Yesterday, several hundred people held a protest in Bishkek over the World Bank’s debt relief program. They just don’t want to be included in the Heavily Indebted Poor Countries Initiative, which would write-off part of their national debt. The “youth activists” (whatever that means) see the program as a money-grab by foreign companies eager to lay claim to Kyrgyzstan’s meager resource base.
According to the World Bank’s Country Assistance Strategy (pdf), private sector development is a major lynch pin of their plan to life the country out of debt. But the World Bank (rightly) sees governance as the primary barrier to Kyrgyzstan’s future development, and the recent democracy crisis was ample evidence of this. Beyond a simple crisis of government, those protests a few weeks back could be seen as outgrowths of Kyrgyzstan’s lingering problems with corruption. President Bakiyev, remember, swept himself to power with promises of reducing corruption—promises that have since fallen flat.
I’m afraid I don’t have the necessary background in developmental economics to offer much more insight aside from a general feeling that developmental economists should revisit the Davies J-Curve when looking at their policies’ perception. But I do know that at least in this specific case, what the World Bank is suggesting—moderate privatization, coupled with a major push to reduce government corruption—is very much in the mainstream for how a country trying to emerge from autocratic rule should adjust its economic policies. Why that would warrant protests, however, eludes me. But it is entirely possible the mainstream solutions won’t work here. Any thoughts?
This post was written by...
Joshua Foust – author of 1801 posts on Registan.net.
Joshua Foust is a Fellow at the American Security Project and the author of Afghanistan Journal: Selections from Registan.net. His research focuses primarily on Central and South Asia. Joshua is a correspondent for The Atlantic and a columnist for PBS Need to Know. Joshua appears regularly on the BBC World News, Aljazeera, and international public radio. Joshua is also a regular contributor to Foreign Policy’s AfPak Channel, and his writing has appeared in the New York Times, Reuters, and the Christian Science Monitor. Follow him on twitter: @joshuafoust
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{ 31 comments }
This came up quite a bit a few months ago while I was in Kyrgyzstan and I was surprised at how many people were negative about HIPC, especially when the required reforms are necessary to help economy anyway. There is a lot of negative propaganda floating around about HIPC, mostly because it’s seen as a way for richer countries to control poor countries. And Kyrgyzstan is not willing to admit that its economy is so bad that it is one of the relatively few countries in the world that even qualifies for this program.
HIPC isn’t a perfect solution, and few countries have benefitted from it as much as the World Bank projected. But nearly all have been helped at least a little, and a billion dollars of debt relief would really help Kyrgyzstan, or even half a million. If they don’t go with HIPC, they’ll have to figure out something soon because those interest payments are huge.
There were few things that frustrated me as much as discussing HIPC with people in Kyrgyzstan.
World Bank and IMF are primary tools of economic Holocaust on third world nations. Some of you, Peace Corps Volunteers, will be selected to be given a training to become Economic Hitman. Amira, you won’t fool us with your false naivety “Why Kyrgyz simpletons are not accepting so good HIPC initiative?”. HIPC negotiatiations are being conducted behind closed doors between IFI and our treacherous Government, in a very undemocratic fashion. It is a last straw. You cannot play false “Democracy” card here.
“There is a lot of negative propaganda floating around about HIPC, mostly because it’s seen as a way for richer countries to control poor countries.”
Well actually that is true, be it that the West and the IFI are only one part of the picture. Russia, for instance, is very savvy at using debt as a levvy to gain control over strategic assest in its former colonies.
A little anthology for those interested:
*Armenia, 2002: the Kremlin cancelled a $98 million debt in exchange for RAO-EES Rossii’s financial control over a key power plant that produces half of the country’s elec. power;
*Georgia, mid-2003: a $32 million debt cancelled in exchange for Itera’s (then a Gazprom affiliate) control over the country’s gas distribution system for 25 years;
*Kyrgyzstan, 2003: the deal on the use of the Kant airbase included a cancellation of a $ 32 million debt;
*Tajikistan, mid-2004: a $299 million debt cancelled in exchange for 51% of the shares in the Sangtuda hydropower plan project for RAO-EES Rossii, and control by teh Russian military over a military space observation facility near Nurek.
Et j’en passe…
There’s also the dubious role of the local compradore “elites” and politicians who are now bellowing about “sovereignity’ and not wanting to be treated “like a Third World country” (HA!!—what do they imagine then?).
As I already wrote under another post (http://www.registan.net/index.php/2006/12/06/kyrgyzstans-us-style-democracy/#comments ), I agree that IMF, WB, EBRD etc. + all these EU consultants helped to screw up the country. Yet, who let them in? Who collaborated with them and got the ‘vzyatki’? Who put all their kiddies, nephews and mistresses in IFI, EU projects and offices?
What I always say in such cases is, that the first colonial posts and the slave trade in Africa in the 18th century could *never have materialised without the active collaboration of local tribal chiefs*. I know that you don’t like to comparison but it is time to face reality!
For starters, “Borat,” if you’re going to reference John Perkins, at least do so openly… and at least bother to acknowledge his own biases and agenda when you do. Otherwise, you come across as a troll, and I believe Nathan has a very low opinion of those, and your paranoid west-baiting.
Rakin, your point is take about how debt can be used as a weapon. However, you’re comparing apples and oranges. Russia’s nasty dominance games might superficially mirror the IMF and the World Bank’s debt relief programs, but aside from the promise of canceling debt the two have nothing in common. Russia was canceling relatively small amounts of debt (is $32 million a magic number? and Tajikistan has been run by Russia since 1996) in exchange for Russian control of certain assets like gas pipes and military bases, whereas the World Bank’s HIPC program cancels a larger share of debt in exchange for reducing bribery and state monopolies. Reducing corruption and inefficiencies through privatization is not the same as seizing power plants, gas pipelines, or military assets. Your analogies are wrong.
And the comparison to slavery is childish at best. The sorry state of Kyrgyzstan is a consequence of geography and a decade of mismanagement, not the west.
“might superficially mirror the IMF and the World Bank’s debt relief programs, but aside from the promise of canceling debt the two have nothing in common. Russia was canceling relatively small amounts of debt (is $32 million a magic number? and Tajikistan has been run by Russia since 1996) in exchange for Russian control”
No it’s not a magic number. It’s especially a cheap price for what the Muscovites got in exchange.
)))
“And the comparison to slavery is childish at best. The sorry state of Kyrgyzstan is a consequence of geography and a decade of mismanagement, not the west.”
And why’s that? Agree with the second part of the quote. In that respect, the point behind that ref. to slavery is, that local compradore elites are instrumental for IFI, multinationals, milit. powers etc. to gain acces to a certain country or territory.
I don’t agree with Borat, but it’s nice to have a debate about it instead of just a love-fest. It’s also nice to have a Kyrgyz person weighing in on his opinion. He and the HIPC protesters do make a point that Kyrgyz should be skeptical of big powers – the IMF has made mistakes. I think the HIPC is a good deal for Kyrgyzstan, but the west should (rightly) try harder to prove its worth.
Yes tribal chiefs did collude with slave takers, but does that absolve the western slave takers of blame? Rich countries should be held to a higher standard because they’re the ones that have the money.
Ataman Rakin, about treachery of local elite, who installed in the power “local elites” in the first place? Try to answer for yourself. Not the people, certainly.
For the same reason there is NO REAL DEMOCRACY in USA. And has never been in place. It’s just a reality show for rednecks and simpletons, and serves superficial purpose.
Genuine Democracy has existed in Ancient Greek Athenes, and even then, it coexisted with slavery.
Purpose of HIPC program, schemed by IFIs is to trap naive countries like Kyrgyzstan. Right now, economic hit men (not John Perkins) from IMF and World Bank are pushing Kyrgyzstan into total submission of HIPC program. Uzbekistan and Kazakhstan should learn from sorry story of Kyrgyzstan not to believe “democracy” agenda of wolves in sheepskin. Kyrgyz people have no objections to real democracy, it is welcome indeed, but not when, under the guise of “democracy”, IFIs push its own neo-colonial interests, then that is altogether different story, and has nothing to do with real democracy as a rule by people. Millions of Kyrgyz workers of industrial enterprises, especially in coal, furniture and machinery production have lost their jobs and been deprived of their social rights as a result of the Western imposed PESAC program’s implementation started in 1996. The reasons of this outrageous injustice are rooted in the reorganization and dissolution of the above-mentioned and other companies within the frameworks of the PESAC de-industrialization project.
DEMOCRACY is welcome in Kyrgyzstan, NEO-COLONIALISM is not.
Objectively, Kyrgyzstan has full rights to default on its debts to IFI. Cameco, major shareholder of The World Bank, shipped out of Kyrgyzstan 600 tons of gold, roughly estimated price 10 billion dollars, leaving ecologic disaster behind. And Kyrgyzstan has full rights to sue IFI for destructive PESAC program.
Alright “Borat” – consider this your last warning. If you have something to say, say it in one comment. Do not use different comments instead of paragraph breaks. Finally: sources. If you’re going to reference a decade old World Bank programs to fix unprofitable state-run corporations as a failure, you need to reference whatever it is you’re getting your information from. And if you’re going to charge “the international system” with raping a country but don’t bother to detail how (a company with 1/3 foreign ownership running mineral export is hardly rape), then you are little more than a comment troll.
If I remember correctly, Nathan bans comment trolls.
“but it’s nice to have a debate about it instead of just a love-fest. It’s also nice to have a Kyrgyz person weighing in on his opinion.”
I agree with Brian. And with Borat as well be it that I want to highligh that what the US/the West are doing is not their monopoly but is also done by other powers, and that cleptocratic local elites are co-guilty.
“who installed in the power “local elites” in the first place? Try to answer for yourself. Not the people, certainly.”
Good question, bratan. I will actually answer it for the whole readership, who might also be interested. OK let’s run the gamut in greater Central Asia:
*Nazarbayev: last Kazakh SSR boss who stayed in power, re-elected in semi-Soviet style elections, buys off legimacy for now with oil- and gas-driven economic growth and ethnic stability;
*Karimov: last Uzbek SSR boss who stays in power through a neo-Stalinist police state, ‘legitimated’ by ritual Soviet-type ‘elections’;
*Niyazov: last Turkmen SSR boss, stays in power through a neo-Stalinist police state;
*Rakhmonov: was not the last Tajik SSR boss but a kolchoz head in Dangara and an MP; installed by a Moscow-backed coup that shattered a coalition government; his regime was long protected by the presence of Russian troops; ‘legitimates’ itself with dodgy ‘elections’ and by exploiting the civil war trauma among the population;
*Aliev junior in Azerbaijan: succeeded his father after pro forma elections (creating a ‘republican dynasty’); Aliev senior was a former politburo member and KGB cadre installed after the Moscow-engineerd overthrow of the democratically elected Abdulfas Elçibey; like his Kazakh counterpart, junior buys legimacy with oil-driven economic growth though here, he might drift away from those who helped bring his father into power (looks more to the West and Turkey);
*Akayev and Bakiev: the former was a Soviet academic and apparachik (though not the last Kyrgyz SSR boss), elected relatively democratically a couple of times; the latter came to power after social upheaval and coup that were meant to repeat the ‘color revolution’ scenario, yet he was not the choice of the ones who backed the ‘revolution’ (the West had clearly bet on Rosa Otunbayeva);
*Karzai in Afghanistan: installed by the US, protected by US&NATO troops.
So, what do we learn from all this boys and girls? Of the 7 cases, three leaders (Karimov, Nazarbayev and Niyazov) are former SSR — as such, they were part of the Soviet-colonial compradore elites — heads who stayed in power. It were these people, and their cronies and entourage, who actually benefitted most from independence, not the population. Why? Because through independence, they were promoted from provincial Soviet satraps to elite on an independet state with everything that this implies: control over raw materials and other assets, access to IFI credits etc.
Two others (Rakhmonov and Aliev senior, succeeded by his son) came in power through Moscow-backed coups. Yet another (Bakiev) was more an ‘accident’, so to say: he came to power in a US-backed ‘color coup’ yet is clearly oriented towards Russian while the Akayevs were eating in all meadows. As for Karzai: yes he is a direct US stooge.
Actually, Joshua, to be fair the Kumtor gold mine was sold off completely to the Canadian company Centerra in 2004. The government’s share of the sale was $116 million Canadian dollars ($100m USD).
Actually, I’m curious, let’s see what kind of a deal this was:
Let’s assume that half of the 700 metric tons of gold estimated in the Kumtor mine was still in the ground as of 2004. Let’s also assume that the price of gold will average about $15 per gram (it’s $19 right now) over the life of the mine.
350,000,000 grams x $15 per gram = $5.25 billion in revenue
But what’s the cost to mine it? I found that the average price to mine gold in 2002 was about $7.5 dollars per gram. Let’s assume in Kyrgyzstan, because of its landlocked location and crumbling infrastructure, it costs $10 per gram.
350,000,000 grams x $10 per gram = $3 billion in costs
Leaving a net profit of $2.25 billion.
I’m no miner or businessman, so there might be added expenses in terms of initial capital outlays or other costs, and outstanding debt. But from this ‘back of the envelope’ calculation it does seem like it was a bad deal for the Kyrgyz people when their government only got $100 million USD, or 4.4% of the estimated total worth of the mine in the sale.
I’m also not sure if the Kyrgyz government gets royalties or taxes from gold that’s exported.
Wait, I’ve discovered more!
The Kyrgyz government had only owned 2/3 of Kumtor before the sale, so their share of the profit would have been $1.5 billion, making the $100 million dollar sale price 6.6% of the total Kumtor profit.
Furthermore, the Kyrgyz government is still left with about 10 million shares of Centerra (16% of the company), a company with holdings in mines around the world.
The current stock price of Centerra is $11.55. This times 10 million shares is: $115.5 million.
So, the estimated total Kyrgyz sale price of Kumtor is about $215.5 million, or about 14.3% of the total expected profit of Kumtor. That’s a better number than before, but unless I’m missing something, it doesn’t seem like a good deal to me.
Whoops, there was a comment posted before my last one that didn’t get posted.
Hey, I like Borat’s comments! And he should be allowed to post as many as he wants as long as he’s not offending anyone and putting up a legitimate argument, which he is. I don’t fully agree with him – but that’s part of the fun.
The unfortunate part of this discussion, as with all posts that Joshua makes, is that they are ‘loaded’, and inaccurate, from the start.
‘The “youth activists” (whatever that means) see the program as a money-grab by foreign companies eager to lay claim to Kyrgyzstan’s meager resource base.”
The fact is, Kyrgyzstan does not have a ‘meagher’ resource base, which is why many Kyrgyz are skeptical of the games being played. What exactly do you mean by ‘meagher’? Not enough to support a population of 5 million? I strongly disagree. Can you be a bit more specific about about ‘resources’? You mean, natural resources, people resources? If it is all about ‘meagher resources’, then the arguments point to government corruption – for the Kyrgyz government is allocating those resources…and has been receiving consultation (and Kyrgyz taxpayers have been paying for that consultation, in the form of dues and loans) from the World Bank for years…and why people like Borat/others are so skeptical of their motives.
The difference between Kyrgystan and places like the US, EU, China is that corruption does not make a significant dent in the economy as in Kyrgyzstan – what’s a few million here or there? Unfortunately, Kyrgyzstan cannot handle it. And people like Borat are frustrated by seeing, reading on the news the corruption of so-called ‘democratic’ societies, with little or no long-term consequences…while the same decision makers advise or criticize Kyrygystan’s ‘path’. A modern conundrum, no doubt.
To respond to Borat – to paraphrase Thomas Jefferson, ‘democracy’ is the least-perfect best alternative of governance. I can sympathise with his current views, after Peace Corps volunteers, diplomats, and others have run around Kyrgyzstan in two-and three- year stints trying to ‘innoculate’ people on democracy, only to discover that it is a complex path. But those people leave, moving on to other places to conquer with the gospel – and the Kyrgyz are left to sort it out themselves.
So the question then is – should the Kyrgyz be left alone to run the state as they see fit? I think they are quite able to do so now, especially with young people like Borat who have a conscience. Even if it means declaring financial bankruptcy and re-organizing the state, perhaps it is part of the process of Kyrgyzstan remaining its own sovereign state.
Sorry about that Brian. We’re having some big issues with commenting and spam right now. (Actually, we’re apparently inaccessibly in many parts of the world, including, until a few days ago, India, as a result.)
When I was going through the stuff caught in the spam filter, I noticed that one in there.
“If I remember correctly, Nathan bans comment trolls. ”
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
In Internet terminology, a troll is a person who enters an established community such as an online discussion forum and intentionally tries to cause disruption, often in the form of posting messages that are off-topic, with the intent of provoking a reaction from others.
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Joshua Foust – trolls do not produce end result – meaningful discussion. I, Ataman Rakin and Brian are discussing matters related to debt relief, (.i.e “relief”). Brian and I represent two extremes, I have leftist views, Brian has conservative views, from what I see. Ataman Rakin is in favor of “Real Politik”, from what I gather.
Brian has just discovered for himsel that Cameco’s subsidiary in Kyrgyzstan, Centerra Gold – have had questionable financial transactions and dubious corporate practices. Knowing that Cameco is a major shareholder of The World Bank, how Kyrgyzstan can trust at all IFIs and their programs from now on?
Kyrgyz MPs are raising an issue, that all financial transactions between Kyrgyz Government and IFI’s were illegal, and breached Kyrgyz Constitution – they have never benn approved by Kyrgyz Zhogorku Kenesh. You see, World Bank and IMF performed illegal financial transactions behind the back of Kyrgyz people. We were denied our democratic rights by IFIs. And we aren’t to tolerate that anymore.
Borat, you’ve done quite a bit of off-topic rambling as well, and I’ve deleted it. (For example, the comment about George Bush and homosexuality in the White House.) You also make plenty of wild, unsupported assertions. Be clear, concise, on-topic, and not so clearly trying to provoke a reaction, and there’s no problem.
I’m afraid by any sort of objective standard, Kyrgyzstan does has a meager resource base, if all we can talk about is 600 tons of gold. Anyway, mineral resources are not how countries become rich. If that were the case, then places like Hong Kong would be dirt poor. Resources can supplement development, or even partially subsidize it, but relying on a purely natural resource economy—like the oil curse—is just bad governance.
On that, we should all be in agreement: Kyrgyzstan has been poorly managed and led. Now, why the introduction of anti-corruption measures, along with privatization (which increases the flexibility and efficiency of the big state companies) and debt relief is actually bad for the country remains to be seen. And complaining about a single gold mine ruining the country makes my point, rather than the opposite: if all the country has to rely on is a few hundred tons of gold, it is in worse shape than I thought.
The trick is, Kyrgyzstan could conceivably (if we squint hard enough) turn into sort of the Colorado of Central Asia: it has the unbelievably beautiful landscape, with mountains for hiking in the summer and snow boarding in the winter, an interesting local culture, and so on. Developing service-based economies, like eco-tourism and resort vacations (among many others), would be a far more sustainable, and less corruption-prone, way of building up local incomes without relying on the monopolizing influence of minerals.
My calculations were flawed! Centerra had a 3-for-1 stock split in 2006! If the Kyrgyz government still owns 16% of the company then their holdings would be 16% of $3.12 billion, or almost $500 million. Even if I’m off, Centerra increased its market cap by 300% since 2004, making it a great investment.
This has been a roller coaster… maybe Kyrgyzstan made a good investment in 2004 after all.
Brian:
This posting is devoted to the memory of Nasirdin Isanov, First Kyrgyz Prime Minister, the Man of Honor, who was murdered for the 600 metric tons of gold.
The first Kyrgyz MPs vehemently objected The World Bank’s corrupted Kumtor Gold mining project. The first Kyrgyz Prime Minister N. Isanov was against this fraudulent project too.
Anyway, Corporate Gorillas got their ways. The first Kyrgyz MPs were dissolved. The first Kyrgyz Prime Minister N. Isanov was killed and then put in the car and run over by truck. This was written off as car accident.
The next Kyrgyz MP’s and Prime Ministers were famous for their treachery of Kyrgyz interests and corruption. The West hypocritically started criticizing their corruption, their own agent of promoting of their corporate interests.
Some bio on Nasirdin Isanov
http://en.wikipedia.org/wiki/Nasirdin_Isanov
IFI’s loans to Kyrgyzstan were totally fraudulent. As much as 40-50 percent of initial loans were spent for salaries of Western consultants and consultancy fees. They simply moved from one US bank account to another US bank account. Some of the US consultants were paid as much as 10 000 US dollars per day from IFI loans to Kyrgyzstan, according to estimates of Kyrgyz commission, investigating now IFI loans to Kyrgyzstan…
Which again sounds like internal corruption (i.e. local politicians hiring consultants at outrageous rates among other things), rather than foreigners, is the biggest obstacle to Kyrgyzstan’s development. You can’t label a long series of bad policies and theft by Kyrgyz politicians, then blame the international financial system—that doesn’t make sense.
“The trick is, Kyrgyzstan could conceivably (if we squint hard enough) turn into sort of the Colorado of Central Asia: it has the unbelievably beautiful landscape, with mountains for hiking in the summer and snow boarding in the winter, an interesting local culture, and so on. Developing service-based economies, like eco-tourism and resort vacations (among many others), would be a far more sustainable, and less corruption-prone, way of building up local incomes without relying on the monopolizing influence of minerals.”
I fully agree with Josh that raw materials are no guarantee for development and stability. It is a typical Soviet fallacy to think that. Examples of the contrary galore: the Middle East, Nigeria, the Caucasus, Sudan (all oil), West Africa (diamonds), etc.
Apart from that, I’m quite sceptical towards that eco- or sustainable tourism thing. This was something very popular in the late 1990s/early 2000s and it was much-hyped by the Akayevs, IFIs and Westren NGOs yet I don’t think it’s feasible to have that as an economic base. Tourism in Kyrgyzstan today are is basically: a) Almatyans and, to a lessre extent, Russians, vacationing on much-hyped but imo largely over-rated Issyk Kul, which is very concentrated in one specific area and not really eco-tourism; b) the – mostly Western – backpackers, trekkers and climbers who come for the yurt stays, the trekking etc. but all in all, that is a quite thin market also because you can get better in that field elswhere (Ladakh; Gilgit-Baltistan in Pakistan; Nepal). Some point to the potential of Chinese middle class tourists, yet – pomogite!!! — that is really the last thing I wish to happen to the Kyrgyz!
IMHO it is not desireable to have tourism an economic key sector. Why? First, a tourism economy is ‘less corruption-prone’?! Izvenite: globally, there are enough examples of tourism activities staying firmly in the hands of companies linked to regime goons who bring very little benefit to the local population; protected nature areas being destroyed for resort construction by the same sort of companies; sex tourism etc. Second, tourism is too much of a vulnerable sector to be over-dependent on. The slightest political unrest — or inflated coverage thereof by the global media – and off it goes. And like/believe it or not, greater Central Asia, along with the Middle East, is going to become even more unstable in the future.
‘An interesting local culture’… Look, after the Soviet Union and 15 years of ‘transition’, what is left of tradiational Kyrgyz nomadic culture really, except for a folklorised version? Do you really want the Kyrgyz to become some sort of anthropolgical tourist curiosity like the Native Americans?
No, Kyrgyzstan ‘s key sector should be st. fundamental i.e. agriculture.
Brian – One major problem regarding Centerra shares is that the Kyrgyz government doesn’t directly hold the shares. They are actually held by Kyrgyzaltyn which allows them to be hidden from public with a complete lack of transparency and accountability. Who knows exactly where the proceeds of share sales are going?
Even if Kyrgyzstan doesn’t join the HIPC program, this has got to be addressed.
“You can’t label a long series of bad policies and theft by Kyrgyz politicians, then blame the international financial system—that doesn’t make sense.”
IFIs are mostly to blame for what we have in Kyrgyzstan today. And corrupted Kyrgyz politicians who helped them to rob country, surely. It is an issue, as Ataman Rakin pointed out early, local elite helping foreign thieves to rob country’s assets. For the last fifteen years since breakup of USSR, IFIs controlled virtually every economic steps in Kyrgyzstan.
Kyrgyzstan should get rid of corrupted IFIs influence, as Latin Americans are doing right now, to get real solution to its woes.
Yes, it takes two to tango as the saying goes.
What we see now in Central Asia has happenend before in other parts of the global periphery. In fact, what the local compradore elites in the southern ex-USSR do with the IFIs, the EU ‘technical assistance’ etc. etc. is, basically, a continuation of what they did under the Soviet regime: paying lip service to Soviet Communist ideology; meet the production quota on paper; cash in Moscow and Gosplan subsidies; and try to place their cronies and rodstvenniki everywhere. It’s not only the IFI’s and the EU BTW (UNDP, for instance).
See, in my humble opinion, a key problem with these IFIs, EU TA etc.. is that their foreign ‘country directors’ (or whatever title they bear), ‘team leaders’ and other US$ 800/day ‘senior consultants’ often don’t know jack shit about reality in the country and often do not even speak the language.
As such, they are overdependent on an entourage of local staff, which itself often comes from local elite families (often also relatives of government officials) and who, because of their background, most often do not know (or care) a iot about wider society outside of their own privileged surroundings. They are the ones who manipulate/’wine, dine and girly’ expatriate IFI/IO cadres into investment decisions, recruiting, etc. according to their carreer and clanic interests.
Which explains the corruption and all these nonsensical projects.
To add the above, when you see what social work a Muslim NGO like the Edhi Foundation ( http://www.edhifoundation.com/ ) is able to do in Pakistan with a budget of merely US$ 15 to 20 per year (mostly funded by private donations), and then look at these multi-million $$$ deals where the bulk of the money goes to consults (whose main fields of expertsie are the bars and the whores) and regime goons … it cries for vengeance really!
“of merely US$ 15 to 20 per year” is, of course, US$ 15 to 20 *million*. Scuzi!
The great part of this ‘string’ of comments is that there is a new generation of local people at the grassroots level that are willing to express their frustration over some of the obvious hypocrisy taking place. That’s the most exciting part of this exchange. If (this) generation continues to remain engaged and concerned about their country, then change is imminent.
It’s hard for me to see how IFIs ‘own the (Kyrgyz) economy’…but it is plausible that IFIs have remained beyond their stay by advising Kyrgyzstan ‘what they should do’. That’s annoying. So, who is going to tell them to leave?
The question also remains…the World Bank, the UN, and others have been advising on ‘One-stop-shops’, ecotourism, hydro-electricity, stock market development (1996), tax and trade reform, “Investment Matrix” etc. etc. for a while. So with all of the great ideas, with all of the laws on the books, all of the help, assistance…which Kyrgyz person is going to stand up and say ‘please leave’ and therefore declare victory and allow Kyrgyz people to go about the business of sorting it out themselves?
I know plenty of taxpayers outside of Kyrgyzstan who have also financed some of these programs that would gladly support the money being used in their own countries and not in Kyrgyzstan. I am sure that Borat and Ataman would support that view!
It would be interesting to hear suggestions of what incentives the Kyrgyz government should offer to its citizens (in addition to asking IFIs to leave) that will allow the Kyrgyz people to run the economy without any IFI and foreign (diplomatic) interference…reducing VAT? Tax breaks? Exiting WTO? Just curious to know.
That is definitely true; most Americans think the US is giving too much aid (but also overestimate how much the US is giving), and would rather spend it domestically, so if Borat is saying Kyrgyzstan should take care of its own problems and not take money from the US or IOs, then there is no conflict of interests.
But I don’t think that is really what Borat (and some others to a lesser extent) are saying. My read (and I could be mistaken) is they think Kyrgyzstan should get Western money with no strings attached.
The World Bank and the IMF are well aware that many mistakes have been made in the past in terms of advice given to developing countries (i.e. Stiglitz); however misguided that advice, few would argue that it was vindictive in nature.
Think of it from the other side. The reason countries like Kyrgyzstan go to the IMF and WB for loans is because they can’t get good loans from private institutions. That is also for a good reason; private banks are only going to lend if they think they are going to get their money back. IOs attach strings to make it more likely that developing countries will be able to repay their debts, which is in both the donor and recipient country’s best interest. How do the donor institutions benefit from impoverishing their debtors?
Latin American countries are indeed repaying their debts (and Russia already has), but that also has something to do with the fact that interest rates are low right now, which means they can more affordably go with a private loan; this might not always be the case.
I am not really disagreeing with some of the criticisms of IOs above; I am just pointing out that the converse argument – that IOs should give out money with no strings attached – is also pretty infeasible. IOs should be able to ensure (or at least try to) that their money is spent well.
Borat, your comments that Nathan isn’t filtering out would be a lot stronger if you backed them up better. Saying that IOs are all corrupt doesn’t really carry that much weight if you don’t show us some evidence (the wikipedia article, for example, doesn’t say anything about Isanov being murdered). Rakin makes similar arguments, but at least (sometimes) cites personal experience when he talks about expats and whoring, and links out to evidence to backup your points.
What are the IMF and the World Bank really? Are they to help poor countries get through a temporary debt problem?
What is their role?
They are purveyors for crooked and soon to be bankrupt Dollar system.
The way the IMF actually works is carefully disguised, behind a facade of free market ideology. In reality, the IMF is a modern era collection agency for the Dollar Empire. It collects its tribute, through major international banks, which use the dollars to further extend the power of American financial and corporate hegemony. Insiders know well that the IMF is run by Washington. It is no accident that its headquarters is also there. The IMF was originally created in the 1944 Bretton Woods New Hampshire international monetary conference, called by President Roosevelt to set up a postwar monetary and trade system. It was intended as a fund to support stability of currencies and trade of the postwar European allied countries. At that time Washington held the vast bulk of world gold reserves and expected to lend dollars to rebuild Europe. The first member to borrow was Great Britain after the war. The last European state was Italy in 1977.
Rebirth of the IMF in 1980s as political tool
Since 1977, no European or G7 country has gone to the IMF to borrow. Instead they have borrowed from private banks or issued state debt. They know all too well how destructive the IMF conditions are. By the end of the 1970s some people were suggesting the IMF had outlived its role, much as some argue with NATO after the end of the Cold War. Washington had other ideas for the IMF however.
The role of the IMF changed dramatically in the early 1980s, under US pressure. Instead of serving as a stabilizing fund for industrial countries of Europe or Japan, the IMF became the tool for controlling economic policies of third world countries. What evolved since the first Latin American debt crises of the early 1980s, was an entirely new role for the IMF to act as hit man to collect dollar loans.
In October 1979, a dramatic shock occurred for the debtor countries. Overnight their cheap dollar loans cost them 300% more interest charge. Paul Volcker of the Federal Reserve Bank in the US, unilaterally changed US interest policy to force the dollar higher against other currencies. The effect was to raise US interest rates 300% and rates in the London bank market by even more. The bank loans to Argentina and other countries had been made in “floating” rate agreements. If the key international rate in the London bank market, LIBOR, was low, Argentina would pay a low rate on its dollar loans. But when it suddenly rose 300% in 1979-1980, many countries suddenly faced a payments crisis.
It took until 1982 for the crisis to reach default level. At that point, Washington demanded the IMF be brought in to police a debt collection process on developing debtor nations. This came to be called the Third World Debt Crisis. The impression was created that countries like Argentina were guilty for mismanagement. In reality, whatever political corruption may have existed in the debtor countries, the corruption of the IMF system and the petrodollar recycling was far greater. The Volcker interest rate shock completed the package of destruction of living standards on behalf of dollar debts.
How did the IMF act in the third world debt crisis? Here is where it becomes clear that the role of the IMF was to support the dollar hegemony of the United States, and not to help poor countries get through a temporary debt problem.