Kyrgyz government collapses as spring looms

By bne IntelliNews March 19, 2014

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Kyrgyzstan's three-party ruling coalition collapsed on March 18, stripping the government of its parliamentary majority. The resurrection of political uncertainty comes at an inauspicious time of the year.

The collapse was provoked when the socialist Ata-Meken, the smallest of the three parties in the ruling coalition, announced that it was quitting the government. The party accused Prime Minister Zhantoro Satybaldiyev of abuse of office and corruption. While Ata-Meken has just 18 MPs, without its support the remaining members of the coalition - President Almazbek Atambaev's Social Democratic Party of Kyrgyzstan (SDPK) and Ar Namys - can no longer command a parliamentary majority.

President Atambaev signed a decree dismissing the government on March 19, according to a statement on the presidential website. Under the Kyrgyz constitution, Satybaldiyev will continue as acting prime minister until a new government is formed. The next step will be for Atambaev to nominate one of the five parliamentary parties to form a new government. The chosen party will have until April 9 to agree on a parliamentary majority and select a prime minister. If the parliament fails to elect a new government after three ballots, Atambaev has the power to dissolve the parliament and call an early election.

Speculation has long linked Ar-Namys leader and the head of the now defunct coalition Felix Kulov - among others - with ambitions to occupy the PM's office. Kulov told on March 19 that he expects a new collation featuring four parties. "I think three factions will definitely enter it, SDPK, Ar-Namys and Ata Meken, plus, probably, one more faction," he said. "But I don't know whom the President Almazbek Atambaev will entrust to form new alliance to, I don't tell fortunes."

Old accusations

The accusations against Satybaldiyev hark back to the events directly following the 2010 revolution that ousted the corrupt regime of Kurmanbek Bakiyev. Ata Meken alleges he misused funds when head of the State Directorate for Reconstruction and Development of Osh and Jalal-Abad - an agency set up to help the south recover from deadly ethnic violence following the revolution. A report from a parliamentary commission on the directorate's work was issued in February.

"[W]e believe that as the Prime Minister of the Kyrgyz Republic Zhantoro Satybaldiyev has exhausted his moral and political resources and cannot continue to occupy this high political office," the statement reads. "In this regard, the Ata Meken faction... decided to withdraw from the Yrys aldy - Yntymak parliamentary coalition."

Bad timing

The collapse of the coalition leaves the country once again in a state of political disarray after almost two years of relative stability. Since the 2010 revolution, Kyrgyzstan has built the first parliamentary democracy in Central Asia. The 2010 parliamentary election and 2011 presidential election were heralded by the Organisation for Security and Cooperation in Europe (OSCE) as the most open the region's history.

However, with at least three parties needed to form a coalition, it has proved difficult to form a stable government. Since the post-revolution parliament was elected in 2010, several different configurations have been tried and ultimately failed. Satybaldiyev, a neutral candidate, took the role of prime minister in 2012. During his term, the economy has seen steady improvement. According to the National Statistical Committee, GDP growth accelerated to 10.5% in 2013.

The collapse of the government also comes at a crucial juncture for the country, with Bishkek close to sealing a deal to increase its holding in the Kumtor gold mine - the most divisive political issue in Kyrgyzstan currently - as well as heading towards entry to the Russian-led Customs Union, which is competing with the EU for new members such as Ukraine.

Satybaldiyev has also been the driving force for a speedy negotiated settlement of the Kumtor issue. The government has been trying since 2012 to increase the state's shareholding in the gold mine, which accounts for around 12% of Kyrgyzstan's GDP. The mine's owner - Toronto-listed Centerra Gold - has agreed to deals that would hand the state a larger stake, as the PM has sought to hold off nationalists in order to avoid further erosion of investor confidence in the country. A March 2014 survey by Canadian think-tank the Fraser Institute rated Kyrgyzstan the least attractive international destination for mining companies, mainly due to the high level of uncertainty and political risk.

Kumtor is currently the largest foreign-owned mine in the CIS region, and the government has faced heavy pressure from the nationalist opposition - as well as on the streets - to nationalize the asset. Numerous protests and rallies have been staged, both around the mine and in Bishkek and other cities, with some resulting in violent clashes.

There was a breakthrough on February 6, when the parliament voted in favour of a deal with Centerra that would give Kyrgyzstan a 50% stake in a new joint venture that will own the mine - despite voting down a similar deal in October. The lower house gave the government up to four months to complete a draft deal on the creation of the JV.

To what extent Satybaldiyev's exit will affect the deal is unclear. However, a lengthy hiatus while a new government is formed is likely to result in delays, while the formation of a nationalist-leaning coalition could spell even more trouble for the Canadian miner.

New club

Other key issues under discussion in Bishkek include Kyrgyzstan's entry to the Customs Union and reforms to the energy sector. Although it was the first country outside the three founders - Russia, Belarus and Kazakhstan - to agree to join the Moscow-led trade club, Kyrgyzstan has been dragging its feet lately.

Adding his voice to those of other senior officials recently, Atambaev indicated in December that Bishkek is unhappy with the accession roadmap. He told journalists Kyrgyzstan will not join the bloc using a roadmap that "someone else has laid out," and insisted his country will join "only if all the requirements of Kyrgyzstan are taken account."

Bishkek also broke rank with the rest of Central Asia in March to strongly criticize Russia's military incursion into Crimea, despite Moscow's growing role in the Kyrgyz economy since it backed the 2010 revolution. Russian companies have taken over Kyrgyzstan's gas distribution monopoly and one of the country's largest banks since 2012.

Moscow has also pledged to co-finance two major hydropower projects - a major issue for Bishkek. A hike in electricity prices triggered the 2010 revolution, and successive governments have repeatedly delayed introducing reforms due to fears that a rise in tariffs would be politically unacceptable.

Meanwhile, the timing of the government collapse is inauspicious. The spring has previously proved a volatile time of year for Kyrgyzstan. Demonstrations and protests have been frequent in recent years, and often erupted into violence. The country's two revolutions took place in March 2005 and April 2010, and the tense negotiations over a new coalition may well be accompanied by more unrest.

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