Attitude toward Foreign Direct Investment
The Kyrgyz Republic is open to foreign direct investment and the government publicly recognizes that foreign direct investment is an important component to growing the economy. Laws exist that make the investment climate more favorable than in the past for foreign companies. Application of these laws, however, is inconsistent, which can cause problems for and deter foreign investors. In addition, government activities, including demands for renegotiation of operating contracts that were legally concluded, invasive and time-consuming audits, levy large retroactive fines, and disputes over licenses are impediments to foreign investment.
Other Investment Policy Reviews
In 2014, the World Trade Organization (WTO) reviewed Kyrgizstan. In 2016, IFC, a member of the World Bank Group, released a report on the Kyrgyz investment climate in January 2016. The report is available here.
Laws/Regulations on Foreign Direct Investment
The Kyrgyz Republic’s main legal framework for foreign direct investment remains
the “2003 Law on Investments.” The justice system in the Kyrgyz Republic is inefficient and lacks independence, and cases can take years to be resolved. The Ministry of Economy’s Investment Promotion Agency maintains the country’s main website for investment queries, www.invest.gov.kg.
The Kyrgyz Republic does not have a business registration website. Registration of legal entities, branches, or representative offices in the Kyrgyz Republic is based on “registration by notification” and the “one stop-shop” practice. State registration of a legal entity is completed within three business days from the date of filing the necessary documents for a specified fee. The relative ease of registering a business is reflected in the improvement of the Kyrgyz Republic’s ranking in the World Bank’s “Doing Business” survey to 67th of 189.
In 2014, the Kyrgyz government established the Investment Promotion Agency (IPA). The IPA does not provide consulting services to individual businesses that would like to enter the market. The IPA supports investors by providing information via its website, brochures, and informational meetings, but does not yet assist companies attempting to navigate the Kyrgyz bureaucracy. The Agency’s website (http://invest.gov.kg/) contains information regarding current legislation and regulations affecting potential investors.
The Kyrgyz Republic defines medium and small enterprises (MSMEs) as physical entities that are involved in entrepreneurship activity without having formed a legal entity, or as commercial enterprises that have a gross turnover less than 3,000,000 KGS ($43,000) a year and that employ fewer than 35 people in industry, 75 people in construction, 35 people in transportation, 50 people in agriculture, 25 people in scientific research, or 30 people in trade. Though there is a legal framework designed to help MSMEs, including tax breaks, the government does little to support development of smaller enterprises.
In its January 2013 Sustainable Development Strategy Roadmap, the government acknowledged that “attracting investment requires having transparent and well-functioning legislation that provides actual protection of rights of ownership and reduces interference from the state and eliminates corruption, and having a stable finance system with the ability to provide benefits to investors, and equal treatment for both foreign and domestic investors.” The government is working to lay the foundations for these key components.
Limits on Foreign Control and Right to Private Ownership and Establishment
While there are no official limits on foreign control, a large investor in a politically sensitive industry may find that the government imposes investor-specific requirements such as a high percentage of local workforce employment or a minimum number of local seats on a board of directors. Foreigners have the right to establish and own businesses. In 2015, U.S. investors did not allege any restrictions on market access. According to the law, the Kyrgyz Republic guarantees equal treatment to investors and places no limit on foreign ownership or control.
In 2015, the Kyrgyz government privatized MegaCom, one of the country’s largest mobile telecommunications companies. There is ongoing deliberation on the privatization of other state-owned assets, such as the postal service and the capital’s international airport, but lack of interest by private partners has stalled any potential moves. Following years of non-transparent delays, the Parliament suddenly and swiftly approved MegaCom’s privatization in June 2015.
There are no restrictions on foreign investors participating in privatization programs. For example, the Kyrgyz government is seeking to attract foreign firms, in particular Turkish companies, to buy Manas (Bishkek) International Airport. The privatization process is not well defined and is subject to change.
Screening of FDI
Coca-Cola and Hyatt are the only major U.S. businesses in Kyrgyzstan. There is no known process to screen foreign investment.
The State Agency for Anti-monopoly Regulation of the Kyrgyz Republic conducts unified state antitrust price regulation in the economy. The main tasks of the State Agency are: