Institutional interrelations among the
State, Business and Civic sector in
Kyrgyzstan
Presentation for PhD seminar (part of PhD thesis)
Marat Djanbaev, PhD student
Supervisor: Prof. PhDr. Martin Potůček
General information about Kyrgyzstan
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Population:5,189,800
GDP (PPP):$ 9.4 billion USD
GDP growth – 3,1%
GDP per capita: $ 1813 USD
Area:198,500 sq km. Borders:China 858 km,
Kazakhstan 1,051 km, Tajikistan 870 km, Uzbekistan
1,099 km
Government and legal system:Republic, Civil Law
Major cities:Bishkek, Osh, Talas, Karakol, Jalal-Abad
Significant economic sectors:Agriculture, textiles,
processing and mining
Major trading partners: Russia, China, Kakakhstan,
Turkey, EU
Basic information on thesis
• Title: “Institutional interrelations among the State,
Business and Civic sector in terms of improving
business environment and investment climate in the
Kyrgyz Republic ”
• Classification of the actors or stakeholders: State - the
President, Government (ministries and agencies),
Parliament and Courts; Private commercial sector mainly by business and professional associations, Civic
sector and society – non – governmental, non – profit
organizations and informal actors (clans, religious
movements).
Structure of presentation
• Purpose and objectives of the thesis
• Research questions
• Theoretical dimension of the thesis
– Theoretical hypotheses
• Methodological approach
• Delimitation of the research problem
• Outcomes of the empirical research in Kyrgyzstan
– Tax reform
– Law on Inspections
– Improving Kyrgyzstan’s standings at international ratings
• Conclusion
• References
Purposes and objectives
The main purposes of the PhD thesis:
• Analyzing interactions among the Government,
Business and Civic Sector in Kyrgyzstan
• Proposing effective models of institutional
interrelations between public and private sectors
in Kyrgyzstan
Objectives
• Learning theoretical approaches to institutional
interrelations between public and private sectors
• Profound studying of the main theories and
concepts on such regulators as: the State,
Market and Civic sector
• Using appropriate methodological approach for
doing comprehensive research
• Delimitation of the research problem in order to
focus on narrower issue
Research questions
1. What are the main actors on policy arena who define
policy agenda and format of interrelations between
public and private sectors in Kyrgyzstan?
2. Do political system, regime and legislative background
allow effective interactions between public and private
sectors in Kyrgyzstan?
3. What are the factors inducing and influencing
interrelations among the Government, Business and
Civic sector in Kyrgyzstan?
4. What values and theories are more applicable in
designing better models of interrelations between public
and private sectors in Kyrgyzstan?
Theoretical dimension
• Theory of the Government, Market and Civic Sector as
regulators of society (Lindblom)
• Multi – Dimensional Concept of Governance (Potůček)
• Theory of Neo - Corporatism (Schmitter, Streeck)
• Actor – Centered Institutionalism (Scharpf)
• Concept of New Public Management (Osborne, Gaebler)
Hypothesis of Theory of the Government,
Market and Civic Sector (Lindblom)
Functioning of global societies should be analyzed on the basis of
definitions of the following elementary political and economic
mechanisms which influence and condition human lives and
societies: 1) government as the expression of political power, 2) the
market as a medium of exchange; and 3) indoctrination (ideology,
civil society)
Table 1. Types of Sector Regulating Human Activity
Source: Wolfenden Commission 1978
Two models of Society (Lindblom)
Two models of Society as a holistic concept of
environments where regulators interact with each other.
• Model 1 – intellectually guided society with optimistic
view of human’s intellectual capacities (Cuba, North
Korea, former U.S.S.R)
• Model 2 – it postulates other forms of guidance for
society due to scarcity of human’s intellectual abilities
(Western Europe, the USA and pacific Asian states)
Verification of Theory of the Government,
Market and Civic Sector (Lindblom)
• Regulators in Kyrgyzstan
State
The President, Government,
Parliament, Court
Private commercial sector
(business)
Business – associations, trade –
unions, private entrepreneurs
Civic sector
NGO’s and international
organizations
Private informal sector (society)
Clans and tribes, religious
movements, crime
• Kyrgyzstan belongs to Model 2 which implies institutional
interactions between regulators
Hypothesis of Multi – Dimensional Concept
of Governance (Potůček)
• Dimension 1: Vertical layers of Governance
• Dimension 2: Regulators – market, state, and civic
sector
• Dimension 3: Actor’s networks and networking
Potůček, 2008
Verification of Multi – Dimensional Concept
of Governance (Potůček)
• Dimension 1: Vertical layers of Governance in Kyrgyzstan
Traditional bureaucratic “Top – down” scheme of
governance represented by the Government, oblast
administration (regional units on macro level), rayon
administration (regional units on micro level) and aiyl
okmotu (local administration)
• Dimension 2: Regulators – market, state, and civic sector
see table with regulators in Kyrgyzstan on the slide 11
Verification of Multi – Dimensional Concept
of Governance (Potůček)
• Dimension 3: Actor’s networks and networking
Horizontal layer of cooperative ties between regulators
emerged as a response to definite issue
1) Constitutional Council of the Kyrgyz Republic between
2005 – 2007
2) Working group on elaborating new version of Tax Code
between 2004 – 2008
3) Public Council under Custom Service of the Kyrgyz
Republic
4) Advisory Council under the Ministry of Economic
Development and Trade of the Kyrgyz Republic
Verification of Multi – Dimensional Concept
of Governance (Potůček)
Constitutional Council – 114 members
NGOs, business community, political parties – 57 members
Working group
(drafts project of Constitution)
26 members
The Government (10), Parliament (37), Constitutional and
Supreme Court (10) – 57 members
Scheme 1. Structure of Constitutional Council in Kyrgyzstan between 2005 - 2007
Constitutional Council – 114 members
Hypothesis of Neo – Corporatism
(Schmitter, Streeck)
• Unlike the sharp division in liberal democratic theory
between hierarchical state authority and the voluntary
organization of civil society, corporatist theory and
practice blur the boundary between state and society as
the state shares authority with private interest
associations, using the latter as agents of public policy
by coordinating their behavior or delegating public
functions and decisions to them (Schmitter, Streeck)
Verification of the Concept of Neo –
Corporatism (Schmitter, Streeck)
Public Chamber of the Kyrgyz Republic
• Established in December 2008 by the President with involvement of
civic organizations, informal movements and leaders, business –
associations for defining policy agendas and monitoring of their
implementation
Investment Council under the President of the Kyrgyz Republic
• The Council includes the President, Prime - Minister, key economic
ministers, leading business associations and parliament deputies for
elaborating policies and monitoring their implementation in business
regulatory reforms. Its decisions and directives possess mandatory
power to all Government bodies
Methodology
• Public policy analysis of the chosen theoretical concepts
and relevant literature (polity, politics, policy framework
by Schubert and Fiala 2000)
• Primary and secondary analysis of policy documents and
national legislation.
• Interviews with the main actors
• Event and content analysis of the actor’s speeches and
interviews related to issue
• Comparative analysis with international experience, case
– study
• Survey on business environment and investment climate
Delimitation of the research problem
• Regulatory reform and its importance for business
environment and investment climate in Kyrgyzstan was
defined as a narrower subject or dimension of research
problem
• The research problem was delimitated in the framework
of the institutional interrelations among the State,
Business and Civic sector in Kyrgyzstan
• Choosing the research problem was based on my
professional experience and access to relevant empirical
data in Kyrgyzstan
Defining the business environment
Source: Supporting business environment reforms; practical guidance for development agencies/
www.businessenvironment.org
Indicators of regulatory reform
• Simplifying business registration and licensing
procedures
• Improving tax policies and its administration
• Improving labor legislation and its administration
• Improving the overall quality of regulatory governance
• Simplifying and speeding up access to commercial
courts and alternative dispute resolution mechanisms
• Broadening public – private dialogue through public
policy standards
• Improving access to market information and access to
finance
Why does Kyrgyzstan need to de – regulate
the business environment?
• To enable businesses compete better in domestic and
international markets by reducing the cost of doing
business
• To increase employment opportunities
• To promote public and private governance that leads to
economic growth
• To reduce corruption and unfair monopoly
• To transform the use of personal contacts and patronage
systems to systems that are based on a market – neutral
set of rules to enable entry and market competition
Main pillars of the business environment
• Policy framework
 Improving national policies that promote competition, open
markets and the general conditions for doing business
• Legal and regulatory reform
 Improving national laws and regulations that affect the
establishment, operation and closure of businesses
 Business regulations: tax legislation and administration, labor
laws and regulation, trade regulations, custom administration
• Institutional arrangements
 Public – private dialogue or partnership
 Regulatory Governance Capacity Building
Regulatory reform in improving business
environment in Kyrgyzstan
• Reforming national Tax Code
• Adopting single Law on Inspections to business
enterprises and entrepreneurs
• Private property protection – research on
“Raiding; problems of hostile takeovers of
private property in the Kyrgyz Republic”
• Improving Kyrgyzstan’s standings at
international ratings: DoingBusiness, Economic
Freedom
Reforming national Tax legislation
(position of business)
– Joint efforts of business and civic sector transformed
into single coalition “For Fair Taxation” with 23
business – associations and NGOs all over
Kyrgyzstan
– The Coalition asked simplification of Tax Code with
clear tax administration; reduce VAT from 20% to
10%, introduce presumption of innocence for tax
payers and tax incentives for exporters, business
beginners and non – profit organizations;
– The Coalition conducted survey among businesses
and entrepreneurs in order to show imperfection of
tax administration and its burden on private sector
Reforming national Tax legislation
Figure 1. Are you satisfied by Tax System in Kyrgyzstan?
60%
50%
40%
30%
52%
20%
24%
10%
16%
8%
0%
I am
completely
satisfied
I am rather
satisfied
I am not rather
satisfied
I am not
completely
satisfied
Source: survey of Bishkek Business Club, 2005
Reforming national Tax legislation
Table 1.What kind of Governmental bodies is the most corruptive?
Tax inspections
1
Departments of Interior Affairs (Police)
2
Departments of licensing
3
Custom services
4
Local Public Administrations
5
Certification departments
6
Sanitary – epidemiological departments
7
Fire control departments
8
Labor force control departments
9
Source: survey of Bishkek Business Club, 2005
Reforming national Tax legislation
Figure 2.Public services that extort bribes
Source: “Review of the investment climate”, 2005
Reforming national Tax legislation
(position of the Government)
– The Government was aware of imperfect Tax
legislation adopted in 1996 which caused complexity
of the legislation and corruption
– The Government established official working group on
elaborating new version of the Tax Code with
involvement of ministers (economy and trade,
finance), members of Parliament, international tax
consultants by IMF and WB and very few
representatives from private sector
– The Government insisted on having more
comprehensive Code with 400 articles instead of
existing 200
Law on Inspections
(position of business and the Government)
 The Government conducted 23918 inspections and
spent roughly 2,2 million USD from the state budget
and collected only 80 thousand USD in 2006
 Effectiveness of the overall inspections by the
Government in 2006 was – 2,2 million USD or – 0,067
% to GDP
 On 29.05.07, President signed the Law on Inspection
and approved single legislation to regulation of
business environment in Kyrgyzstan
Kyrgyzstan’s standings at
international ratings
 Impressive shift of Kyrgyzstan from 99th to 68th
position in Doing Business 2009
 The Kyrgyz Republic is the most advanced country in
Central Asian region and among the top 3 reformist
economies according to Doing Business ranking of
2009 (see table 2)
 Enactment of Moratorium to all kinds of inspections
toward business in 2008
Kyrgyzstan’s standings at
international ratings
 Such internationally recognized ratings as “Doing
Business” by the World Bank and “Index of Economic
Freedom” by the World Heritage Foundation are
guides for attracting foreign direct investments (FDI)
to national economy
 Methodology of these ratings promotes main
principles of the democratic society and free market
economy (see next table for details)
Kyrgyzstan’s standings at
international ratings
• Definition by Heritage Foundation
 Economic freedom is the fundamental right of every human to control his or her
own labor and property. In an economically free society, individuals are free to
work, produce, consume, and invest in any way they please, with that freedom
both protected by the state and unconstrained by the state. In economically free
societies, governments allow labor, capital and goods to move freely, and refrain
from coercion or constraint of liberty beyond the extent necessary to protect and
maintain liberty itself.
• Methodology of the Index of Economic Freedom (freedoms)
Business Freedom
Trade Freedom
Fiscal Freedom
Government Size
Monetary Freedom
Investment Freedom
Financial Freedom
Property Rights Freedom
Freedom from Corruption
Labor Freedom
Kyrgyzstan’s standings at
international ratings
Source: Heritage Foundation Annual Reports, http://www.heritage.org/Index/Explore.aspx?view=by-region-country-year
Kyrgyzstan’s standings at
international ratings
• Methodology of Doing Business (indicators)
–
–
–
–
–
–
–
–
–
–
Starting a Business
Dealing with Construction permits
Employing Workers
Registering Property
Getting credit
Protecting Investors
Paying Taxes
Trading across Borders
Enforcing Contracts
Closing a Business
Kyrgyzstan’s standings at
international ratings
Dynamic of Kyrgyzstan’s development in Doing Business between 2008 - 2009
200
180
160
140
120
100
80
60
40
2008
20
2009
0
Source: Doing Business Report 2009, the World Bank
Kyrgyzstan’s standings at
international ratings
The 10 top reformers in 2007/2008
Source: Doing Business Report 2009, http://doingbusiness.org/Documents/FullReport/2009/DB_2009_English.pdf
Conclusions
• Verification of the proposed theoretical
concepts
• Delimitation of the research problem to the
issue of regulatory reform and its
importance for business environment in
Kyrgyzstan
• Theoretical dimension, delimitation of the
research problem and outcomes of the
empirical research helped me in answering
cognitive questions
Conclusions
• I have not reached second purpose in proposing effective
models of institutional interrelations between public and
private sectors in Kyrgyzstan
• There is a need for definite variables and indicators that
evaluate results of interaction processes between public
and private sectors (share of SME in employment rate,
share and growth of FDI in GDP)…
• Hypothesis I: a shift from pluralist to corporatist model of
interactions improved business environment and
investment climate in Kyrgyzstan by such variables as
growth of FDI in the share of GDP and national economy
References
•
•
Books and articles
Axelrod, R.M. (1984). The Evolution of Cooperation. New York: Basic Books.
•
Axelrod, R.M. (1997). The Complexity of Cooperation: Agent – based model of competition and collaboration.
Princeton: Princeton University Press.
•
Cawson A. (1986). Corporatism and Political Theory. Basil Blackwell Ltd.
•
Dahrendorf, R. (1985). Law and Order. London: Stevens.
•
Hill, M. (1997). The Policy Process in the Modern State. 3rd edition. Cornwall: Prentice Hall.
•
Lane, J.E. (1993). The Public Sector. Concepts, Models and Approaches. London: Sage.
•
Lindblom, Ch.E. (1977). Politics and Markets. New York: Basic Books.
•
Lindblom, Ch.E. and Woodhouse, E. (1993). The Policy – Making Process. Englewood. Cliffs (NJ); Prentice Hall.
•
Managerial public administration: Strategy and structure for a new state. Luiz Carlos Pereira. Journal of Post
Keynesian Economics; Fall 1997.
•
Okun, A.M. (1975). Equality and Efficiency. The Big Tradeoff. Washington: The Brookings Institution.
•
Ornstein, N.J. and Elder, S. (1978). Interest Groups, Lobbying and Policymaking. Washington (DC):
Congressional Quarterly Press.
References
Books and articles
•
Osborne, D and Gaebler, T. (1993). Reinventing Government. How the Entrepreneurial Spirit is Transforming the
Public Sector. Reading: Addison – Wesley Publishing Co.
•
Politt, Ch. Managerialism and the Public Service. Oxford: Blackwell, 1990.
•
Popper, K. (1994). Open Society and Its Enemies.
•
Potůček, M. – Musil, J. – Mašková, M. (2008) Strategické volby pro českou společnost – teoretická východiska.
(Strategic Choices for the Czech Society – Theoretical Points of Departure. In Czech with the English summary)
Praha, Sociologické nakladatelství.
•
Potůček, M. (1999). Not only the market. Central European University Press.
•
Potůček, M. (2005). Veřejná politika. Praha: Sociologické nakladatelství (SLON).
•
Pressman, J.L. and Wildavsky, A. (1984). Implementation. Berkeley: University of California Press.
•
Robert A. Dahl. (1961). Who Governs? Democracy and Power in an American City.
•
Robert A. Dahl. (1971). Polyarchy. New Haven, Conn.: Yale University Press.
•
Rosenbloom, D.H. (1993). Public Administration – understanding management, politics and law in the public
sector. New York: Mc Graw – Hill.
Sabatier, P. (1986). Top – Down and Bottom – Up Approaches to Implementation Research. Journal of Public
Policy, 6, p.21 – 48.
•
References
•
Stiglitz, Joseph E.(1995) “Role of Government in the Contemporary World”. Paper presented to the conference
sponsored by the International Monetary Fund, “Income Distribution and Sustainable Growth”. Washington, DC.
•
Streeck, W and Schmitter, P.C. (1985). Private Interest Government. Beyond Market and State. London: Sage.
•
Scharpf F. (1997). Games real actors play: actor – centered institutionalism in policy research. Boulder. Westview
Press.
•
Uphoff, N. (1993). Grassroots Organizations and NGO in rural Development: Opportunities with Diminishing
States and Expanding Markets. World Development, 21, # 4. p.607 – 622.
•
Weber, Max. Economy and Society. Berkeley: University of California Press, 1978.
•
Wilensky, H.L. and Turner, L. (1987). Democratic Corporatism and Policy Linkages. Berkeley: University of
California, Institute of International Studies. Research Series # 69.
Assessments and Surveys
•
Survey of Bishkek Business Club on Tax Code and its administration in Kyrgyzstan. Bishkek 2004.
•
Research of Bishkek Business Club “Strengthening advocacy of business associations and improving
entrepreneurial climate in Kyrgyzstan”. Bishkek 2004.
•
ИССЛЕДОВАНИЕ БИЗНЕС-АССОЦИАЦИЙ КЫРГЫЗСКОЙ РЕСПУБЛИКИ (январь-февраль 2006).Центра
Тренинга и Консалтинга. Бишкек 2006.
•
Research of Bishkek Business Club and Institute for Constitutional Policy “Raiding: problems of hostile takeover of
private property in the Kyrgyz Republic”. Bishkek 2008.
•
Research of Bishkek Business Club and International Business Council “Impact of inspections to business
enterprises in Kyrgyzstan”. Bishkek 2007.
References
Legal materials
•Constitution of the Kyrgyz Republic. 1993 (amended in 2006, 2007).
•Civil Code of the Kyrgyz Republic. 1996 (amended in 2009).
•Law on non – governmental organizations of the Kyrgyz Republic. 1999.
•Law on social partnership in the area of labor regulation in the Kyrgyz Republic. 2003.
•Decree of the President of the Kyrgyz Republic on Investment Council under the President of the Kyrgyz Republic.
2007
•Law on Inspections of business enterprises of the Kyrgyz Republic. 2007
•The Government decree and program “100 days toward improving business environment and investment climate in
the Kyrgyz Republic”. 2007
•Law on social contracts and order of the Kyrgyz Republic. 2008
•Tax Code of the Kyrgyz Republic. 2009
•Decree of the President of the Kyrgyz Republic on Public Chamber of the Kyrgyz Republic. 2009.
Statistical data
•Data on the number of NGOs and business – associations. Ministry of Justice of the Kyrgyz Republic 2006.
•Data on number of inspections of business enterprises in the Kyrgyz Republic. Statistical Committee of the Kyrgyz
Republic.
Internet sources
www.akipress.org
www.bdk.kg
www.businessenvironment.org
www.ceses.cuni.cz
www.cipe.org
www.doingbusiness.org
www.24.kg
www.naba.org.kg
www.president.kg
www.martinpotucek.cz
www.ibc.kg
www.ipp.kg
www.gov.kg
www.investment.kg
www.heritage.org
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