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EASTERN EUROPE AND
CENTRAL ASIA AGROINDUSTRY DEVELOPMENT
COUNTRY BRIEF
2014
KYRGYZ REPUBLIC
Contents
Agro-industry national policy framework ........................................................................................................................ 2
Economic and social development and trends .............................................................................................................. 3
Agro-industry outlook and performance ......................................................................................................................... 5
Trade liberalization, WTO accession and trade performance.................................................................................... 7
Foreign direct investments ................................................................................................................................................. 10
Food safety, certification & quality control ................................................................................................................... 12
Business environment and competitiveness ............................................................................................................... 12
1
Key Economic Indicators1
2009
2011
2012
2013
Food&Beverages Indicators
GDP (PPP), current intl.$, billion
14.8
16.1
16.4
18.4
Value Added, % of manufactur. 18.55
Manufacturing VA, % of GDP
16.0
20.6
14.1
n/a
2009
Enterprises, % of
manufacturing
2011 2012 2013
n/a
n/a
n/a
24
n/a
n/a
25
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
-0.4
n/a
n/a
24.62
Agriculture VA, % of GDP
21.1
18.6
19.7
n/a
Employment, % of manufact.
24.69
Employment in Agri., % of total
34.0
n/a
n/a
19.4
Investments, % of manufact.
n/a
Gross Fixed Capital F.,% of GDP
28.6
24.0
27.6
n/a
FDI inflow, % of total inflow
4.0
11.2
5.6
n/a
Net food trade, US$ billion
100.5
100.6
110.0
n/a
Food exp.,% of merch. exp.
23.9
25.8
24.7
n/a
1.67
1.97
1.89
n/a
Food imports, % of merch.
16.9
16.6
14.6
n/a
108
n/a
FDI net inflows., % of GDP
Merch. trade., % of GDP
Merch. exports, curr. US$ billion
n/a
imp.
Merchandise imports, US$ bln
3.04
4.26
5.37
n/a
Food export, 2006-11 growth.
18.6
%
Exports annual growth, %
-1.08
15.7
-11.3
n/a
Food import, 2006-11
24.3
growth.%
Imports annual growth, %
-19.4
14.9
18.5
n/a
Food prod. index (2004-
102
107
06=100)
GNI per capita, PPP 1’000
2.6
2.7
2.9
3.1
c.intl.$
Agribusiness Indicators
3.08
Value
Trade per capita, US$ 2010-
1479
FDI inflow rank
106
Global Competitiveness Index
121
2012
Doing Business Indicators Rank
Global Merch. Exports Rank ‘12
Imports Rank 2012
70
68
137
126
Agro-industry national policy framework
National development programmes: The key documents that set out the Government policies of Kyrgyzstan
for overall economic development as well as for agriculture, rural and agro-industry development include: (i)
Medium-Term Development Program – Poverty Reduction Strategy Paper for 2012-2014, which provides a
complex solution for social and economic problems; (ii) the Agriculture and Food Security Strategy - Concept
of Food Security for 2009-2019 that includes measures to increase the volume of agricultural and food products
and diminish the import-dependence of the country in foodstuff, and the (draft) Medium-Term Development
Program for 2012-2014 with the estimated budget for Development of Agriculture and Processing Industry of
KGS 10.4 billion (US$ 201 million); (iii) the Programme of Fisheries development in Kyrgyzstan for 2008-2012;
(iv) the Strategic Plan for Veterinary Services of the Kyrgyz Republic 2008-2012; (v) the Concept of industry
development for 2012-2015; (vi) the Social Protection Development Strategy for 2012-2014;
The Government of Kyrgyzstan is now in the process of reformulating its policies, strategies and investment
plans as it endeavors to move the country to a higher level of growth and development after the recent political
and food security shocks. One of the important documents is a drafted Strategy of Sustainable Development of
Kyrgyzstan for the period 2013-2017. In 2011 the new government embarked on an ambitious reform
1
World Bank Indicators, ITC, FAOSTAT & UNIDO databases, accessed in August 2014. Author’s calculations
2
programme to improve public administration and boost the business environment. The Ministry of Agriculture
and Land Reclamation has designed a number of long-term national strategies with mid-term plans and
proposed them for public discussions in 2012.
Kyrgyzstan has with the EU a Partnership and Cooperation Agreement since 1999, which sets out the political
and economic values of the cooperation. Together with the UN organizations Kyrgyzstan elaborated and signed
the United Nations Development Assistance Framework (UNDAF) for 2012-2016. Kyrgyzstan is participating in
a process of integrating and establishing direct contacts between the agricultural economic entities with the
CIS, EurAsEC, SOC through harmonization of the regulatory-legal acts and agreements signed within these
agencies. In 2011 the Kyrgyzstan became the sixth full member of the Eurasian Development Bank (Armenia,
Belarus, Kazakhstan, Russia and Tajikistan). Potential accession of Kyrgyzstan to the customs union of Belarus,
Kazakhstan and Russia remains under negotiation.
Legal framework: Kyrgyzstan has adopted a number of laws to encourage a growth of agriculture and agroindustry and rural development, passing the land (2000) and tax (2008) codes, the Presidential Decree on
“Development and Support of Enterprises involved in harvesting, processing and marketing of agricultural
products” (2000); the law on Food Security (2008); the law on Agriculture development (2009), the law on
Cooperatives (2005); the law on State regulation of manufacturing and trade of ethyl alcohol, liquors and spirits
(2007); the law on Business partnerships and companies (1996); the law on Peasant farms; the law on Publicprivate partnerships (2012). The amendments to the Tax Code in 2009 provide for exemption of VAT on
technological equipment, imported as a contribution to share capital as well as for exemption of profit tax for
three years for agro-processing enterprises (except processing of excisable products) based on the annually
approved list of agro-enterprises. A number of relevant laws were drafted for further approval, namely: a law
on Competition and a law on Consumer’s Protection.
Supporting institutions: The main state bodies related to agriculture and agro-industry development in the
Kyrgyz Republic are the Ministry of Agriculture and Land Reclamation and the Ministry of Economy and
Antimonopoly Policy. Other supporting institutions are: the State enterprise information and marketing center
"Ayylmaalymat" under the Ministry of Agriculture and Land Reclamation; JSC the Kyrgyz Agriculture and Food
Corporation (AFC) (established in 2009) that ensure stable functioning of the food market in the interests of
producers and meeting public demand for food; the Agribusiness Competitiveness Center (established in 2006)
to help food processors be more efficient and profitable; the State enterprise "Center one-stop-shop" in the
field of foreign trade under the Ministry of Economy and Antimonopoly Policy; the Rural Advisory Service (RAS)
for extension services, the Kyrgyz Agricultural Market Information System, the Food Security Council
(established in 2009); the Fruit and Vegetable Association.
Economic and social development and trends
Economic and social development: Kyrgyzstan is a landlocked and low income country with GNI per capita of
US$ 562 (constant 2005) in 2012. The population is 5.78 million, of which 65.49 percent live in rural areas, and
the annual population growth is 1.3 percent. Between 2000 and 2004, there was strong economic growth and
real GDP increased by approximately 7 percent per year, but in 2005, the first socio-political crisis hit the
country’s economy. In 2007 and 2008 the economy recovered rapidly with GDP growth of 8.5 percent on
average. However, the socio-political crises of April and June 2010 hampered the recovery of the Kyrgyz
economy from the global economic crisis and affected agriculture, trade, construction and the banking system.
Real GDP grew by 5.7 per cent in 2011 after a decline in 2010. The economy is still recovering from the political
crisis. Kyrgyzstan was, and remains highly dependent on gold mining and agriculture. Over the past decade,
despite an increase in real terms the share of the agricultural sector in total GDP has decreased substantially in
Kyrgyzstan and since 2000 the share of agriculture value added in total GDP declined from 34 to 19.7 percent
in 2012. The agricultural sector still accounts for a large part of the total labour force, employing around 19
percent of the total economically active population in 2014. Manufacturing industry generated about 14.1
percent of GDP in 2012, growing by approximately 15 percent in nearly all major subsectors, except food
processing. The share of small and medium-sized businesses is increasing.
3
Chart 1. Evolution of value added to GDP in the Kyrgyz Republic (percent)
Source: WBDI 2014
Growing demands and trends: Kyrgyzstan is a net food importer (except in dairy products) and domestic
agriculture cannot satisfy demand for a range of commodities such as vegetable oil, flour, meat and poultry
products, beverages and high-value grocery products. Flour and flour goods account for more than 30 percent
of household expenses for food but wheat production meets about 40-50 percent of requirements with the
balance imported from Kazakhstan. Milk is an important element of the diet, with almost 90 percent of
households reporting to consume it. There is has been a small increase in the consumption of ready-to-eat food
and fish products. Food expenditures represented almost half of total expenditures of severely food-insecure
households. On the demand side, private consumption is estimated to have grown by 4.5 percent, reflecting a
notable rise in retail sales, despite a small increase in unemployment.2 One of the main tasks of the Government
is to reduce poverty in the country. It has been estimated that about 33.7 percent of the population were living
below national poverty line in 2011, which has declined from 39.9 percent in 2006. Poverty is higher in rural
areas (39 percent) than in urban areas (23 percent) and varies significantly between regions. Extreme poverty
declined from 9.1 percent in 2006 to 3.1 percent in 2009 but also increased in 2010 to 5.3 percent, with 4.2
percent in urban areas and 6.0 percent in rural areas3, and continued to increase to 6.2 percent by 2012.
In 2010, the five top agricultural products in terms of value in Kyrgyzstan were: cow’s milk (356 million intl$)
cattle meat (265 million intl$), potatoes (128 million intl$), sheep meat (118 million intl$), and tomatoes (70
million intl$).4 Besides, the important commodities of domestic production are apples, wheat, beans, walnuts,
horse meat and milk, cotton and tobacco.
2
IFC (2012) Kyrgyz Republic: Medium-Term Development Program—Poverty Reduction Strategy Paper. Country Report. Approved by
Government of the Kyrgyz Republic
3
The Impact of the Economic and Financial Crises on Agriculture and Food Security in Europe and Central Asia: a Compendium
4
FAOSTAT, accessed in November 2012
4
Agro-industry outlook and performance
Agro-industry background and challenges: After the collapse of the Former Soviet Union in 1991, the Kyrgyz
Republic implemented a number of rapid market oriented reforms and was the first CIS country to join the WTO.
Agriculture has a very high importance for Kyrgyzstan’s economy and the successful land-reform policies
converted the agricultural sector into an engine for growth during the late 1990s. However, land privatization
resulted in the creation of a large number of small private farms (over 300 000 smallholder farmers with an
average farm size of about 3 ha), sharing 80-95 percent in total agricultural production. The system of vertical
integration and coordination between processors and farmers in production chains were broken.
Agro-industrial reforms led by the Kyrgyzstan’s Government and actively supported by various donors have
focused on enhancing the development of agribusinesses, modern supply chains and food safety. However,
political instability over the last decade had a negative impact on the growth in the overall economy including
in the agro-industry. The latest government’s priority is to develop the clusters approach in agro-industry by
regions as well as to increase production of meat, dairy, sugar and oil products in order to exclude import
dependence from some products and to increase production of export-oriented products such as dairy.
Most food processing companies are involved in primarily wheat processing, milk processing and smaller shares
go to fruit and vegetables processing. Despite the fact that livestock is one of the major parts of the rural
economy in Kyrgyzstan and 87 percent of the territory is occupied by pastures, the meat industry is not well
developed. To stimulate replenishment of the key assets, enterprises are exempted from VAT on imported
technological equipment included in their foundation capital. Mechanisms of accelerated depreciation are
introduced. Processers of agricultural products are exempted from VAT and tax on revenues for a three year
period. At the same time, there is a strong dependence on imports of the raw materials and ingredients used
for processing. A shortage of floating assets and limited access to commercial loans due to high interest rates
impedes replenishment of the key assets and the use of new technology.
Organic products have become more popular and expensive commodities in developed countries. Organic
production in Kyrgyzstan is growing. The land share under organic products has grown from 0.02 percent to
0.14 percent of the total agriculture land over the period 2005-2010. The number of registered producers has
also grown from 225 in 2005 to 987 in 2010,5 and had exceeded 1,000 b y 2011, especially thanks to organic
cotton growers.
Food & beverage industry performance: The food and beverage industry forms a large part of the
Kyrgyzstan’s economy, generating 3.5 percent of GDP. In 2009 food and beverages industry generated US$ 430
million or about 21.6 percent of manufacturing output, grown up by 27 percent to the level of 2008, but
representing 14 percent in 2011. After a sharp decline by 32 percent in 2003 the output of the F&B industry
grew steadily at about 21.7 percent on average every year between 2004 and 2009, when it seemed to stagnate.
Per capita output was US$ 371.1 in 2009, but had fallen to about US$ 330 in 2012.
In 2010, the F&B industry employed 11 500 people (or 25 percent of the manufacturing labor force).
Employment has been unstable over time and it declined by 8.5 percent year-on-year in 2009. Labour
productivity significantly increased between 2000 and 2009, but the number of employees declined by 45
percent in the same period. In 2009 the F&B industry had 409 enterprises operating (or about 24.6 percent of
total number of manufacturing enterprises), and in 2010, 387 enterprises most of which were private small or
medium-scale enterprises. The number of enterprises decreased by 1.9 times between 2000 and 2010.
The most important and fairly well developed food processing industry by turnover is the dairy industry with a
stable growth. Flour and sugar producers are the second and third most important food processing industries
by turnover. The output of vegetable processing companies is increasing and it has traditionally been one of
the largest sectors. Meat industry is underdeveloped and has the lowest turnover compared to other foodprocessing industries.
Chart 2: Evolution food industry in Kyrgyz Republic over time
5
Research Institute of Organic Agriculture FiBL and International Federation of Organic Agriculture Movements IFOAM, 2012,
http://www.organic-world.net
5
Source: WBDI
Chart 3. Distribution of Output, employment, enterprises and investments in food & beverages subsectors of Kyrgyzstan in 2009
Breakdown of Food & Beverages branches in Kyrgyzstan, 2009
100%
90%
80%
70%
1,371
3,365
77
108
29,449,218
9,421,570
209,523,794
34,118,348
Other food products
60%
50%
40%
1,373
2,015
30%
20%
10%
92
42
3,470
90
22,365,215
Grain mill products; starches;
animal feeds
22,495,076
Dairy products
20,090,451
Beverages
54,722,679
71,845,982
65,833,881
Processed meat, fish, fruit,
vegetables, fats
0%
Employment, Enterprises, Output, US$ Value added,
number
number
US$
Source: Author’s calculations are based on UNIDO data and national statistics
6
Trade liberalization, WTO accession and trade
performance
Trade regulation and trade unions: Kyrgyzstan has the most liberal trade regime among countries in the
region and was the first to join the WTO in 1998. The adopted Custom Code (2004) under the Law on Custom
Duties (2006) complies with most international standards and takes into account the regulations of the Kyoto
Convention on Simplification and Harmonization of Customs Procedures. The Government has made major
liberalizing commitments, such as binding tariffs at relatively low ceiling levels, other import charges and
agricultural export subsidies at zero; eliminating discriminatory excise taxes; and applying the customs
valuation provisions. Due to growing prices for important foodstuffs the Government has eliminated import
tariffs and is to increase export tariffs for some groups of products.
Kyrgyzstan has trade relations with 123 countries and has signed free-trade agreements with 10 countries.
Kyrgyzstan has officially applied to be next member of the Customs Union, formed by Belarus, Kazakhstan and
Russia inaugurated in January 2012. Entry into the Customs Union would mean Kyrgyzstan adopting the
common external tariff, the average rate of which amounts to 10.6 percent in the CU, whereas the average rate
of Kyrgyzstan’s custom duties for 2009 was 5.1 percent. Conflicts between customs union arrangements and
the country’s obligations as a WTO member also need to be resolved.
Kyrgyzstan – together with seven countries from the CIS (Russia, Belarus, Kazakhstan, Armenia, Ukraine,
Moldova and Tajikistan) – signed the CIS FTA in October 2011, which provides for free movement of goods
within the territory of the CIS, as well as non-application of import customs duties, non-discrimination, gradual
decrease of export customs duties and the abolition of quantitative restrictions in mutual trade between the
CIS FTA member states. The CIS FTA came into force for Russia, Belarus and Ukraine in September 2012 as those
countries have ratified it.
WTO accession: Kyrgyzstan joined WTO on 20 December 1998, being the first CIS country to do so. It is an
observer to the Agreement of Government Procurement (GPA) accession with a 0.15 percent contribution to
the WTO budget in 2011. The simple average of imports duties for agricultural goods applied in 2009 was 7.7
percent. The latest Trade Policy review by the WTO was in Oct 2006.
Trade performance: From 2007 to 2011, despite a decline of 27.2 percent in 2009, Kyrgyzstan's exports
increased on average by 14.9 percent each year and amounted to US $2.0 billion in 2011, reflecting an increase
of 33 percent from 2010. Imports showed a similar development and increased by 32.2 percent in 2011 to US$
4.3 billion. This resulted in a trade deficit of US$ 2.3 billion in 2011, compared to US$ 1.7 billion in 2010. In 2013
total imports exceeded US$ 5 billion, while imports were around US$ 1 8 billion, showing a US$ 3 2 billion trade
deficit6.
Kyrgyzstan is import-dependent country in F&B products, except dairy products, which represent about half of
total exports along with tomato products (tomato paste). The trade balance of processed F&B experienced a
negative food balance of US$ 410 million in 2011, higher than any previous year. Food and agricultural exports
and imports together accounted for 10.1 percent and 15.4 percent of total merchandise exports and imports of
Kyrgyzstan in 2011. Processed F&B products accounted US$ 60 million or 3.0 percent of total merchandise
exports and US$ 470 million or 11.1 percent of total merchandise imports in 2011 with an annual growth of 7.4
percent and 47.9 percent respectively, compared to a negative growth of 20 percent of exports and of 9.3
percent of imports in 2009. The exports per capita of F&B were US$ 10.9 in 20117.
The import of F&B products are diversified and the highest share of imported products is with sugars and sugar
confectionery products group (20 percent, ranking in world imports 89), vegetable oils (15 percent, ranked 108),
cocoa preparations (15 percent, ranked 65), and beverages (13 percent, ranked 100). Dairy products account for
6
http://www.indexmundi.com/kyrgyzstan/
7
FAOSTAT 2014
7
48 percent of exports (ranking in world exports 70), while other large commodities groups are beverages (17
percent, ranked 108), and miscellaneous edible preparations (12 percent, ranked 95).8
Across partners, exports of Kyrgyzstan’s F&B commodities were not diversified in 2011, where Kazakhstan
shared 62 percent of total exports, compared to relatively diversified imports, where four countries made 86
percent of total F&B imports.
Top destinations for F&B products: Kazakhstan (62 percent), Tajikistan (14 percent), Russia (9 percent), UAE
(6 percent), and Uzbekistan (4 percent) in 2011.
Top origins for F&B products: Russia (39 percent), Kazakhstan (19 percent), Ukraine (16 percent), Belarus (12
percent), and Turkey (2 percent) in 2011.
Chart 4. Food and agriculture trade performance over time
Source: WBDI 2014
8
ITC (UNCDAT/WTO)
8
Chart 5. Share of product groups in total exports and imports of food & beverages, top ten products
Share of product groups in total F&B
exports by Kyrgyzstan in 2011
3%
2%
2%
1%
0%
Share of product groups in total F&B
imports by Kyrgyzstan in 2011
3%
0%
7%
6%
1%
1%
4%
20%
9%
10%
48%
12%
15%
11%
13%
17%
Dairy products, eggs, honey, edible animal product
15%
Sugars and sugar confectionery
Beverages, spirits and vinegar
Animal,vegetable fats and oils, cleavage products
Miscellaneous edible preparations
Cocoa and cocoa preparations
Cereal, flour, starch, milk preparations and products
Beverages, spirits and vinegar
Cocoa and cocoa preparations
Milling products, malt, starches, inulin, wheat gluten
Meat, fish and seafood food preparations
Cereal, flour, starch, milk preparations and products
Vegetable, fruit, nut, etc food preparations
Miscellaneous edible preparations
Sugars and sugar confectionery
Dairy products, eggs, honey, edible animal product
Milling products, malt, starches, inulin, wheat gluten
Vegetable, fruit, nut, etc food preparations
Residues, wastes of food industry, animal fodder
Meat, fish and seafood food preparations
Animal,vegetable fats and oils, cleavage products
Residues, wastes of food industry, animal fodder
Chart 6. Evolution of the top five destinations of exported F&B products by Kyrgyzstan over time
Source: ITC (UNCTAD/WTO). Data is based on the selected products’ groups. Trade Map online, accessed in October 2012
9
Chart 7. Growth of national supply and international demand for exports of F&B products by
Kyrgyzstan in 2011
Source: ITC (UNCTAD/WTO). Data is based on the selected products’ groups. Trade Map online, accessed in October 2012
Foreign direct investments
Strategies, regulations and ranking: Kyrgyzstan has a liberal investment regime on paper with a broad base
of commercial laws in place among those are the Law on Investments (2003); the Law on State Registrations of
Legal Entities and the Law on Free Economic Zones. Attracting FDI is a priority of the Kyrgyzstan’s Government.
There is an investment department at the Ministry of Economy and Antimonopoly Policy, which assists investors
with bureaucratic procedures. Kyrgyzstan has entered into bilateral treaties on mutual support, encouragement
and protection of investment (capital expenditure) with 27 countries. There are five Free Economic Zones (FEZs)
in the country.
According to WIR 2012,9 Kyrgyzstan was ranked 64 (among 181 economies) on the FDI Inward Attraction Index
in 2011, which is a significant improvement compared to 114 in 2000 (among 178 economies).
According to the IAB report,10 Kyrgyzstan is one of the more open countries to foreign capital participation,
where all sectors, with the exception of the domestic and international air transportation sectors, are fully open
to foreign capital participation. Kyrgyz legislation provides for equal treatment of domestic and foreign
investors. It takes four procedures and 12 days to establish a foreign-owned limited liability company (LLC) in
Bishkek, making it one of the faster processes in the EECA region. An LLCs need a minimum of two shareholders.
Companies are registered at the one-stop shop at the Ministry of Justice. Companies in the Kyrgyz Republic are
free to open and maintain bank accounts in foreign currencies. There is no minimum capital requirement,
although the authorized capital stipulated in the constitutive documents must be paid in full within the first
year of the company’s operation. Foreign companies can lease privately or publicly held land (for 50 years). The
9
UNCTAD (2012) World Investment Report 2012: Towards a New Generation of Investment Policies, UN Conference on Trade and
Development NY and Geneva, Switzerland
10
IFC/MIGA/WB (2010) Investing Across Borders: Indicators of foreign direct investment regulation in 87 economies. The World Bank
Group. Washington
10
land code prohibits the purchase of land by foreign companies. The land may be leased through an auction or
tender process or through direct negotiations with the relevant public authority. There is also a favorable fiscal
climate (profit and income tax is 10 percent and VAT is 12 percent)
Foreign direct investments flow: Overall, FDI in the Kyrgyz economy is low per capita compared to the other
CIS countries and it has decreased as a result of social tensions and political instability in the country since 2009.
In 2011 Kyrgyzstan’s FDI inflows accounted US$ 390 million or 6.6 percent of GDP with an annual decline by 11
percent, almost reaching the peak of FDI inflow of 2009. In 2013, FDI inflows were at US$ 758 million.11 Between
2007 and 2010, there was a substantial increasing the inflow of foreign capital in the agri-food industry.
However, in 2011, there was a drop in the inflow of foreign capital. The vast majority of FDI is directed to
manufacturing, food processing, banking and mining. FDI in the agricultural sector is relatively limited.
Manufacturing is the biggest recipient of FDI, generating about 55 percent of total FDI inflow in 2011.12
In 2010 largest sources of FDI were Canada (37 percent), United Kingdom (16 percent), China (12 percent) and
Russia (10 percent).13
The following countries are listed as the largest sources of FDI in first nine months of 2011: Canada (48 percent),
China (14 percent), United Kingdom (7 percent), Germany (6 percent). In 2010 largest sources of FDI were
Canada (37 percent), United Kingdom (16 percent), China (12 percent) and Russia (10 percent)14.
Many foreign firms are contractors of foreign assistance organizations. In 2010 there were 98 enterprises (or
17.9 percent of total industrial enterprises with foreign investments) with foreign investments operating in
Kyrgyzstan, employing 4 867 people (or13.4 percent of industrial).15 In 2009 manufacturing companies with
foreign investments employed 38 percent of total labor force and counted 520 enterprises decreased in 1.4
times more than in 2005. In 2009 the food, beverage and tobacco industries counted 99 enterprises with foreign
investments making more than third of the total manufacturing output and employing 5 228 people. Joint
ventures and foreign companies are involved in production of wheat flower, macaroni, packed tea, mineral
water, non-alcoholic beverages (Coca-Cola Icecek), dairy products (Wimm Bill Dann from Russia, Dairy Spring
from Switzerland), packaging/bottling (Plaskap Company) and tobacco products (Reemtsma company).
Chart 8. Foreign direct investments in Kyrgyzstan over time
Source: WBDI 2014
11
World Investment Report 2014
http://www.mineconom.kg/index.php?option=com_content&view=article&id=2020&Itemid=725&lang=en
13
http://www.state.gov/e/eb/rls/othr/ics/2012/191179.htm
14
http://www.state.gov/e/eb/rls/othr/ics/2012/191179.htm
15
National Statistic Committee of Kyrgyz Republic (2011) Activities of enterprises with FDI for 2006-2010
12
11
Food safety, certification & quality control
Food safety background and country’s membership: Kyrgyzstan is a member of the Codex Alimentarius
Commission and a correspondent member of the International Organization of Standardization (ISO). Issues of
protection of human health in general and in particular from food-borne risks, which come under the SPS
Agreement, are dealt with by the Law on Sanitary-epidemiological Safety of Population (2003) and the Law on
Veterinary (2005). The country’s existing system for regulating the safety of foods and related production
processes is not in a full compliance with internationally accepted regulations and WTO requirements yet. A
draft of a law on Requirements for the safety of food products and processes of their manufacturing, storage,
transportation, marketing and utilization was elaborated by the Ministry of Health. A number of projects of
international organizations (WB, ITC, GTZ) were conducted in order to streamline the compulsory standards
requirements for business, develop systems to enhance product quality and safety and to support Kyrgyzstan
becoming a member of the International Laboratory Accreditation Cooperation and establishing a national
information body and national reference centers on technical barriers to trade and sanitary and phytosanitary
measures within the WTO framework.
Quality control and certification: The Republican National Centre for Veterinary Diagnosis and Republican
State Seed Inspectorate under the Ministry of Agriculture and Land Improvement are responsible for veterinary
and phytosanitary control in Kyrgyzstan. The Republican Sanitary-Epidemiology station under the Ministry of
Health is responsible for sanitary-epidemiological control in Kyrgyzstan. The Centre for Standards and
Metrology of the Ministry of Economy and Antimonopoly Policy together with the technical committees for
standardization is responsible for standardization and certification criteria.
In accordance with the Laws on the Fundamentals of Technical Regulation (2004, amended in 2009) of
Kyrgyzstan certification is only required for products that can potentially endanger consumer health (like
alcohol, tobacco products, equipment etc.). This reduced obligatory standards coverage from 70 to 22 percent.
Other goods can be certified on a voluntary basis, but only to confirm product quality. There are 172 Kyrgyz
state standards as well as over 1 500 CIS intergovernmental standards for foodstuffs. ISO standards have begun
to be adopted. The Government’s resolution (2006) on procedures for the importation of products subject to
mandatory conformity certification regulates the standards for imports.
Raw materials, semi-finished and final products, including ingredients and equipment must meet requirements
stipulated in relevant Sanitary Rules and Regulations (SanPiN) and National State Standards (GOSTs).
Business environment and competitiveness
Retail and domestic market: The domestic retail market is underdeveloped and fragmented across the
country and it has been slowly emerging mainly in the capital. Retail trade of food products generated KGS 69
billion (US$ 1.5 billion) in 2009 sharing 53 percent of the total retail turnover, where flower and bakery products
generated 26 percent, meat products – 15 percent and alcoholic products – 14 percent.
Business environment: According to the Doing Business Report,16 through business reforms the Kyrgyz
Republic has improved the process of starting a business and enforcing contracts in comparison with 2010. The
economy was ranked 70 (out of 185 economies) in 2012 (3 points down compared to 2010; 14 point up
compared to 2006). Trading across the borders is ranked 174, paying taxes – 168, protecting investors – 13,
getting credit – 12, and starting business – 15.
Kyrgyzstan is ranked 10 out of the top 50 economies the most improved overall (by 14.8 percent of points) in
narrowing the distance to frontier since 2005 as well as by 42 percent improvement in dealing with construction
permits and by 38 percent in getting credit. While still among the most difficult countries in terms of obtaining
electricity, Kyrgyzstan has good practice around the world to obtain an electricity connection and it has
narrowed the distance to the frontier in getting electricity the most since 2010 (by 11 percent). Kyrgyzstan is
considered one of the slowest and the most costly economies in terms of exporting and importing.
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WB/IFC (2012) Doing Business 2013: Smarter Regulations for Small and Medium-size Enterprises. 10th edition. Washington, USA
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Kyrgyzstan has formed regulatory reform committee at the inter-ministerial level, reporting that use the DBIs
as one input to inform their programs for improving the business environment.
Taxation relief: According to a PWC report17, in 2012, the Kyrgyz Republic made paying taxes costlier for firms
by introducing a real estate tax, though it also reduced the sales tax rate. The new Tax Code (2009) has
flattened personal income tax to 10 percent and VAT from 20 to 12 percent. Kyrgyzstan is also a party to 30
double tax treaties as of 2011. Agriculture is exempt from VAT. Certain goods that are imported temporarily
are fully or partially exempt from payment of customs duties and taxes. Excise taxes are imposed on locally
produced and imported goods: alcohol, beer, tobacco, wines, coffee and cacao, raw materials for wines.
Research & Development, innovations: Required investments and activities in R&D of new technologies and
products in agro-industry still remain low. State-owned enterprises continue to be the primary beneficiaries of
government support for innovation and R&D.
In 2009 expenditures in R&D accounted 0.16 percent of GDP, decreased in share of 0.23 percent of GDP in 2007.
Investments in R&D represented about 19 percent of total F&B output in 2009.
Competitiveness: According to the Global Competitiveness Report 2012-2013 Kyrgyzstan is at the first stage
of development (factor driven), it got only 127 overall Global Competitiveness Index among 144 economies
(121 in 2010-2011 among 139 countries). Kyrgyzstan is ranked only 142 for Innovation, 130 for Business
sophistication factors, and 129 (score 3.1) for agricultural policy costs18. In 2014, Kyrgyzstan is ranked 68
regarding ease of doing business among 189 countries. The five problematic factors for doing business in
Kyrgyzstan are: policy instability, corruption, government instability/coups, inefficient government
bureaucracy and access to financing.
According to IDR 201119 Kyrgyzstan in the context of the Competitive Industrial Performance index (CIP) was
ranked 101 in 2009 with no changes compared to 2005 with manufacturing value added per capita of US$ 50
and US$ 46, respectively. Competitive industrial performance index decreased from 0.01 in 1995 to 0.005 in
2011, ranked as 116 among the 134 countries measured20.
17
PwC (2012) Paying Taxes 2012. The Global Picture, PriceWaterhouseCoopers supported by WB and IFC
Agricultural policy costs: How would you assess the agricultural policy in your country? [1 = excessively burdensome for the
economy; 7 = balances the interests of taxpayers, consumers, and producers] | 2011–12 weighted average
19
UNIDO (2012) Industrial Development Report 2011. Industrial energy efficiency for sustainable wealth creation: Industrial energy
efficiency for sustainable wealth creation: capturing environmental, economic and social dividends. Vienna, Austria. UNIDO’s
Competitive Industrial Performance (CIP), page 18-19. Note: 144 economies in total. From 2011 the CIP index comprises eight
indicators classified in six dimensions: (i) Industrial capacity, measured by MVA per capita; (ii) Manufactured export capacity, measured
by manufactured exports per capita; (iii) Impact on world MVA, measured by an economy’s share in world MVA.
20
UNIDO 2014
18
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The designations employed and the presentation of material in this information product do not imply the
expression of any opinion whatsoever on the part of the Food and Agriculture Organization of the United
Nations concerning the legal or development status of any country, territory, city or area or of its authorities, or
concerning the delimitation of its frontiers or boundaries. The mention of specific companies or products of
manufacturers, whether or not these have been patented, does not imply that these have been endorsed or
recommended by the Food and Agriculture Organization of the United Nations in preference to others of a
similar nature that are not mentioned. The views expressed in this publication are those of the author(s) and do
not necessarily reflect the views of the Food and Agriculture Organization of the United Nations.
For more information please contact:
Stjepan Tanic
Agri-food Economist
FAO Regional Office for Europe and Central Asia
Email: [email protected]
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