenge in February 2014, and Kyrgyz exports into Russia and Kazakhstan became less competitive. This weakened the Kyrgyz som and accelerated inflation in Kyrgyzstan. The National Bank of the Kyrgyz Republic responded by increasing discount rates and stabilized inflation.
Mildly authoritarian and oil-abundant Kazakhstan was a pioneer in conducting financial sector reforms in the late 1990s, but has had a more closed economy than Kyrgyzstan and maintained the exchange rate within narrow corridors during the 2000s and the early 2010s. The country benefited from the oil boom of the early and mid-2000s, but also faced a more severe recession in the late 2000s than its neighbors due to a strong dependence of its banking system on borrowings from abroad. Though oil-rich Kazakhstan was not as quick as Kyrgyzstan in joining the WTO, had periods of fixing the tenge exchange rate and never experienced a color revolution, the government was generally interested in market reforms and strove to develop its financial markets during the late 1990s and the 2000s. With few political changes to back economic reforms, some of them were reversed later, but Kazakhstan remains freer economically than its neighbors in Central Asia.
Unlike Kazakhstan and Tajikistan, whose foreign policies remained stable during the period being studied, the initially more pro-western and largely pro-reform Kyrgyzstan shifted to being more pro-Russian after the second color revolution. The power of the President has decreased substantially, but fewer and less far-reaching economic reforms were conducted in Kyrgyzstan than in Georgia.
The examples of authoritarian, but relatively prosperous and stable Kazakhstan, Uzbekistan, Russia and China were more appealing for Kyrgyzstan than for Georgia due to cultural similarities and close geographic location. This was not the case for Georgia. The people of Kyrgyzstan also saw a negative example of Tajikistan having experienced a civil war and wanted a strong leader as the lesser of the possible evils more than the Georgians had. Also, both Georgia and Kyrgyzstan depend on remittances, but Kyrgyzstan’s remote location from the European Union that makes EU accession unlikely in the future made western-style reform prospects less appealing and economic integration with Russia more desired by Kyrgyzstani people than by Georgians.
Conclusion
Although Kyrgyzstan experienced two color revolutions, they together had a much weaker impact on the structure of the country’s economy and its economic performance than the Rose Revolution in Georgia. Nevertheless, with the exception of brief periods shortly after the two color revolutions, Kyrgyzstan has tended to perform better than neighboring Tajikistan in terms of key macroeconomic parameters. Kazakhstan, another neighbor of Tajikistan, never experienced a color revolution either and still has a weak parliament, but progressed further in economic reforms than the other two countries, does not depend on remittances and has had a more stable foreign economic policy.
BTI Transformation Index. Kyrgyzstan Country Report 2020. https://www.bti-project.org/en/reports/country-report-KGZ-2020.html. 2020.
The CIA World Factbook. Central Asia: Tajikistan. https://www.cia.gov/library/publications/the-world-factbook/geos/ti.html. 2017.
Eurasian Development Bank. Challenges and prospects of Tajikistan’s EAEU accession. http://eurasian-studies.org/archives/6434. 2017.
Eurasian Economic Commission. The Treaty on the Eurasian Economic Union is effective. http://www.eurasiancommission.org/en/nae/news/Pages/01-01-2015-1.aspx. 2015.
European Commission. Countries and regions: Kazakhstan. https://ec.europa.eu/trade/policy/countries-and-regions/countries/kazakhstan/. 2020.
European Commission. EU-Kazakhstan relations. https://eeas.europa.eu/sites/eeas/files/kazakhstan_factsheet_web.pdf. 2018.
Faskhutdinov, G. The Tajik peace agreement - 15 years without war. https://www.dw.com/ru/таджикское-примирение-15-лет-без-войны/a-16051399. 2017.
Gadimova, N. Kassym-Jomart Tokayev wins by a landslide in Kazakhstan Presidential election. https://caspiannews.com/news-detail/kassym-jomart-tokayev-wins-by-a-landslide-in-kazakhstan-presidential-election-2019-6-10-28/. 2019.
Giordono, J. U.S. optimistic Manas base will stay open. Stars and Stripes. https://www.stripes.com/news/u-s-optimistic-manas-base-will-stay-open-1.87811. 2009.
Heritage Foundation. Index of Economic Freedom. Kazakhstan. https://www.heritage.org/index/country/kazakhstan. 2020.
Heritage Foundation. Index of Economic Freedom. Kyrgyzstan. https://www.heritage.org/index/country/kyrgyzrepublic. 2020.
Heritage Foundation. Index of Economic Freedom. Tajikistan. https://www.heritage.org/index/country/tajikistan. 2020.
International Monetary Fund. IMF Survey: Kazakhstan on road to recovery, but banking system still weak. https://www.imf.org/en/News/Articles/2015/09/28/04/53/socar081710a. 2010.
International Monetary Fund. IMF World Economic Outlook Database. https://www.imf.org/external/pubs/ft/weo/2020/01/weodata/weoselgr.aspx. 2020
Kommersant. The Post-Soviet experience: How leaders of CIS countries were buried. https://www.kommersant.ru/doc/762072. 2007.
Kucera, J. U.S. Formally closes its Kyrgyzstan air base. Eurasianet. https://eurasianet.org/us-formally-closes-its-kyrgyzstan-air-base. 2014.
National Bank of the Kyrgyz Republic. Policy Rate of the National Bank of the Kyrgyz Republic. https://www.nbkr.kg/index1.jsp?item=123&lang=ENG. 2020.
National Bank of the Republic of Kazakhstan. Official Internet resource. Official foreign exchange rates on average for the period. https://nationalbank.kz/?docid=364&switch=english. 2020.
Reuters. Kyrgyzstan amends constitution in referendum, boosting government powers. https://www.reuters.com/article/us-kyrgyzstan-referendum-idUSKBN1400XH. 2016.
Reuters. Kyrgyz ex-President sentenced to 11 years in prison. https://www.reuters.com/article/us-kyrgyzstan-atambayev/kyrgyz-ex-president-sentenced-to-11-years-in-prison-idUSKBN23U1CS. 2020.
Saldazimova, G. Kyrgyzstan: Economic reforms seem stalled. https://www.rferl.org/a/1068670.html. 2006.
Satubaldina, A. Kazakh president announces major reform package. The Astana Times. https://astanatimes.com/2019/12/kazakh-president-announces-major-political-reforms-package/. 2019.
Samuels, G. The country that just voted to allow its President to rule forever. The Independent. https://www.independent.co.uk/news/world/europe/tajikistan-votes-to-allow-authoritarian-president-emomali-rahmon-to-rule-forever-a7048011.html. 2016.
Temirbayev, A. Kazakhstan announces currency devaluation. https://astanatimes.com/2014/02/kazakhstan-announces-currency-devaluation/. 2014.
The World Bank. Doing Business 2011. Kyrgyz Republic. Making a difference for entrepreneurs. http://documents1.worldbank.org/curated/en/323191468088756426/pdf/588200AR0Doing101public10BOX353820B.pdf. 2011.
The World Bank. Ease of doing business regulations. https://www.doingbusiness.org/en/rankings. 2020.
The World Bank. Personal remittances, received (% of GDP) - Kazakhstan. https://data.worldbank.org/indicator/BX.TRF.PWKR.DT.GD.ZS?locations=KZ. 2019.
The World Bank. Personal remittances, received (% of GDP) - Kyrgyz Republic. https://data.worldbank.org/indicator/BX.TRF.PWKR.DT.GD.ZS?end=2019&locations=KG&start=2013. 2019.
The World Bank. Personal remittances, received (current U.S. Dollars) - Kyrgyz Republic. https://data.worldbank.org/indicator/BX.TRF.PWKR.CD.DT?end=2019&locations=KG&start=2013. 2019.
The World Bank. Unemployment, total (% of labor force). https://data.worldbank.org/indicator/SL.UEM.TOTL.ZS. 2020.
Thompson, M. Could the U.S. lose its base in Kyrgyzstan? Time. http://content.time.com/time/world/article/0,8599,1979013,00.html.
Trading Economics. Kazakhstan exports by country. https://tradingeconomics.com/kazakhstan/exports-by-country. 2020.
Trading Economics. Kazakhstan imports by country. https://tradingeconomics.com/kazakhstan/imports-by-country. 2020.
Trading Economics. Kyrgyzstan exports by country. https://tradingeconomics.com/kyrgyzstan/exports-by-country.
Trading Economics. Kyrgyzstan imports by country. https://tradingeconomics.com/kyrgyzstan/imports-by-country.
Trading Economics. Tajikistan exports by country. https://tradingeconomics.com/tajikistan/exports-by-country. 2020.
Trading Economics. Tajikistan imports by country. https://tradingeconomics.com/tajikistan/imports-by-country. 2020.
Zuenko, I. The Eurasian gap: Winners and losers of the economic union. Carnegie Moscow Center. https://carnegie.ru/commentary/65114. 2016.
