Corruption and its impact on Kyrgyzstan

It is not a secret that both regime changes that took place in Kyrgyzstan were set off by rampant corruption in every possible aspect of public sector. Unfortunately, corruption is ingrained so deep into the fabric of our society that it is culturally very much acceptable; and even it can be an object of envy if one gets a public position that allows him/her to exercise corrupt behavior and make personal gains abusing the public position bestowed by the public. At the same time most people do see that this is evil that harms each and every one of us either by depriving equal opportunities or by robbing us openly and without impunity at every instance you deal with the bureaucrat. At the same time we are more inclined to embrace it rather than reject it, mainly because we believe that we are all corrupt and there is no way we can change it.

Not surprisingly, corruption is not bad for everyone. We heard about hundreds of millions of dollars-worth wealth being accumulated by the ruling groups and sent out to other countries. Some people may be being euphoric about kicking those people out and replacing them with others allegedly less corrupt and possessing best intentions for the country. Nevertheless, we incurred huge economic losses, as we never can repatriate that largess gone overseas for the benefit of those who practiced corruption in large scale in the name of god and other nice things.

Interestingly, even if you are not a member of the ruling elite that can benefit from corruption without any doubt, you still may find that some corruption is useful for you. At least it may feel like that. For example, many people are happy to pay bribes and get their driver’s licenses, or commit even worse crime and get away by paying off to the judges. Firms and businesses are happy to pay bribes and ignore safety and environment protection norms. The most important thing is not paying taxes and social security contribution, as one can easily bribe the tax inspector, and save significant amount of money. From this perspective it seems like a good deal to have corrupt bureaucrats around.

However, we know by not paying taxes we reduce government revenues. That means less money to build and maintain infrastructure that really increases private productivity. This means also less money spent by the government to educate people and take care of their health. It is well known that educated and healthy workers are not accidentally turn to be more productive. So the firm or business that believes that corruption is creating gains for them by letting them go with tax evasion and noncompliance to regulations, in fact, are fooling themselves. As government (at least the functional one) not only takes but also gives back.

This effect of corruption is so visible in Kyrgyzstan: you can see many expensive luxury cars and mansions most likely obtained by cheating the government; however, you will be appalled to see the degree of degradation of roads and general infrastructure. Do you think the business is thriving in Kyrgyzstan because of these conditions? No I do not think so. They are losing a lot because of the poor quality of infrastructure and labor force.

Yet, I think, the worst effect of corruption comes through our beliefs that command the way we behave. People distrust bureaucrats as they believe all of them are corrupt; hence, the concept of the public interest does not exist in Kyrgyzstan. Most people do not believe that they can entrust someone to further their common interests, as the experience shows every time you do that you end up being robbed and left behind with the smouldering Government House. That is sad, really.

This distrust then feeds into enforcement of different sorts of informal groupings and clans, as only where one seems like finds some sort of support in hard times. So when one does not believe that we as a society have common interests, then all sorts of opportunism starts blooming and the tough people moves to the vanguard of the events and gain at the expense of weaklings of the society. This is a destructive path. This way we lose our humanity, thus we lose ourselves eventually.

The only way out of this situation, seems to me, is start talking about these issues and trying to find the ways how to re-build the state and replenish trust of the people on which the state draws its powers. The future of our country and our identity is at stake.

Is There a Threat of Aggressive Nationalism in Kyrgyz Republic?

The Open Society report warns of a rising aggressive nationalism, and the head of legal clinic Adilet claims that the "virus of nationalism...has spread in North Kyrgyzstan." This post attempts to detangle the logical knots behind these claims.

A very basic logical statement has the following form: Assertions (A) + Conditions (B)--> Conclusions (C). For example, Germs of type Z lead to a variety of diseases (A) + Washing hands with soap after using a toilet kills Z germs (B) --> Washing hands after using a toilet is a good way to avoid diseases (C). We can apply the same structure to the argument of a rising aggressive nationalism in Kyrgyz Republic. The conclusion is that an aggressive nationalism is on the rise. What are (A) and (B) that lead to the conclusion?

The Open Society report and Cholpon Dzhakupova's statements imply that the conditional assumptions (B) are (i) nationalistic speeches by Ata Jurt leadership, (ii) disproportionate arrests and prosecutions of Uzbeks in the southern regions of the country, and (iii) harassment of civil activists who are expressing concerns over human rights violations. Now, we can establish the initial assertion (A) that will unambiguously lead to the stated conclusion:

Any activity- independent of whether it is localized and driven by a small and unrepresentative group, or nationally representative and driven by an overwhelming nation-wide support-that is repressive to Uzbeks in its nature, directly or indirectly, is an indicator of a nationwide aggressive nationalism.

The argument in the form I laid out is internally consistent, i.e. the conclusion follows from the premises. Arguments are evaluated not only on the basis of internal consistency but also on the validity of the assumptions. If we establish that the assertion (A) is false, then the conclusion will be invalid. But what reasons are there to suspect that the assertion (A) is false? This assumption is a prime example of what is called a Hasty Generalization Fallacy. It is a logical fallacy where one makes a generalization to a larger set from a smaller and unrepresentative subset. Activities of a few do not imply that a broader population will engage in similar activities.

The most frequent error in these so called analytical articles or briefs is confusing sentiment and actions. The sentiment, feelings, or any other term that works for you, can be extremely aggressive but does not necessarily turn into an aggressive action. One may speculate that the overwhelming number of Europeans dislike Jews. Suppose that the speculation is true (Of course, this can never be true. Europeans are too advanced to hold such a low-level primitive sentiments.). Does that sentiment necessarily imply that the Europeans will act upon them? Under Nazi Germany, the overwhelming nationwide sentiment was directed by the state's machinery into inhumane actions. In France, Britain, and the US, where the sentiment toward Jews was no less aggressive, the actions of Nazi SS officers and some common folk, were met with disgust and horror. If politicians and their rhetoric are precursors to such an aggressive behavior, then the recent anti-Muslim hearings led by a Republican Congressman Peter King should indicate that the US is facing a threat of aggressive nationalism (aggressive anti-Islamism?). Feelings of a select few do not represent the feelings of the US population. Furthermore, even if these feelings were commonly shared, it does not mean that the violent or unconstitutional actions of a few will translate into a mass action.

Kyrgyz Republic is facing many challenges. The risk of another turmoil is real in terms of non-negligible probabilities of such an event. A nationwide aggressive nationalism would be disastrous, but the bottom line is that the likelihood of it is (extremely) over-inflated.

Bleeding Heart Fools

On March 11, the Oshika Peninsula of Japan was hit by a magnitude 8.9 earthquake, the largest recorded earthquake the world had ever seen, which subsequently triggered devastating tsunamis. Many lives were lost, buildings destroyed, and as I write this piece it is still unclear whether the explosion at Fukushima Daiichi 1 Reactor poses a serious danger or not. In light of this event, over 60 countries are currently involved in relief efforts. Our poor but generous government announced that it also wants to help the people of Japan.


Young progressive citizens whom I admire greatly organized a campaign to bring a sizable group to the gates of the Embassy of Japan in Kyrgyz Republic. They laid flowers, signed a letter of condolence, and some even held lit candles. One could even watch the live feed of the event. This was a genuine act of compassion where Kyrgyz people expressed their concerns about the affected people of Japan. But when the government announced that it is considering sending relief effort workers over to Japan, I was deeply troubled. The amount of money required to send our Kyrgyz relief effort workers, to feed them, to house them, and to safely returns them home is greater than the dollar equivalent of their help to the people of Japan. If we do want to help the Japanese victims, the sensible thing is to send financial support to those relief effort workers who are more productive on the ground. That would make sense if we had the money. The Japanese government is one of the biggest contributors of financial and technical aid to Kyrgyz Republic. We are net debtor for Japan. To use the borrowed funds to help the Japanese is no different than borrowing 10,000 dollars from your relative in Russia who is in distress and spending 8,000 of it on travel expenses and providing them 'help' worth 2,000 dollars. It just does not make any sense. More sensible alternative is to organize a private fund, privately charter a plane, and send private volunteers over to Japan. To ask for public funds (borrowed) to achieve a private (and very noble) goal is no different than saying "I have strong feelings about this and, even if you don't share my sentiment, I believe I have the right to take your money to get this done."

I admit that I share these young progressives' sentiment to do something, now. This call for public action is likely to have a net positive social gain if one assumes that most of the public funds will be channeled into unproductive (most likely to the black hole) ends. Unfortunately, this assumption is not too far from reality. That makes the issue doubly tragic.

Remittances

I came across an interesting article by a young Kyrgyz scholar, Aziz Atamanov, over at Maastricht Graduate School of Governance. The article is entitled "Determinants of Remittances in Central Asia: Evidence Based on the Household Budget Survey in the Kyrgyz Republic". You can download it here.

Aziz and his co-author investigate the characteristics of sending and receiving parties. Their study compares the motives of the seasonal workers with the permanent migrants. The results are not groundbreaking or something that would be re-tweeted. Nonetheless, I was excited to learn that there are young scholars engaged in empirical investigation of Kyrgyz economy. After reading Aziz's article, a particular thought came to mind, which I tried to suppress all day long. Now that I have some 'free time', I would like to share it with you all. And you decide whether it was worth reading.

The latest reports from the National Bank of Kyrgyz Republic put the remittances for 2010 at about 1.2 billion US dollars. That's a little over 20% of Kyrgyz Republic's official GDP, not a small amount by any count. These remittances primarily help the poor families in the southern provinces of Kyrgyz Republic, where economic activity is the least active. Furthermore, remittances increase monetary base, providing much needed liquidity to remote (poor) parts of the country. According to the estimates from foreigners, the average annual amount that workers send is approximately 1,000 US dollars. Now, my math (I have to admit that I subscribe to George Gamow's principle that 'arithmetic precision is not a mathematician's concern, it is a task for bank accountants') suggests that 500,000 workers in Russia sending 1,000 dollars don't add up to 1.2 billion, but about 2,000 dollars seem to make more sense. The question is how sensitive are these amounts to the economic changes in Russia? If they are sensitive, then at least 20% of consumption and investment expenditures in Kyrgyz Republic arising from these remittances are at stake.

Aziz's work and other reports suggest that the most of these laborers earn their wages in Construction sector. I used the official Russian Statistical Data to see how the construction sector activities relate to the remittances to Kyrgyz Republic. Here is the graph I made (Construction Index has a base value 100 in year 2000):

For many, this picture shows that Russian construction sector and remittances are highly correlated. For others, this picture suggests that 1/5 of expenditures in Kyrgyz republic are extremely sensitive to an extremely volatile sector of the Russian economy. Much can be said about this, but ultimately it is a pretty scary picture. Let's hope oil prices stay high?