Agricultural development in the Kyrgyz Republic : the impact of domestic policies, changing macroeconomic conditions, and international migration

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2017

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DOI:
http://dx.doi.org/10.22029/jlupub-16720

Abstract

The pattern of agricultural development in the Kyrgyz Republic is intermingled with a number of sector-specific and economy-wide trends that have been unique in this country. With the background of drastic reforms, frequent economic and political shocks, and an erratic government support, it is hard to single out the effect of individual factors on agricultural development. The goal of this PhD thesis is to elaborate on government policies in the agricultural sector, as well as on some important macroeconomic trends, in order to obtain a clearer idea on how these policies and economy-wide trends affected agricultural development in the Kyrgyz Republic. To achieve this goal, an analysis of the impact of both direct agricultural policies and economy-wide developments on agricultural incentives, an analysis of the impact of WTO accession on agricultural trade, and analyses of the international migration impacts on the household and on the macroeconomic level have been conducted.Materials used for this dissertation include scientific literature, government and donor reports related to economy-wide, agricultural and food policies in the Kyrgyz Republic, secondary data on agricultural prices and trade, cross-sectional surveys of rural households, and secondary data on macroeconomic indicators and remittances. Methods comprise descriptive statistical tools as well as econometric techniques for analysing time-series and cross-sectional data. The empirical part of the dissertation relies on the theoretical concepts of agricultural distortions analysis, true-protection concept, the New Economic of Labour Migration framework, and the Dutch-disease concept. The findings on government support to agriculture since independence show that the assistance to farmers has been concentrated mostly on input-related support, yet was not based on a continuous medium-run policy of market price support. On the other hand, regression results demonstrate that a significant part of the increase in the prices in the import sector is shifted on to the export sector as an implicit tax. Furthermore, own empirical findings do not confirm the view that outmigration of labour significantly reduces crop output. Thus, the concern for policy-makers should not be that outmigration negatively affects crop production, but rather that remittances are not used for generating more income that would sustain the positive effect of remittances for the remaining residents and possibly create multiplier effects. If the exchange rate of the Kyrgyz Som with the US dollar is considered, empirical results furthermore show that the Kyrgyz export sector lost in international competitiveness due to remittances. An important policy implication from both studies on international migration is that the government should create a favourable environment for and promote the investment of workers remittances in productive enterprises, including crop and livestock activities. The Dutch disease effects can be reversed if remittances are used to strengthen the losing sectors, but such an investment has to be economically attractive for migrants and their families.

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