Local government in Kyrghyzstan

PUBLIC ADMINISTRATION AND DEVELOPMENT, VOL. 15,49>505 (1995)

Local government in Kyrghyzstan

WILLIAM TORDOFF University of Manchester

SUMMARY

The Kyrghyzstan government is making the difficult transition from a command economy under Communist Party control to a market economy within a pluralist political framework. For the time being, however, the reality of firm executive, hierarchical control persists. An Akim heads the government structure at provincial (oblust ) and district (ruion) levels and exercises considerable power; though formally answerable for his budget and socio-economic programme to the local parliament (kenesh), his accountability is virtually nil. Some attention is given to equalizing revenue among the provinces: Bishkek, the capital city, which has oblast status, and Chui oblast provide substantial financial underpinning for the rest of the country. In April 1995 the government accepted the main provisions of the EIPA Report prepared under the European Union’s TACIS project ED/052, the effect of which should be to enhance the government’s ability to promote development. President Akayev sees local administration, local self-government and privatization as important levers of reform.

DECENTRALIZATION

Decentralization is often used as a blanket term to cover what are usually two complementary processes: the deconcentration of administrative authority, whereby the central government delegates power to its own field officers, and political devolution, an arrangement whereby certain powers are conferred on representative bodies at provincial and/or district level, each with its own separate legal existence and its own budget, and with the authority to allocate resources and to carry out multiple functions. On a strict interpretation, the term decentralization refers to the latter process-political devolution. This is substantially absent in Kyrghyzstan, where administrative authority is exercised on behalf of the central government by the Akims. Though an elected local council or ‘kenesh’ exists at both oblast and raion levels, it exercises little check on the Akim’s power. The present system is therefore characterized by administrative decentralization rather than political devolution. This is not surprising since it was only at independence in August 1991 that the country emerged from 70 years of highly centralized Communist Party rule.

Dr William Tordoff is Emeritus Professor of Government, University of Manchester, Manchester, M13 9PL, UK. Note. This article draws upon my experience as consultant in 1994-95 for the European Union-EIPA/ RIPA International TACIS Project ED/052: Civil Service Reform and Training in the Republic of Kyrghyzstan. I t reflects my personal views and not those of the European Union, the Government of the Republic of Kyrghyzstan, EIPA or RIPA International.

CCC 0271-2075/95/050495-11 0 1995 by John Wiley & Sons, Ltd.

496 W. Tordoff

Given the fact that political behaviour is conditioned more by past experience than constitutional laws, it is likely that hierarchical authority will remain, at least in the short-term, the hub of the governmental system of Kyrghyzstan. Nevertheless, the objective of President Askar Akayev is to work within a pluralist political framework towards a more open and democratic system of local government.

ECONOMY

The government’s reform initiative is being undertaken in difficult socio-economic circumstances. There is a shortage of finance caused initially by the complete cut-off at independence in 1991 of subventions and payments from the USSR and aggravated by the weak state of the Kyrghyzstan economy in the subsequent period. Indications of this weakness were given in a number of official statements early in 1995. For example, on 31 January the Deputy Chairman of the State Committee for Economics stated that during 1994 industrial output decreased by 14.5% and agricultural production by 17%, while the volume of capital investment was down by 55%. Real income of the population fell by 20.4% during the year and the officially registered number of unemployed was 424,000 out of a population of some 4.5 million. On the same occasion, the Minister of Finance reported that only 61% of the budget was implemented in 1994 and that the budget deficit was 850 million soms (approximately, US77 million).

The government’s spending capacity was drastically reduced, prompting the search for alternative sources of finance in the West. This, coupled with the failure of the command economy approach in the former Soviet Union and Eastern Europe, led President Akayev’s Government to opt for a market economy strategy of development. The Government sought to attract foreign investment and to rehabilitate industry and agriculture by means of an ambitious privatization programme. Impediments to success included the shortage of skilled manpower, infrastructural weakness such as the lack of a commercial banking sector, and the persistence of old attitudes among conservative elements in the government.

THE STRUCTURE OF GOVERNMENT

Since independence, there have been three major levels of government in Kyrghyzstan. In the executive branch, these include at the centre the presidium, vice-premiers (now reduced to three), and ministries and state committees subject to the apparats of the President and Prime Minister. Next are the six oblasts or provinces-Osh and Jalal-Abad in the south and Chui, Talas, Naryn and Issyk-Kul in the north-and the city of Bishkek, the national capital, which has oblast status. At the third level are ‘gorods’ (cities) and ‘raions’ (districts), under which are villages grouped into ‘ails’, each under the chairman of the local kenesh.

Though the former Communist Party structure as an arm of government has been dismantled, the reality of firm executive hierarchical control has been retained with the higher organ-the oblast--checking the gorods and raions and the latter supervising the ails. The Akim, supported by Deputy Akims (each with his own apparat) is head of the structure at oblast and gorod/raion levels and exercises

Local government in Kyrghyzstan 497

considerable power at that level. All Akims are de fucto appointed by the President and can be removed by him at any time. Ad hoc arrangements to monitor the performance of Akims have been set up by the Presidential Administration.

The system of government is unitary. The central government is responsible for defence, foreign affairs, international trade and justice, and makes national policy in spheres such as education and health, though primary responsibility for providing these particular services to the public rests with the local administrations. The latter also provide the public with water, housing, libraries and recreational activities, and maintain local roads. They promote agriculture and/or industrial and commercial enterprises.

The republic provides social security transfers, while economic and administrative expenditures are shared by the two levels. The republic has a major say in revenue collection, which is mostly undertaken by tax inspectors of the Ministry of Finance, in the expenditure policies of the local governments and extra-budgetary funds. Technical training is required to develop local institutional capacity in financial matters. State enterprises enjoy greater financial autonomy than government departments, but the picture in this regard is changing as the government’s privatization policy takes effect and as several enterprises are forced to close dom- often following the emigration of their former (mainly Russian) managers.

Oblasts, gorods and raions

Table 1 lists the oblasts into which the country is divided and gives in each case population and constituent gorods and raions. This is amplified further in Figure I .

The contrast is sharp between the relatively wealthy oblasts of Chui and Bishkek (the capital city) on the one hand and the poor and remote oblasts of Naryn and Talas on the other. Osh is a large and populous province with a prosperous

Table 1 . Oblasts in Kyrghyzstan with population and constituent gorods and raions

Number of

Oblast Population (approx) Raions Gorods

Osh Jalal-Abad Bishkek Chui Naryn

Talas Kyrghyz Republic

ISsyk-Kul

1,394,000 81 7,000 606,900 746,700 270,200 424,700 203,100

4,462,600

10 3 8 5 4 1 9 l a 5 b 0 5 1 C

4 1

Source: Department of Population of the National Statistics Agency ‘Prior to the merger of Tokmak city and Chui district, the province had two gorods; now it has only one- Karabalta bPreviously Naryn Oblast had 7 raions. However, in 1994 Susamir was transferred to Chui province and was merged with Jayil; t he city of Naryn was merged with Naryn district ‘In 1992 the city of Cholpon-Ata was merged with Issyk-Kul district, with administrative headquarters based in the city

498 W. Tordoff

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‘heartland’; though less wealthy than Chui and Bishkek, it, too, can normally balance its budget without a subsidy from the central government. Jalal-Abad, where ninety per cent of the country’s energy resources are located, Issyk-Kul, a lakeland area with largely untapped tourist potential, and Naryn and Talas are dependent on central support. However, Jalal-Abad did not receive any subvention in the first quarter of 1995-see Table 3 below.

Historically, there were only two oblasts in Kyrghyzstan-one for the north based on Issyk-Kul and one for the south based on Osh; other territories were supervised directly from the centre. The number of provinces was increased to six at independence-as a result, according to Vecherny Bishkek, 16 May 1994, of intense pressure exerted by ‘various tribes and clans’ to have ‘their own provinces and their own rulers’; two provinces (Osh and Jalal-Abad) were established in the south and four (Chui, Talas, Naryn and Issyk-Kul) in the north.

The President and his apparat-restyled the ‘Presidential Administration’ in 1994-resisted subsequent pressure to reorganize the oblasts and decided to retain the existing number both in the interests of stability and firm government and because a detailed review suggested that the savings of such reorganization would be minimal. Reorganization was limited to the merging of a number of gorods and raions-in Chui province, for example, Tokmak city was joined to Chui district. A rare instance of inter-provincial transfer also occurred: the border district of Susamir was transferred from Naryn to Chui oblast, but lost its raion status on being amalgamated with Jayil.

There is therefore no prospect of overhauling the existing oblast/raion structure, revolving round the Akim, at an early date. However desirable it may be, the creation of a single level of decentralized administration, operating between the central government and the ails, through the judicious amalgamation of raions and/ or the dismantling of oblasts is not at present viable. The feeling in official circles is that this issue, which is politically loaded, has been sufficiently ventilated and should not be reopened. It has therefore been decided to write the names of the six oblasts and Bishkek city (which has oblast status) into the Constitution; this means that subsequent reorganization of the oblast structure will necessitate prior constitutional amendment. The merger of the odd gorod and raion and of one raion with another will take place, but for it to occur on any substantial scale is a long-term rather than an immediate possibility.

There is some overlap between the functions of Bishkek City Council and the four raions within the city boundaries. The recently elected mayor, who has management responsibility, is tackling this sensitive problem in association with the relevant Akims. There would seem to be no case, in either the short or medium-term, for merging the City Council and the raions within the city boundaries; this is also true of Osh.

The Akim and apparat

The Akim is head of the administration at oblast and raion/gorod levels and has assumed the mantle of power of the former secretary of the Communist Party central committee at that level. He is the personal and political representative of the head of state in his province/district and is responsible for its development. He supervises the

500 W. Tordoff

activities of government departments in his area and coordinates their efforts. Overall, his powers are very wide and, as the head of a local network held together by bonds of friendship and loyalty, he can exercise extensive patronage.

Most oblasts and raions have departments corresponding to each of the ministries. The latter have a major say in senior appointments, particularly those of a technical nature, but the appointees are a charge on the local administration’s budget and the Akim exercises day-to-day control over them. The Akim has authority to appoint, often on contract terms, other departmental officers and members of his own apparat. There are no clear-cut recruitment procedures and, in the absence of grading and salary structures and schemes of service, the only limitation on the Akim’s discretion in making these appointments is the size of his budget, within whose limits he must work. The Akim can also exercise his own judgement in relation to promotion. Moreover, in order to encourage effort and good work, he can award a one-time bonus to his deputies and officers (again within the limits of his budget) of up to fifty per cent of one month’s salary; he can offer such inducements several times a year. As well as rewarding, the Akim can also discipline officers and dismiss them for poor performance or dishonest conduct; a series of official warnings is supposed to precede dismissal except, it would seem, on the grounds of reorganization and subsequent staff retrenchment.

Akims are responsible for administering rural areas that are dominated by tribal and nationality issues. There are many allegations of nepotism and corruption, though these are difficult to substantiate. It is traditional for collective farms, factories and other local enterprises to make gifts to senior officials. Such practices are open to misinterpretation and abuse. It is now government policy that Akims and Deputy Akims should wherever possible serve outside their home province or district in order to avoid the intense local pressure that relatives, friends or others might try to assert. The need both to check the Akim’s arbitrary use of his extensive powers and to make him fully accountable for his actions is recognized, but is difficult to realize. A beginning has been made by appointing a number of reform- minded Akims and by invoking the incompatibility rule in the 1993 Constitution debarring MPs from membership of the Jogorku Kenesh (national parliament)-an Akim who stood for election as Deputy had first to resign his office provisionally and was only reinstated if defeated in the election.

The Akim has a major say in the preparation of the budget of his province/district and is formally answerable for this and the socio-economic programme to the local kenesh; in practice, his accountability has been virtually nil. There is some prospect that stronger local keneshes may emerge from the recent elections to these local ‘parliaments’. Following a presidential decree of early January 1995 the latter should be smaller-a district kenesh will now comprise from 15 to 25 elected Deputies and a provincial kenesh from 25 to 35, the number varying according to the size of the electorate. Also, the quality of the Deputies may well be higher than it was. In Chui- Tokmak city some 80% of the Deputies were new, while the 20% or so re-elected were very active in the old council. Some of the incoming Deputies were engineers while others were teachers, economists, doctors and farmers. The turnover of membership was less marked in Kemin district, which is also in Chui oblast: here, the division was roughly equal between old and new council members. Another encouraging sign is that the former practice whereby the Akim might serve as the council chairman seems to have been abandoned in favour of having a chairman

Local government in Kyrghyzstan 50 1

elected from among the council membership. In Kemin district the Akim put forward the names of two members for the office of chairman; it was then left to the Deputies to decide which of the two they preferred.

FINANCE

Each of the country’s six oblasts and the city of Bishkek negotiates the financing of its budget (as approved by the provincial kenesh) with the central government: this is a keen bargaining process, upon which the fate of the raions and gorods also depends. It is undertaken with some regard to the need to equalize revenue among the provinces: the operative principle is that the better-off oblasts-Bishkek, Chui and Osh-retain a smaller share of the proceeds of certain taxes (notably value added tax (VAT), profits tax on enterprises, and excise tax) than the rest. When contributions from local sources are added, only these three oblasts are able to balance their budgets in most years (see Tables 2 and 3). The other oblasts cannot normally do so and depend on the centre for a budget-balancing grant (see Table 4). The chief beneficiaries of this process are the poor and inaccessible provinces of Talas and Naryn; the latter, in a so-far unsuccessful bid to attract foreign investment, has been allowed to declare Naryn a tax-free zone. The central government has sanctioned the payment of somewhat higher salaries to teachers in these poorer provinces in order to try and raise their educational standards.

The effect of the present bargaining system is that it encourages oblasts to overstate their case in negotiations with the centre; a system using specific allocation criteria would be preferable. The grant of an unconditional subsidy to Naryn and Talas might serve as a disincentive to them to improve their tax base by local effort; this suggests the need for some linkage between grants and fiscal behaviour.

As Table 3 on revenue sharing in Kyrghyzstan in 1993 shows, Bishkek’s share of national revenue derived from VAT-the ‘workhorse’ of the fiscal system-and from

Table 2. Revenue sharing in Kyrghyzstan, 1993 (percentage shares by oblast)

Oblast

Jalal- Issyk- Osh Abad Kul Naryn Talas Chui Bishkek

Bank profits tax Natural resources Land tax Individual income

tax Excise taxes Value added tax Profits tax from

state enterprises

45 45 45 45 45 0 100 0 0 0

45 45 45 45 45 100 100 100 100 100

85 100 100 0 0 85 100 100 100 100 40 100 100 100 100

~~ ~

45 45 0 0

45 0 50 50

55 15 55 15 32.5 18.9

Source: Ministry of Economy and Finances, Budget Division, Bishkek. Reproduced with permission from Wayne Thirsk and Arturo Jacobs (1993), Report on Tax Policy and Tax Ahinistration in Kyrghyzstan, USAID, October, p. 18

502 W. Tordoff

Table 3. Revenue sharing in Kyrghyzstan January-March 1995

Decree of the President on the budget for the 6rst quarter of 1995

I

I1

I11

Allocations to the local budgets of provinces and Bishkek city: -from VAT: Osh, Issyk-Kul, Naryn, Talas, Jalal-Abad provinces-100%; Chui

-from excise tax: Osh, Jalal-Abad, Issyk-Kul, Naryn and Talas provinces-100%;

-from profit tax of enterprises, corporations and organizations: Osh, Issyk-Kul,

provincd2Y0; Bishkek city-22 YO.

Chui province-42%; Bishkek city-23%.

Naryn, Talas provinces-lOO%; Jalal-Abad provinc+31.8%; Chui province- 42%; Bishkek city-22%.

-from turn-over tax (retail trade and services): Osh, Jalal-Abad, Issyk-Kul, Naryn, Talas provinces-100%; Chui province-42%; Bishkek city-23%.

In the republican budget, the income tax levied from citizens by enterprises, institutions and organizations in Chui province was 58% and in Bishkek city 78%. Subvention to the local keneshes from the republican budget: -to Issyk-Kul province - 3,158,000 soms; -to Naryn province - 20,151,000 soms; -to Talas province - 9,287,000 soms.

Source: Vechemi Bbhkek, 25 January 1995, N17 Note: USSl = approx .11 soms

the share of profits tax from state enterprises was much less than that of any other province, including Chui and Osh. Bishkek, and t o a lesser entent Chui oblast, provided substantial financial underpinning for the rest of the country. While this arrangement is desirable in the interests of provincial equity, i t should not be allowed to serve as a disincentive to development in these particular areas.

As can be seen from Table 3, Osh’s share of national revenue derived from VAT increased to 100% in the first quarter of 1995 (as compared with 85% in 1993). Subventions to the local keneshes from the republican budget were given to only three provinces-Issyl-Kul, Naryn and Talas-and not also on this occasion to Jalal- Abad, as occurred in 1993 (see Table 4).

Table 4. Grants and local revenues, by oblast, 1993 (as percentage of total oblast spending)

Oblast Jalal- Issyk-

Osh Abad Kul Naryn Talas Chui Bishkek ~~~~ ~ ~ ~ ~

Grants from the 0 16 20.4 32.6 54.7 0 0 republican government

various taxes and miscellaneous

Revenue share of 82 69.5 65.6 76.2 37.4 82.2 74

Local revenue sources 18 14.5 14 11.2 7.9 21.8 26

Source: Ministry of Economy and Finances, Budget Division, Bishkek. Reproduced with permission from Thirsk and Jacobs, (1993) Report on Tar Policy and Tax Ahinistrotion in Kyrghyzstan, USAID, October, p. 18


As at oblast level, each raion and gorod administration prepares its budget and socio-economic programme for submission to the local kenesh out of the revenue available to it. In preparing the budget, considerations include the number of secondary schools and hospitals to be maintained, the upkeep of old people’s homes, the number of pensioners, and the cost of staff salaries.

The main sources of district revenue are their share of the income raised locally, any contributions from surplus funds held at oblast level, and any grants from the centre for approved capital projects (such as the building of a new hospital), plus revenue derived from non-budget sources. Table 4 shows, in percentage terms, the grant which each oblast received from the republican government and its revenue from local sources in 1993. The underlying principle laid down is that the better-off districts should ‘live off their own’, while the poorer districts will receive a subvention from the oblast treasury. However, this principle is not always applied since considerations of realpolitik may distort the picture.

OPTIONS FOR FURTHER REFORM AND DEVELOPMENT

The issues discussed above fall within the local government area of the European Union’s TACIS programme: Civil Service Reform and Training in Kyrghyzstan (Project ED 052). In the first stage of the project, the legal framework and central and local government structures were analysed and embodied in an EIPA Report, which was submitted to the Kyrghyzstan government in April 1995. The government has accepted the main provision of the Report and implementation will constitute the second stage of the Project. A presidential decree establishing a Steering Committee and Administrative Reform Unit has been issued and a Civil Service Statute is to be enacted at an early date.

It is unlikely that there will be any significant change in the short term, either in the Akim’s powers or the local kenesh’s ability to hold him accountable for their exercise. Nevertheless it would seem essential that as soon as possible the Akim should become a permanent official rather than a politician; as the senior civil servant in his province/ district he would then be responsible to the President for its good government and socio-economic development. He would coordinate and supervise the work of the government departments in his area except in matters of purely national concern, but would not interfere with departmental officers in the performance of their professional duties. The key to the accountability problem might be solved not only by subjecting the Akim to civil service rules and regulations, but also by making his administration subject to independent audit and responsible to the local kenesh for those matters within the latter’s competence, notably essential local services. A long-term possibility-though one that is alien to Kyrghyzstan’s political tradition-would be to transfer the Akim’s powers, wholly or in part, to the chief executive of the local kenesh, which would thereby provide, through its various departments, an expanded range of services.

The wider issues of socio-economic reform include the privatization programme that was referred to briefly at the beginning of this article. The effect of this particular TACIS project should be to enhance the administration’s ability to promote development. In his New Year address of January 1995 the President stated

504 W. Tordoff

that the local administration, acting in close association with local self-government, should become ‘the foothold of the state and the main level of reform’. In the same address he also stated that: ‘For us private ownership is necessary, especially private ownership of the land’. These are important statements of government policy which, when taken together rather than separately, have unfortunately reinforced a belief- widespread in Bishkek-that under the market economy virtually all property is to be privatized, placed outside state management and control, and made the responsibility of local self-governing bodies.

Part of the problem is that the term ‘local self-governing body’ tends to be used very loosely, sometimes being used to cover the local state administration itself. Properly understood, the importance of local self-government is not in doubt: in a context where public finance is in very short supply, a premium is placed on the voluntary efforts of the citizens themselves in, for example, maintaining individual dwelling houses and communal property. In Bishkek’s Lenin district, local self- government is seen as a means of promoting the socio-economic development of a community that was formerly the centre of a number of flourishing industrial enterprises. Local self-governing units are also intended to serve other purposes, such as developing civic responsibility, protecting poor families, and keeping open a channel of communication to the administration.

Private ownership remains a key government objective. In the present transitional period, it works in tandem with state-owned enterprises, as in the case of Chui- Tokmak. This city’s relative prosperity, which allows it to contribute some 40% of Chui oblast’s budget, is founded on its many industries. These include two flour mills, two bus assembly plants, and glass-making and concrete-producing factories. Most enterprises have been, or are in the process of being, converted to joint stock but a variety of problems have meant that both state-owned and privatized enterprises are operating well below their productive capacity. Among these problems are the shortage of finance, the lack of highly-trained managers, the difficulty of obtaining raw materials, transport costs, and delays at customs posts.

Chui-Tomak city, which resulted from the merger in 1994 of Tokmak city and the outlying raion, has 32,000 hectares of land. This is in the process of being converted from kolkhoz and sovkhoz to independent collective and individual forms of peasant production. Here, as in Kemin district in the same (Chui) oblast, difficulties are being experienced in keeping up production levels because of the lack of credit, machinery and fertilizers. While other experiments have been more successful-for example, the area coming under the Petrovskiy village council in the Moskovskiy district of Chui provincedata compiled by the Centre for Agrarian and Land Reform attached to the Ministry of Agriculture and Food, and reported in Sfovo Kyrghyzstana on 1 February 1995, placed a large question mark on holdings officially considered to be privatized. It was stated that: ‘Of 150 kolkhozes and sovkhozes only a few are transformed to the new mode of ownership . . . the great majority of them are still keeping the collective form of production’. There is now reason to suspect that the transition from state-controlled collective to private peasant farming in the Susak raion of Jalal-Abad province was much less advanced than was previously reported. Accurate information is not easy to come by without in-depth field research, but it may well be the case that the newly emerged agricultural cooperatives, joint stock societies and peasant farmers’ collectives are really kolkhozes and sovkhozes under another name.


CONCLUSION

Kyrghyzstan’s experience with privatization underlines the difficulty which any former socialist regime will face in making the transition to a market economy. The repercussions of the reform process are widespread and extend to every aspect of the government and administration. The President himself has a key innovative role to play and, since officers pledged to reform are mainly located in his office, it is fitting that the Steering Committee and Administrative Reform Unit that has recently been established to serve as a coordinating body, should be located in his office. However, while the centre can formulate policy, it is largely dependent on the local administration to implement it. At both oblast and raion levels a major problem is to democratize the inherited system revolving round the Akim and to increase the accountability of the Akimiat without undermining its efficiency. A phased approach to change has been adopted in this sphere-a sensible move given the fact that ingrained patterns of behaviour cannot be altered overnight. The President’s statement, referred to above, about local administration acting in close association with local self-government suggests that he is anxious that the ordinary people in Kyrghyzstan’s towns and villages should actively participate in the process of change. This calls for the establishment of effective communication networks so that citizens can understand the nature of the reform programme and what part they can play in implementing it.

Glossary of terms

Ail Akim Apparat Gorod Jogorku Kenesh Kenesh Kolkhoz Oblast* Raion* Sovkhoz EIPA RIPA International Ltd

-village -head of oblast/raion/gorod administration -administration staff office +ity/town (not subordinate to a district) -Supreme Soviet (national parliament) -council/soviet +ollective farm -province --district -state farm -European Institute of Public Administation -Royal Institute of Public Administration International

Ltd

*I have used oblast/province and raion/district interchangeably throughout the text.

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Local government in Kyrghyzstan