KYRGYZSTAN FAST-TRACKS ENERGY SELL-OFF  Parliament gives away its right to 
block controversial privatisation deals in the electricity industry.  By IWPR 
staff in Bishkek

TURKMEN CURRENCY REFORM TAKES STEP FORWARD  Moving away from a system where 
prices and exchange rates are held at unrealistic levels by government is going 
to be a slow and difficult process.  By Inga Sikorskaya in Bishkek


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Parliament gives away its right to block controversial privatisation deals in 
the electricity industry.

By IWPR staff in Bishkek

Legislative changes allowing the Kyrgyz government to privatise the potentially 
lucrative energy sector without consulting parliament have raised concerns that 
it wants to speed ahead with sales with little accountability or transparency.

On April 18, parliament passed three bills relating to energy privatisation in 
the course of a single day. The key law signs away parliament’s right to be 
consulted before privatisation programmes are approved.

In past years, it would have been difficult to get such bills passed so easily. 
In its previous incarnation, the legislature frequently raised objections to 
plans to sell power stations and other energy-sector assets because members 
felt the process was botched and was not in Kyrgyzstan’s best interests.

That changed after the December election, when the newly-created Ak Jol party 
swept the board and gave President Kurbanbek Bakiev and his allies the majority 
they needed to pass bills effectively unopposed.

The two other parties represented in parliament – the Social Democrats and the 
Communists, with 20 of the 90 seats between them – were unable to slow the 
rapid progress of the privatisation bills’ rapid progress, let along block them.


In January, Bakiev told his government to make the rapid sell-off of power 
companies a priority. (For more on this, see Kyrgyz to Pay High Price for Power 
Privatisation, RCA No. 528, 25-Jan-08.)

Kyrgyzstan's mountainous terrain means it has the potential to produce enough 
hydroelectricity to meet its own needs and for export as well. For now, the 
cash-strapped authorities argue that privatisation is the only way of 
attracting investment to renovate infrastructure, build new plants and 
eventually become self-sufficient in electricity, and that the state does not 
have the funds to sustain current losses, let alone fund new projects.

Denationalisation of the power industry, launched in 1998, has been a 
protracted process, beginning with the breakup of the state-run Kyrgyzenergo 
into several constituent parts – one company to run the power stations, another 
in charge of the national grid, and others distributing electricity to 
consumers in various parts of the country.

The companies that have now been lined up for sale, or alternatively a 
management lease arrangement, under the current fast-track programme include 
the electricity distributors Severelektro in the north of Kyrgyzstan and 
Oshelektro and Jalalabadelektro in the south. Other assets on offer are 
Bishkekteploset, which pipes hot water to the capital, and the power station 
that supplies the heating for this system as well as the city’s electricity.

Apart from massive inefficiencies, theft and unpaid bills, Kyrgyzstan’s power 
industry is just recovering from an unusually harsh winter which placed a huge 
strain on existing generating capacity. Low water levels in the Toktogul 
reservoir, where one hydroelectric scheme accounts for 40 per cent of the power 
generated in the country, are continuing to create blackouts of up to 14 hours 
a day in many regions and even in Bishkek.

Pro-Bakiev members of parliament have defended the decision to cede control of 
the privatisation process. 

Ak Jol deputy Osmonali Attokurov told IWPR that the decision placed 
responsibility for the process firmly on the government, where it belonged. 

“I personally think the government was right to assume this responsibility,” he 
said. “Now it is entirely answerable for its own actions and will not shift 
responsibility onto parliament. Since it is proposing the energy-sector 
development programme, it should be responsible for the consequences.” 

Tursun Turdumambetov, head of the government agency in charge of state 
property, was a strong advocate of the change and was pleased to see it sail 

“Privatising any asset requires speed. The republic loses potential investors 
because of the long-drawn-out procedures for approving decisions,” he said. 
“That’s why we removed [parliament’s right of] approval, so that government can 
work with speed and agility.” 

He added that ministers would remain accountable to parliament, whose members 
would be able to look into the privatisation process any time they wanted. 

“We aren’t concealing anything from the public,” he said. 

Opponents of the new arrangement disagree. 

Tolekan Ismailova, the head of the Citizens Against Corruption group, told IWPR 
that the people have lost their right to scrutinise the privatisation process 
by means of an elected parliament. 

“The decision to implement the programme without going through parliament is 
anti-constitutional and it will be easy to contest it in court,” said 
Ismailova. “Parliament is now closed, and no longer exists as a public 

Ismailova and some other human rights activists were ejected from parliament on 
April 16 when the amendments were being discussed in committee. 

According to Azimbek Beknazarov, a leading opposition figure from the Asaba 
party, recalled how the previous parliament, of which he was a member, used to 
be the scene of robust debates on this issue. 

By contrast, he said, “The current tame parliament does what it’s told. The 
authorities now do whatever they want, and it’s useless to resist them as they 
do not listen to anyone else’s opinion. All the key decisions are made in 

Isa Omurkulov, a member of parliament for the Social Democratic Party, told 
reporters on April 23 that the only option now might be to seek a national 
referendum on the issue of privatisation. 

“Today we, the parliament, have absolutely no influence over these processes. 
Thanks to a certain group of deputies – we know who they are – we’re unable to 
monitor the implementation of this programme,” said Omurkulov. 

The government is currently developing two energy-related documents – a 
programme lasting until 2010 and a strategy for 2025, both of which are 
currently before parliament. 

Public hearings were held on the two papers on April 23, during which industry 
and energy minister Saparbek Balkibekov said the energy sector needed at least 
five billion US dollars in investment, and this kind of money could only come 
from commercial investors. 


For critics of Bakiev’s policies, the underlying concern is that once private 
companies come in – most likely from more powerful countries like Russia and 
Kazakstan – they will simply replace the state monopoly with one of their own, 
and proceed to bump up utility prices as a way of recouping their investment. 

These fears will be heightened if the bidding process is less than transparent. 
At the moment there are believed to be four prospective investors waiting in 
the wings for privatisation to move forward, but the government has not 
revealed their identity. 

Officials insist that electricity prices will be held down once the private 
sector takes over, but local human rights groups doubt it will have the legal 
mechanisms at its disposal to ensure this happens. 

“The is a strong possibility that an investor will increase prices and start 
cutting off the power to hospitals and other public-service institutions,” said 
Aziza Abdirasulova, head of the Kalym Shamy human rights centre. 

One of the other laws passed last week designates electricity as a “commodity” 
rather than a service. This might seem an academic distinction, but it has 
become yet another bone of contention between the government and its critics 

Those in favour of the re-designation say it is consistent with other pieces of 
legislation, while minister Balkibekov argues that it will make it easier to 
prosecute those who steal or waste electricity. or default on unpaid bills 

Yury Danilov, an Ak Jol member who chairs the parliamentary committee on energy 
affairs, told IWPR that the law was in the best interests of the public. 

“Until now, electricity has been regarded as a service, so [offences were] only 
punishable by administrative [civil] law. Now that it is designated a 
commodity, the criminal code is applicable and it can be dealt with as theft of 
property,” he explained. “This law is in the interests of honest electricity 
consumers who don’t steal it, but pay for it,” 

Activist Anara Dautalieva said the change deprived people of one of their basic 

“Electricity and water are not goods, they are services of social importance to 
the population; this is about access to a local resource that we produce 
ourselves,” she said. 

“Why have a state at all, if the president says the state cannot be an 
efficient manager and everything should be handed over to private ownership?” 


Moving away from a system where prices and exchange rates are held at 
unrealistic levels by government is going to be a slow and difficult process.

By Inga Sikorskaya in Bishkek

Turkmenistan’s first step along the road of monetary revaluation has had the 
curious effect of making the national currency suddenly look more attractive 
than the country’s unofficial favourite, the US dollar. 

On April 14, President Gurbanguly Berdymuhammedov told cabinet ministers that a 
new official exchange rate for the manat would come into effect on May 1, in 
preparation for a re-denomination next year which will knock three zeros off 
the current face value. 

Five days later the Central Bank increased the value of the manat by changing 
its “commercial bank” exchange rate from 20,000 to the dollar to 17,600 for 
sale and 17,430 to one for purchases. 

The immediate reaction was long queues at currency exchanges as people tried to 
turn dollars into Turkmen banknotes at the new, more favourable rate. 

The rush to dump American money was so intense that many exchange offices would 
only buy 100 dollars per customer. 

“Foreign currency is available, but not manats. These queues are bizarre; we’re 
having to wait for two or three hours to exchange no more than 100 US dollars,” 
said one Ashgabat resident waiting in line. 

The stir led to unprecedented scenes in places like Ashgabat’s Russian Bazaar, 
with dollars changing hands for ten or 12 thousand manats – much less than the 
banks were offering. Until the change, the dollar was worth around 20,000 
manats on the black market. 

In an inflationary environment where people are reluctant to put their money in 
the bank, the American dollar has long been used to preserve the value of cash 
savings, and it has generally in high demand in Turkmenistan. 

As well as the commercial bank rate, there exists an “official exchange rate” – 
unchanged at only 6,250 to the dollar – which is unavailable to all but a lucky 
few. Both these exchange rates are believed to be artificially low compared 
with demand for the dollar, and this has created the thriving black market. 

Monetary reform might have been expected to relax exchange rate controls so to 
allow the manat to move gradually towards a more realistic, lesser market 
value, and eventually to become a free-floating, fully convertible currency. 

However, the authorities decision to boost the manat’s value appears to 
confound that logic. 

The explanation came in the president’s April 14 speech, when he said a new 
exchange rate would be established from May 1. Without saying what it might be, 
he said it would take international factors into account, adding, “Turkmenistan 
will build its [currency] pricing policy based on an assumption of favourable 
conditions created by a consistent increase in world demand for Turkmen 

Berdymuhammedov’s remarks clearly show he is anticipating a strengthening of 
the manat as his country exports more of its vast natural gas resources to a 
more diverse range of energy-hungry countries in coming years. 

That forecast looks reasonable based on the experience of other countries – 
oil-rich Kazakstan, for example, underwent currency appreciation as the country 
benefited from investment and rising hard-currency export revenues. 

Monetary reform has been one of Berdymuhammedov’s policies since he was elected 
last February. In November, he spoke of the “immense losses” the state was 
suffering by having such a huge spread between official and black-market rates. 
In the textile and oil and gas industries… we price products at the official 
rate… but use the black market rate to buy imported equipment,” he said. 

Soon after that speech, the authorities made an attempt to close the gap, 
apparently by injecting additional dollars to strengthen the manat. However, 
this experiment quickly failed, and exchange rates went back to where they were 
before. (See Turkmen Economy Needs Real, Not Superficial Reform, RCA No. 526, 

Berdymuhammedov is clearly unhappy with the financial authorities’ record on 
putting his reforms into practice. According to RFE/RL, at the April 14 cabinet 
meeting, he sacked the Central Bank chairman Geldymurat Abilov for general 
failure to institute changes, saying he “could not understand the job we gave 

Cynics say there has to be a catch, saying the change to a more advantageous 
exchange rate could just be a short-term ploy to trick people into selling 
their hard-earned dollars to the state. 

“They’re looking for ways to fleece us,” said one civil society activist in 

However, one economist working with a non-government organisation in 
Turkmenistan believes the move shows the authorities are serious about monetary 

“As far back as January, Berdymuhammedov pledged to unify the black and ‘white’ 
[official] rates and to prepare for re-denomination, and now we’re waiting for 
it to happen,” he said. 

The economist recalled that in February, the authorities started gradually 
adjusting the prices of goods that had been held at artificially low levels due 
to the monetary policies of Berdymuhammedov’s predecessor, Saparmurat Niazov.

As a first step, they raised the price of petrol from 400 manats to 3,100 
manats per litre (from two to about 50 US cents) – ignoring public concern 
about the change. (For a report on this, see Petrol Price Shakeup Panics 
Turkmen Drivers, RCA No. 532, 15-Feb-08.)

A civil servant agreed that the government was right to take tough measures to 
adjust domestic prices and exchange rates, even it this would “hit ordinary 
people’s pockets”. 

“The population will of course suffer, but the situation cannot continue as it 
is. For example, people from Russian, Kazakstan and many other places fly with 
our airlines because the tickets are so cheap. At a dollar and a half for a 
flight on a Boeing, it cannot be right,” he said. 

Annadurdy Khadjiev, a Turkmen economist based in Bulgaria, warned that making 
these adjustments would not be easy because with its unreformed, 
state-controlled economy, Turkmenistan was in no shape to endure the shock of 
adjusting completely to global prices. Even at the new price, petrol prices are 
only a fifth of the world average. 

He said trying to implement exchange-rate and price liberalisation as long as 
the government continued directing and interfering with pricing policy would 
lead to “imbalance and chaos in market mechanisms and in the economy itself, 
and will again create rising inflation, a weakening of the manat and a fall in 
its exchange rate.” 

In particular, Khadjiev said, the government had yet to put proper arrangements 
in place to allow banks to trade foreign currency with each other. 

He said that only if a broad package of monetary and economic reforms, 
including measures to limit their social impact, was implemented could the 
planned re-denomination take place safely. 

“Otherwise the problems will automatically transfer to the new banknotes and it 
will turn out that after the re-denomination, the manat’s real rate will be 
artificially undervalued,” he said. 

>From January next year, Turkmenistan is to get new banknotes with a face value 
>1,000 times less than the current one. Thus, the biggest note now in 
>circulation, 10,000 manats, will be replaced by one worth ten manats. 

The old notes all carried portraits of Niazov, whose image was everywhere in 
Turkmenistan as part of a carefully fostered personality cult. His face will 
still appear on the biggest of the new notes, worth 500 manats, but others will 
depict a variety of Turkmen historical personalities. 

(Some of the names in this story have been withheld out of concern for 
interviewees’ safety.) 

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