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Economy

The Kyrgyz Republic is rich in natural resources, has a high level of public education, enjoys a geographically favourable location, and is characterized by a mild climate. The country has a vast potential for the development of industrial production, hydro power sector, agriculture, and tourism.

Being a democratic nation, the Kyrgyz Republic promotes a convergent system of economy based upon such key principles as free entrepreneurship, a free pricing system, free competition, and state regulation. 

Development of the industrial sector is represented primarily by electricity production, the non-ferrous metal industry, and food processing. Achievements of the agricultural sector have become possible primarily due to the efforts of peasant farms.

The Kyrgyz Republic ranks 108st  out of 139  countries in the Forbes “Best Countries for Business” list 2016.[1] It ranks 88th  in terms of trade freedom, 42th  in investor protection, 105th  in personal freedom, 122th  and 115th  in innovation and technology, 113rd  in corruption, 28th  in red tape, 110th  in tax burden, and 121th  in monetary freedom.

 

Key Macroeconomic Indicators[2]

 

 According to preliminary data from the National Statistics Committee of the Kyrgyz Republic, in January -July 2015 , Kyrgyzstan’s real GDP has marked 7.1%  growth, which is 12.9 percentage points lower than that in the corresponding period of 2011, while nominal GDP has reached 203.8 billion KGS. Decline in economic growth is attributable to a significant reduction in industrial production at the Kumtor deposit.

 

Real GDP, excluding gold production at the Kumtor deposit, grew by 4.5% (vs. 6.0% in January - September 2011) due to a rise in production (excluding Kumtor) by 7.0%, services by 5.0%, and construction by 12.0%.

 

In January – July 2015 , investments in fixed capital from all sources of finance increased by 6.2 % compared to the same period last year (vs. 12.5% decline ​​in January - September 2011) totaling KGS 44,864.2  million over the reporting period.

 

The value of international trade in goods in January – June 2015  reached USD 2,707.9 million which is 13.5% less  than in the corresponding period of 2014, with USD 1,995.3  million accounting for import (16.8% decline ) and USD 712.6 million accounting for export (2.6% decline).


Privatization

 

In the Kyrgyz Republic, the legal framework for state property privatization and the legal system for securing property rights of individuals and legal entities were formed between 1991 and 2003.  

 

The first phase (1991-1993) concentrated on privatization of trading, public catering and consumer services enterprises. The second phase (1991-1997) ended up with privatization of large and mid-size industrial production, transport and construction enterprises. The third phase (1998-2003) gave rise to privatization of large strategic enterprises operating in monopolized sectors of the economy and in non-production area. 

 

These economic reforms resulted in active transformation of state ownership. They gave rise to new property relations and led to a significant decrease of the state’s ownership stake in all sectors of the economy, except for basic industries. The general level of privatization is now 70%. Many state-owned enterprises have been converted into municipal ownership.[3]  

 

Economic reforms in the country have brought about the following general preconditions for the development of trade and market relations:

  • Private property and freedom of entrepreneurship;
  • Elimination of monopoly of state enterprises and collective farms;
  • Significant efforts on promotion of broad competition between individual private enterprises, private joint stock companies, joint ventures, foreign companies, farmers’ associations, and other forms of business; 
  • Established two-level system of banking and crediting;
  • Liberalized prices.

According to research by the Index of Economic Freedom 2015 Heritage Foundation, the Kyrgyz Republic is one of the “moderately free ” countries in the world. The Kyrgyz Republic ranks 82nd  out of 178 countries of the world and 15th out of 42 countries of the Asia Pacific region in terms of freedom of economy and its general score is higher than the average score in the region.[4]

 

In 2009, the President of the Kyrgyz Republic[5] adopted a decision to conduct the analysis of operations of existing public enterprises in terms of their efficiency and, where necessary, to carry out their reorganization and liquidation, privatization and conversion into joint stock companies. At present, the following publicly owned enterprises are active: Kyrgyzpochtasy PE, Kyrgyzaeronavigatsia PE, Kyrgyzdipservice PE, Kyrgyz Temir Jolu National Company PE, Kyrgyzmarkasy PE[6], Pravitelstvennaya Svyaz PE, Infocom PE, Kyrgyzstroyservice PE, Kyrgyzresursy PE, Komur PE, Kyrgyz Experimental Biofactory PE, Karakol Distillery PE, Kara-Balta Distillery PE, Temir PE, and others.

 

Also, a decision was adopted to carry out privatization of state shareholdings (up to 10% of the total number of outstanding or initially or additionally issued shares in public offerings) in joint-stock companies with state shareholding[7] by having them listed and publicly traded on the stock exchange. In Kyrgyzstan, the state has ownership interests in 51 joint stock companies, 32 of which have a state  controlling stake. Based on their size, the state’s stakes in joint stock companies are spread as follows: less than 25% (12), from 25% to 51% (6), from 51% to 100% (33). Among them, the following companies have been listed on stock exchanges in 2008: RSK Bank OJSC, Manas International Airport OJSC, Uchkun OJSC, Ayil Bank OJSC, TNK Dastan OJSC, Kyrgyzneftegaz OJSC, Kyrgyztelecom OJSC, Elektricheskie Stantsii OJSC, Severelectro OJSC.    

 

[1] http://www.forbes.com/lists/2011/6/best-countries-11_Kyrgyzstan_CHI148.html 

[2] Social and economic conditions in the Kyrgyz Republic for January-August 2011 – Bishkek: 2011.

[5] Edict No.: UP No. 96 of the President of the Kyrgyz Republic dated February 10, 2009.

[6] http://www.stamp.elcat.kg/

[7] Report on the Kyrgyz Government’s performance in 2008 approved by Resolution No. 115 of Government of the Kyrgyz Republic dated  February 11, 2009 (http://www.gov.kg/images/otchet/otchet2008r.doc).