Although many people think of the IMF working in poorer “Underdeveloped”, or Developing” economies, in the past the UK has also found itself in need of assistance from the IMF on a number of occasions, and several European countries are currently in receipt of assistance from the Fund.  In return for a “bailout” the IMF imposed certain conditions on the British government’s handling of the economy.

Here in Kyrgyzstan, the IMF has played a considerable role over the years in helping the country’s economy in transition from the Central Command system of the former Soviet Union into a Free Market economy.  They have provided support in the form of advice as well as funding – indeed, they have a mission in Kyrgyzstan at the moment to study fiscal sustainability over the medium term period and possibility to fulfill state budget revenues scheduled for year 2011.  There is, however, some misgivings amongst the local people as they have seen over the years, under the tutelage of organizations like the IMF, factories close with the concomitant rise in unemployment and the fall of living standards – especially once you get out of the capital – and the apparent burgeoning of corruption.

Whoever does get the job as the Fund’s Chairman, Gordon Brown or someone else, they don’t face an easy task.

Part of the problem is the fact that people all over the world are not particularly good when it comes to handling money … and I suppose that I have to admit, that includes me!  Maybe one reason people have trouble managing their finances is that it involves figures – and an awful lot of people have a fear of numbers: be it called numerophobia or arithmophobia.  Some people actually take pride in their lack of ability or understanding of mathematics, or more specifically arithmetic, or to be precise: numbers.  Financial Management, however, is a subject that spreads far beyond pure number theory … and is embroiled with all sorts of complex abstract concepts, especially as the numbers get bigger, (and hence the rewards and risks are greater), and the systems and schemes become more intricate and sophisticated.

In school, classes are taught how to read statements and calculate interest, and although most children have little difficulty coping with the appropriately titled “Simple Interest”, fewer seem able to get to grips with “Compound Interest”, yet alone grasp the difference between a quoted interest rate and the equivalent APR, (Annual Percentage Rate).

Now, I am not afraid of numbers, and I do understand one key principle: Cash is King.  If you have cash, then you can do something, but if you don’t … then you can’t.  I spend a lot of my time worrying about Cashflow.  Although I have a basic understanding of the concepts, I’ll let my accountants worry about the details of technicalities on the Balance Sheet such as Depreciation and Currency Loss … but I do spend many hours worrying over payment schedules and overdue accounts.

I keep in mind the words of advice from Wilkins Micawber to the young David Copperfield:

“Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.”

Indeed, the kids are sick and fed up of hearing me ask the question, “How many times can you a spend a som?”  By now they know the answer and reply parrot fashion: “Once.  Once you have spent it, you don’t have it any more.  It’s not yours to spend, it’s somebody else’s and only they can spend it.”  They can even add the corollary: “So, it is important to spend it wisely.”

I’m not, however, so keen on the other notable quotation associated with Wilkins Micawber: “Something will turn up,” although that does seem to be a popular philosophy here – especially in the local variation of: “vsye budet horosho“, (“everything will be OK”).

.

I came across an article recently about our attitudes to money which identified five archetypes of people, even those who are “financially astute”, who have bad “money habits”:

• misers fear becoming penniless and have trouble enjoying the benefits of their money
• spenders shop in an often uncontrolled manner, particularly when feeling low – and get a short-lived high, often followed by guilt
• tycoons see money as a route to power and approval, and believe wealth will make them happy
• bargain hunters feel superior when they get discounts, and feel angry if expected to pay full price
• gamblers feel exhilarated when taking chances, and find it hard to stop – even when losing – as a win brings a sense of power.

As I read that list I found myself thinking, “That sounds just like ‘so-and-so’”, although I wasn’t sure which one best describe me.  Although the research identified five archetypes, I think there is a little bit of each in everyone.

The article pointed out that that people don’t always behave sensibly when it comes to money matters, and suggested that those graduates who have followed courses which included units on Financial Management were more likely to make mistakes with their investments, perhaps because they thought that they knew what they were doing and so, were tempted into rash decisions.

Another issue highlighted in the article was the ready availability of “easy money”: credit.  With credit, people are able to buy now and pay later, but, unfortunately, they don’t always think of the difficulties that can arise and the implications of having to meet the repayment schedules, yet alone the consequences of failing to do so.  There is predisposition to think, or to hope, like Wilkins Micawber, that “something will turn up”.

I know of several cases where a family’s home has been under threat because it was pledged against a loan and the borrower was having trouble with making the repayments.  As a result, the kids have also become used to hearing me say: “never a borrower or a lender be …“, (Shakespeare, Hamlet, Act 1, Scene 3), and the follow up that “every som borrowed has to be repaid – with interest”, (which is nothing to do with the bard – although his subsequent line, “For loan oft loses both itself and friend“, is also valid).

(Incidentally, the interest may not be monetary; there are, after all, such things as “interest free loans”, but “nothing is for free“, and “there is always a catch” .)

.

Here in Kyrgyzstan, (basically, even now, a cash based society), the sage advice of Wilkins Micawber about the need to live within you means and the difference between “happiness” and “misery”, is likely to fall on stony ground.  There seems to be a distinct tendency for cash to “burn a whole in people’s pockets” … if someone has 100 som, then it isn’t long before it’s spent.

I used to think that this was a reaction to the financial crisis that followed the collapse of the rouble in the early 1990’s, (before the introduction of the local currency, the som), and several of the financial scandals and bankruptcies that left people with savings which turned out to be worth very little: “Better to spend now, rather than later, when it is worth less – if anything”; a case of “let’s enjoy it while we can.”

There may well be an element of that, but it also seems to be a case of … we haven’t had the opportunity before, so let’s “make hay whilst the sun shines”.

There seems to be a distinct priority on how and where money is spent.  People don’t have much disposable income, most of what they do have is spent on the “essentials”: food, housing, clothing.  I am often surprised, however, at how one piece of modern piece of technology seems to have been elevated almost to the position of an essential: the mobile phone.  The are ubiquitous.  They are everywhere.   Once the essentials have been provided, then the first “luxury item” that they purchase is a mobile phone.  Sometimes, it seems as if the phone takes precedence over some of the essentials.

It hasn’t always been like that, of course.  Shortly after we opened the guesthouse in Naryn, I got summoned by one the local officials for a “friendly little chat”.  She was very pleasant as she explained that she was concerned about one particular aspect of our business.  She didn’t exactly say so, but she clearly thought that we were being cheated by our staff.  She told me: “Ian, you have to understand our local mentality.  If someone comes into money, then they spend it. They buy some clothes – preferably foreign clothes.  If they come into more money, then the buy a car – preferably a foreign make.  If they come into even more money, then they build themselves a house.”  She looked around at members of our staff in the room, dressed in new clothes – some of them foreign; some of whom had bought a car – one of them a foreign make, and one of whom was building an extension to their house.

(For the record: In reply, I pointed out that I had told them that they had to dress smartly, and that we had even helped to subsidize them by buying “uniform”; that unlike so many of the local population, they had jobs which paid them a regularly salary, (and a reasonable salary by local standards, although still low when compared to those in the UK), rather than having to wait months before being paid, and that we kept strict accounts and regularly checked their work.  As far as I was aware, we had no grounds to distrust them.  If she could find evidence to the effect that we were being cheated, then we would pursue the matter rigorously, but that we needed more than just a vague suspicion.)

The “local mentality” reminds me of the situation that Viv Nicholson found herself in, back in 1961, when she won over a hundred and fifty thousand pounds, (the equivalent of over three million pounds at today’s value), on the football pools, (a betting pool based on predicting the results of football matches).  When asked what she would do with her winnings, she is reputed to have replied: “I’m going to spend, spend, spend.”  Apparently, that’s exactly what she did, providing the tabloids with headlines until well after the money was exhausted.

These days, the companies in the West that run such systems as football pools and lotteries, offer an advisory service to winners on how to cope with the psychological and social pressures associated with such life changing experiences and Financial planning and Management to try and ensure that they gain the most benefit from their good fortune.

In her case, of course, it was her money, her winnings, which was frittered away over the course of time.  Apparently, after a while, she did try to manage her dwindling fortune but made but made some bad investments and eventually lost it all.

..

The government, just the people of Kyrgyzstan in general, is in a difficult position in that it has limited resources, and faces many demands on the (tax) revenue that it is able to raise.  In order to meet the needs and expectations of the people it is forced into trying to run a deficit budget.  It is obviously faced with difficult decisions when it comes to managing its meager finances: the need to prioritize, to meet existing demands as much as possible but also – and, (probably, far more importantly), to plan ahead so as to avoid Wilkins Micawber’s “misery”.

I don’t normally wear bright clothes – but recently I have been seen sporting a bright red Rugby Shirt.

The breast displays two small emblems – on the left is the manufacturer’s trade mark: “Kukri”, and on the right is a small embroidered Kyrgyz flag.

It’s the Rugby shirt of the Kyrgyz Rugby Federation and I have been try to get one of these shirts for over two years.  I haven’t found anywhere here in Bishkek that sells them, but there are a couple of websites that do offer them.  The only trouble is that, after you’ve selected them and put them “in your basket”, and proceeded to the checkout, you then have to pay for them.  That shouldn’t be a problem, I have a credit card and it’s easy to buy things over the internet using a credit card, isn’t it?

Apparently not.

Maybe I haven’t got the exact wording, but this was the gist of the message I got: “Sorry but your IP address indicates that you are located in a part of the world which our payments engine doesn’t service.”

It didn’t help that the card was a British card, issued by a British bank with a billing address in the UK.  I was able to enter all that information into the form … and they could have checked.  No … the problem was my IP address … I was using a computer here in Kyrgyzstan – and they weren’t going to accept that.

So, here I am in Kyrgyzstan, and I can’t buy the Kyrgyz national rugby shirt.

Not long ago I was talking to a friend over a beer.  John’s recently started a long term contract here in Bishkek and I had taken him to see the Russian Orthodox Cathedral … the blue onion domes, the myriad of icons, the remains of Saint Irakily, (the only Saint that Kyrgyzstan has produced to date) and we were relaxing over lunch, (and that beer), in a restaurant just next door to the National Stadium.  It was a holiday and there was a large crowd … so I asked one of the waiters what was going on.  “National Games”, he told me, “followed by a Rugby game.”  You can imagine our surprise … and that’s how the conversation turned to Rugby, and my difficulties in buying a Kyrgyz national rugby shirt.

John offered to order one for me when he next visited the UK, and to use part of his valuable baggage allowance to bring it back for me … which he did and so I am now the proud owner of a Kyrgyzstan official national Rugby shirt … one of the few people in the country with one.

I presume the blanket ban on accepting payment by credit card over the internet from “surfers” in Kyrgyzstan is to do with preventing fraud and identity theft.  I suppose  that as a consumer and credit card holder, I have to welcome this … but it does seem indiscriminate (affecting everybody in the country) and it can be very frustrating.

Now, I don’t often use my credit card over the internet … it’s not that I am afraid of identity theft, although obviously it is an issue.  It’s just that there are so few occasions when it is useful.  Once you have identified something you want to buy, ordered it, and the money has been deducted from your account, you then have to wait for it to be delivered.  If you chose the ordinary postal options, that can take some time, and if you use an international courier firm that can often cost more than the goods themselves.

This is not the only problem I have had buying things over the internet with my credit card.  There has been other occasions when the payment transaction engine wouldn’t accept my card because I was attaching to the internet from a computer in Kyrgyzstan.  I have tried contacting the site to see if we can find some other solution, but after exchanging a few emails I was told that the only way that they could accept payment was through the payment system that they used.  I still don’t understand why this was so … I may be wrong of course, but the impression I got was that it seemed they just didn’t want to make a sale … they didn’t want to take my money.

The problem isn’t limited to credit card payments.  I don’t think there are any sites that are blocked in Kyrgyzstan – unlike in some countries such as China or Iran, but there are problems in downloading data from some.

I understand that the BBC don’t allow Amazon or other sites to sell their tapes, CD’s and DVD’s to certain countries, (such as Kyrgyzstan), because they have copyright concerns … It’s a pity because I do miss programmes like “Just a Minute” or “I’m Sorry, I Haven’t a Clue”.  It’s possible to listen to these over the the internet but it would be nice to have them in a format where I could listen to them in the car, or have them lull me to sleep as I lie in bed.  It would be great, for example, if there was a podcast of these programmes, but there isn’t.  It’s odd that I can download episodes of the Newsquiz from the Friday Night Comedy Show  podcast … which is great … but Newsquiz doesn’t have “One Song to the Tune of Another” or “Mornington Crescent”.  OK – I realize that only Brits will understand that reference, (and not all of them at that), but suffice it to say that Mornington Crescent  is somewhat of a cult in Britain!.  It’s a pity that I can’t download the latest episodes, just because I live in Kyrgyzstan.

As an aside, talking of podcasts, I would like to subscribe to the BBC’s Jazz Library podcast …  but they won’t let me … I am tempted to say once again that it is “because I live in Kyrgyzstan” … but, actually, the BBC website does say that the podcast is only available for download in the UK, so people in New Zealand, America, France and Germany and so on are also subject to the same restriction as I am.