Institutional Interrelations Among the State, Business and Civic Sector in Kyrgyzstan

Marat Djanbaev, PhD student

Supervisor: Prof. PhDr. MartinPotůček

INSTITUTIONAL INTERRELATIONS AMONG THE STATE, BUSINESS AND CIVIC SECTOR IN KYRGYZSTAN

Abstract

This thesis touches on the issue of institutional interactions between public and private sectors in Kyrgyzstan after collapse of the Soviet Union in 1991. The work argues core and modes of interrelations among the Government, Business and Civic sector as main regulators of human being. The first step was done in classification of the actors on domestic policy arena who represent State, Market, Civic sector and Society in Kyrgyzstan.

Analyzing interactions among the Government, Business and Civic Sector in Kyrgyzstan and proposing effective models of institutional interrelations between them outlined as purposes of the thesis. Consequently, in order to reach mentioned – above purposes I set up such objectives as learning theoretical approaches to institutional interrelations between public and private sectors; profound studying of the main theories and concepts on mentioned regulators: the State, Market and Civic sector; using appropriate methodological approach for doing comprehensive research; and delimitation of the research problem so as to concentrate on a narrower issue. As a focus, I have chosen Regulatory reform and its importance for business environment and investment climate in Kyrgyzstan. The choice was based on importance of the issue for my home country, own professional experience and access to empirical data and actors in this area.

In this work, I am trying to verify all proposed theoretical hypotheses and concepts with gained empirical data and information on Kyrgyzstan. Moreover, I present outcomes of the research where I would like to show case - studies of institutional interrelations between public and private sectors in Kyrgyzstan in different areas.

Content

Introduction

I.  Purpose and objectives of the thesis

II.  Research questions

III. Theoretical dimension of the thesis

a.  Theoretical hypotheses

IV.  Methodological approach

V.  Delimitation of the research problem

VI.  Outcomes of the empirical research in Kyrgyzstan

a.  Tax reform

b.  Law on Inspections

c.  Improving Kyrgyzstan’s standings at international ratings

Conclusion

References

“We consider a man who takes no interest

in the state not as harmless, but as useless,

and although only a few may originate a policy,

we are all able to judge it”

Pericles (antique Greek philosopher)

INTRODUCTION

Following the disintegration of the Soviet Union, the Kyrgyz Republic as a post-communist country moved towards democracy and free market economy. At the rhetorical level, the newly emerged country declared its commitment to values and principles of free market, democracy and civil society. Although at the policy level, the Kyrgyz Republic conducted a number of sound reforms aimed at fostering free market economy, redesigning state institutions and empowering private sector, it still remains as a country with relatively centralized, tribal and clan political system, weak public administration and inefficient economy.

In the proposed thesis, my mission is to research institutional interrelations among the Government, Business and Civic Sector in Kyrgyzstan as main regulators of human’s life and public affairs. The research on these regulators in such developed societies as the USA, Continental Europe and Japan has proven that successfulness and effectiveness of Governance depend on regulators and modes of their interactions. For that reason, I took the most prominent theoretical and conceptual approaches on the issue and I am trying to apply them into Kyrgyzstani realities. At the same time, outcomes of my empirical research on regulatory reform toward business environment and investment climate in Kyrgyzstan for past 3 years and relevant case – studies will either verify or falsify applied theoretical hypotheses. In the final analysis, it will help me in identifying and proposing a definite hypothesis of my dissertation.

The thesis also comprises of research questions, methodological approach, delimitation of the research problem; results of the empirical research in areas of Tax reform, Law on Inspections and improving business environment and investment climate by promoting Kyrgyzstan in such well - recognized international ratings as Index of Economic Freedom and Doing Business.

I.  PURPOSES AND OBJECTIVES OF THE THESIS

I outlined the following purposes and objectives for my PhD thesis.

Purposes

•  Analyzing interactions among the Government, Business and Civic Sector in Kyrgyzstan.

•  Proposing effective models of institutional interrelations between public and private sectors in Kyrgyzstan.

Objectives

These objectives will help me to reach the mentioned – above purposes:

-  Learning theoretical approaches to institutional interrelations between public and private sectors.

-  Profound studying of the main theories and concepts on such regulators as: the State, Market and Civic sector.

-  Using appropriate methodological approach for doing comprehensive research.

-  Delimitation of the research problem in order to focus on narrower issue.

II.  RESEARCH QUESTIONS

1.  What are the main actors on policy arena who define policy agenda and modes of interrelations between public and private sectors in Kyrgyzstan?

2.  Do political system, regime and legislative background allow effective interactions between public and private sectors in Kyrgyzstan?

3.  What are the factors inducing and influencing interrelations among the Government, Business and Civic sector in Kyrgyzstan?

4.  Which theory and/or concept are more applicable in designing better models of interrelations between public and private sectors in Kyrgyzstan?

CLASSIFICATION OF THE ACTORS

State

In its etymology, the state implies a wide range of definitions. But within this research, the state means legitimate three branches of power with its institutions in the Kyrgyz Republic: the President and Government; unicameral Parliament and Court system. In the regard to business and civic sector, the state always has dual position: 1) as a sole legitimate authority that establishes legal rules and frameworks for society, and 2) as an equal actor of interrelational process as well as private commercial and civic sectors.

Private commercial sector – represented mainly by business and professional associations, private entrepreneurs (according to research on business – associations in Kyrgyzstan done by Eurasia Foundation in 2006, there are 35 officially registered business – associations).

Civic sector and society – non – governmental, non – profit organizations and informal actors (clans, religious movements). According to data of Ministry of Justice of the Kyrgyz Republic, there were registered 10 000 non – governmental organizations in Kyrgyzstan in 2006.

III. THEORETICAL DIMENSION

In my work, I referred to following theories and concepts: Theory of the Government, Market and Civic Sector as regulators of society (Lindblom 1977), Multi–Dimensional Concept of Governance (Potůček 2007), Theory of Neo - Corporatism (Schmitter, Streeck 1999). At the same time, I am planning to utilize such advanced theoretical frameworks as Actor–Centered Institutionalism (Scharpf 1997) and Concept of New Public Management (Osborne, Gaebler 1992) in final part of my dissertation when I am to propose definite modes of interaction for Kyrgyzstani regulators.

§  Theory of the Government, Market and Civic Sector as regulators of society (Lindblom)

Theory of the Government, Market and Civic Sectors as regulators of society by Lindblom is one of core theoretical dimensions that I applied to my thesis because of holistic character and universal approach. Strictly speaking, I will exploit it as the basic and fundamental theory of my thesis.

Charles Lindblom (1977) proposes to consider the functioning of global societies on the basis of definitions of the following elementary political and economic mechanisms that influence and condition human lives and societies: 1) government as the expression of political power, 2) the market as a medium of exchange; and 3) indoctrination. Typical agents of indoctrination are educational systems and the mass media, because indoctrination means ideology in terms of politics and it refers to advertisement in terms of market.

Above all, it is necessary to define environment in which all regulators are interacting with each other. According to Lindblom, there are two models of society. Model I might be called an intellectually guided society. It derives from a buoyant or optimistic view of man’s intellectual capacities. Model II postulates other forms of guidance for society due to scarcity of man’s intellectual abilities.

In terms of social interactions, Model I proposes that elite would study the question in an attempt to find correct decisions in order to solve problems. Economic planning of the communist variety is the obvious example. In Model II, it would establish an interactive and cooperative process that would make the diagnostic study unnecessary. For instance, the market system is the clear example where it can set up a tripartite commission of representatives of workers, managers and public officers and allow negotiation among them to settle the question.

It is urgent to sub – divide private sector into private commercial sector (business) and private informal sector (society, family, community, clans).

Table 1: Types of sectors regulating people’s action

Source: Wolfenden Commission (1978)

In order to verify application of this theory to Kyrgyzstani experience, I referred to political, legislative and institutional backgrounds where Constitution of the Kyrgyz Republic declares democratic political regime based on three branches of power (Executive, Legislative, Court); free market economy and civil society. Thus, according to classification of Lindblom and Wolfenden Commission, regulators of human lives in Kyrgyzstan look as following (see table 1.1)

Table 2. Regulators in Kyrgyzstan

State / The President, Government, Parliament, Court
Private commercial sector (business) / Business – associations, trade – unions, private entrepreneurs
Civic sector / NGO’s and international organizations
Private informal sector (society) / Clans and tribes, religious movements, crime

If I apply Lindblom’s approach on defining models of society, Kyrgyzstan belongs to Model II which implies participatory democracy and institutional interactions among mentioned – above regulators. Further, in delimitation of the research problem and case – studies I will speak about such interactions in Kyrgyzstan in more detail and verify belonging of Kyrgyzstan to Model II.

§  Multi–Dimensional Concept of Governance (Potůček)

I decided to apply this concept because of multi – dimensional approach to traditional Neo – Weberian concept of state. The concept brings new approaches to classical bureaucratic administration by subdividing governance into three different and interconnected layers.

Dimension I. Vertical layers of Governance

This dimension shows us traditional bureaucratic “Top – down” scheme of governance represented in Kyrgyzstan by the Government, oblast administration (regional units on macro level), rayon administration (regional units on micro level) and aiyl okmotu (local administration on the lowest level).

Dimension II. Regulators – market, state and civic sector

The dimension is based on market – government– civic sector interface (figure 1.) that I discussed in depth in previous theoretical concept proposed by Lindblom. Nevertheless, I would like to enrich verification of the concept by adding table with criteria distinguishing the public, private commercial and civic sectors.

Figure 1. The concept of governance based on market, state and civic sector interface

Source: Potucek (2008)

Table 3. Criteria Distinguishing the Public, Private Commercial and Civic sectors

Criterion /

Sector

Public sector / Private commercial sector / Private civic sector
Political power
Consumption and investment
Characteristics of decision making
Provision of goods, benefits and services
Ownership
Employment / Government power
Public consumption and investment
Political or administrative decision – making
Public goods, benefits and services
Public ownership
Public sector / Individual freedom
Private consumption and investment
Private decision – making
Private goods, benefits and services
Private ownership
Private sector / Individual freedom and public power
Public - private consumption and investment
Public - private decision making
Public – private goods, benefits and services
Public – private ownership
Private sector

Source: Lane (1993), corrected

Dimension III. Actors’ networks and networking

The main message of this dimension is horizontal and mostly informal interactions among regulators. Usually, horizontal layer of cooperative ties between regulators emerged as a response to definite agenda, issue, problem or interest. For that reason, the dimension is more result – driven rather than process – oriented.

The dimension is easily verified in Kyrgyzstan by recently emerged different horizontal interrelations of the Government, business community and civic organizations within such public bodies on national levels, for example: Constitutional Council of the Kyrgyz Republic between 2005 – 2007, Working group on elaborating new version of Tax Code between 2004 – 2008, Public Council under Custom Service of the Kyrgyz Republic and Advisory Council under the Ministry of Economic Development and Trade of the Kyrgyz Republic.

Source: bulletin of National Alliance of Business Associations in Kyrgyzstan (2008)

Figure 2. Structure of Constitutional Council in Kyrgyzstan 2005 - 2007

Constitutional Council – 114 members

Proposal of revised Constitution

Approved by Parliament Approved by referendum

(Option 1) (Option 2)

§  Theory of Neo - Corporatism (Schmitter, Streeck)

Theory of Neo - Corporatism or Liberal Corporatism declares main principles of necessity of partnership between public and private sectors due to their interdependent interests. Corporatism is a widespread concept in democratic societies with free market economy. The main core of the concept of Corporatism are bargaining, negotiating and finally reaching consensus among the state, representatives of non – profit sector and business in solving common issues. For example, tripartite commissions including Government bodies, trade unions and business companies in arranging work hours, work conditions and salaries.

The conceptual definition of corporatism by classics of this concept Schmitter and Streeck says that: “Unlike the sharp division in liberal democratic theory between hierarchical state authority and the voluntary organization of civil society, corporatist theory and practice blur the boundary between state and society as the state shares authority with private interest associations, using the latter as agents of public policy by coordinating their behavior or delegating public functions and decisions to them”.