The Economic Situation of Sovereign Kyrgyzstan
Kyrgyzstan gained independence in a complex economic and political environment. With the transition to market relations, the unified economic complex that had been established in the USSR began to disintegrate. Economic ties between neighboring enterprises, which supplied each other with components for production, were severed. Kyrgyzstan, which had traditionally supplied raw materials and received finished products from other republics, found itself in a difficult situation. Supply contracts were disrupted. New concepts such as barter exchange and others came into practice. The republic's industry, unprepared for this, fell into decline. Almost all major productions, such as the Lenin plant, "Physpribory," "Selmashzavod," and others, were halted. The standard of living for the population sharply decreased.
Course towards a Market Economy. To change the situation, it was necessary to restore order in the economy. States that embarked on a democratic path of development needed to have the freedom to choose forms of economic activity—trade, production, i.e., a flexible, rational economy as a whole. In developed countries, such an economic system is known as a market economy. In a market economy, free competition and free prices operate. Enterprises determine for themselves what goods to produce, in what volumes, at what prices, and where to sell them. They can trade with foreign states without any restrictions, and the latter can also freely conduct business within the country. Kyrgyzstan began transitioning to such a market economy in 1992.
However, the transition to a market economy was impossible without the establishment of private property and without the emergence of people's interest in their own production. In these conditions, the question of property and the development of the private sector came to the forefront. To engage workers in the revival of enterprises, a transfer of state property to collectives and private individuals was carried out, i.e., its denationalization and privatization.
On December 20, 1991, the Supreme Council adopted a law on privatization, and a State Property Committee was established for its implementation. Thus, the possibility for the activity of enterprises of all forms of ownership emerged.
Starting from 1992, large factories and enterprises, service enterprises, and utilities began to transition into private ownership or the ownership of worker collectives. Subsequently, their children could also become owners, as property rights are inherited by law.
Now every new owner, striving to improve their life, had to participate in the revival of their enterprise. Now their present and future depended on themselves, their intellect, and efforts, not just on external circumstances. People who understood this began to work, independently seeking ways to improve product quality and reduce production costs, finding markets for their goods.
An important, difficult, but necessary step to pull the country out of crisis, develop the economy, and implement economic reforms was the introduction of the Kyrgyz Republic's own national currency, the som, on May 10, 1993. Kyrgyzstan ceased to depend on Russia in conducting monetary policy. This decisive step by Kyrgyzstan was supported by international financial organizations. The country began to receive large loans. The assistance provided allowed for greater investment in production, which, in turn, was supposed to lead to a gradual increase in production volumes and stabilization of the economy.
Reforms in Agriculture. Historically, the Kyrgyz have always been connected to the land, living off what the land provided. Kyrgyzstan is an agrarian country: agriculture is the most important sector of its economy. Sixty percent of the republic's population lives in rural areas. Therefore, without the uplift of agriculture and the implementation of agrarian reforms, it was impossible to talk about the future of the state.
By the time of gaining sovereignty and independence, the situation in agriculture was dire. The state could not provide the population with agricultural products in sufficient volumes. It reached the point where it was necessary to purchase the most essential goods—grain—from abroad. Collective farms and state farms—the foundation of the Soviet agricultural system—ceased to justify themselves in the new conditions. Their debts to the state reached enormous sums and hung like a heavy burden on the shoulders of the people. Negligent attitudes towards state property—livestock, equipment—led to its disintegration and theft.
In 1991, the republic's government decided to dissolve collective farms and state farms and transfer the property under their management—livestock, equipment, land—to the workers. Instead, private peasant and farming enterprises were created. To support them, the state provided special preferential loans. A total of $234 million 117 thousand was allocated for the development of agriculture from 1992 to 1998.
In a nationwide referendum held on October 17, 1998, the question was raised: to introduce or not to introduce private property on land. The majority of the population voted for the introduction of private property. Rural workers became the true owners of their land plots, and their attitude towards the land changed. Farmers gained motivation and interest in managing their own farms. They received the opportunity to freely sell the wheat, cotton, tobacco, meat, wool, and other products of their labor at market prices.
Agrarian reforms progressed slowly but steadily. The results were noticeable. In Kyrgyzstan, the yields of grain, tobacco, cotton, vegetables, and fruits increased, and trade in various agricultural products revived.
Economic Problems of Recent Years. The transition to a market economy was fraught with considerable difficulties. The main issue was that neither the people as a whole nor the leaders were prepared for it. Therefore, the reforms were not carried out thoughtfully enough. The shutdown of enterprises and the transition to private land use led to an increase in the number of unemployed people. They did not receive salaries, pensions, or benefits. Economic difficulties forced many people to leave the republic.
During the privatization process, the legitimate interests of people and labor collectives were often disregarded, and the legally established procedures were violated. The term "privatization" gained great popularity among the people. State officials, enterprise managers, and farm leaders acquired state property for a pittance, seeking to seize ownership by using their positions. Formally creating joint-stock companies on the basis of enterprises, they deceived people. The newly created joint-stock companies did not ensure the operation of factories and plants. The funds intended for payment to the state treasury were appropriated by a small group of people managing the enterprise.
The number of impoverished people increased. According to data from 1998, 70 percent of the entire population of the republic lived below the poverty line.
From 1992 to 1998, foreign countries provided the republic with loans totaling $1 billion 200 million; however, they were not fully directed towards boosting production. Foreign companies operating in Kyrgyzstan sought to conclude contracts favorable to themselves, often infringing on the interests of the republic.
The situation in agriculture was also complicated. A large number of livestock, equipment, and the best lands were illegally seized by local authorities, officials, and their relatives. The livestock population sharply decreased. Of the 10 million sheep in 1991, only 4.5 million remained by 1995. The loans allocated for agriculture did not reach the farmers; they were also appropriated by various leaders and officials. As a result, from 1993 to 2000, agriculture faced significant difficulties.
