Referendum Results Announced: Stability Outlook Strong

On 11th December Kyrgyzstan held a constitutional referendum and a series of regional council elections.

KLS Securities informs its clients and business partners outside Kyrgyzstan that in our opinion the outcome of the voting further strengthens the investment stability of the country.

Although the voter turnout at the elections/referendum was at its historic low (slightly over 40%, country-wide), the position of those who voted on the amended Constitution showed predominant support for the Government’s initiative to update the main law of the land.

The main feature of the new Constitution is introduction of a system where ultimate executive power in the country will be shared between the President and the Government (more powers given to the Prime Minister), and the Government is made more immune to day-to-day political bargaining between various parliamentary groups, thus making it more stable. This would enable the executive branch to think more long-term than during the past 6 years (which saw changes of the Government almost on a yearly basis).

This is good for the investors as it should add stability and predictability to industrial investment deals and other forms of foreign investment. A further positive factor is that the new Constitution makes it even harder for any political group or figure to monopolize power in the country. Kyrgyzstan, thus, should continue on its democratic path.

The outcome of regional level council elections further demonstrated that Kyrgyzstan has a very diverse political scene and no single party has a stable majority. While the President-supported SDPK Party (Social Democrats) generally showed strong results, in many local councils it is still a minority player, with other strong parties (such as Omurbek Babanov’s Respublika party) sharing voter support.

We view this as a good sign. While this diversity will add drama to the upcoming presidential race of 2017, whoever is ultimately elected to serve as new President will have to forge alliances and only thus consolidate a very diverse voter base. It is a further guarantee against authoritarian rule in Kyrgyzstan where aversion to authoritarianism is deeply routed in the tribal traditions of its people.