WTO
Kyrgyzstan joined the WTO in 1998. Due to the membership in the WTO, Kyrgyzstan received a completely new model of economic development and a legal framework that meets international standards, which became the basis for taking the economy out of the deep crisis caused by the collapse of the USSR and the global financial crisis of 1998. Among the main benefits received by Kyrgyzstan from membership in the WTO, the following are noted:
- export of Kyrgyz goods and services enjoys the most favored nation (MFN) regime in all WTO member countries;
- domestic trade and tax legislation is harmonized with the rules and regulations of the WTO;
- newly adopted legal acts are developed in accordance with international requirements;
- a predictable regime has been created for domestic producers and investors, both in trade and services;
- The United States in 2000 canceled the Jackson – Vanik amendment in relation to Kyrgyzstan;
- the geographical distribution of trade in the republic expanded from 98 countries in 1998 to 120 countries in 2008;
- access to operational international trade information;
- the country joined the WTO before its regional partners (China, Russia, Kazakhstan, Uzbekistan), which gave it the opportunity to influence the terms and conditions for joining this organization of new countries, including demanding concessions for domestic goods and solving problems arising in trade with these countries;
- Kyrgyzstan gained access to the mechanism for resolving trade disputes of the WTO;
- there is an opportunity to participate in the development of new international trade rules.
Despite the difficulties in foreign trade that Kyrgyzstan faced after joining the WTO in 1998–2001, the country's trade has been steadily developing since 2002, and the growth rate of trade with WTO member countries is higher than with other partners. The share of Kyrgyzstan in world imports (as well as the volume of imports) for 10 years has a positive trend and in 2007 amounted to 0.02%. After a slight reduction in exports in 2005, there is a tendency to increase it, but the share of Kyrgyzstan in world exports for 10 years decreased from 0.016% (1998) to 0.009% in 2007.
Since 2004, the service sector has been steadily growing, providing more than 35% of GDP. According to the Ministry of Economic Development and Trade, since 2001 the volume of direct foreign investments in the country has been growing at a fairly steady pace. So a small economic effect from the entry into the WTO is evident.
Custom legislation
In 2015, the Kyrgyz Republic adopted the unified customs tariffs and non-tariff regulations of the Russia-led Eurasian Economic Union. The Kyrgyz Republic implemented the new common Customs Code and abolished internal customs borders upon fully acceding to the Union in August 2015, but implementation of the agreement is slow.
Tax regimes
Taxation in the Kyrgyz Republic is regulated by the Tax Code of the Kyrgyz Republic and other regulatory legal acts. The competent authority exercising control over compliance with tax laws and full and timely payment of taxes is the State Tax Service under the Government of the Kyrgyz Republic.The current Tax Code was enacted in October 2008 and took effect on the 1st of January, 2009. In addition to general tax regime, Kyrgyz law establishes special tax regimes for specified categories of taxpayers.
These regimes are:
• Simplified single tax-based tax regime;
• Mandatory patentbased tax regime;
• Voluntary patent-based tax regime;
• Tax contract-based tax regime;
• Free economic zone tax regime;
• High-tech park tax regime
Regulatory framework
The Kyrgyz Republic has adopted a number of laws and regulations on the protection and promotion of investments. One of the main legal acts is the Law of the Kyrgyz Republic No. 66 “On Investments in the Kyrgyz Republic” adopted on March 27, 2003. Law No. 66 guarantees foreign investors the same protections and treatment as domestic nationals and companies. Foreign investors are free to choose where to invest, use foreign currency and granted the right to repatriate invested funds and proceeds.
In addition to Law No. 66, the Interim Government of the Kyrgyz Republic has also adopted Decree No. 23 “On the Protection of Investments,” dated April 26, 2010. The decree which was adopted as a result of the harm caused to the investment climate by recent political and civil instabilities and further acknowledges the importance of foreign investment to the Kyrgyz economy and reaffirms the government’s commitment to protecting foreign investors by upholding the rule of law.
On May 18, 2010, the Ministry of Economic Regulations adopted Order No. 113 which provided a road map with specific measures aimed at restoring and improving the investment climate of the Kyrgyz Republic. The road map addressed several issues including activities for the protection of investments, the possibility of granting tax breaks in some business sectors, and establishing a regular dialogue between state authorities and business communities.
GDP annual growth rate
The Gross Domestic Product (GDP) in Kyrgyzstan was worth 7.70 billion US dollars in 2017. The GDP value of Kyrgyzstan represents 0.01 percent of the world economy. GDP in Kyrgyzstan averaged 3.59 USD Billion from 1990 until 2017, reaching an all time high of 7.70 USD Billion in 2017 and a record low of 1.25 USD Billion in 1999. The gross domestic product (GDP) of Kyrgyzstan in 2018 amounted to 8 billion US dollars or 557 billion Som, which indicates its growth by 3.5% compared with the figures for 2017.
GDP of Kyrgyzstan (since 2014 to 2018 in US dollars)
Years
2014
2015
2016
2017
2018
Kyrgyz Republic
7 428,7
6 633,4
6 864,4
7 700,5
8 081,9
Kyrgyzstan's GDP in market prices in 2015 amounted to slightly more than 423 billion soms (about 6 billion US dollars). In the past ten years, the decline in GDP compared to the previous year was not recorded, while in some periods the increase in GDP occurred at a gigantic pace - 30 percent or more in comparison with the previous period. In absolute terms, for the period from 2006 to 2015, GDP grew from KGS 113 billion to KGS 423 billion, that is, almost four times. In the World Bank's ranking, Kyrgyzstan is in 146th place (out of 193 possible) in terms of GDP. The gross output of agriculture in the last decade has a steady increase compared with the previous period. Thus, the growth for the period from January to July 2016 over the same period of 2015 was 2.1 percent.
Income growth
Kyrgyzstan's Annual Household Income per Capita reached 825.840 USD in Dec 2017, compared with the previous value of 730.835 USD in Dec 2016. Kyrgyzstan's Annual Household Income per Capita data is updated yearly, available from Dec 1994 to Dec 2017, with an averaged value of 305.875 USD. The data reached an all-time high of 885.123 USD in Dec 2014 and a record low of 113.739 USD in Dec 1994. CEIC calculates Annual Household Income per Capita from Monthly Average Household Income per Capita multiplied by 12 and converts it into USD. The National Statistical Committee of the Kyrgyz Republic provides Average Household Income per Capita in local currency. The National Bank of the Kyrgyz Republic average market exchange rate is used for currency conversions. Household Income covers Household Disposable Income only.
Main investors and trading partners
The main investors in Kyrgyzstan are Canada, China, the United Kingdom, Russia and Kazakhstan. Since 2017, China and Kyrgyzstan have signed more than 10 investment agreements worth US $ 1.81 billion. The top export destinations of Kyrgyzstan are Kazakhstan ($377M), Switzerland ($337M), the United Kingdom ($319M), Russia ($268M) and Turkey ($162M). The top import origins are China ($2.72B), Russia ($1.36B), Kazakhstan ($534M), Turkey ($279M) and Uzbekistan ($160M). In 2017 Kyrgyzstan exported $1.92B, making it the 133rd largest exporter in the world. During the last five years the exports of Kyrgyzstan have increased at an annualized rate of 5.4%, from $1.68B in 2012 to $1.92B in 2017. he top exports of Kyrgyzstan are Gold ($712M), Precious Metal Ore ($144M), Other Ores ($95.6M), Planes, Helicopters, and/or Spacecraft ($78.5M) and Refined Petroleum ($61.1M), using the 1992 revision of the HS (Harmonized System) classification. Its top imports are Rubber Footwear ($740M), Refined Petroleum ($593M), Light Pure Woven Cotton ($194M), Packaged Medicaments ($160M) and Trunks and Cases($105M).
Credit Rating
Standard & Poor's credit rating for Kyrgyzstan stands at NR with n/a outlook. Moody's credit rating for Kyrgyzstan was last set at B2 with stable outlook. In general, a credit rating is used by sovereign wealth funds, pension funds and other investors to gauge the credit worthiness of Kyrgyzstan thus having a big impact on the country's borrowing cost. The rating remains unchanged since December 2015, when it was first assigned to the republic. At the same time, the information about the rating of Kyrgyzstan is closed, therefore it is impossible to study the data why the experts assigned it to the republic. Initially, Kyrgyzstan used the services of two agencies — Standard & Poor’s and Moody’s. Later, the country decided to refuse the services of the first one.
Inflation rate
In 2018, inflation rate for Kyrgyzstan was 1.5 %. Though Kyrgyzstan inflation rate fluctuated substantially in recent years, it tended to decrease through 1999 - 2018 period ending at 1.5 % in 2018.
Unemployment Rate
Unemployment Rate in Kyrgyzstan increased to 3.10 percent in February from 2.90 percent in January of 2019. Unemployment Rate in Kyrgyzstan averaged 2.64 percent from 2000 until 2019, reaching an all time high of 3.50 percent in December of 2006 and a record low of 2.20 percent in August of 2015.
Doing Business Index (The World Bank)
In the 2019 Doing Business report published by the World Bank, Kyrgyzstan ranks 70th out of 190 countries, which represents a progress of 7 places compared to the previous year.At the end of 2018, the republic scored 68.33 points, which is 2.57 points more than the 2017 figure.
Kyrgyzstan significantly changed its legislation to improve the business environment. It is about the adoption of the new Civil Code. The World Bank noted the positive work of Kyrgyzstan in expanding the role of shareholders in managing companies and improving export and import procedures. Significant changes have been made to civil procedures and law enforcement practices, and the possibilities for choosing ways to resolve disputes have been expanded.
The rights of creditors have been built, as they now have an access to information about the business and financial affairs of a debtor. Kyrgyzstan facilitated cross-border trade, simplified the export procedure to the countries of the Eurasian Economic Union.
Human Capital Index (The World Bank)
Kyrgyzstan takes the 76th place in Human Capital Index in the list of 157 countries by 2018. First place is occupied by Singapore, the USA take the 24th place, Kazakhstan — the 31st , Russia — the 34th. The Republic of Chad takes the last place.
The investment climate in the Kyrgyz Republic is characterized by considerable risk and uncertain time horizons. Widespread corruption and uneven application of the rule of law continue to pose major obstacles for the business community. The judicial system is not fully independent, and each sector of government experiences capacity and resource shortages. Weak enforcement undermines the legal and regulatory framework, especially with regard to intellectual property rights. In addition to at times restricting movement of expatriate staff of foreign entities, in one case the Kyrgyz government arbitrarily detained local staff for executing routine official duties. Potential investors should also be aware that more than an estimated 60 percent of economic activity in the country occurs in the unregulated gray economy. Kyrgyz government officials continue to speak positively and with hope of factors they say indicate an improving investment climate, but there have been few significant and measurable improvements. The government has identified FDI as a key component to growing the economy and has created a strategic roadmap for economic development designed to facilitate this growth. The government is taking steps to streamline the process of starting a business, as well as its tax regime. Still, many burdensome regulations hinder business development for foreigners and locals alike.
The Kyrgyz Republic struggles to meet basic infrastructure needs. The government has difficulty providing adequate power supply, especially outside of the capital, Bishkek. Several failed infrastructure projects, tied to corruption allegations, plagued the government’s development efforts. Power plants, roads, and canals are dilapidated and in need of major capital investment. Chinese infrastructure projects tend to improve market access predominantly for Chinese goods. The Kyrgyz Republic is still undergoing an economic transition to the Eurasian Economic Union (EAEU), whose current members also include Russia, Kazakhstan, Armenia, and Belarus. Membership has altered economic conditions, as cheaper goods from competitive firms of other EAEU member states have flooded the local market and squeezed Kyrgyz domestic industries. EAEU accession also introduced new regulatory hurdles and led to an increase in non-tariff measures, to which the Kyrgyz government and businesses alike have struggled to adapt. Persistent reliance on Russia as a source of remittances, imports, and financial support subjects the economy to Russian influence.
Kyrgyz entrepreneurs increasingly are purchasing franchise licenses of major U.S.-based companies, particularly in the food service industry. The Kyrgyz Republic has also experienced a modest uptick in interest from U.S. corporations interested in bidding on infrastructure development projects funded by international financial institutions.
EAEU. According to preliminary estimates of the National Statistics Committee of Kyrgyzstan, in the first half of 2018, the volume of foreign and mutual trade in goods of the Kyrgyz Republic amounted to 3 billion 794.9 million US dollars and increased by 14% compared to the same period last year. The share of imports was formed in the amount of 2 billion 877.1 million US dollars, and the volume of exports amounted to 917.8 million US dollars.
The volume of mutual trade of Kyrgyzstan with the countries of the Eurasian Economic Union (EAEU) amounted to 1 billion 295.4 million US dollars and increased by 0.3% compared with January-July 2017. At the same time, there was a decrease in the volume of imported goods by 2.8%, which in the total calculation amounted to 956.1 million US dollars. Against the background of a decline in imports, there was an increase in exported goods to the EAEU countries by 10.4%, which in total amounted to $ 339.3 million.
- Exports of goods to the Russian Federation in January-July 2018. amounted to 189.9 million dollars and compared with January-July 2017. increased by 28.1%, while imports formed in the amount of 667.9 million and increased by 2.9%;
- Exports of goods to the Republic of Kazakhstan in January-July 2018. formed in the amount of 144.9 million and compared to January-July 2017. decreased by 5.8%, while imports decreased by 6.4%, reaching $ 271.4 million;
- Exports of goods to the Republic of Belarus in January-July 2018. amounted to 4.4 million dollars and compared with January-July 2017. decreased by 14.8%, imports also decreased by 62.7%, reaching 16.5 million US dollars;
- With the Republic of Armenia in January-June 2018. insignificant import operations were carried out, amounting to $ 0.3 million, compared with January-July 2017. decreased by 39%, and export operations amounted to US $ 0.1 million.
UK is the leader in the ranking of exporters of Kyrgyz domestic products. Over the 10 months of 2018, the UK purchased gold from Kyrgyzstan for $ 416 million, according to a report by the National Statistical Committee. British spent a total of $ 420 million on goods from the Kyrgyz Republic.Russia was in second place - exports amounted to almost $ 254 million. Most Russians bought Kyrgyz clothes, shoes and cotton fiber. Kazakhstan is the third - 206 million dollars. Large amounts of ores of precious metals, food and footwear were sent to the neighboring republic of the Kyrgyz Republic. This is followed by Turkey, who imported vegetables, fruits and cotton. In fifth place is Uzbekistan - there Kyrgyzstan exports electricity, building materials and products.
As for importing countries, China has been at the top of this rating for several years. For 10 months of 2018, the volume of imports of goods from China exceeded half a billion dollars. Most Kyrgyz people buy Chinese clothes, shoes, electronics and fabrics. Russia is in second place: from there Kyrgyzstan imports fuel, construction equipment, products and car tires.
Third is Kazakhstan: Kyrgyzstan imports mineral water, coal, flour and cement from our neighbors. Next comes Turkey, which supplies clothing, shoes and furniture to the local stalls. From Uzbekistan, which is located on the fifth line, nuts, fruits and vegetables, as well as clothing, are brought to Kyrgyzstan.
Economy of Kyrgyzstan is highly dependent on the exports of gold and other precious metals and stones (34 percent of total exports). Other exports include: oil, gas and other mineral products (15 percent of total exports), textiles (12 percent), vegetables (9 percent) and transport equipment (8 percent). Main export partners are: Switzerland (33 percent of total exports), Kazakhstan (24 percent), Russia (13 percent) and Uzbekistan (11 percent). Others include: China, Turkey, Turkmenistan and Afghanistan.
Kyrgyzstan is divided into seven regions administered by appointed governors. The capital, Bishkek, is administratively an independent city (shaar) with a status equal to a region.
The regions, and capital city, are as follows:
Bishkek
Batken (Batken)
Chui (Bishkek)
Jalal-Abad (Jalal-Abad)
Naryn (Naryn)
Osh (Osh)
Talas (Talas)
Issyk-Kul (Karakol)
Industry of regions in Kyrgyzstan
Batken
The main industry in the Batken region is mining, which is represented by two large enterprises: Kakdamzhai antimony plant and Khaidarkan mercury plant. The industry in the Batken region also specializes in the extraction of coal and enzymatic tobacco, making galoshes and national carpet carpets. There are enterprises of non-ferrous metallurgy, food and flour-and-cereals industry. Oil and gas deposits are known, on which coal is extracted annually from combustible minerals in the amount of 100-150 thousand tons of conventional fuel, and 50-100 thousand tons are consumed .t energy. The region produces 4-5 million kWh per year of electricity, while its consumption is 465 million kWh per year.
Chui
Chui region occupies the main place in the industrial production of the Kyrgyz Republic. The production of rare-earth elements of the Iptriev group, cable products, equipment for trade and catering, building materials, lime, window glass, slate, cardboard, carpet products, felted shoes, granulated sugar, alcohol, primary processing of wool and cement are concentrated here.
The main industries: light, non-ferrous metallurgy, mechanical engineering and metalworking, production of industrial materials. In 2001, the volume of industrial products (works, services) produced in the Chui oblast amounted to 15786.9 million soms or the share of the region in the total volume of industrial production of the republic was 32.4%. In the total volume of industrial production, the share of non-ferrous metallurgy is 71.8% of the food industry - 12.7%, mechanical engineering and metalworking - 3.2%, the flour-and-cereals and feed mill industries - 2.8% of the fuel industry - 0.2%, light industry - 1.4%, the fuel and energy industry - 1.2%.
Jalal-Abad
Jalal-Abad region is one of the industrialized regions of the Kyrgyz Republic, where more than 100 industrial enterprises are located. The enterprises of the region represent practically all industries: electric power industry, electronics, coal, clothing and footwear industries, exploration and mining of minerals (gold, oil, coal, gas, volostanite, etc.), metalworking, processing of agricultural products, woodworking, mechanical engineering. and the production of building materials. Among the enterprises there are such giants as Mailuu-Suuysky Electrolight Plant, OJSC, Kyrgyz Electroizolit, Kyrgyzneftegaz, JSC, Toktogul HPP Cascade, Makmal Gold Ore Works, Tashkumyr Kristall State Joint-Stock Company (semiconductor materials plant), Jalalabad nekaktekan nekaktekan nekaktekan nekaktekan nekaktekan nekaktekkontekkalonny materials,) , JSC Mata, JSC Nur (b. Plant of plug connectors), JV Kyrgyz Petroleum Company refinery, JSC Tash-Kumyr and many others.
One of the promising industries is the gold mining industry. The region has explored deposits with a high gold content. The reserves of the Terekkanskoye gold deposit in the amount of 16.2 tons were diluted and approved. Currently, work is underway to establish joint ventures with foreign investors for exploration and production of gold. Jalal-Abad region is rich in many minerals.
Naryn
The industry of the Naryn region is represented by energy, coal, food, milling and industrial construction enterprises. The industry is mainly based on the processing of local raw materials, coal mining. At an absolute altitude of about 3000 m. Above sea level, 60 km. southeast of with. At-Bashy At-Bashinsky district is located Beshbelchir-Arashan water deposit. Hydroorbate water, calcium-sodium with mineralization of 2.3 g / l, belongs to the type of Siarm (Georgia). Forecast resources are 500 cubic meters / day.
Studies show that in the world, two out of three residents suffer from diseases caused by the lack of minerals contained in the mineral waters of the region. It is planned to use modular equipment with direct investment in the amount of $ 100 thousand, with a production capacity of 10 thousand liters per day.
Osh
The largest industrial enterprises of the region are: Joint-stock company (JSC) “Tekstilshchik”, JSC “Ak-Altyn” in Kara-Suu, JSC “Kara-Suu Dan-Azyk” JSC “Osh-Dyubek” in Karasu district, JSC “ Aska "in Kara-Suu, Ak-Bula JSC in p. Aravan, Osh TPP, Osh-Zhibek JSC, Osh Aragi LLC, Osh-Ak-Tash JSC, Osh TKE, Kelechek JSC - Osh Meat Processing Plant, Osh-Nan JSC, etc. The textile industry plays a decisive role in the light industry, where 99.3% of the output of this industry is produced. It occupies a leading place in the production of cotton fabric not only in the Osh region, but also in the republic as a whole.
In the food industry, the share of the food flavor sub-branch accounts for 98% of the volume of production of all products. Food industry enterprises produce a wide range of goods for the domestic market and for export - confectionery and bakery products, oil and fat, alcoholic beverages, consumer goods for meat, butter and cheese, dairy, tobacco and tobacco products. As part of the food sub-industry, the share of production of goods in terms of value of tobacco and tobacco products accounts for almost 51%.
Talas
The main industrial sectors in Talas oblast include the processing, footwear, clothing industries and enterprises producing construction materials. Industrial enterprises are mainly concentrated in the city of Talas, where Azyk JSC (meat-processing plant), Dan-Azyk JSC (bread-baking complex), Manas company (mineral water production, lemonade) are located. Talas-sut machine-building plant , clothing factory, shoe factory; reinforced concrete plant. In 1996, approximately 75% of the products produced by industrial enterprises of the region accounted for the city of Talas. Kara-Buurinsky district there are JSC "Arashan" (dairy plant). The only enterprise of the Manas district is a reinforced concrete plant (idle), in the Bakai-Ata region - a brick plant (idle). Production facilities are small and are represented by obsolete unsuitable buildings, equipment and skilled, but not interested labor.
Issyk-Kul
In the Issyk-Kul region, the industrial complex consists of 57 large and medium-sized enterprises, of which 40 are stable enterprises. These are such companies as - Munduz Brick LLC, Darkhan LLC, Fire LLC, Aika-Seika LLC, Ak-Zhalga JSC, Sut-Bulak JSC, Toshtuk LLC, LLC Textiles Milenium and others. Such enterprises as Vodokanal, Koopromservis LLC, Kungoy Fuel and Energy Complex, Cholpon-Ata Fuel and Energy Complex work stably.
The increase in the construction of tourist and other facilities in the region creates a high demand for building materials, which favorably affected the increase in the production of other small enterprises. Slowdown in growth occurred in 4 enterprises, incl. at the company Polygraph Print LLC, Sadus LLC (furniture), Master Print LLC and Bimek LLC.
In Issyk-Kul oblast, 13 enterprises or 22.8% of their total number were completely idle during 2013. This is stated in the analysis of the industries of the Ministry of Economy in the regions of the northern region of Kyrgyzstan. According to the ministry, if we consider the structure of industries in the Issyk-Kul region, the share of mining products in January – November 2013 was 0.1% (28.5 million soms), manufacturing - 96.3% (33 billion 535, 4 million soms), production and distribution of electricity, gas and water - 3.6% (1 billion 245.5 million soms).