by Alena Kim

Main Text
Country Profiles
Chronology of Historical Events
Macroeconomic Indicators
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Other essays on 
Kazakhstan  and 




This paper deals with two countries, Kazakhstan and Kyrgyzstan, their social, political, and economic systems with greater emphasis on their economies. I chose these two countries as subjects of my paper for several reasons.

First of all, both Kazakhstan and Kyrgyzstan are Central Asian republics of the former Soviet Union. They share common borders, with the southern boundary for Kazakhstan and northern boundary for Kyrgyzstan.

Close proximity of these two states goes hand in hand with their historical background. Both countries (territories of the present-day Kazakhstan and Kyrgyzstan) were inhabited by nomadic herding people, both were incorporated into the Russian Empire in the 19th century and both underwent Russian and later Soviet rule. For more detailed information on historical background of the region see Table 1.

Another common feature of these two countries is that they are ethnically heterogeneous. Not only do significant tribal and clan differences within each country account for this diversity, but also the presence of large Slavic population and a large diversity of ethnic groups. See Table 2 for countries’ profiles.

 Finally, I chose Kyrgyzstan and Kazakhstan for this paper because I would like to concentrate on their post-communist performance as independent states. Both republics declared their independence more than 10 years ago (August 31 and December 16, 1991), so there is a sufficient time period to focus on results of their reform policies, extent of their implementation, and impact on countries’ development processes. 




The dissolution of the USSR transformed the fifteen republics into independent sovereign states with various capabilities for survival. Among them were Kazakhstan and Kyrgyzstan, the two Muslim Soviet Republics of Central Asia. The year of 1991 was the first time for these countries to become sovereign states. In many respects, they were unprepared for this important event.[1]

In the Soviet economic system all fifteen republics had carried out a specific task; these two republics were mainly the suppliers of raw materials. Their economies depended heavily on other republics for vital inputs. Only obsolete Soviet model of political structure with one-party central government remained in these countries, with no practice of national political institutions in the past. Eradication of this model has been very slow. “The political opposition of the early 1990s has been virtually extinguished in the name of preserving stability and preventing the putative onset of Islamic politicization.”  Eleven years after independence, “…political leadership remains in the hands of the same individuals as in the last years of the Soviet Union: Nursultan Nazarbaev in Kazakhstan, Askar Akayev in Kyrgyzstan…”[2] As for the social developments in these countries, both face significant domestic problems as the recovery of ethnic identity has become a part of public consciousness. The ethnic diversity of the region is the result of Stalin’s mass relocation campaign, the purpose of which was to weaken the ethnic strength of one dominant group by creating a significantly large ethnic minority within it. As a result of this policy, present borders fail to correspond to the ethnic and linguistic situation in the region and constantly threaten its stability.




Culture of both countries has a long and rich tradition. It was greatly influenced by the nomadic lifestyle of the modern nations of Kazakhstan and Kyrgyzstan. Tribal movements, conflicts, invasions, and alliances with many different tribes determined their history, culture, and character.

Because of the nomadic heritage, the Kazakhs and Kyrgyz did not have the tradition of written language until they were incorporated into the Russian Empire in the mid-nineteenth century; their literature relied on oral history. Various legends and histories have been memorized and recited by people, akyns. Most of the works tell about hero-warriors, batyrs, and important events in the historic development of Kazakh and Kyrgyz people.[3]

Among the Kazakh literature, there are such cultural treasures as legends “Koblandy-batyr” (fifteenth or sixteenth century), “Er Sain” (sixteenth century), and “Er Targyn” (sixteenth century).[4] All of them describe the struggle against Kalmyks.[5] These legends are recited in a chant manner and are accompanied by the play of drums or dombra.[6]

The Kyrgyz legends consist of two categories: the “great epos” – the trilogy of “Manas”, “Semetei”, and “Seitek”; and the “small epos” - “Er Toshtuk”, “Dzhanysh-bayish”, “Kurmanbek”, “Kodzhozhash”, and “Er Tabildi.”[7]

The Kyrgyz “Manas” is the world’s longest epic poem. One of sixty versions of this epic, recorded by a very well known Manaschi (teller) Sayakbai Karalaev, contains more than 500,000 poem lines. “Scholars who have studied this epic call it as stirring as ''The Iliad,'' as episodic as ''Don Quixote'' and as rich in moral guidance as the Gospels.”[8]

The epos “Manas” is the unique memorial of Kyrgyz culture; it embodies Kyrgyz freedom-loving minds, centuries-old struggle against oppression. Every significant change in political, social, and economic life of Kyrgyz people had brought certain imprint to the epic. The epos is not only the collection of the events of different periods of life, but also the result of the artistic thinking of Kyrgyz people who had gone through the period of the multi-secular history. “Manas” is the life encyclopedia of the Kyrgyz people.

A representative of the Kazakh nobles, an officer of the Russian army, Chokan Valekhanov gave the precise definition of the poem’s essence. “Manas is an encyclopedic collection of all folk myths, fairy-tales, legends brought to one period and gathered around one character – the epic hero Manas. The way of life, customs, traditions, morals, geography, religions, relations found their reflection in this great epic.”[9]

The poem tells the story of an ancient hero Manas who fought to establish and defend a homeland for Kyrgyz people. At the age of twelve, he vowed to free his people from foreign invasion and was truly committed to this until he was treacherously killed. Nobody knows where he was buried. But it is believed that when someone seeking this sacred place comes too close, a severe storm breaks out and can be calmed down only by reciting the poem.[10]

The figure of Manas is not based on any particular individual. He is a collective character who personifies the ideal of Kyrgyz people.  “Semetei” and “Seitek” are continuation of “Manas.” All three parts of the epos have one common, indissoluble theme: “Semetei” and “Seitek” tells about the epic heroism of Manas’ son Semetei and grandson Seitek, who continued Manas’ struggle for nation’s freedom against foreign oppression.

“Manas” is one of the main cultural treasures of Kyrgyz people and has a very important role in their history. Lacking a strong religious or political tradition, the Kyrgyz use the legend of Manas to define their collective identity. As Kyrgyz President Askar Akayev once said: “For the Kyrgyz people, Manas is more than an epic. It is what the Bible is to Christians. It inspired people in their hard times. Thanks to Manas, this small nation preserved its traditions and history, and survived to become a country in Central Asia.”[11]

Czarist and Soviet rule tried to suppress Kyrgyz for self-determination by manipulating the content of the poem. But because the Manas tradition is an oral work, it helped the Kyrgyz to preserve their identity. The epic originated in the ninth century, but it was recorded for the first time only in the second half of the nineteenth century.[12] Manaschi, masters of recitation, pass it from one generation to another in oral form, frequently to the accompaniment of komuz.[13]





Economic transition to a market-based economy has been more difficult and painful than it was originally expected. It was particularly true for the Kyrgyz Republic, which has a more limited range of natural resources than Kazakhstan. Both countries have suffered “all transitional ills” of former communist states moving toward a free market economy: erratic supply of critical industrial inputs, increased unemployment, sharply increased inflation, declining output and related growth poverty, and acute shortages of goods. Governments of both states have undertaken meaningful reform, but obstacles such as unworkable government structure, bribery and corruption, ethnic and clan rivalries, and a variety of social tensions have made these countries move cautiously.[14]

Since the break-up of the Soviet Union, both countries have been painstakingly seeking to adopt plans that would give them economic self-sufficiency. They want to exploit their own natural resources and not to export them to Russia; they want to integrate their economies not only with Russia, but also with their southern neighbors, Europe and the United States. But, apart from the common Soviet-era legacy, both countries suffer from geographic disadvantages. Both Kazakhstan and Kyrgyzstan are landlocked states and are distant from potential markets outside the Commonwealth of Independent States (CIS) and the Middle East. “Following a long period of isolation and catering to the needs of the Soviet Union, [both] countries faced the tough challenge of how to exploit more effectively their natural resources to improve living standards, while introducing the systemic changes needed to achieve a market framework and to integrate their economies with the rest of the world”[15].

Both countries have succeeded in confronting economic challenges after the collapse of the Soviet Union. There are noticeable signs of progress. They have chosen and carried out the most liberal and democratic reforms in the Central Asian region since their independence. They have liberalized prices, introduced freely convertible currencies, reduced high levels of inflation, implemented financial and banking reforms, succeeded in large-scale privatization programs, allowed private ownership of land, expanded their international trade and attracted foreign investments.[16]

But there is still a long way to go toward market economy, more stabilization, and development. Their economies are still weak and dependent on Russian politics and economic conditions. Drops in the output and declining in the standards of living were significant in the early 1990s. By the mid-1990s there were signs of improvement in both republics. But just their economies started to recover from the collapse of the Soviet highly integrated economic system, both Kazakhstan and Kyrgyzstan experienced another decline. It was due to the collapse of the Russian ruble in 1998 and Russia’s decline in demand for republics’ exports.

Notwithstanding their challenges, the governments of both countries continue to implement comprehensive reform measures toward macroeconomic stabilization and restructuring. Resumption of growth after the Russian economic crisis, improvement in major economic figures, and governments’ adherence to further economic reforms restored investors’ confidence and flow of foreign cash.




Both Kazakhstan and Kyrgyzstan are taking foreign investments seriously and are determined to attract more. The countries need hard currency for building and strengthening their industrial infrastructure and further economic development. Both Kazakhstan and Kyrgyzstan are among the most investment-friendly countries in Central Asia. Since the break-up of the Soviet Union both republics began a series of reforms aimed at constructing market-based economy in their countries. 

I. Foreign Direct Investment

Although Kyrgyz Government pursuit comprehensive reforms aiming to liberalize trade and investment regimes since the early 1990s, FDI to Kyrgyzstan have not been tremendously excessive: since 1994 Kyrgyzstan has attracted about US$ 450.1 million. See Table 5 for more details.[17] Analysts and experts point out several problems responsible for negative impact on FDI flow to the country, among which are weak implementation of legislation, bureaucratic delays, widespread corruption, complex and burdensome tax policies, lack of transparency and some contradictions in law.[18] Although many small- and medium-size enterprises were privatized, little was done on a large-scale: planned privatization of the telecommunication monopoly, KyrgyzTelecom, the energy monopoly, Kyrgyzenergo, the state gas company, Kyrgyzgas, tourist facilities at Lake Issyk-Kul, Kairat Bank and the Savings Bank[19], which could have increased investors’ confidence came to halt in 2000 due to elections in the country.

FDI to Kazakhstan have been amounted for US$10.356 billion since 1993. In 2000, net FDI totaled to US$1,350 million.[20] More investments could be attracted if transparency in issuing licenses, tariff reforms and further large-scale privatization would have been enacted.  “More than 300 of the largest enterprise remain fully state0owned, including oil company KazakhOil, oil transit company KazTranOil, gas transit company KazTransGas, railway company KTZ and energy utility KEGOC.”[21] The major attraction to foreign investors has been oil and gas sector. Kazakhstan is the second largest oil producer in the former Soviet Union and expects to attract more than US$65 billion to its oil and gas sector in the next 10 years.[22]  See Table 9 for more information.

II. Investment Policy and Incentives

 Since the early 1990s Kyrgyzstan has started to create legal framework in its attempts to attract more FDI. The Kyrgyz Law On Foreign Investments was adopted in June 28, 1991 (and has been amended many times since then). The provisions of this law guarantee no discrimination against foreign investors, compensations and guarantees against nationalization and other forms of expropriation, protection against any bureaucratic delay in the government, provision foreign investors with guarantees of full use of their profits and unlimited exports of their profits, and provide with different kind of tax exemptions and customs duties. [23]

On April 5, 2001, State Committee on Investments and Economic Development (GosKomInvest) was established. Its purpose is to create state policy for attracting foreign investments, to identify investment opportunities, to coordinate technical assistance and grants, and maintain centralized coordination with international organizations, financial institution, and donor-states.[24]

In its continuing attempts to attract more FDI, Kyrgyz Government in conjunction with the US and German Embassies and the World Bank organized an investment conference in July 2001. The purposes of the meeting were “to identify main obstacles for FDI and local private investment, to discuss strategies and develop approaches for eliminating these barriers, and to develop a strategy for marketing the Kyrgyz Republic in the world business community.” [25] An advisory body, Coordination Council, was created. “The Council consists of representatives from government and the investor, diplomatic and international financial communities. Its role is to analyze the FDI situation in the Kyrgyz Republic, review progress on steps to improve the investment climate, and make recommendations and proposals to the government for further action.”[26]

In Kazakhstan, four major bills relating to foreign investments have been in force since 1994: the Law on Foreign Investment (1994), the Tax Code of 1995, the Law on State Support for Direct Investment (1997), and the Law on Government Procurement (1997).[27] “These laws provide for non-expropriation, currency convertibility, access to international arbitration, guarantee of stability in the legal regime, transparent government procurement, and incentives in certain priority sectors such as industrial infrastructure, the processing industry, the city of Astana, housing, the social sector, tourism and agriculture.”[28]

 In 1998, Foreign Investors’ Council (FIC) was established in order to increase foreign investment flow to Kazakhstan and consists of government representatives and representatives from international financial institutions and foreign companies. FIC objectives are “to submit to the President… proposals for the improvement of legislation concerning investment issues and the implementation of large internationally important investment programs and projects in Kazakhstan; to prepare recommendations for the improvement of the investment climate, and also for the strategy to attract foreign investment into Kazakhstan’s economy.”[29]





There is no doubt that both Kazakhstan and Kyrgyzstan have made significant progresses in developing and implementing transition policies from a centrally planed to market-based economy. Both countries introduced democratic practices and institutions, opened their economies and performed several broad-based reforms. However, much more needed to be done to further transition processes and economic development. Among major ills and impediments toward complete realization of transition-policy plans is slow large-scale privatization, corruption at all levels, bureaucratic delays, clan/family-type relations, lack of transparency of the regulatory system.





[1] Federal Research Division, Library of Congress. Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan: Country Studies. Washington, DC: The Division, 1997.

[2] Federal Research Division, Library of Congress. Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan: Country Studies. Washington, DC: The Division, 1997.

[3] Federal Research Division, Library of Congress. Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan: Country Studies. Washington, DC: The Division, 1997.

[4] Federal Research Division, Library of Congress. Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan: Country Studies. Washington, DC: The Division, 1997.

[5] Kalmyks – nomadic tribes of Mongol origin who inhabited steppes along the Ob River and who started their invasion of Kazakh land in the early 17th century.

[6] Dombra – Kazakh two-stringed musical instrument.

[7] Elmira Kochumkulkizi’s Home Page.

[8] Kinzer, Stephen. A Legendary Hero Guides a Reborn Kyrgyzstan.
New York Times: January 2, 2000.

[9] Dudashvili, Sergey. Kyrgyzstan: the Sacred land of Manas. (Bishkek: Rarity Firm, LTD, 1999)

[10] Kinzer. A Legendary Hero Guides a Reborn Kyrgyzstan. New York Times: January 2, 2000.

[11] Kinzer. A Legendary Hero Guides a Reborn Kyrgyzstan. New York Times: January 2, 2000.

[12] Kinzer. A Legendary Hero Guides a Reborn Kyrgyzstan. New York Times: January 2, 2000.

[13] Komuz – Kyrgyz three-stringed musical instrument, akin to lute.

[14] Federal Research Division, Library of Congress. Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan: Country Studies. Washington, DC: The Division, 1997.

[15] Economic Reforms in Kazakhstan, Kyrgyz Republic, Tajikistan, Turkmenistan, and Uzbekistan.

[16] Emine Gürgen, Harry Snoek, Jon Craig, Jimmy McHugh, Ivailo Izvorski, and Ron van Rooden. “Economic Reforms in Kazakhstan, Kyrgyz Republic, Tajikistan, Turkmenistan, and Uzbekistan.”

[17] EBRD: Investment Profiles 2001  - Kyrgyzstan

[19] EBRD: Investment Profiles 2001  - Kyrgyzstan

[20] EBRD: Investment Profiles 2001  - Kazakhstan

[21] EBRD: Investment Profiles 2001  - Kazakhstan

[22] EBRD: Investment Profiles 2001  - Kazakhstan

[23] Kyrgyz Law On FDI to Kyrgyz Republic. Normative Documents of the Kyrgyz Government.

[24] Presidential Decree On State Committee of Kyrgyz Republic on Foreign Investments and Economic Development. Normative Documents of the Kyrgyz Government.

[25] Nusurov, Erkin. “Kyrgyz Government Takes Foreign Investment Seriously.”

[26] Nusurov, Erkin. “Kyrgyz Government Takes Foreign Investment Seriously.”

[27] EBRD: Investment Profiles 2001  - Kazakhstan

[28] EBRD: Investment Profiles 2001  - Kazakhstan

[29] EBRD: Investment Profiles 2001  - Kazakhstan


(1) Batalden, Stephen K. and Sandra L. Batalden.  “Newly Independent States of Eurasia.” Phoenix, AZ: Oryx, 1993.

(2) BISNIS, Central Asia: Kazakhstan.


(3) BISNIS, Central Asia: Kyrgyzstan.


(4) “CIA – The World Factbook – Bangladesh.” The World Factbook 2001.


(5) Dudashvili, Sergey. “Kyrgyzstan: the Sacred land of Manas.”  Bishkek: Rarity Firm, LTD, 1999.

(6) Elmira Kochumkulkizi’s Home Page.


(7) Emine Gürgen, Harry Snoek, Jon Craig, Jimmy McHugh, Ivailo Izvorski, and Ron van Rooden. “Economic Reforms in Kazakhstan, Kyrgyz Republic, Tajikistan,  Turkmenistan, and Uzbekistan.”


(8) “European Bank for Reconstruction and Development.” EBRD: Investment Profiles 2001 – Kazakhstan and Kyrgyzstan


(9) The Europa World Year Book 1992-2001. London, England: Europa Publications Limited, 1992-2001.

(10) Federal Research Division, Library of Congress. “Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan: Country Studies.” Washington, DC: The Division, 1997.

(11) Interstate Statistical Committee of the Commonwealth of Independent States <>


(12) Kinzer. “A Legendary Hero Guides a Reborn Kyrgyzstan”. New York Times: January 2, 2000.

(13) Normative Documents of the Kyrgyz Government. Kyrgyz Law On FDI to Kyrgyz Republic.


(14) Normative Documents of the Kyrgyz Government. Presidential Decree On State Committee of Kyrgyz Republic on Foreign Investments and Economic Development.


(15) Nusurov, Erkin. “Kyrgyz Government Takes Foreign Investment Seriously.”





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