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Institutional interrelations among the State, Business and Civic sector in Kyrgyzstan

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Institutional interrelations among the State, Business and Civic sector in Kyrgyzstan Presentation for PhD seminar (part of PhD thesis) Marat Djanbaev, PhD student – PowerPoint PPT presentation

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Title: Institutional interrelations among the State, Business and Civic sector in Kyrgyzstan


1
Institutional interrelations among the State,
Business and Civic sector in Kyrgyzstan
  • Presentation for PhD seminar (part of PhD thesis)
  • Marat Djanbaev, PhD student
  • Supervisor Prof. PhDr. Martin Potucek

2
General information about Kyrgyzstan
  • Population5,189,800
  • GDP (PPP) 9.4 billion USD
  • GDP growth 3,1
  • GDP per capita 1813 USD
  • Area198,500 sq km. BordersChina 858 km,
    Kazakhstan 1,051 km, Tajikistan 870 km,
    Uzbekistan 1,099 km
  • Government and legal systemRepublic, Civil Law
  • Major citiesBishkek, Osh, Talas, Karakol,
    Jalal-Abad
  • Significant economic sectorsAgriculture,
    textiles, processing and mining
  • Major trading partners Russia, China,
    Kakakhstan, Turkey, EU

3
Basic information on thesis
  • Title Institutional interrelations among the
    State, Business and Civic sector in terms of
    improving business environment and investment
    climate in the Kyrgyz Republic
  • Classification of the actors or stakeholders
    State - the President, Government (ministries and
    agencies), Parliament and Courts Private
    commercial sector - mainly by business and
    professional associations, Civic sector and
    society non governmental, non profit
    organizations and informal actors (clans,
    religious movements).

4
Structure of presentation
  • Purpose and objectives of the thesis
  • Research questions
  • Theoretical dimension of the thesis
  • Theoretical hypotheses
  • Methodological approach
  • Delimitation of the research problem
  • Outcomes of the empirical research in Kyrgyzstan
  • Tax reform
  • Law on Inspections
  • Improving Kyrgyzstans standings at international
    ratings
  • Conclusion
  • References

5
Purposes and objectives
  • The main purposes of the PhD thesis
  • Analyzing interactions among the Government,
    Business and Civic Sector in Kyrgyzstan
  • Proposing effective models of institutional
    interrelations between public and private sectors
    in Kyrgyzstan

6
Objectives
  • 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

7
Research questions
  • What are the main actors on policy arena who
    define policy agenda and format of interrelations
    between public and private sectors in Kyrgyzstan?
  • Do political system, regime and legislative
    background allow effective interactions between
    public and private sectors in Kyrgyzstan?
  • What are the factors inducing and influencing
    interrelations among the Government, Business and
    Civic sector in Kyrgyzstan?
  • What values and theories are more applicable in
    designing better models of interrelations between
    public and private sectors in Kyrgyzstan?

8
Theoretical dimension
  • Theory of the Government, Market and Civic Sector
    as regulators of society (Lindblom)
  • Multi Dimensional Concept of Governance
    (Potucek)
  • Theory of Neo - Corporatism (Schmitter, Streeck)
  • Actor Centered Institutionalism (Scharpf)
  • Concept of New Public Management (Osborne,
    Gaebler)

9
Hypothesis of Theory of the Government, Market
and Civic Sector (Lindblom)
  • Functioning of global societies should be
    analyzed on the basis of definitions of the
    following elementary political and economic
    mechanisms which 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
    (ideology, civil society)

Table 1. Types of Sector Regulating Human Activity
Source Wolfenden Commission 1978
10
Two models of Society (Lindblom)
  • Two models of Society as a holistic concept of
    environments where regulators interact with each
    other.
  • Model 1 intellectually guided society with
    optimistic view of humans intellectual
    capacities (Cuba, North Korea, former U.S.S.R)
  • Model 2 it postulates other forms of guidance
    for society due to scarcity of humans
    intellectual abilities (Western Europe, the USA
    and pacific Asian states)

11
Verification of Theory of the Government, Market
and Civic Sector (Lindblom)
  • Regulators in Kyrgyzstan
  • Kyrgyzstan belongs to Model 2 which implies
    institutional interactions between regulators

State The President, Government, Parliament, Court
Private commercial sector (business) Business associations, trade unions, private entrepreneurs
Civic sector NGOs and international organizations
Private informal sector (society) Clans and tribes, religious movements, crime
12
Hypothesis of Multi Dimensional Concept of
Governance (Potucek)
  • Dimension 1 Vertical layers of Governance
  • Dimension 2 Regulators market, state, and
    civic sector
  • Dimension 3 Actors networks and networking

Potucek, 2008
13
Verification of Multi Dimensional Concept of
Governance (Potucek)
  • Dimension 1 Vertical layers of Governance in
    Kyrgyzstan
  • Traditional bureaucratic Top down scheme of
    governance represented by the Government, oblast
    administration (regional units on macro level),
    rayon administration (regional units on micro
    level) and aiyl okmotu (local administration)
  • Dimension 2 Regulators market, state, and
    civic sector
  • see table with regulators in Kyrgyzstan on the
    slide 11

14
Verification of Multi Dimensional Concept of
Governance (Potucek)
  • Dimension 3 Actors networks and networking
  • Horizontal layer of cooperative ties between
    regulators emerged as a response to definite
    issue
  • 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
  • Advisory Council under the Ministry of Economic
    Development and Trade of the Kyrgyz Republic

15
Verification of Multi Dimensional Concept of
Governance (Potucek)
Constitutional Council 114 members
NGOs, business community, political parties 57
members
The Government (10), Parliament (37),
Constitutional and Supreme Court (10) 57 members
Scheme 1. Structure of Constitutional Council in
Kyrgyzstan between 2005 - 2007 Constitutional
Council 114 members
16
Hypothesis of Neo Corporatism (Schmitter,
Streeck)
  • 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 (Schmitter,
    Streeck)

17
Verification of the Concept of Neo Corporatism
(Schmitter, Streeck)
  • Public Chamber of the Kyrgyz Republic
  • Established in December 2008 by the President
    with involvement of civic organizations, informal
    movements and leaders, business associations
    for defining policy agendas and monitoring of
    their implementation
  • Investment Council under the President of the
    Kyrgyz Republic
  • The Council includes the President, Prime -
    Minister, key economic ministers, leading
    business associations and parliament deputies for
    elaborating policies and monitoring their
    implementation in business regulatory reforms.
    Its decisions and directives possess mandatory
    power to all Government bodies

18
Methodology
  • Public policy analysis of the chosen theoretical
    concepts and relevant literature (polity,
    politics, policy framework by Schubert and Fiala
    2000)
  • Primary and secondary analysis of policy
    documents and national legislation.
  • Interviews with the main actors
  • Event and content analysis of the actors
    speeches and interviews related to issue
  • Comparative analysis with international
    experience, case study
  • Survey on business environment and investment
    climate

19
Delimitation of the research problem
  • Regulatory reform and its importance for business
    environment and investment climate in Kyrgyzstan
    was defined as a narrower subject or dimension of
    research problem
  • The research problem was delimitated in the
    framework of the institutional interrelations
    among the State, Business and Civic sector in
    Kyrgyzstan
  • Choosing the research problem was based on my
    professional experience and access to relevant
    empirical data in Kyrgyzstan

20
Defining the business environment
Source Supporting business environment reforms
practical guidance for development agencies/
www.businessenvironment.org
21
Indicators of regulatory reform
  • Simplifying business registration and licensing
    procedures
  • Improving tax policies and its administration
  • Improving labor legislation and its
    administration
  • Improving the overall quality of regulatory
    governance
  • Simplifying and speeding up access to commercial
    courts and alternative dispute resolution
    mechanisms
  • Broadening public private dialogue through
    public policy standards
  • Improving access to market information and access
    to finance

22
Why does Kyrgyzstan need to de regulate the
business environment?
  • To enable businesses compete better in domestic
    and international markets by reducing the cost of
    doing business
  • To increase employment opportunities
  • To promote public and private governance that
    leads to economic growth
  • To reduce corruption and unfair monopoly
  • To transform the use of personal contacts and
    patronage systems to systems that are based on a
    market neutral set of rules to enable entry and
    market competition

23
Main pillars of the business environment
  • Policy framework
  • Improving national policies that promote
    competition, open markets and the general
    conditions for doing business
  • Legal and regulatory reform
  • Improving national laws and regulations that
    affect the establishment, operation and closure
    of businesses
  • Business regulations tax legislation and
    administration, labor laws and regulation, trade
    regulations, custom administration
  • Institutional arrangements
  • Public private dialogue or partnership
  • Regulatory Governance Capacity Building

24
Regulatory reform in improving business
environment in Kyrgyzstan
  • Reforming national Tax Code
  • Adopting single Law on Inspections to business
    enterprises and entrepreneurs
  • Private property protection research on
    Raiding problems of hostile takeovers of
    private property in the Kyrgyz Republic
  • Improving Kyrgyzstans standings at international
    ratings DoingBusiness, Economic Freedom

25
Reforming national Tax legislation (position of
business)
  • Joint efforts of business and civic sector
    transformed into single coalition For Fair
    Taxation with 23 business associations and
    NGOs all over Kyrgyzstan
  • The Coalition asked simplification of Tax Code
    with clear tax administration reduce VAT from
    20 to 10, introduce presumption of innocence
    for tax payers and tax incentives for exporters,
    business beginners and non profit
    organizations
  • The Coalition conducted survey among businesses
    and entrepreneurs in order to show imperfection
    of tax administration and its burden on private
    sector

26
Reforming national Tax legislation
Figure 1. Are you
satisfied by Tax System in Kyrgyzstan?
Source survey of Bishkek Business Club, 2005
27
Reforming national Tax legislation
Table 1.What kind of Governmental bodies is the
most corruptive?

Tax inspections 1
Departments of Interior Affairs (Police) 2
Departments of licensing 3
Custom services 4
Local Public Administrations 5
Certification departments 6
Sanitary epidemiological departments 7
Fire control departments 8
Labor force control departments 9
Source survey of Bishkek Business Club, 2005
28
Reforming national Tax legislation
Figure 2.Public services that extort bribes

Source Review of the investment climate,
2005
29
Reforming national Tax legislation (position of
the Government)
  • The Government was aware of imperfect Tax
    legislation adopted in 1996 which caused
    complexity of the legislation and corruption
  • The Government established official working group
    on elaborating new version of the Tax Code with
    involvement of ministers (economy and trade,
    finance), members of Parliament, international
    tax consultants by IMF and WB and very few
    representatives from private sector
  • The Government insisted on having more
    comprehensive Code with 400 articles instead of
    existing 200


30
Law on Inspections (position of business and the
Government)
  • The Government conducted 23918 inspections and
    spent roughly 2,2 million USD from the state
    budget and collected only 80 thousand USD in 2006
  • Effectiveness of the overall inspections by the
    Government in 2006 was 2,2 million USD or
    0,067 to GDP
  • On 29.05.07, President signed the Law on
    Inspection and approved single legislation to
    regulation of business environment in Kyrgyzstan

31
Kyrgyzstans standings at international ratings
  • Impressive shift of Kyrgyzstan from 99th to 68th
    position in Doing Business 2009
  • The Kyrgyz Republic is the most advanced country
    in Central Asian region and among the top 3
    reformist economies according to Doing Business
    ranking of 2009 (see table 2)
  • Enactment of Moratorium to all kinds of
    inspections toward business in 2008

32
Kyrgyzstans standings at international ratings
  • Such internationally recognized ratings as Doing
    Business by the World Bank and Index of
    Economic Freedom by the World Heritage
    Foundation are guides for attracting foreign
    direct investments (FDI) to national economy
  • Methodology of these ratings promotes main
    principles of the democratic society and free
    market economy (see next table for details)

33
Kyrgyzstans standings at international ratings
  • Definition by Heritage Foundation
  • Economic freedom is the fundamental right of
    every human to control his or her own labor and
    property. In an economically free society,
    individuals are free to work, produce, consume,
    and invest in any way they please, with that
    freedom both protected by the state and
    unconstrained by the state. In economically free
    societies, governments allow labor, capital and
    goods to move freely, and refrain from coercion
    or constraint of liberty beyond the extent
    necessary to protect and maintain liberty itself.
  • Methodology of the Index of Economic Freedom
    (freedoms)
  • Business Freedom Investment
    Freedom
  • Trade Freedom Financial
    Freedom
  • Fiscal Freedom Property
    Rights Freedom
  • Government Size Freedom
    from Corruption
  • Monetary Freedom Labor
    Freedom

34
Kyrgyzstans standings at international ratings
Source Heritage Foundation Annual Reports,
http//www.heritage.org/Index/Explore.aspx?viewby
-region-country-year
35
Kyrgyzstans standings at international ratings
  • Methodology of Doing Business (indicators)
  • Starting a Business
  • Dealing with Construction permits
  • Employing Workers
  • Registering Property
  • Getting credit
  • Protecting Investors
  • Paying Taxes
  • Trading across Borders
  • Enforcing Contracts
  • Closing a Business

36
Kyrgyzstans standings at international ratings
  • Dynamic of Kyrgyzstans development in Doing
    Business between 2008 - 2009

Source Doing Business Report 2009, the World Bank
37
Kyrgyzstans standings at international ratings
  • The 10 top reformers in 2007/2008

Source Doing Business Report 2009,
http//doingbusiness.org/Documents/FullReport/2009
/DB_2009_English.pdf
38
Conclusions
  • Verification of the proposed theoretical concepts
  • Delimitation of the research problem to the issue
    of regulatory reform and its importance for
    business environment in Kyrgyzstan
  • Theoretical dimension, delimitation of the
    research problem and outcomes of the empirical
    research helped me in answering cognitive
    questions

39
Conclusions
  • I have not reached second purpose in proposing
    effective models of institutional interrelations
    between public and private sectors in Kyrgyzstan
  • There is a need for definite variables and
    indicators that evaluate results of interaction
    processes between public and private sectors
    (share of SME in employment rate, share and
    growth of FDI in GDP)
  • Hypothesis I a shift from pluralist to
    corporatist model of interactions improved
    business environment and investment climate in
    Kyrgyzstan by such variables as growth of FDI in
    the share of GDP and national economy

40
References
  • Books and articles
  • Axelrod, R.M. (1984). The Evolution of
    Cooperation. New York Basic Books.
  • Axelrod, R.M. (1997). The Complexity of
    Cooperation Agent based model of competition
    and collaboration. Princeton Princeton
    University Press.
  • Cawson A. (1986). Corporatism and Political
    Theory. Basil Blackwell Ltd.
  •  
  • Dahrendorf, R. (1985). Law and Order. London
    Stevens.
  •  
  • Hill, M. (1997). The Policy Process in the Modern
    State. 3rd edition. Cornwall Prentice Hall.
  •  
  • Lane, J.E. (1993). The Public Sector. Concepts,
    Models and Approaches. London Sage.
  •  
  • Lindblom, Ch.E. (1977). Politics and Markets. New
    York Basic Books.
  •  
  • Lindblom, Ch.E. and Woodhouse, E. (1993). The
    Policy Making Process. Englewood. Cliffs (NJ)
    Prentice Hall.
  •  
  • Managerial public administration Strategy and
    structure for a new state. Luiz Carlos Pereira.
    Journal of Post Keynesian Economics Fall 1997.
  •  

41
References
  • Books and articles
  • Osborne, D and Gaebler, T. (1993). Reinventing
    Government. How the Entrepreneurial Spirit is
    Transforming the Public Sector. Reading Addison
    Wesley Publishing Co.
  •  
  • Politt, Ch. Managerialism and the Public Service.
    Oxford Blackwell, 1990.
  •  
  • Popper, K. (1994). Open Society and Its Enemies.
  •  
  • Potucek, M. Musil, J. Mašková, M. (2008)
    Strategické volby pro ceskou spolecnost
    teoretická východiska. (Strategic Choices for the
    Czech Society Theoretical Points of Departure.
    In Czech with the English summary) Praha,
    Sociologické nakladatelství.
  • Potucek, M. (1999). Not only the market. Central
    European University Press.
  •  
  • Potucek, M. (2005). Verejná politika. Praha
    Sociologické nakladatelství (SLON).
  •  
  • Pressman, J.L. and Wildavsky, A. (1984).
    Implementation. Berkeley University of
    California Press.
  •  
  • Robert A. Dahl. (1961). Who Governs? Democracy
    and Power in an American City.
  •  
  • Robert A. Dahl. (1971). Polyarchy. New Haven,
    Conn. Yale University Press.
  •  

42
References
  • Stiglitz, Joseph E.(1995) Role of Government in
    the Contemporary World. Paper presented to the
    conference sponsored by the International
    Monetary Fund, Income Distribution and
    Sustainable Growth. Washington, DC.
  •  
  • Streeck, W and Schmitter, P.C. (1985). Private
    Interest Government. Beyond Market and State.
    London Sage.
  •  
  • Scharpf F. (1997). Games real actors play actor
    centered institutionalism in policy research.
    Boulder. Westview Press.
  •  
  • Uphoff, N. (1993). Grassroots Organizations and
    NGO in rural Development Opportunities with
    Diminishing States and Expanding Markets. World
    Development, 21, 4. p.607 622.
  •  
  • Weber, Max. Economy and Society. Berkeley
    University of California Press, 1978.
  •  
  • Wilensky, H.L. and Turner, L. (1987). Democratic
    Corporatism and Policy Linkages. Berkeley
    University of California, Institute of
    International Studies. Research Series 69.
  • Assessments and Surveys
  • Survey of Bishkek Business Club on Tax Code and
    its administration in Kyrgyzstan. Bishkek 2004.
  • Research of Bishkek Business Club Strengthening
    advocacy of business associations and improving
    entrepreneurial climate in Kyrgyzstan. Bishkek
    2004.
  • ???????????? ??????-?????????? ??????????
    ?????????? (??????-??????? 2006).?????? ????????
    ? ???????????. ?????? 2006.
  • Research of Bishkek Business Club and Institute
    for Constitutional Policy Raiding problems of
    hostile takeover of private property in the
    Kyrgyz Republic. Bishkek 2008.
  • Research of Bishkek Business Club and
    International Business Council Impact of
    inspections to business enterprises in
    Kyrgyzstan. Bishkek 2007.
  •  

43
References
  • Legal materials
  • Constitution of the Kyrgyz Republic. 1993
    (amended in 2006, 2007).
  • Civil Code of the Kyrgyz Republic. 1996 (amended
    in 2009).
  • Law on non governmental organizations of the
    Kyrgyz Republic. 1999.
  • Law on social partnership in the area of labor
    regulation in the Kyrgyz Republic. 2003.
  • Decree of the President of the Kyrgyz Republic on
    Investment Council under the President of the
    Kyrgyz Republic. 2007
  • Law on Inspections of business enterprises of the
    Kyrgyz Republic. 2007
  • The Government decree and program 100 days
    toward improving business environment and
    investment climate in the Kyrgyz Republic. 2007
  • Law on social contracts and order of the Kyrgyz
    Republic. 2008
  • Tax Code of the Kyrgyz Republic. 2009
  • Decree of the President of the Kyrgyz Republic on
    Public Chamber of the Kyrgyz Republic. 2009.
  • Statistical data
  • Data on the number of NGOs and business
    associations. Ministry of Justice of the Kyrgyz
    Republic 2006.
  • Data on number of inspections of business
    enterprises in the Kyrgyz Republic. Statistical
    Committee of the Kyrgyz Republic.
  • Internet sources
  • www.akipress.org www.president.kg

  • www.bdk.kg www.martinpotucek.cz

44
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