Keeping SMEs in Kyrgyzstan Powered

On the 1st of November the heating season officially started in the Kyrgyz Republic, a top global reformer in Doing Business 2009. The question of whether the country will be able to avoid major heat and electricity outages has become more pressing than ever.  Due to the especially dry weather since the summer of 2007 the level of water in Toktogul reservoir, which supports the country’s hydro power plant, has been especially low. 

To maintain water reserves for the heating and electricity needs of the cold winter season, the Kyrgyz government imposed electricity rationing in late August.  Every day power was cut for up to eight hours a day in different regions of the country  Naturally electricity cuts were not welcomed by the population as they damaged the economy, especially hurting small and medium enterprises which do not have access to back-up generators

Whether the planned electricity cuts had the desired effects remains unclear.  Saparbek Balkibekov, the Minister of Industry, Energy and Fuel Resources, reported that during October Kyrgyzstan saved over 30 percent of its power energy, and said there should be no electricity blackouts after the 1st of November. However, contradictory to earlier promises, he also reported that both industrial and residential buildings will experience power cuts if consumption limits are exceeded.

Skeptical of the government’s ability to fulfill its promises, the population and businesses have been preparing for the winter season relying on their own means.  (One of my colleagues from Kyrgyzstan bought two and a half tons of coal for his family in the southern part of the country so that they can survive this winter season).  Since the price of coal increased significantly in the last year this solution represents a tremendous burden for households and enterprises.

Most importantly continuing from year to year problems in the energy sector may impact economic growth in the country.  According to Chynybai Tursunbekov, the President of the Union of Entrepreneurs, the activities of small and medium enterprises are crippled by the energy crises.  This winter season new construction sites can not receive technical conditions for an electricity connection at all.  Considering that SMEs account for up to 40 percent of GDP, there is an urgent need to ensure supply of power and hence to restore economic activity.  Easier said than done, but a (working and binding) agreement between neighboring countries in the region which are well endowed with various resources will be an immense step towards stability in the energy sector.