Policy of economic transition in Kyrgyzstan

In 1989±90, Gorbachev’s political and economic reforms started to impact on the political and economic environment of not only Moscow, but also on the remote republics of the USSR such as Kyrgyzstan. In 1991, the consequences of the political development and reforms brought the USSR to its end. As a result of this the Kyrgyz Republic obtained its independence and emerged as a sovereign state for the ® rst time in its history. After the disintegration of the Soviet Union, Kyrgyzstan, like all other Central Asian republics (CARs), faced a complex problem of a transition from a centralized socialist system towards a more open society based on a market driven economy. The issue of sustainable transition was complicated by the fact that the republic was not prepared for independence, and did not have enough time to adjust to the new political environment. Kyrgyzstan, therefore, faced a number of urgent transitional problems that needed to be solved in a pressing environment. The post-Soviet development strategy chosen by Kyrgyzstan’s government was based on deep and comprehensive economic transformation, which would eventually create a ® rm foundation for its independent existence. These changes meant not only reform in economic policy or improvements in the system of economic management and regulation, but also fundamental reorganization in the overall economic system of the country. These changes included the deregulation of the public sector and labour market, price liberalization, largescale privatization, the creation of a modern banking and ® nancial infrastructure, the development of legislative norms for the effective functioning of the private sector and a number of other measures. For Kyrgyzstan, the issue of reforming its national economy has been an especially dif® cult task. The country inherited from the Soviet economic system some serious problems that were further complicated by the deteriorating post-Soviet economic environment. The Kyrgyz national economy was a clear example of Soviet economic modernization. It was deeply integrated into the all-Union division of labour and production. The unwieldy and ineffective public sector practically dominated the national economy, and the proportion of state ownership reached almost 100 per cent in industry, transportation, and parts of the agricultural and service sectors. In 1990 Kyrgyzstan’s industrial sector had produced around 30 per cent of Kyrgyzstan’ s GDP and employed around