Kyrgyzstan Business & Economy - The Times Of Central Asia

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Seasonal workers in Kyrgyzstan look to Europe

The Russian Federation is now the leader in the number of migrants coming from Central Asian countries. However, according to the Kyrgyz Ministry of Labor, Social Security and Migration, the number of Kyrgyz working in Russia has decreased by 30% over the past year. According to the Ministry of Labor, for nine months of 2023, the number of Kyrgyz migrants in the Russian Federation decreased by 180,000 people. The tightening of Russia's migration policy, the weakening of the ruble, and the war in Ukraine are to blame. In addition, according to the National Bank of the Kyrgyz Republic, remittances from Russia to Kyrgyzstan decreased by almost one billion dollars (35%) during the reporting period. Remittances from the Russian Federation account for almost one third of Kyrgyzstan's GDP. Today, many migrants who previously worked in Moscow and other major Russian cities for decades have begun to consider new countries for work. In Bishkek, one can see many advertisements for construction workers in Bulgaria or plantations in the United Kingdom. The increase in the flow of migrants from Central Asia in London is explained by an increase in quotas for seasonal workers, as well as a decrease in the number of workers from Ukraine. Where men between 18 and 60 are banned from leaving the country due to mobilization. Before the war, most seasonal workers in the UK came from that country. In 2023, the number of work quotas for Kyrgyz people increased from 1,500 to 2,000 people, the Kyrgyz Ministry of Labor said. It also said Kyrgyz authorities support migration both westward and eastward. "Previously, our citizens worked legally in only two or three countries around the world. But at the moment the geography for official employment is expanding every year. Fifteen destinations are already available - people have a choice. This includes employment in the Persian Gulf countries, the UK, Germany, Japan and Hungary," Almaz Alybayev, director of the Center for Employment of Citizens Abroad under the Ministry of Labour, Social Development and Migration, told Kyrgyz media. The Kyrgyz government believes that Kyrgyz people will return from the UK and other countries with the capital and experience to start their own businesses, which will contribute to the growth of the state's economy and the welfare of its citizens. The example of Kyrgyz migrants working in South Korea is noteworthy. There, Kyrgyz migrants worked at factories producing doors and plastic windows. As a result, Korean technologies in this area are now actively used in Kyrgyzstan. The same can be said about innovations in agriculture, which are used by farmers in Great Britain. Kyrgyzstan is in many ways an agrarian country, which means that the experience of such migrants will be useful to the country.

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Kyrgyzstan Gives “National Significance” Status to Strategic Energy Projects

The Deputy Chairman of the Cabinet of Ministers, Minister of Water Resources, Agriculture and the Processing Industry of the Kyrgyz Republic, Bakyt Torobaev on January 16th held a meeting of the governmental commission for the selection of national investment projects. The meeting considered giving certain undertakings the status of “projects of national significance,” which, according to Torobaev, will help increase their attractiveness to investors. This will contribute to socioeconomic development, job creation, the development of industry and agriculture in regions where such projects are implemented, Torobaev stated. The commission granted the status of “projects of national significance” to the construction of the Kambarata hydroelectric power plant-1, the Kazarman hydroelectric power plants cascade, and the Kemin-Torugart 500 kV power transmission line. With this status, companies interested in investing in these will be exempt from value added tax, sales tax, and income tax for a certain period. The Cabinet of Ministers expects that this step will help speed up the implementation of these strategic projects. Construction of the Kambarata hydroelectric power plant-1 and the cascade of the Kazarman hydroelectric power plants are two flagship projects aimed at introducing new power generating capacities to help Kyrgyzstan overcome its chronic electricity shortages, which are especially acute in the winter months.

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Despite Challenges, Kyrgyzstan Showed Steady Economic Growth in 2023

Despite global uncertainties, Kyrgyzstan’s economic development in 2023 showed good results, the country’s Ministry of Economy and Commerce said on January 16th. Economic growth over the past three years averaged 6.9% — 5.5% in 2021, 9% in 2022, and 6.2% in 2023, indicating the stability of the economy and its gradual adaptation to the post-Covid world and current geopolitical uncertainty, the ministry said in a statement. According to preliminary estimates from the National Statistical Committee, in 2023 Kyrgyzstan’s gross domestic product amounted to $13.7 billion. In construction, growth was at 10.3%, in the services sector 6.2%, in industry 2.7%, and in agriculture 0.6%. Industries producing goods accounted for 32.3% of GDP, and industries providing services 50.8%. The volume of foreign trade from January-November 2023 amounted to $13.9 billion, an increase of 29% compared to January-November 2022. Kyrgyzstan’s exports amounted to $2.8 billion and increased by 36.7%, and imports amounted to $11.1 billion, up 27.2%. In the structure of trade turnover, exports accounted for 20.2%, and imports 79.8%. Kyrgyzstan’s trade with fellow member states of the Eurasian Economic Union (EEU) - Armenia, Belarus, Kazakhstan, and Russia - amounted to $3.9 billion, a decrease of 11% compared to January-November 2022. Kyrgyzstan’s largest trading partners were Russia (65.9%) and Kazakhstan (31.7%). Meanwhile, Kyrgyzstan’s trade with countries outside the EEU from January-November 2023 amounted to $10 billion, a 1.6-fold increase compared to January-November 2022.

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Development of Kyrgyzstan’s largest iron deposit begins

Kyrgyzstan's state enterprise Kyrgyzgeologiya will begin exploration work at the iron deposit "Zhetim Too" in the Naryn region. The country's Cabinet of Ministers granted the entity the right to use subsurface resources for geological exploration at the deposit. The development of the iron deposit was one of the election promises of the current President of the Kyrgyz Republic, Sadyr Japarov. In 2020, Japarov said he was considering paying off the state debt to China with raw materials from the deposit. "This is a project that will pull our economy out of the swamp," the future head of state had declared while campaigning before the presidential election. Geologists predict that the "Zhetim-Too" deposit could earn $200 million a year. But it's not only about earning and selling raw materials abroad. At the "People's Kurultay" (i.e., people's parliament), the President noted that at the moment, the Kyrgyz Republic spends millions of dollars a year to buy iron to build railroads, hydroelectric power plants and other structures in the country. "In the future, we intend to use our own iron ore deposits and build modern plants to process iron ore and manufacture products from it instead of buying iron from outside," Japarov said. It should be noted that earlier attempts to start work at the "Zhetim Too" deposit ended in a political scandal and high-profile dismissals of officials. At one time, various foreign mining companies worked at the deposit, which caused discontent among local residents. Rallies were repeatedly held in nearby villages. In 2012, the Kyrgyz authorities sued the Chinese company Mylin Resources for the license of the deposit. Since 2016, the license for exploration and development of the subsoil of "Zhetim Too" has belonged to the state. Kyrgyzstan's geologists have previously stated that the exploration of the deposit will take at least five years. After all, it is necessary to assess the reserves of the deposit and the depth of their occurrence, as well as to study the composition of the soil and what percentage of it contains metals. There are also issues of ecology, environmental protection and construction of necessary infrastructure. Additionally, relic forests of the Naryn Reserve are located near the deposit. "Zhetim Too" was discovered in 1956 at the junction of Naryn and Issyk-Kul oblasts of Kyrgyzstan. Iron reserves at the deposit were estimated from 3 to 10 billion tons. The Association of Mining Industries of Kyrgyzstan calls the site one of the largest iron ore deposits in the world. However, the deposit has been explored only superficially so far and requires additional exploration. The approximate cost of exploration is estimated at more than 20 million U.S. dollars.

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Kyrgyzstan Budget Surplus for 2024

The President of the Kyrgyz Republic has signed a law "On the Republican Budget of the Kyrgyz Republic for 2024 and the planning period of 2025-2026." According to the data, this year the budget had a surplus with revenues amounting to $4,242,215,000, against expenditures of $4,120,000,000. The authorities want to use the surplus towards operations with financial assets and to cover state debt. According to the Ministry of Finance, the national debt of the republic as of September 2023 amounted to $5,987,000,000, Approximately $60 million dollars was spent on its servicing debt last year. In 2024, the authorities plan to allocate $74 million dollars from the state budget for the servicing and payment of debt. "To confidently pass the stage of peak payments on the state debt, we have projected the budget policy in terms of the formation of surpluses. This gives us the opportunity to service the debt without borrowing," Finance Minister Almaz Baketayev stated. The Kyrgyz state budget is so stable today that there are no doubts about servicing the national debt, he said. In Kyrgyzstan, Baketaev emphasized, all payments are made on time and in full, and external debt is decreasing The Ministry of Finance said that part of the surplus will be used to increase the state's share in local joint stock companies and to provide budget loans to domestic companies. Almost 40% of the nation’s external debt is owed to the Export-Import Bank of China. The authorities took these loans mainly for construction projects, the repair of roads, and rehabilitation of the electricity network.

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Interest-Free Loans for SMEs in Kyrgyzstan

The Ministry of Finance of Kyrgyzstan has published a report on the amount of interest-free loans granted to enterprises under the project, "Emergency Support to Micro, Small and Medium Enterprises" as of January 1st, 2024. The report indicates that loans of 5,921,800,000 som ($6,629,870) were granted to 8,929 entrepreneurs. This includes loans of up to 1,000,000 som ($11,196) to 7,788 entrepreneurs totaling 4,219,300,000 som ($47,238,020), and up to 3,000,000 som ($33,587) to 1,141 entrepreneurs totaling 1,702,400,000 som ($19,059,561). The project, "Emergency Support to Micro, Small and Medium Enterprises," which started its activities in September 2021, and will continue until June 2027, is supported and financed by the World Bank and the Asian Infrastructure Investment Bank (AIB). Several agreements with commercial banks have also been signed under the project. Small and medium-sized businesses play a significant role in the private sector, which in turn forms the basis of Kyrgyzstan's market economy. The main reason for this is the lack of the need for large start-up investments, and the speed of resource turnover. Due to their scale, small businesses represent the largest layer of the economy, determining the socioeconomic and partly the political level of development within the country. They act as both direct producers and consumers of a wide range of goods and services. The small business sector operates mainly in local markets. Micro, small and medium-sized businesses account for approximately 50% of Kyrgyzstan's GDP, and are fundamental to job creation in the country.