Kyrgyzstan can become a prosperous country in 10 years if measures aimed at achievement of more results in terms of the private sector growth, increasing the quality of state services and strengthening institutions are taken, the World Bank Vice President for Europe and Central Asia Cyril Muller told in the interview to Tazabek.
We know that one of the objectives of your visit to Bishkek is to discuss the findings of the Systematic Country Diagnostic which the World Bank recently conducted to inform development of its new partnership strategy for the Kyrgyz Republic. Could you please share what these findings are about?
- The Systematic Country Diagnostic for the Kyrgyz Republic showed that the country has been successful in reducing poverty in half over the last fifteen years and in growing at 4 per cent a year on average during that period.
What the Diagnostic also found out was that these growth and poverty reduction cannot be sustained going forward without making further improvements and taking further steps. And these steps would need to focus on three areas. First, we need private sector growth for the Kyrgyz economy to grow and for jobs to be created. Second, we need to make sure that public service delivery improves in quality, so that going forward you not only have access to those services but better outcomes. And the third is that institutions need to further be strengthened and modernized. If steps are taken to achieve better results in terms of private sector growth, better service delivery and stronger institutions, then one would expect that in the next ten years the Kyrgyz Republic could become a prosperous nation.
- What kind of reforms should the country pursue?
- The foundations are very much already there to enable the country to move forward. So, I would not necessarily call it reforms, I would call actions to be taken that enable these improved outcomes, these better results. For instance, to have the private sector grow faster and create more jobs it will take a better business climate, a more transparent tax system. It will also take that state institutions do not impede the growth of the private sector.
It will also take that as the education system improves, you have students that have better outcomes in terms of their reading skills, their ability to use science and new technology going forward. If you look at international tests today, the Kyrgyz Republic is not among the top countries in terms of learning outcomes. So now what, I think, should be a priority is to move the Kyrgyz Republic up in those rankings so that you have better trained labor force, more motivated, and with more opportunities.
I would like also to highlight another area which has to do with putting in place policies that help the Kyrgyz Republic to participate in the regional economy. WTO membership, Eurasian Economic Union offer new opportunities, so a vibrant economy, vibrant private sector will have to be based on exporting more, diversifying exports, and – within the country – having regional development in which all of the regions of the country participate in the economy. It might be about developing agriculture, livestock or tourism, and the connectivity of the whole country.
I also expect more investments coming to the energy sector if energy sector policies & energy tariffs become more attractive for investors to want to develop capacity. I believe that in the long term the Kyrgyz Republic will be a major exporter of electricity and that the price of electricity in the country will be among the lowest in the world, because you have very a large capacity in hydropower.
It is also important that there are programs in place that protect those people who are vulnerable. And that can be in two different ways. The first way is that for those households that are facing difficulties there should be programs allowing, for instance, income support or subsidized consumption of services. The second is to make sure that all the people in the country have opportunities. It is very important that we think of the future more in terms of opportunities and having those opportunities shared by all people.
- What will be the main areas of the Bank’s support to the Kyrgyz Republic in the next several years?
- It is a bit early to define yet the areas where we will be active, because we are starting consultations on the new strategy. But I expect a few areas to be important, and among those areas I would highlight the following three. The first one is to have the World Bank support programs that build the strength of the economy and give opportunities to people for jobs across the whole country. This is very much aligned with the current country priorities – as I understand, the President of the country has declared 2018 as the Year of Regional Development.
The second area is that the World Bank has been associated as an aid agency to finance infrastructure, services, and I would hope that in the future we can enable more private sector participation in the economy. The World Bank Group has its three institutions. One is the public sector institution – the World Bank the one I represent; we have the International Finance Corporation on the private sector side, and the Multilateral Investment Guarantee Agency – also working with the private sector. I hope that our sister organizations, IFC and MIGA, will grow in the future, and that will mean investment in the country.
I also expect that our program will support the Kyrgyz Republic in its regional economic integration objectives, creating opportunities for the Kyrgyz Republic to use other countries around it as a driver of economic growth and as a driver of prosperity for people.
To give you an idea of what the future may be, it is good to look at the present. Over the last few months we have approved a very significant project of more than 40 million USD to help with district heating. We are approving very soon a project that will support digitalization of government and the economy – Digital CASA. And we are also working with the government on supporting their economic reform program with budget support. Finally, we are working on helping the government to have schools retrofitted so that they are resistant against natural disasters, for instance, earthquakes. So, you can see a World Bank that tries to support programs that really make a difference for people.
- At the end of 2017, President Jeenbekov has signed a law on ratification of the World Bank grant aimed at preparation of the Digital CASA project. Could you tell us more about this project? Which stage is it in now?
- The project is now being prepared, and we expect that the it will be approved in the coming two or three months. This project will help fund some of the key infrastructure that is needed to implement the Taza Koom program. It is important to have investment in the infrastructure, in the backbone – to enable this program to go ahead and reach the whole country.
What will also be included is how you use this technology: creating opportunities for citizens to have better services with the Government; also for the private sector to be able to grow their businesses and create opportunities in the ICT sector; and for improving services and building more transparency. These are some of the objectives we are trying to achieve with this project to help the Kyrgyz Republic join the digital revolution.
- How important are regional cooperation and integration for the World Bank in the context of Central Asia? What role could the Kyrgyz Republic play in this process?
- In today’s world, countries do not have a choice – they have to integrate with their neighbors and they have to integrate with the world. In the case of the Kyrgyz Republic, this is particularly important because you share a number of challenges with your neighbors. If you try to address those challenges together, you will be better off than if you try to just address those challenges individually.
Let me give you an example. In the Kyrgyz Republic energy is a very sensitive issue. It is very sensitive in all of the neighboring countries as well. But if the countries come together and get to understand what each country wants to do and develop, then you will be able to use your comparative advantage to a fuller extent. In the case of the Kyrgyz Republic it means developing your hydro energy capacity for hydroelectricity. That means that you are managing water flows, and these water flows are very important for some of your neighboring countries. So, if you can work together and cooperate, everybody will feel comfortable and expect that the outcome will be positive. And this is true for water, transport, energy, connectivity.
The Kyrgyz Republic is a beautiful country, you have a growing tourism industry. But I believe that if the markets were more integrated, you would get much more tourism than you have today and the ability to grow it in more places in the country. You could imagine that you would have tourists who want to see historic cities, then they want to see the beautiful nature and mountains of the Kyrgyz Republic, your beautiful lake. If it is easy to cross the border, if it is easy to arrange a tour and visits, then the industry has real potential for further growth.
It is also interesting that in the ICT sector most companies work in networks – across borders. That has also potential in the region: Kyrgyz entrepreneurs could partner with entrepreneurs in neighboring countries and learn from each other. And that we see in the technology area right now, for instance, in Europe, in the United States, but also in some of the countries of the former Soviet Union. This regional integration and cooperation will mean also more vibrant market, more vibrant entrepreneurs that want to grow their businesses and serve larger markets.
- What are the Bank’s economic forecasts for Central Asia?
- In terms of the economic prospects of the region of Central Asia for 2018, I feel positive. I am positive because each of the countries is trying to improve its economic position and this opportunity for more economic integration and cooperation should be positive this year already.
The second reason why I am positive about it is that all of the governments in the region are being very careful in their economic management, both in terms of public spending and in terms of trying to promote growth carefully through the financial sector. External markets are also making a positive contribution. I am moderately optimistic for this year and hoping that there are no external shocks that could affect this in the future. So, I have the weather forecast that is more sunny than it was last year and the year before.