Analysis: How to spend a billion dollars in Kyrgyzstan?

NEW YORK, 9 August 2010 (IRIN) – Nearly two weeks after international donors pledged more than a billion dollars in aid to Kyrgyzstan, its caretaker government is busy working out how to turn the promises into hard cash, and experts say there is confusion about who will get how much aid, when.

The US$1.1 billion in aid pledged at the 27 July high-level donors’ conference in Kyrgyzstan’s capital, Bishkek, is not a lump sum. It is made up of multiple pledges which, if they materialize, will be distributed on different terms and at different times.

“Each international organization has its own rules for allocating funds,” First Deputy Prime Minister Amangeldi Muraliyev told the news agency. so the figures cited last month “may be not exact but approximate”.

Muraliyev said Kazakhstan, Russia and Turkey had promised grants, while the World Bank offered loans at discounted rates, and the European Bank for Reconstruction and Development gave loans at commercial rates.

“Right now, we are entering a phase where we must work with each donor and analyse their reports and clearly determine what actual aid will come in what time frame,” Muraliyev said on 3 August – “in other words, what will come in 2010 and what will come later.”

The Kyrgyz Finance Ministry on 2 August revised down the amount of aid it expects Kyrgyzstan to receive by the end of 2010 – from the $600 million announced immediately after the conference to $260 million – not enough to cover the budget shortfall, variously estimated at $335 million (by the World Bank) and $619 million (by the Finance Ministry).

Another $735 million of the aid pledged at the July 27 conference is expected over a period of two and a half years, the ministry said on its website.

Political turmoil in April, and interethnic violence in June which killed hundreds and displaced hundreds of thousands, badly affected Kyrgyzstan’s economy.

Needs assessment discrepancies

The central document outlining Kyrgyzstan’s needs at the donor conference was the Joint Economic Assessment (JEA) compiled by the Asian Development Bank, the International Monetary Fund (IMF), the World Bank and a number of other multilateral institutions, with input from the Kyrgyz government.

The 21 July document – seen by IRIN – calls for a billion dollars in aid, split about equally among three top priorities: shoring up the budget, funding infrastructure needs and providing immediate help to internally displaced persons and others affected by the upheavals.

Kyrgyzstan’s Finance Ministry has confirmed that it shares those priorities, but its breakdown of funding needs differs in scope and structure from the tentative breakdown in the JEA, making it tricky to compare the two. The ministry has called for 25-30 percent more aid money, and categorizes spending needs differently from JEA (the JEA document is not publicly available).

Kyrgyz Deputy Prime Minister Jantoro Satybaldiyev, who addressed the donor conference, identified key priorities as urgent repair and construction of housing before winter, and repair of damaged schools, social and health facilities, public buildings, water and gas infrastructure and power grids.

Both Satybaldiyev and the JEA have reiterated that aid must go not only to those who suffered in June’s violence – disproportionately ethnic Uzbeks – but also to those who have been affected by recent mudslides and other natural disasters, reasoning that this would be perceived as equitable and guard against further unrest.

Russian, Kazakh aid

Kyrgyzstan has already begun to receive large consignments of humanitarian aid from Russia and Kazakhstan. According to a 4 August update by the UN Office for the Coordination of Humanitarian Affairs (OCHA), “the aid, including foodstuffs, non-food items, coal, construction materials and electric generators, is due to arrive by rail over the course of the next month.”

The OCHA report also said, however, that the humanitarian community in Kyrgyzstan is still concerned about the persistently low level of funding of the UN Flash Appeal for $96 million. OCHA said it was 29.6 percent funded as of 4 August.

Exactly how aid will reach the needy is not yet clear. “The mechanisms are not yet in place,” Finance Ministry spokeswoman Begayim Satybaldiyev said by phone from Bishkek on 3 August.

New aid bodies set up

The reconstruction of the southern cities of Osh, Jalal-Abad and their surrounding regions has been assigned to a number of agencies: a new State Directorate, the State Architecture and Construction Agency, the Emergency Situations Ministry, the governments of Osh and Jalal-Abad regions and the highly controversial mayor’s office in the city of Osh.

On 4 August interim President Roza Otunbayeva created a Special Fund for the Reconstruction and Development of the Cities of Osh and Jalal-Abad and a Supervisory Board to oversee it. Both bodies had been mentioned at the donors’ conference by Deputy Prime Minister Satybaldiyev, who heads the State Directorate for the Reconstruction and Development of Osh and Jalal-Abad, which was created soon after the violence in mid-June and has thus far received about $1 million, according to the Finance Ministry.

Another government body, created two days after the new directorate, is a national commission to assess the damage in the south. Kyrgyzstan’s leadership also has a package of proposals asking donors to contribute to at least four different national funds, including one for emergencies and another for post-conflict reconciliation.

Speaking at the conference, Satybaldiyev said the Special Fund would collect the international aid, as well as funds from other sources, and channel them into the rehabilitation programme and assistance to affected communities.

But donors do not seem to be entirely on the same page. For example, the coordinator of US Assistance to Europe and Eurasia, Daniel Rosenblum, told the Russian newspaper Kommersant that the $137 million pledged by the USA would go to support the programme developed by the World Bank and the IMF, but “will not go through the Kyrgyz government at all. Only salaries to specialists working as advisers under the ministries will go through the government. All the remaining money will go either to American organizations providing on-site assistance in Kyrgyzstan or to local NGOs.”

Elections, graft

The lack of clarity about aid flows exacerbates a sense of the authorities’ opaqueness in Kyrgyzstan, which ranked among the world’s 20 most corrupt countries in Transparency International’s 2009 Corruption Perceptions Index. Some analysts have speculated that October’s parliamentary elections are heightening concerns about graft.

“There will be elections in Kyrgyzstan this autumn and many worry that the money will be spent on election campaigns,” Andrei Grozin, deputy head of the Central Asia department at Moscow’s CIS Institute, told Kommersant. “Under these circumstances, the international community will toss the country three to five million dollars at a time, to keep it afloat, but the bulk of the money will not come before October.”

In the past, when aid money for Kyrgyzstan was earmarked for relatively narrow or homogenous tasks, it often went via the Treasury to the relevant state agency – the Transportation Ministry for road construction, for instance, or the Health Ministry for vaccination projects.

Osh tensions continue

Many Osh residents, particularly ethnic Uzbeks, suspect that Mayor Melis Myrzakmatov played a part in targeted assaults and arson in June and complain that he clearly took no meaningful action to stop it. Moreover, Myrzakmatov has spearheaded a radically divisive approach to one of the most pressing issues on the humanitarian agenda: housing.

He has reportedly backed plans not to rebuild the single-family homes in the destroyed Uzbek neighbourhoods of Osh, but wants to construct high-rise apartment buildings in their stead. While federal officials in Bishkek have said relocation in Osh must be voluntary, they have nonetheless embraced the idea of a major redevelopment of the city.

President Otunbayeva voiced her support for a “general plan of reconstruction” in a speech to the new “technical” government appointed in mid-July, and Deputy Prime Minister Satybaldiyev told the donors conference that 80 percent of the residential buildings in Osh and Jalal-Abad cannot be rehabilitated. Preliminary estimates by his team put the number of damaged buildings at 2,323.

Some development economists have argued that short-term humanitarian aid cannot be upgraded to longer-term reconstruction assistance until post-conflict unrest gives way to security and citizens begin to feel they have a stake in government.

But in the Osh and Jalal-Abad regions, public mistrust of the authorities and the potential for new waves of violence remain strong.

OCHA expressed concern in its 4 August update, citing “reports of serious human rights abuses… including abuse of power, arbitrary detentions, ill-treatment, torture and extortion by law enforcement officials”.

Ethnic Uzbeks again appear to be at the receiving end of the harassment. Reports from the ground say they have systemically been denied access to legal assistance and health care, with the acting health minister promising last week to remove armed guards from local hospitals.

There have also been reports of Uzbeks being fired groundlessly from public-sector jobs. Tens of thousands of ethnic Uzbeks are opting to leave the country, though they have run up against debilitating red tape and demands for bribes in procuring the necessary documents.