7. State-Owned Enterprises
There are approximately 94 SOEs in the Kyrgyz Republic that play a significant role in the local economy. According to 2021 data, 65 of the 94 SOEs were not profitable. Still, SOE income managed to double only for the first nine months of 2021 to $76.4 million dollars. The State Property Management Fund of the Kyrgyz Republic (www.fgi.gov/kg) is the public executive authority representing the interests of the state. The purpose of the Fund is to ensure the efficiency of the use, management, and privatization of state property. Information on allocations to and earnings from SOEs is included in budget execution reports and is published (in Russian) by the Ministry of Finance and Economy (www.minfin.kg).
Information on SOE assets, earnings, profitability, working capital, and other financial indicators is available on the State Property Management Fund’s website (http://finance.page.kg/index.php?act=svod_profit), though the website is not actively maintained. The State Property Management Fund also reviews the budgets for the largest SOEs, while the Accounting Chamber reviews the accounts of all SOEs and publishes audit reports on their website (www.esep.kg).
The Kyrgyz Republic does not fully adhere to the OECD Guidelines on Corporate Governance of SOEs. Cronyism and corruption within SOEs are a major obstacle to the Kyrgyz Republic’s economic development. The Heritage Foundation’s 2017 Index of Economic Freedom report noted, elected officials appoint company board members based on political loyalty rather than professional skills and corporate governance knowledge. Positions on boards of directors are frequently used as rewards for political support, and the dynamic has reinforced the patronage system and resulted in poor economic performance and public service delivery. As of February 2021, the presidential decree on “State Personnel Hiring Policy” authorizes the State Personnel Service to direct all state agencies and SOEs to verify the qualifications of all candidates, including education and professional experience, as the basis for personnel appointments.
The government has attempted to improve transparency on contracts and bidding processes. Due to widespread corruption, there are common complaints that only individual government officials have access to government contracts and bidding processes. SOEs purchase goods and services from the private firms and usually place the calls for bids either on their websites or in public newspapers, as required. Private enterprises have the same access to financing as SOEs and are subject to the same tax burden. In some cases, SOEs have preferential access to land and raw materials.