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C O N F I D E N T I A L SECTION 01 OF 03 BISHKEK 001692 
 
SIPDIS 
 
SIPDIS 
 
DEPT FOR SCA/CEN 
 
E.O. 12958: DECL: 11/30/2016 
TAGS: ECON EFIN EINV PREL KG
SUBJECT: KYRGYZ HIPC DEBATE BECOMES POLITICAL HOT POTATO 
 
BISHKEK 00001692  001.2 OF 003 
 
 
Classified By: Amb. Marie L. Yovanovitch, Reason 1.4 (b) and (d). 
 
¶1.  (SBU) Summary: The arrival this week of a World Bank team 
to Bishkek for 2-3 weeks of technical consultations has 
focused political and media attention on the HIPC initiative. 
 According to a World Bank insider, Kyrgyz object to energy 
reforms proposed under the HIPC program, specifically 
regarding tariffs and schedules, and to a lesser extent 
mining reforms top the team's agenda.  Local media have been 
very critical of HIPC, but have recently begun running more 
balanced assessments of the initiative.  Nevertheless, public 
commentary appears strongly negative towards HIPC. 
 
¶2.  (C) Summary continued:  According to National Bank 
Chairman Alapaev, the government's HIPC advisory board is 
evenly split.  In Alapaev's view, HIPC opponents either lack 
information or are attempting to score political points. 
While admitting that he "fears for his family" due to his 
support of HIPC, Alapaev argued that the government must 
decide the HIPC issue to avoid the likelihood of Parliament 
scuttling Kyrgyzstan's chances of joining the HIPC 
initiative.  The President and Prime Minister fear a backlash 
from an opposition that has painted the HIPC initiative as a 
loss of "independence," a shameful association with African 
countries and a decline into international "receivership." 
Postponing a decision on HIPC to late December may give the 
government time to counteract some of the negativity, but the 
government still lacks a unified voice to advocate joining 
the HIPC initiative.  End summary. 
 
Energy and Mining on the Agenda 
------------------------------- 
 
¶3.  (SBU) The simmering debate in Kyrgyzstan over the Heavily 
Indebted Poor Countries (HIPC) debt relief initiative has 
intensified with this week's arrival of a World Bank team 
planning to hold technical discussions with Kyrgyz officials 
to resolve outstanding sticking points preventing 
Kyrgyzstan's accession to the HIPC initiative.  World Bank 
Operations Officer Mirlan Aldayarov told emboff November 24 
that broad agreement with the Kyrgyz has been reached on 
policy issues with the exception of two "problem areas" -- 
energy and to a lesser extent mining. 
 
¶4.  (SBU) On the energy front, Aldayarov noted differences 
over "realistic views" (on topics such as tariff reform and 
privatization) and pressure to "soften deadlines."  The World 
Bank has previously advocated the privatization of Kyrgyz 
power distribution companies and has recently emphasized the 
need for tariff revisions, but has seen Kyrgyz authorities 
focus on the completion of the Soviet-era Kambarata 
hydroelectric stations.  On mining, Aldayarov said "the 
government is coming around with decisions on key mines 
already having been made," but cautioned that "transparency" 
remained an issue.  His comments provided additional context 
to complaints emboffs have heard elsewhere about "inflexible" 
World Bank proposals and distaste for the World Bank's robust 
schedule of "triggers" linked to the HIPC initiative's 
implementation.  Aldayarov promised to advise emboff of any 
roadblocks encountered during the HIPC discussions, which 
began November 29. 
 
For National Bank Chairman, HIPC Debate Gets Personal 
--------------------------------------------- -------- 
 
¶5.  (C) National Bank chairman Marat Alapaev told the 
Ambassador November 30 that the government's HIPC advisory 
committee is evenly split.  Alapaev, Minister of Finance 
Japarov and Presidential Chief of Strategic Development and 
Expertise Ukulov favor HIPC, whereas Foreign Minister 
Jekshenkulov, Deputy Prime Minister Usenov and Presidential 
Advisor Bekboyav oppose it.  Opponents, according to Alapaev, 
fall into two categories: 1) people who do not have any 
information about the HIPC initiative, and 2) people who are 
 
BISHKEK 00001692  002.2 OF 003 
 
 
using the issue to advance political agendas. 
 
¶6.  (C) Alapaev argued that the government should rely on its 
experts to reach a decision on HIPC.  He feared that 
Kyrgyzstan's chances of joining HIPC would be doomed if 
debated in Parliament.  The government, Alapaev said, "must 
decide, not the population."  He recounted to the Ambassador 
how his parents, brother and other relatives have been 
pressured over his support of HIPC, with his brother 
receiving calls from the tax authorities and customs. 
Alapaev confided in the Ambassador that he "fears for his 
family."  He noted that Parliament's Budget and Finance 
Committee chairman Keldibekov lambasted the National Bank for 
its advocacy of HIPC and called for stripping Alapaev of his 
citizenship.  Despite his public bombast, Keldibekov, 
according to Alapaev, privately conceded his understanding of 
the benefits of joining HIPC.  Alapaev also noted that Russia 
is playing a significant role in the anti-HIPC movement. 
 
Is the Official Opposition Moderating its Stance? 
--------------------------------------------- ---- 
 
¶7.  (C) After emboff noted that the Ambassador sent letters 
November 20 on HIPC to President Bakiyev and Prime Minister 
Kulov, the World Bank's Aldayarov said he has "been hearing 
that the President and Prime Minister have already decided to 
go with HIPC."  PM Kulov advised the Ambassador November 30 
that "President Bakiyev said he will do what we advise," but 
Kulov cautioned, "look at the popular reaction."  The World 
Bank's Aldayarov, however, pointed out the recent "silence" 
of prominent HIPC opponents, FM Jekshenkulov and Deputy PM 
Usenov.  Usenov, who in his advisory position advocated 
against HIPC and who previously threatened to resign if 
Kyrgyzstan signed on to the HIPC initiative, reportedly 
announced on television November 24 that Kyrgyzstan might 
"join this initiative under terms beneficial for us." 
 
Emotions Still High in the Media 
-------------------------------- 
 
¶8.  (SBU) Although Kyrgyz media have recently included more 
balanced and analytical pieces on HIPC, many articles still 
contain sensational and emotional appeals against joining the 
HIPC initiative.  While bemoaning a loss of "independence" if 
Kyrgyzstan joins the HIPC initiative, many commentators 
bristle at comparisons with existing, mostly African, 
beneficiaries of the HIPC initiative.  Other HIPC opponents 
have raised the specter of outsiders taking over Kyrgyz 
infrastructure, the country falling into international 
"receivership" and the loss of flexibility in future 
negotiations with international institutions.  An anti-HIPC 
rally November 29 outside the World Bank attracted 
approximately 30 people. 
 
¶9.  (C) The Central Bank and the Ministry of Finance have 
made positive statements about HIPC, with the Central Bank 
November 29 leading a panel discussion on HIPC at the 
American University of Central Asia.  Alapaev advised the 
Ambassador that originally he and others reasoned that the 
government did not require public approval for an inherently 
governmental decision.  He admitted to the Ambassador that 
now he realizes this approach was a mistake.  Alapaev 
detected an anti-American streak in the opposition to HIPC, 
and cautioned that any overt U.S. support of the HIPC 
initiative might be counterproductive in the current Kyrgyz 
environment. 
 
Comment 
------- 
 
¶10.  (SBU) With the World Bank discussions scheduled to last 
until mid-December, it is unlikely that the government will 
take any significant announcements on HIPC until the 
discussions reach a conclusion.  Given the possibility that 
 
BISHKEK 00001692  003.2 OF 003 
 
 
postponing a decision until 2007 might reduce the amount of 
debt relief available, the government, if it can reach a 
consensus, cannot afford to delay action on HIPC beyond the 
end of December.  (Note: Economic data covering 2006 may be 
available as early as January 2007.  If, as generally 
believed, economic conditions improved in 2006, debt relief 
available to Kyrgyzstan may subsequently decrease.  End 
note.) 
 
¶11.  (SBU) While the media atmosphere remains stormy with 
politicians trying to score political points, a late December 
announcement might give the government time to counteract 
some of the negativity.  However, Parliament is anxious to 
exercise powers embodied in the new constitution, and thus 
may seize upon the unpopular HIPC initiative to prove the 
need for increased parliamentary oversight of the government. 
YOVANOVITCH