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Regional Office for Europe and Central Asia
FOOD AND AGRICULTURE ORGANIZATION OF THE UNITED NATIONS
EASTERN EUROPE AND
CENTRAL ASIA AGROINDUSTRY DEVELOPMENT
COUNTRY BRIEF
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 and quality control ..................................................................................................................................12
Business Environment and Competitiveness ...................................................................................................................................12
Ranking Kyrgyz Republic .........................................................................................................................................................................14
Key indicators
Key Economic Indicators1
GDP (PPP), US$ billion
2006
2009
Food & Beverages
indicators
2011
2006
2009
2011
9.46
12.17
13.35
Output, % of manufacturing
19.32
21.59
n/a
Manufacturing VA, % of GDP
12.56
15.99
17.79
Value Added, % of
manufactur.
20.67
15.69
n/a
Agriculture VA, % of GDP
32.77
21.08
19.82
Enterprises, % of
manufactur.
27.72
24.62
n/a
Employment in Agric., % of
total
36.30
34.0
Employment, % of
manufactur.
23.42
24.69
n/a
Gross Fixed Capital F., % of
GDP
23.03
28.60
24.84
Investments, % of
manufactur.
n/a
n/a
n/a
FDI net inflows, % of GDP
6.42
4.04
6.61
FDI inflows, % of total inflow
n/a
4.2
n/a
R&D, % of GDP
0.23
0.16
n/a
R&D, % of Output
n/a
18.9
n/a
99.58
100.49
105.11
-0.11
-0.26
-0.41
Merchandise Exports, US$
billion
0.89
1.67
1.97
Exports, %of merchandise
Exp
5.8
4.2
3.0
Merchandise Imports, US$
billion
1.93
3.04
4.25
Imports, % of merchandise
Imp
9.3
10.3
11.1
Exports annual growth, %
18.2
-27.2
33.0
Exports annual growth, %
11.5
-20.0
7.3
Import annual growth, %
55.1
-27.0
32.2
Import annual growth, %
48.5
-9.3
47.9
GNI per capita, 1’000 US$
0.50
0.86
0.92
Output per capita, US$
202.9
371.1
n/a
137.0
Exports per capita, US$
8.80
9.26
10.91
Merchandise Trade, % of
GDP
Trade per capita, US$ 20092011
Doing Business Indicators
Rank
Global Merchandise Exports
Imports Rank
84
70
136
133
as
Net Trade, US$ billion
Agribusiness Indicators
Value
FDI Inward Attraction Index
Global Competitiveness
Index
3.08
64
127
1
Agro-industry national policy framework
National development programmes: The key documents that set out the policies of the Government of
Kyrgyzstan for overall economic development as well as for agriculture, and the development of the agro-industry
and rural areas include: (i) Medium-Term Development Program – Poverty Reduction Strategy Paper for 20122014, which provides a complex solution for social and economic problems; (ii) the Agriculture and Food Security
Strategy – Concept of Food Security for 2009-2019, which includes measures to increase the volume of agricultural
and food products and reduce the country’s dependence on import of foodstuffs, and the (draft) Medium-Term
Development Program for 2012-2014 with an estimated budget for Development of Agriculture and Processing
Industry of KGS 10.4 billion (US$ 210 million); (iii) the Programme of Fisheries Development in Kyrgyzstan for 20082012; (iv) the Strategic Plan for Veterinary Services of the Kyrgyz Republic 2008-2012; (v) the Concept of industry
development for 2012-2015; and (vi) the Social Protection Development Strategy for 2012-2014;
1 World Bank Indicators Database and ITC accessed in October 2012. Author’s calculations
2
The Government of Kyrgyzstan is now in the process of reformulating its policies, strategies and investment
plans as it endeavours 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 the draft Strategy of Sustainable Development of
Kyrgyzstan for the period 2013-2017. In 2011, the new government embarked on an ambitious reform 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 discussion in 2012.
Kyrgyzstan has been party to the EU Partnership and Cooperation Agreement since 1999, which sets out the
political and economic values of the cooperation. Together with the UN organisations, 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 contact 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, Kyrgyzstan became the sixth full member of the Eurasian Development Bank (Armenia, Belarus, Kazakhstan,
Russia and Tajikistan). Kyrgyzstan’s potential accession to the Customs Union (current members: Belarus,
Kazakhstan and Russia) remains under negotiation.
Legal framework: Kyrgyzstan has adopted a number of laws to encourage the growth of agriculture and the
development of the agro-industry and rural areas; namely, 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 Agricultural 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 Public-private Partnerships (2012). The recent amendments to the Tax Code in 2009 provide for VAT exemption
on technological equipment, imported as a contribution to share capital as well as for a profit tax exemption
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 Law s were drafted for further approval, most notably: an
Law on Competition and an Law on Consumer 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 Centre
“Ayylmaalymat” under the Ministry of Agriculture and Land Reclamation; JSC, the Kyrgyz Agriculture and Food
Corporation (AFC) (established in 2009), which ensures stable functioning of the food market in the interests of
producers and that the public demand for food is met; the Agribusiness Competitiveness Centre (established in
2006), which help food processors be more efficient and profitable; the State enterprise “Centre 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) and 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$ 920 in 2011. The population is 5.5 million, of which 64.6 percent live in rural areas, and annual population
growth is 1.09 percent. Over the period 2000-2004, there was strong economic growth and real GDP increased by
approximately seven percent a year, but in 2005, the first socio-political crisis hit the country’s economy, lasting
until 2006. 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 the global
3
economic crisis affected agriculture, trade, construction and the banking system. Real GDP grew by 5.7 percent 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 GDP that the agricultural sector contributes has decreased substantially (from 34 to 19.8 percent in 2011).
The agricultural sector still accounts for a large part of the total labour force, employing around 34 percent in
2010. The manufacturing industry generated about 17.8 percent of GDP in 2011, growing by 18.8 percent in nearly
all major subsectors, except food processing. The share of GDP that small and medium businesses contribute is
increasing steadily.
Chart 1. Evolution of value added to GDP in the Kyrgyz Republic (percent)
Source: WBDI, accessed in October 2012; UNIDO database; National Statistics; Author’s calculations
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 36 percent
of household expenditure on food; and domestic 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 consuming it. There has been a slight increase in the consumption of ready-to-eat foods and fish
products. Severely food-insecure households spend almost half of their total expenditure on food. On the demand
side, private consumption is estimated to have grown by 4.5 percent, reflecting a notable rise in retail sales, despite
a slight increase in unemployment. 2 One of the main tasks of the Government is to reduce poverty in the country.
It was estimated that about 33.7 percent of the population were living below the national poverty line in 2010,
which is a decline from the 39.9 percent recorded in 2006. Poverty is higher in rural areas (39.5 percent) than urban
areas (23.6 percent) and varies significantly from region to region. Extreme poverty fell 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 areas.3
In 2010, the five top agricultural products in Kyrgyzstan in terms of value were: cow’s milk (ranked by commodity
in the world 59) indigenous cattle meat, potatoes (ranked 44), indigenous sheep meat (ranked 42), and tomatoes
(ranked 61).4 In domestic production the most important commodities 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 October 2012
4
Agro-industry outlook and performance
Agro-industry background and challenges: After the collapse of the 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
is of very high importance in Kyrgyzstan’s economy and land-reform policies were successful in converting 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 three hectares), sharing 80-95 percent of total agricultural production. The system of vertical integration and
coordination between processors and farmers in production chains were broken after the independency.
Agro-industrial reforms led by 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 past decade has had a negative impact on the overall growth of the economy, including in the
agro-industry. The government’s latest priority is to develop a cluster approach in the 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 primarily in wheat processing and milk processing, with smaller
shares being accounted for by fruit and vegetable processing. Despite the fact that livestock is one of the major
pillars 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 exempt from paying
VAT on imported technological equipment, including on their foundation capital and mechanisms of accelerated
depreciation have also been introduced. Processers of agricultural products are exempt from paying VAT and tax
on revenues for three year period. At the same time, there is a strong dependence on imports of raw material and
ingredients used for processing. A shortage of floating assets and limited access to commercial loans due to high
interest rates impedes the replenishment of the key assets and new technology use.
In developed countries, organic products are becoming more and more popular and expensive. Kyrgyzstan is
growing in terms of organic products production and the total land share under organic products grew from 0.02
percent to 0.14 percent between 2005 and 2010. The number of registered producers has also grown from 225 in
2005 to 987 in 2010. 5
Food and beverage industry performance: The food and beverage industry forms a large part of Kyrgyzstan’s
economy, generating 3.5 percent of GDP. In 2009 the food and beverage industry generated US$ 430 million or
about 21.6 percent of manufacturing output, which is an increase of 27 percent on the 2008 level. After a sharp
decline by 32 percent in 2003 the output of food and beverage industry grew steadily at about 21.7 percent on
average every year between 2004 and 2009. Per capita output was US$371.1 in 2009.
In 2009, the food and beverage industry employed 11,600 people (or 24.7 percent of the manufacturing labour
force). The level of employment has been unstable over time and declined by 8.5 percent in 2009. Labour
productivity increased significantly between 2000 and 2009, although the number of employees decreased by 45
percent during the same period. In 2009 there were 409 enterprises operating in the food and beverage industry
(or about 24.6 percent of all manufacturing enterprises), most of which were private small or medium-scale
enterprises. The number of enterprises has declined over time with 1.8 times fewer in 2009 that there were in 2000.
The most important food processing industry by turnover is the dairy industry, which is well developed and
has shown 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 this has traditionally been
5 Research Institute of Organic Agriculture FiBL and International Federation of Organic Agriculture Movements IFOAM, 2012, http://
www.organic-world.net
5
one of the largest sectors. The meat industry is underdeveloped and has the lowest turnover compared to other
food-processing industries.
Chart 2: Evolution of the share of the food and beverage industry in the economy of the Kyrgyz Republic
over time (percent of manufacturing)
Evolution of share of Food & Beverages industry in economy of
Kyrgyzstan over time (percent of Manufacturing)
40
35
30
25
20
15
10
5
0
%
2000
2001
2002
Value Added
2003
2004
Output
2005
2006
Employment
2007
2008
2009
Enterprises
Source: Author’s calculations are based on UNIDO data and national statistics
Chart 3. Distribution of output, employment, enterprises and investments in the food and beverage subsectors of Kyrgyzstan in 2009
Breakdown of Food & Beverages branches in Kyrgyzstan, 2009
100%
90%
80%
70%
1,371
3,365
77
29,449,218
9,421,570
34,118,348
108
209,523,794
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 in the region as in 1998 it
was the first to join the WTO. The Customs Code (2004) and the Law on Custom Duties (2006) comply with
most international standards and take 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 customs valuation provisions. Due to growing prices of
important foodstuffs, the Government eliminated import tariffs and increased 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 the next member of the Customs Union, formed by Belarus, Kazakhstan
and Russia and inaugurated in January 2012. Entry into the customs union would mean that Kyrgyzstan would
adopt the common external tariff, the average rate of which is 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.
Together with seven countries from the CIS (Russia, Belarus, Kazakhstan, Armenia, Ukraine, Moldova and
Tajikistan), Kyrgyzstan signed the CIS FTA in October 2011, which provides for free movement of goods within
the territory of the CIS, 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 these are the countries that have
ratified it.
WTO accession: In December 1998 Kyrgyzstan became the first CIS country to become a member of the WTO and
it is an observer to the Agreement of Government Procurement (GPA) accession with 0.15 percent contribution to
WTO budget in 2011. The simple average of import duties for agricultural goods applied in 2009 was 7.7 percent.
The latest Trade Policy review by the WTO was in October 2006.
Trade performance: From 2007 to 2011, despite a decline of 27.2 percent in 2009, Kyrgyzstan’s exports in-
creased on average by 14.9 percent each year and amounted to US$ 2 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.
Kyrgyzstan is an import dependent country in food and beverage products, except dairy products, which
represent about half of the total exports, and tomato products (tomato paste). The trade balance of processed
food and beverages showed a negative balance of US$ 410 million in 2011, which was 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 respectively. Processed food and beverage products
amounted to US$ 60 million or three 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). Per capita food and beverage
exports in 2011 were US$ 10.9.
Food and beverage imports are diversified, although the sugars and sugar confectionery product group makes up
the highest proportion (20 percent, ranking in world imports 89), followed by vegetable oils (15 percent, ranked
108), cocoa preparations (15 percent, ranked 65), and beverages (13 percent, ranked 100). Dairy products account
for 48 percent of exports (ranking in world exports 70), followed by beverages (17 percent, ranked 108), and
7
miscellaneous edible preparations (12 percent, ranked 95).6
Across partners, exports of Kyrgyzstan’s food and beverage commodities were not diversified in 2011, as
Kazakhstan accounted for 62 percent of total exports, compared to relatively diversified imports, where four
countries accounted for 86 percent of total food and beverage imports.
Top destinations for food and beverage products: Kazakhstan (62 percent), Tajikistan (14 percent), Russia (nine
percent), UAE (six percent), and Uzbekistan (four percent) in 2011
Top origins for food and beverage products: Russia (39 percent), Kazakhstan (19 percent), Ukraine (16 percent),
Belarus (12 percent), and Turkey (two percent) in 2011
Chart 4. Food and beverages and agricultural trade performance over time
Source: ITC (UNCTAD/WTO): Trade Map online, accessed in October 2012
6 ITC (UNCDAT/WTO)
8
Chart 5. Share of product groups in total exports and imports of food and beverages in 2011
Source: ITC (UNCTAD/WTO): Trade Map online, accessed in October 2012
Chart 6. Evolution of the top five destinations of exported food and beverage 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 food and beverage products by
Kyrgyzstan
in 2011
gy
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: On paper, Kyrgyzstan has a liberal investment regime with a broad base
of commercial laws in place, including the Law on Investments (2003); the Law on State Registration of Legal
Entities and the Law on Free Economic Zones. Attracting FDI is a priority of 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 20127, Kyrgyzstan was ranked 64 (among 181 economies) by the FDI Inward Attraction Index in
2011 that has significantly improved compared to 114 in 2000 (among 178 economies).
According to the IAB report8, Kyrgyzstan is one of the more open countries to foreign capital participation, and 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 LLC needs a minimum of two shareholders. Companies are registered
7 UNCTAD (2012) World Investment Report 2012: Towards a New Generation of Investment Policies, UN Conference on Trade and
Development NY and Geneva, Switzerland
8 IFC/MIGA/WB (2010) Investing Across Borders: Indicators of foreign direct investment regulation in 87 economies. The World Bank
Group. Wachington
10
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 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 favourable fiscal climate (profit and income tax is 10
percent and VAT is 12 percent)
Foreign direct investment flows: Overall, per capita FDI in the Kyrgyz economy is low compared to the other CIS
countries and has decreased as a result of social tensions and political instability in the country since 2009. In 2011,
Kyrgyzstan’s FDI inflows were US$ 390 million or 6.6 percent of GDP with an annual decline of 11 percent, which
almost reached the peak FDI inflow of 2009. Between 2007 and 2010, there has been a substantial increase in
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 towards manufacturing, food processing, banking and mining and FDI
in the agricultural sector is relatively limited. Manufacturing is the biggest recipient of FDI, generating about 55
percent of total FDI inflows in 2011.9
In 2010, the largest sources of FDI were Canada (37 percent), the United Kingdom (16 percent), China (12
percent) and Russia (10 percent).10 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 (or 13.4 percent of all industrial employees).11 In
2009 manufacturing companies with foreign investments employed 38 percent of the total labour force and there
were 520 enterprises, which is 1.4 times more than in 2005. In 2009 the food, beverage and tobacco industries
comprised 99 enterprises with foreign investments making more than one third of the total manufacturing output
and employing 5,228 people. Joint ventures and foreign companies are involved in the production of wheat
flower, pasta, 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; ITC (UNCTAD/WTO); accessed in October 2012
9 http://www.mineconom.kg/index.php?option=com_content&view=article&id=2020&Itemid=725&lang=en
10 http://www.state.gov/e/eb/rls/othr/ics/2012/191179.htm
11 National Statistic Committee of Kyrgyz Republic (2011) Activities of enterprises with FDI for 2006-2010
11
Food safety, certification and quality control
Food safety background and Kyrgyzstan’s membership: Kyrgyzstan is a member of the Codex Alimentarius
Commission and a correspondent member of the International Organisation of Standardization (ISO). Issues
surrounding the protection of human health in general and especially from food-borne risks, which come under
the SPS Agreement, are dealt with by the Law on Sanitary-epidemiological Safety of the Population (2003) and
the Veterinary Law (2005). The country’s existing system for regulating the safety of foods and related production
processes is not yet in a full compliance with internationally accepted regulations and WTO requirements. A
draft of a law on requirements for the safety of food products and processes of their manufacturing, storage,
transportation, marketing and utilization has been 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
in becoming a member of the International Laboratory Accreditation Cooperation and establishing a national
information body and national reference centres 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 the 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.), which 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 and 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 and final products, including ingredients and equipment shall meet requirements stipulated
in the 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 flour and bakery products generated 26
percent, meat products 15 percent and alcoholic products 14 percent.
Business environment: According to the Doing Business Report12, through business reforms the Kyrgyz Republic
has made starting businesses and enforcing contracts easier in comparison with 2010. The economy was ranked
70 (out of 185 economies) in 2012 (three points down compared to 2010 and 14 points up compared to 2006).
Cross border trading is ranked 174, paying taxes at 168, protecting investors at 13, getting credit at 12 and starting
a business at 15.
12 WB/IFC (2012) Doing Business 2013: Smarter Regulations for Small and Medium-size Enterprises. 10th edition. Washington, USA
12
Kyrgyzstan is ranked 10 out of the top 50 most improved economies overall (by 14.8 percent) since 2005. There
was also a percent improvement in dealing with construction permits and a 38 percent improvement in getting
credit. While still being among the most difficult countries to get electricity, Kyrgyzstan has good practice around
the world in terms of obtaining electricity connections and it has improved in getting electricity the most since
2010 (by 11 percent). Kyrgyzstan is considered one of the slowest and most costly economies in terms of exports
and imports.
Kyrgyzstan has formed regulatory reform committee at the interministerial level, and has reported that the use
DBIs is one input to inform their programs for improving the business environment.
Tax relief: According to a PWC report13, in 2012, the Kyrgyz Republic increased taxes for firms by introducing a real
estate tax, although it also reduced the sales tax rate. The new Tax Code (2009) introduced a flat personal income
tax of 10 percent and VAT of between 12 and 20 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;
including, alcohol, beer, tobacco, wines, coffee and cocoa and the raw materials for wines.
Research & Development and innovations: Required investments in new technologies and products and in the
agro-industry R&D remain low. State-owned enterprises continue to be the primary beneficiaries of government
support for innovation and R&D.
In 2009, R&D expenditures accounted for 0.16 percent of GDP (0.23 percent of GDP in 2007). Investments in R&D
represented about 19 percent of total food and beverage outputs in 2009.
Competitiveness: According to the Global Competitiveness Report 2012-2013, Kyrgyzstan is at the first stage
of development (factor driven), it placed only 127 overall on the 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 costs14. The five biggest barriers to doing business
in Kyrgyzstan are as follows: Policy instability, corruption, government instability/coups, inefficient government
bureaucracy and poor access to financing.
According to IDR 201115, in the context of the Competitive Industrial Performance index (CIP) Kyrgyzstan was
ranked 101 in 2009 with no change compared to 2005, with per capita manufacturing value added of US$ 50 and
US$ 46 respectively.
13 PwC (2012) Paying Taxes 2012. The Global Picture, PriceWaterHouseCoopers supported by WB and IFC
14 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
15 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.
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Ranking Kyrgyz Republic
Doing Business Indicators Ranking in 2012
Agribusiness Indicators Values in 2012
Source: Author’s estimations and calculations; WB/IFC Doing Business Rankings online, accessed in October 2012
Source: EBRD database; UNCTAD; Author’s calculations of EECA average
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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
Agribusiness and Enterprise Development Officer
FAO Regional Office for Europe and Central Asia
Email: [email protected]
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