Shanghai Cooperation Organization
Shanghai Cooperation Organization is an organization deals with the political issues, economic and defense related issues. The operational area of this organization is some Eurasian regions primarily Russia and China. The other operational countries are Kazakhstan, Kyrgyzstan, Russia, Tajikistan, Uzbekistan and Shanghai. Shanghai Cooperation Organization founded in 1996 but came into action 2001. The organization is an intergovernmental organization (Akihiro 2012). The primary objectives of the organization are to (i) maintain relationship among the member countries; (ii) project cooperation in the sphere of politics, economics and social affairs of the member countries, (iii) the Shanghai Cooperation Organization looks after the security and defense policy of each member state and (iv) to promote democracy in political and economic sphere.
Economic Issue of Kyrgyzstan
Being one of the member states of Shanghai Cooperation Organization, Kyrgyzstan is considered as the second poorest country of central Asia after Tajikistan. According to the 2002, report of earning it is estimated that annual per capita income is around $270 (Akmoldoev and Budaichieva 2012). The primary reason is the country has very few things that the neighboring country would like to buy hence the entire nation submerged in debt of $300 per person.
The other factor that the country is facing is due to its geographic location, as the country is mountainous in nature and the economy is mainly dwelling in the agricultural and the extraction of minerals sector. The agricultural products that are mainly produced in the country consist of tobacco, wool, cotton and meat out of which cotton and tobacco are exported to other countries. Bishkek is entangled in a legal battle with the investors of Canada over the Kumtor gold mine, which is one of the largest within the country. The country is experiencing various investments from the foreign companies so that the hydroelectric resources can be tapped in a better manner. This has created a lot of economic rupture within the country, as the workers who are migrating to the country are heavily dependent on the revenue (Doolot and Heathershaw 2015).
It is one of the first countries in Commonwealth of Independent States (CIS), which was accepted by World Trade Organization (WTO). There has been decrease in the production within the country after they broke off with the Soviet Union in the year 1991 of December, as the exports had decreased to a large extent. Under the leadership of the President Atambaev, the country began to open its door for international donors, as he developed the economic plan for the improvement of the country. The economic condition of the country is suffering badly because of the intense corruption that is breeding within the country along with the decrease in the transparency of the government (Adigamova, Safiullin and Tufetulov 2014).
Agricultural and Industrial Issues
Geographically Kyrgyzstan is surrounded by mountains. The economy of the country depends mainly on agriculture and the minerals. Among the agricultural products like wool, mea, tobacco, cotton only tobacco and cotton are exported to the foreign country. The minerals like, gold, uranium, mercury, natural gas are also exported to the foreign country. Gold is the most exported item of Kyrgyzstan. Much international mining company has dispute regarding possession of the mine in Kyrgyzstan. Many people of Kyrgyzstan migrate to Russia for job purpose so the country`s economy also depends on the migrant workers.
The primary problem of Kyrgyzstan is the lack of resources apart from gold. The other problem is exportation cost, which impede the country to export goods to the foreign countries (Aris 2012). The electrical energy generated from the river as the country is surrounded by the mountains; hence, most of the rivers flow from the mountains so they are perennial and can be used as constant source of electricity. The economy of Kyrgyzstan can be divided into three sectors such as, agriculture, mining and energy. Gold is the most exported product then comes the hydroelectric power. Apart from gold coal, antimony, tungsten, copper and bismuth are also extracted from the land. The backbone of Kirgizstan`s economy is agriculture.
In order to upgrade the economic situation in Kirgizstan profit should be reduced in order to increase the availability of food to everyone. The subsistence farming is the best for the country. In farming, 70% of the land needs irrigation to increase crop production. The main use of lands are done for the production of livestock like, corns, wheat, barley, vegetables, sugar, potato and beets (Birkman et al. 2012). The production declined in recent years and as a result, the bank credit scared the farmers. In mining industry the production also declined 58% in recent years. The reason was the scarcity of skilled Russian workers. The industry depends on textiles, electronics production, machine manufacturing, food processing and metallurgy like, iron ore, lead, copper, gold, zinc, antimony and mercury (Doolot and Heathershaw 2015). The industry always remains under the external political pressure. To increase the production rate in industrial sector the outsourcing of workers needs to stopped and a reasonable wage chart need to be maintained. This will also help to keep away the Russian political pressure on industrial sector. In energy sector, a reform is essential as the country as a very limited deposits of natural oil and gas. In early 90s the production of electricity from coal was replaced by the hydroelectric power as the country has abundant of natural water resources. Now it is needed to sell the hydroelectric power to the neighboring state through which the country can generate revenue. Foreign investment is essential in mining and industrial sector to manufacture machines, which will help in production.
Going through the economic statistics of the country the GDP (official exchange rate): $7.647 billion estimates in 2016, GDP (purchasing power parity): $19.29 billion estimated in 2016, $18.53 billion estimated in 2015 and $16.77 billion in 2012, country comparison to the other countries. The country poses sole productive gold mine named Kumtor Gold Mine. GDP in agricultural sector 19.3 %; industry 31.1 %, services 49.6 % as estimated in 2016. On the other hand, the inflation rate is 7.2%.
According to the 2016 budget revenues is $2.036 billion, yearly expenditure is $2.214 billion, budget surplus or deficit -2.3 % of GDP. The country has been experiencing a high amount of monetary deficit per year. The total tax and revenue of the country is 26% of the GDP. There are several factors, which are identified as the main barriers of declining state revenue. The factors impede the termination of debt of the country. In 2015, revenue was US$431.3 million, and expenditure was US$445.4 million, incurring a deficit of US$14.1 million. In 2016, revenue increased up to US$516.3 billion, but expenditures increased up to US$539.9 million, increasing the deficit to US$23.6 million. According to the 2016 fiscal year a new reform is recommended as the revenue of the country, which was mainly generated from tax has shrank (Adigamova, Safiullin and Tufetulov 2014). This has resulted the reduction of government spending due to the crisis in revenue.
The World Bank predicted the GDP growth of Kyrgyzstan will 4.9% in 2019 by observing the gradual growth and the economic reform is about to happen which will move the growth up to 3% (Liechti 2012). The IMF is also hopeful by investigating a survey. The 65% of the people supported the arrest of few politicians in recent days (De la Martiniere 2012). According to the economic survey, the 39% supported the economic reform. In case of unemployment and corruption, the country is affected to the rural level. Unemployment is the national problem of the Kyrgyzstan. The corruption became the pivotal issue as the country overlooks the ground level corruption this leads to the damaged road and poor transport system. The interference of Bishkek may reduce the country`s severe practice of corruption as according to IMF the economy of Kyrgyzstan is considered as nascent economy.
The banking sector of the country is very week and management is very poor. Due to the debt and governmental tax problem banks are undercapitalized. The total number of which are operational in the country are 23 with 151 branches across the country. The primary profit of the banks is earned from the foreign exchange and trading of bills related to treasury (Aris 2012). The interest rate is very high which impede the people to credit money from bank. There is a record of disappearance with the deposited money of the customers, which made the customers to stay away from opening account in banks.
Economic Policy of Kyrgyzstan
To rectify the existing issue related to banking sector nationalization of bank is necessary. The change in banking law is essential and it should maintain parity with the foreign banks (Tiainen, Sairinen and Novikov 2014). The organizational structure poses most disadvantage to the people hence the nationalization of the banking sector is essential.
Discussing about the above issues the essential policies are as follows,
- Need to stop out sourcing of labors.
- Irrigation of farming fields to increase crop production.
- Compulsory foreign investment in industrial sector.
- Mitigation of disputes regarding the ownership of mines.
- Reduction of transportation costs.
- Nationalization of Banks.
- Reformation of fiscal policy and proper taxation.
- Exportation of hydraulic energy.
- The economy of Kyrgyzstan is relatively vulnerable to revive the economy promotion of tourism is essential.
- To reduce the transport cost for goods a nexus with the neighboring state is required.
- To bring diversity in economy development in private sector is mandatory.
- Foreign investments in professional courses are essential to produce skilled workers.
- Effective competitiveness should be promoted among the private organization.
- Need to establish a committee which will look after the debt related issues.
- The non-bank financial organization needs a infrastructural change with a regulatory frame work.
- Privatization of energy sector, telecommunication sector mining and civil aviation sector is needed to upgrade the infrastructural issues.
The economy of Kyrgyzstan is highly influenced by Russian economy. The dislocation of Soviet`s economy has a direct effect on the Kyrgyzstan economy. The country faces unnecessary inflation, internal enterprises face loss, and the production often stops. All these are reasons of deterioration of exportation cost.
The foreign currency that the enterprises are earning has to be protected by the government of the country so that these enterprises can develop in a better manner. The Free Economic Zones (FEZ) within the country has been established by the government so that the employment of the people along with exports and imports can be increased within the country so that the economy can grow in a better manner (Aris 2012).
The enterprises that are on the border of the country are run and under the control of the government of the Soviet Union. The country adapted the Privatization and the Demonetization Law in the year 1991, which helped in the implementation and the designing of the privatization program. The enterprises that are private in nature has become joint stock companies, as the shares have been distributed among the employees of the organizations as well along with the Federal Government. This has put immense pressure on the budget of the federal system. The statutory framework has been developed keeping in mind the bureaucracy and the corruption that is widespread within the private sector so that the obstacles that are present within the system can be removed (Tiainen, Sairinen and Novikov 2014).
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