Investor’s guide

INVESTMENT CLIMATE

Investments are major prerequisite for economic development of Kyrgyz Republic; therefore, investment legislation of Kyrgyz Republic is quite liberal.

The Constitution is the basic and paramount law and all other laws must conform with it. Some of these laws directly or indirectly regulate investments in Kyrgyz Republic such as Licensing law, Joint-Stock Companies law, Mining law, Free Economic Zones law of Kyrgyz Republic, Tax Code, Land Code, Customs Code, Civil Code, Public-Private Partnership law of Kyrgyz Republic. Nonetheless, the principal is Investment law of Kyrgyz Republic”[1]

Thus, according to the legislation of Kyrgyz Republic,[2] foreign investors shall enjoy the national treatment applied to individuals and legal entities of this country. Legislation provides a broad scope of rights and guarantees to foreign investors, including guarantees of export and repatriation of investments, property and information out of Kyrgyz Republic, guarantees of protection against investment expropriation and reimbursement of losses incurred by investors, guarantees of income use and freedom of monetary transactions, and others. 

Kyrgyz Republic has entered into a number of bilateral agreements on mutual support, encouragement and protection of investment (capital expenditure). Such agreements have been signed with a number of countries such as[3]:

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The People’s Republic of China (1995);

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The Republic of Turkey (1996);

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The Republic of Ukraine (treaty signed in 1993);

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The United States of America (1994);

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The Republic of Armenia (1995);

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The United Kingdom of Great Britain and Northern Ireland (1998);

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The Republic of France (1997);

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The Islamic Republic of Iran (2005);

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The Republic of Azerbaijan (1997);

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The Federal Republic of Germany (2006);

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The Republic of Georgia (1997);

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The Republic of India (2000);

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The Republic of Kazakhstan (2005);

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The Republic of Belarus (2001);

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The People’s Republic of Mongolia (treaty signed in 1999)

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The Swiss Confederation (2003);

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The Republic of Tajikistan (2001);

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The Kingdom of Sweden (2003);

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The Republic of Moldova (2004);

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The Republic of Finland (2004);

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The Republic of Korea (2008);

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The Republic of Latvia (signed in 2008);

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The Republic of Lithuania (2009);

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Denmark (signed in 2001);

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Malaysia (signed in 1995);

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The Islamic Republic of Pakistan (signed in 1995);

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The Republic of Indonesia (1997);

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The Republic of Uzbekistan (signed in 1997);

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The United Arab Emirates (signed in 2014);

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State of Qatar (signed in 2014);

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State of Kuwait (signed in 2015).

The Government of Kyrgyz Republic has approved draft agreements on mutual support, investment encouragement and protection with The Czech Republic,[4] The Kingdom of the Netherlands[5].

The Ministry of Economic Development and Trade of Kyrgyz Republic is the authorized executive body responsible for the development of national investment policy. It drafts and implements a cohesive national macroeconomic, financial, tax and customs policy. Also, a policy that covers economic development, foreign trade and economic activities, encouraging investment, technical regulation, support and development of entrepreneurship, and the development of free economic zones.[6] 

The primary tasks of the Investment Promotion and Protection Agency of Kyrgyz Republic are to attract and promote investment into the national economy, to assist existing and potential exporters in promoting their products in overseas markets and to develop mechanisms for public-private partnership[7].

State Guarantees to Foreign Investors

Subject to its legislation,[8] Kyrgyz Republic provides the following guarantees to foreign investors:  

  • Equal investment rights of domestic and foreign investors, no intervention into the business activities of investors, protection and restitution of infringed rights of investors in accordance with the legislation of Kyrgyz Republic; 
  • Export or repatriation of profit gained on investment, proceeds of investment activities in Kyrgyz Republic, property and information out of Kyrgyz Republic;
  • Protection against expropriation (nationalization, requisition, or other equivalent measures, including action or omission on the part of authorized government bodies of Kyrgyz Republic that has resulted in seizure of investor’s funds or investor’s deprivation of the possibility to use the results of their investment). In exceptional cases involving public interest, investments may be expropriated with concurrent state guarantees of appropriate coverage of damage incurred by the investor;
  • The investor has the right to freely use the income derived from their activities in Kyrgyz Republic;
  • The freedom to invest in any form into objects and activities not prohibited by the legislation of Kyrgyz Republic, including the activities subject to licensing;
  • Freedom of monetary transactions (free conversion of currency, unbound and unrestricted money transfers; should provisions restricting money transfers in foreign currency be introduced into the legislation of Kyrgyz Republic, these provisions will not apply to foreign investors, with the exception of cases where investors engage in illegitimate activities (such as money laundering)); 
  • Free access to open-source information;
  • The right to: establish legal entities of any organizational and legal form in accordance with the legislation of Kyrgyz Republic; open branches and representative offices on the territory of Kyrgyz Republic; select any organizational and managerial structure for the business entities, unless a different structure is explicitly required by the law for the given organizational and legal form of a business entity; acquire property (with the exception of land plots), shares, other securities, including governmental securities; participate in privatization of state property, establish associations and other unions; hire local and foreign employees subject to legislation of Kyrgyz Republic; and engage in other investment activities not prohibited by legislation in Kyrgyz Republic; 
  • Recognition of all intellectual property rights of foreign investors by public authorities and officials of Kyrgyz Republic;
  • In the event of amendments to the Investments law or the tax legislation of Kyrgyz Republic or the non-tax payments legislation, an investor and the investee who meet the statutory requirements have the right, during 10 years from the date of signing the stabilization agreement, to choose such conditions as may be most favorable to them for taxes payment purposed including VAT, but excluding other indirect taxes, and non-tax payments (except fees and charges for public services) in a way stipulated in the laws of Kyrgyz Republic. The procedure and conditions to apply for stabilization regime to tax and non-tax legal relationships are established by the laws of Kyrgyz Republic;
  • Other guarantees specifically provided in bilateral and multilateral international agreements on the investment promotion and protection signed by Kyrgyz Republic.  

Investment Agreement with the Government of Kyrgyz Republic

The Government of Kyrgyz Republic may execute investment agreements for implementing investment projects initiated by an investor in accordance with state development programs in high priority economic and social sectors. Such investment agreements may be executed through direct negotiations between the Government of Kyrgyz Republic and an investor, if the amount of investment made by an investor in the investment project exceeds USD 50 million and the investor has internationally recognized business reputation, unique knowledge and experience in successfully implementing the projects in the similar area.

Settlement of Investment Disputes

According to the legislation of Kyrgyz Republic,[9] investment dispute parties may agree on any applicable procedure for settlement of investment disputes. 

An investment dispute between Kyrgyz authorities and an investor should be settled wherever possible by consultations between the parties. If the parties do not settle amicably within 3 months from the day of the first written request for such consultation, any investment dispute between the investor and Kyrgyz authorities shall be settled in courts of Kyrgyz Republic, unless either party of the dispute between the foreign investor and the authority requests to consider the dispute in accordance with one of the following procedures by addressing the case to:

  • the International Center for Settlement of Investment Disputes (ICSID) under the Convention on the Settlement of Investment Disputes between States and Citizens of Other States or under the Rules Governing the Additional Facility for the Administration of Proceedings by the Secretariat of the ICSID; or
  • arbitration or an international ad hoc arbitral tribunal (commercial court) formed in accordance with the arbitration rules of the United Nations Commission on International Trade Law;

Some agreements on mutual support, encouragement and protection of investment (capital expenditure), signed by Kyrgyz Republic, contain provisions entitling foreign investors to submit their investment disputes to international arbitral tribunals.

[text is provided by Kalikova & Associates]


[1] http://www.kgembassy.org/index.php?option=com_content&view=article&id=112&Itemid=225

[2] The Law of Kyrgyz Republic “Investments in Kyrgyz Republic” dated March 27, 2003 (with the latest amendments as of February 13, 2015). 

[3] In parentheses are the years on which the respective treaties came into effect in the Kyrgyz Republic, unless stated otherwise. 

[4] Ordinance No. 125-r of the Government of Kyrgyz Republic dated April 12, 2000. 

[5] Ordinance No. 594-r of the Government of Kyrgyz Republic dated October 1, 2003.

[6] Regulation on Ministry of Economy of Kyrgyz Republic dated 20 February 2012 (with the latest amendments as of September 27, 2016)

[7] Regulation on State Investment and Export Promotion Agency under the Ministry of Economy of Kyrgyz Republic dated October 14, 2016.

[8] Chapter 2 of the Law of Kyrgyz Republic: “On Investments in Kyrgyz Republic” dated March 27, 2003 No.66 (with the latest amendments as of February 13, 2015 No.32). 

[9] Article 18 of the Law of Kyrgyz Republic: “On Investments in Kyrgyz Republic” dated March 27, 2003 No.66 (with the latest amendments as of February 13, 2015 No.32).).