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O 311347Z JUL 08
FM AMEMBASSY BISHKEK
TO RUEHC/SECSTATE WASHDC IMMEDIATE 1244
INFO RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE
RUCNCIS/CIS COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 2610
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RUEKJCS/OSD WASHDC
RUEAIIA/CIA WASHDC
RHEHNSC/NSC WASHDC
RUEKJCS/SECDEF WASHDC
RUEKJCS/JOINT STAFF WASHDC
RUEHGV/USMISSION GENEVA 0992
RUEHVEN/USMISSION USOSCE 3003
RUCNDT/USMISSION USUN NEW YORK 2388
RUEHNO/USMISSION USNATO BRUSSELS BE
RUEHBS/USEU BRUSSELS
RUEHLMC/MILLENNIUM CHALLENGE CORP
RUMICEA/USCENTCOM INTEL CEN MACDILL AFB FL

UNCLAS SECTION 01 OF 03 BISHKEK 000784 
 
SENSITIVE 
SIPDIS 
 
H PLEASE PASS CODEL REID 
 
E.O. 12958: N/A 
TAGS: PGOV PREL ECON OVIP OTRA KG
SUBJECT: SCENESETTER FOR CODEL REID'S AUGUST 4-6 VISIT TO 
KYRGYZSTAN 
 
BISHKEK 00000784  001.2 OF 003 
 
 
¶1. (SBU) Summary:  Embassy Bishkek warmly welcomes the August 
4-6 visit of CODEL Reid to Kyrgyzstan.  Kyrgyzstan is an 
important ally of the United States, hosting the Manas 
Coalition Air Base, which serves as a crucial logistical hub 
for Operation Enduring Freedom in Afghanistan.  The 
U.S.-Kyrgyz bilateral relationship is cooperative in several 
areas, and our assistance programs focus on promoting 
economic growth, improving governance, and strengthening 
security.  The recently launched Millennium Challenge Account 
Threshold Country Program is targeting reforms in the 
judiciary, criminal justice, and law enforcement. 
 
¶2. (SBU) Since its independence over 16 years ago, Kyrgyzstan 
has been noteworthy for the relative openness of its 
political discourse and vibrancy of its civil society. 
However, democratic and economic reform has slowed, as the 
government has moved to consolidate political power.  The 
deeply flawed parliamentary elections in December 2007 gave 
President Bakiyev's party complete control of the parliament. 
 The government claimed that its stronger authority would 
allow it to move ahead on reforms, but to this point we have 
not seen that progress.  Kyrgyzstan faces a deteriorating 
economic situation, with rising inflation, a growing budget 
shortfall, and possible energy shortages.  The government is 
seeking increased foreign assistance to help prepare for what 
could be a very difficult winter. 
 
¶3. (SBU) Your visit will emphasize to the Kyrgyz the 
importance we place on our relationship with them, as well as 
underline our appreciation of Kyrgyzstan's support for the 
Manas Coalition Air Base.  You will be meeting with President 
Bakiyev, as well as with members of the political opposition. 
 Following is a brief overview of the main political, 
economic, and commercial issues in the country.  We look 
forward to briefing you in greater detail about our USAID 
assistance programs, our military-to-military cooperation and 
assistance, our exchange and public diplomacy programs, and 
our Peace Corps program after your arrival in country.  End 
Summary. 
 
Political Developments 
---------------------- 
 
¶4. (SBU) Following the March 2005 overthrow of former 
President Askar Akayev, Kurmanbek Bakiyev won the July 2005 
presidential elections with over 88% of the vote, running on 
a platform that promised constitutional and economic reforms. 
 Opposition groups held a series of demonstrations in 2006 
and 2007 to protest the lack of progress on reforms.  Over 
the past year, President Bakiyev has moved to consolidate 
political power and to divide the opposition.  A 
Bakiyev-proposed new version of the constitution, adopted 
through a flawed referendum in October 2007, strengthened the 
power of the presidency.  Deeply flawed elections in December 
2007 gave Bakiyev's new Ak Jol party complete control of the 
parliament, with the "constructive opposition" Social 
Democrats and the Communists gaining a few seats each and the 
largest opposition party, Ata Meken, excluded altogether. 
The political opposition remains disunited and disorganized. 
 
¶5. (SBU) Government officials have said that the increased 
authority -- and increased stability -- would allow them to 
undertake economic, judicial, and law enforcement reforms. 
The government has moved forward quickly with legislation to 
reform the judicial system, as envisioned in Kyrgyzstan's 
Millennium Challenge Account Threshold Program.  For example, 
the new Judicial Council, composed of judges, will have 
substantial authority over training and discipline in the 
judicial system, as well as over budgeting and 
administration, if the law is fully implemented. 
 
¶6. (SBU) However, there have also been a number of apparent 
 
BISHKEK 00000784  002.2 OF 003 
 
 
steps backwards with legislation.  President Bakiyev signed 
amendments to the broadcasting law which give the president 
full control over the board of the state radio and television 
broadcasting company, ending the promise of establishing a 
public interest broadcaster.  Strangely, as Bakiyev signed 
the bill, he instructed the Ministry of Communications to 
consider further amendments that would take into account the 
many criticisms of the bill.  Citing a need to reduce the 
number of political parties, Parliament passed a new 
political party law which makes party registration more 
difficult.  Parliament also passed a new law on public 
assembly, which restricts when and where public meetings can 
be held.  Bakiyev has not yet signed the political party or 
public assembly bills.  The government is also drafting a new 
law on religion, which in its current form could restrict the 
rights of minority religious groups and ban religious 
conversions. 
 
Economic Difficulties 
--------------------- 
 
¶7. (SBU) Despite robust 8% GDP growth, increased government 
revenues, and a steady flow of remittances from Kyrgyz 
working abroad, the Kyrgyz economy may be heading into a 
difficult period.  Inflation, pushed by the rise in world 
commodity prices, may reach 30% this year.  As a result of 
faster-than-expected government spending in the first part of 
the year, the government has mandated a 20% spending cut 
across all ministries.  A spring frost and a locust 
infestation have contributed to concerns about food security. 
 Most seriously, the water level of the Toktogul Reservoir, 
which feeds the main hydro-electricity generation cascade (as 
well as provides irrigation water to Uzbekistan and 
Kazakhstan) is at a historic low.  As a result, Kyrgyzstan 
faces the real possibility of widespread electricity 
shortages by the winter. 
 
¶8. (SBU) At a July 24 government meeting, President Bakiyev 
publicly criticized several cabinet ministers and government 
officials for their slow reaction to rising prices and over 
the lack of preparations for the coming winter.  Bakiyev 
complained that too much time was spent "studying problems" 
rather than acting on them.  Bakiyev suggested that those 
"well-off people" in large houses could afford to switch from 
electricity to coal-burning heating systems.  The government 
has instituted a number of measures, including electricity 
rationing and establishment of a food security working group, 
and it has appealed to international donors to provide 
additional assistance.  The IMF recently approved a 
$14-million extension to its program, which ended in May, to 
assist with fiscal difficulties.  The World Bank has approved 
$10 million to help Kyrgyzstan address food security 
difficulties. 
 
Manas Air Base 
-------------- 
 
¶9. (SBU) Manas Coalition Air Base was stood up in December 
2001 to support Coalition efforts in Operation Enduring 
Freedom in Afghanistan.  Kyrgyz government officials have 
expressed their commitment to the continued presence of Manas 
Airbase, but there are a number of difficult issues connected 
to the base.  Compensation, which was renegotiated in 2006, 
remains an issue, and the Kyrgyz government has repeatedly 
requested a new radar for the airport.  Other issues include 
the completion of a USAF investigation into the December 2006 
shooting of a Kyrgyz fuel truck driver by a base airman, as 
well as Kyrgyz requests for compensation for alleged 
environmental damage caused by the base. 
 
Commercial Relations 
-------------------- 
 
BISHKEK 00000784  003.2 OF 003 
 
 
 
¶10. (SBU) The Kyrgyz are keen to develop stronger business 
relations with the United States.  The Embassy recently 
organized a "Doing Business with the United States" seminar 
for over 150 Kyrgyz businesses, and the American Chamber of 
Commerce in Kyrgyzstan, which has more than 70 U.S., Kyrgyz, 
and international members, seeks to inform U.S. firms about 
conditions and opportunities here.  U.S. data show that 
bilateral trade amounted to only $50 million in 2007, but 
Kyrgyz data show a much higher figure, perhaps due to U.S. 
goods transshipped through third countries. 
 
¶11. (SBU) While we continue to broaden business ties, the 
business and investment climate suffers from high levels of 
corruption, administrative harassment, and weak rule of law. 
Continued discord between the Kyrgyz government and the 
Canadian-run Kumtor gold mine, which represents the largest 
foreign investment in Kyrgyzstan, has given many investors 
reason to delay decisions regarding doing business in 
Kyrgyzstan.  Recent difficulties for the Hyatt Regency Hotel, 
which represents the largest private U.S. investment in 
Kyrgyzstan, have also damaged the business climate.  On July 
14, the Bishkek Mayor's office demanded that the Hyatt remove 
its perimeter security fence, claiming this was necessary to 
provide public access to a statue on the hotel's ground.  On 
July 16, the city shut off water to the hotel, and on July 
24, the city tore down the hotel's fence.  The Mayor has 
since said that the fence can be restored if the Hyatt agrees 
to renegotiate the terms of its long-term land lease from the 
city.  As of July 31, the issue remains unresolved. 
LITZENBERGER