KYRGYZSTAN TODAY Policy briefs on - Department of Geography

protectionism, unfair competition, an excessive number of regulations and government
inspections. The result of all this is the growing cost of government projects, a decrease
in economic efficiency, and the development of the shadow economy.
Corruption in budget relations
The highest level of corruption can be seen in the spheres of budget and government
property. This process is fostered by the inefficiency of the government sector,
inconsistency of the actions of its bodies, unmanageable administration, and the low
level of transparency in the process of government decision-making. The handling of
unclear legislation actions also results in the growth of corruption crimes. That is why
corruption is undoubtedly present in practically all interactions between entrepreneurial
companies and the government.
Governmental bodies still carry the burden of “old” problems, such as a lack
of division of authorities and responsibilities at the level of decision-making and
implementation, duplication of functions by different government bodies. Subjective
factors that encourage corruption due to an inability of the government to comply with
market conditions include low salaries that provoke official bribe-taking.
Declared counter-corruption measures are actually only measures to fight its outcomes,
and not its causes. The multiplicity of government bodies is also a basis for corruption:
Kyrgyzstan is similar to China in the number of its different ministries and agencies.
Basic corruption schemes in budgetary relations are the deduction of government
resources, overestimated costs of services, goods and materials provided to the
government, allocation of budget resources on non-target issues, participation of only
“friendly” companies in tenders. Government procurement and logistic procedures
seem to be a gold mine for corrupt elements.
Another widespread technique of plundering budgetary resources is a “cut
economy” (a corruption tool when a certain part of budget money is transferred to an
official for a positive or favourable decision). In the sphere of government procurement/
logistics alone, the percentage of stolen funds via “cuts” is at least 15 percent. A very vivid
example may be the purchase of cars for newly-elected Jogorku Kenesh (Parliament)
of Kyrgyzstan. In accordance with the data from the Chamber of Accounts that made
an audit of Jogorku Kenesh at the end of 2007, they had announced a tender for the
purchase of “Toyota Camry” cars 75 each at 836,000 KGS each (only 55 were purchased),
at a total cost of 62.7 million KGS. It should be noted that the price for each car was
approximately $22,600, and, according to Internet sources, the price for each of these car
in the UAE is $20,000, which indicates an obvious cost overestimation.
Another corruption technique is the sale of government property at underestimated
values. We can offer the outcomes of Chamber of Accounts audit, made in JSC
Kyrgyztelecom, as an example. One infringement was that this JSC sold their industrial
base without the permission of the State Property Fund– a proprietor– at 5 million KGS,
which is 75 million KGS lower than the market price. Thus, the underestimated amount
was 70 million KGS or 2 million USD [1].
Entrepreneurship also suffers from the pressure of government bodies that have
the authority to hold inspection and auditing procedures. According to Taalaybek
Koychumanov (Chief of Investment Council under President of the Kyrgyz Republic,
Doctor of Economy), “they carry out more than 65 thousand of absolutely unnecessary,
and from our view point economically inexpedient or even harmful, audits and
inspections in the country” [2].
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