During its more than 30 years of strengthening democracy around the world, CIPE has learned time and again that sound corporate governance practices and principles improve economic performance and have a significant democratic dividend.
According to CIPE’s Corporate Governance Toolkit, “The shift to better private governance accelerates the move toward more democratic public governance.” By improving transparency, corporate governance reduces corruption and cronyism that inhibit the democratic process. Corporate governance principles strengthen the democratic values of fairness, accountability, responsibility, and transparency. In transitioning economies where state-owned enterprises dominate key industries, sound corporate governance practices can improve budget management and service delivery, thus building public trust in the government.
In Kyrgyzstan, state-owned companies play a significant role in the economy, especially in the banking, mining, and transportation sectors. According to the Index of Economic Freedom, government expenditure accounts for 38 percent of Kyrgyz domestic output. Cronyism and corruption within these companies presents a major obstacle to Kyrgyzstan’s market- economic transition. In many cases, elected officials appoint company board members based on political loyalty rather than professional skills and corporate governance knowledge. The positions on boards of directors are frequently used as rewards for political support. This dynamic only reinforces a patronage system—the antithesis to democracy—resulting in poor economic performance and public service delivery.
According to Freedom House’s Freedom of the Press 2013 report, Kyrgyzstan’s media environment remains ‘not free’ with little improvement in press freedom over the last ten years.
Though the situation is not as bleak as in the rest of Central Asia, when reporting on politically-sensitive issues in Kyrgyzstan, media outlets practice self-censorship to avoid threats or harassment. When reporting on economic topics, however, journalists often simply lack the skills or background to provide comprehensive analysis. As a result, the Kyrgyz public lacks information about important economic trends, events, and issues. As access to information is a crucial component of free societies, the poor information flow in Kyrgyzstan hinders the country’s democratic and market-economic transition.
Providing the poor with access to credit at reasonable interest rates does seem to be a panacea for alleviating poverty. With credit, a person can produce a good or provide a service that will generate an income with which basic needs can be met. Credit also allows a person to utilize their talents, skills, and initiative to fill a niche in the market, spurring economic and entrepreneurial growth in a community and country. In rural Guatemala, for example, a woman bakes bread every morning in a stove bought with a small loan and sells the loaves to a shop in her village. In Nepal, a man buys five water buffalo with a small loan and sells the milk each morning to his neighbors.
Though it is difficult to estimate the affect of such micro-entrepreneurial activities on a country’s overall GDP, the impact on individuals and society is immeasurable. Small loans stimulate private entrepreneurship and expand economic freedoms crucial to building a market economy and democracy. They empower the poor with the freedom to make choices regarding how they use and save their income. If spent on food, health care, shelter and education, individuals can more easily escape the poverty trap. Raising the income level and standard of living among the world’s poor also builds a middle-income class that is more able to participate in civic activities and demand greater accountability from the government.
Budget transparency strengthens a government’s accountability to its constituents. The public has a right to be informed about how taxes are allocated and spent, as such decisions directly impact a country’s political and economic development.
The International Budget Partnership (IBP) ranks countries based on the level of budget transparency and public participation in the budget-making process. IBP’s recently-released 2012 Open Budget Survey found that only 23 of the 100 countries surveyed provide sufficient budgetary information to the public. To improve transparency, IBP stresses the need for mechanisms that allow civil society to participate in and monitor the budget-making process to hold government officials accountable for use of public funds.
According to IBP’s report, Kyrgyzstan scored in the bottom percentile (20 out of 100), receiving the same score as Zimbabwe. In fall 2012, the Kyrgyz Parliament held hearings and debates on the 2013 budget. Pressing issues for the population, such as poor infrastructure and waste management, were among the topics discussed. CIPE’s partner, the Development Policy Institute (DPI), noted that parliamentary hearings were not widely covered in the media and the public remained largely unaware of the decisions being made. To address this, DPI used CIPE/NED support to organize two press conferences with 24 Kyrgyz journalists on the 2013 budget.
Kyrgyzstan’s capital city of Bishkek hosted more than 100 Eurasian journalists and economic experts for a two-day conference on the emerging field of economic journalism. The CIPE/NED-funded event entitled “Economic Journalism as a Factor and Indicator for Market Economic Development” took place on October 11-12 and was the first of its kind, with participants from all five Central Asian countries. Organized and moderated by the Bishkek-based Development Policy Institute, the event fostered greater cross-border and cross-sectoral dialogue on economic and business-related issues.
Informed and educated citizens are an important part of a thriving democracy. When citizens are well-informed and equipped with facts and independent analysis, they can better engage in the policymaking process at every level to keep the government honest, responsible, and accountable to its constituents.
Kyrgyzstan has a relatively free media compared to other Central Asian countries. However, good information on business and economic issues is scarce in Kyrgyzstan. Typically, available materials are written in professional jargon and not easily understood by average citizens or by journalists. Journalists lack the knowledge of basic market concepts and the benefits of market-oriented economic reforms.
CIPE’s partner, the Kyrgyz Stock Exchange Press Club (KSEPC) engaged and educated journalists from different regions to improve economic and business reporting in Kyrgyzstan. To help journalists better understand crucial market-related issues, KSEPC published a 76-page practical manual (in Russian and Kyrgyz) for economic journalists concentrating on basic information regarding key economic sectors.
Participants in last year’s economic journalism training program.
From Astana to Tashkent, approximately 80 Central Asian media and business representatives will gather in Bishkek on October 11th for a two-day conference aimed at strengthening reporting on economic and business-related issues. Presenters will include experts from Belarus, Kazakhstan, Georgia, Russia, and Ukraine, who will offer lessons learned and best practices to develop the field of economic journalism and facilitate effective cooperation and information exchange between media and business.
The topics are timely and relevant, given Freedom House’s 2012 Freedom in the World Report which ranks four of the five Central Asian states among the least free countries in the world, with only Kyrgyzstan improving its ranking from last year. Even after more than twenty years of post-Soviet independence, the region still faces major challenges to its transition to a market-based democracy.