Kyrgyzstan: Entrepreneurs, tired of inspections and barriers, leave for other countries

BISHKEK (TCA) — Kyrgyzstan should create a competitive economy applying innovative technologies and open to attract investments, Kyrgyz President Sooronbai Jeenbekov said at a meeting with representatives of the business community on September 17.

“The main goal of our meeting is to openly discuss the country’s economy and acute problems of entrepreneurship. What does business need to further develop the economy and how the branches of power could support it?” the President addressed the businesspeople.

State measures and business claims

President Jeenbekov spoke about the state’s measures to eliminate the problems hampering entrepreneurs. A moratorium on inspecting newly opened businesses has been introduced for three years. Entrepreneurs engaged in the import of technological equipment are exempted from customs duties. In the sewing industry, the social tax rate for individual entrepreneurs has been reduced from 27% to 12%. Business service centers are being established to provide state support to entrepreneurs.

“Nevertheless, there are serious claims of the business community to the Government including the judiciary and law enforcement agencies. Indeed, the claims are justified. Some state bodies, instead of creating conditions for business and rendering assistance to them, continue to intervene in their activity with checks,” Jeenbekov said.

Some entrepreneurs, tired of inspections and barriers, leave for other countries, he added.

Business Ombudsman

The injustice of litigation is among the main complaints of entrepreneurs. Another problem is that there are no real guarantees to ensure the inviolability of private property rights of investors. Entrepreneurs are concerned about the instability of legislation, as well as the administration of social payments and taxes.

At the meeting, the President and businesspeople discussed how to remove the factors that impede the development of entrepreneurship in the country. The President listened to the ideas and proposals of entrepreneurs, promising that they will be taken into account and decisions will be made on them.

“We will struggle with shortcomings in the work of control and law enforcement agencies. Therefore, the Business Ombudsman institution will be established to protect the rights of business entities. To define the country’s industrial policy, the Industrial Development Committee will be created under the auspices of the National Sustainable Development Council,” Jeenbekov said.

The Committee will work on a voluntary basis. To enhance its status, the President proposed to invite representatives of leading business associations and international companies to become its members.

Corruption is the main problem

According to a survey conducted by the Chamber of Commerce and Industry of Kyrgyzstan among local entrepreneurs, corruption is the main problem in doing business in the country.

Businesspeople are also concerned about the lack of state guarantees in protecting private property. The absolute majority of disputes in courts are resolved in favor of the state. To solve the problem, the CCI suggested transferring the issue of resolving disputes between businesses and the State to independent arbitration tribunals.

Among other problems, entrepreneurs mentioned unstable legislation and high social taxes for employers, which is among the main reasons for working in the shadow.

The mining industry can be promising and bring good revenue to the state budget if work of officials is well-coordinated, Executive Director of the International Business Council based in Bishkek, Askar Sydykov, said.

In June 2018, the Government opened a special account for financial proceeds from the fight against corruption. As of September 12, almost 400 million soms had been received on the account.

“Now the account is being actively replenished from the fight against corruption. We would not want this to turn into extortion of money from the business,” Sydykov commented.

“There is no justice in the business environment,” Chairman of the National Alliance of Business Associations Stalkbek Akmatov said. He told the meeting about an entrepreneur who bought a $1.5 million building three years ago to open production there. However, the state bodies took this facility, and nobody returned the invested money to the businessman. “We have no one to turn to, except for the President,” Akmatov said. Jeenbekov promised to take the issue under his control.

Shadow economy and unclear tax rules

The shadow economy is also among the biggest problems in the country, entrepreneurs said. For example, alcohol and tobacco industries accounted for 27% of GDP in the Soviet period. Currently, this sector’s input is less than 1% of the country’s GDP, because businesses work in the shadow. Entrepreneurs developed a project on how to withdraw the industry from the shadow.

The tax rules and administration are very complicated in Kyrgyzstan, the head of the Suppliers’ Association Gulnara Uskenbaeva believes.

“We need clear internal and external tax rules that should be in force at least for five or ten years, but the Economy Ministry wants to reduce it to three years. When large investors come to the country, they have to calculate their business plans, so a long-term tax policy is vital.”

Trade problems

Aziza Yuldasheva, Executive Director of the Agribusiness Association, proposed to hold talks with the leadership of Uzbekistan on the opening of the second checkpoint at the border of the two countries. This will simplify trade cooperation for citizens and speed up export-import procedures.

Currently, the only checkpoint, Dostuk, is heavily overloaded. The checkpoint, located at the Kyrgyz-Uzbek border between the Osh and Andijan regions of Kyrgyzstan and Uzbekistan, was opened in September 2017.

Head of the Kyrgyz Trade Union Damira Dolotalieva spoke about unequal competition between domestic and Chinese businesspeople. In 2016, China significantly complicated the procedure for issuing visas for Kyrgyz citizens.

Chinese traders enjoy great benefits and support from their state. Besides, thousands of local traders cannot continue their business due to the price dumping by Chinese traders, she said, proposing to ensure a balance of interests in trade and create a working group to determine quotas for foreign citizens and resolve the issue of obtaining Chinese visas.

Balance of interests

There will be more meetings with entrepreneurs, because there is the National Sustainable Development Council which includes MPs, government members, and representatives of the judiciary, state bodies and the public, President Jeenbekov said.

Business problems often remain unresolved due to the frequent change of Government ministers. The Government should work steadily so that officials do not change and fulfill their obligations, he added.

“But we should consider the interests of both entrepreneurs and the State. There must be a balance of interests,” the President believes.

The responsibility lies with both sides. “You also have to contribute to the national budget. The State will create conditions, but you, as representatives of business associations, should influence the entrepreneurs who are working incorrectly so that they pay taxes on time and do not hide their income,” Jeenbekov said.

In January 2019 another big meeting between the head of state and the business community will take place, and the Prime Minister will report on the work done to solve the business community’s problems, President Jeenbekov concluded.