The planned for 2002 GDP growth by 7 percents and 5-percent increase in exports could be achieved only at 5% growth of industrial output. Obviously, it is not how things stand this year, industrial production level is much lower than expected – hardly 5.6 bln soms.
There are three main reasons to account for that. The first one is necessity to accumulate water in the Toktogul water reservoir at the beginning of the year. Second, prolonged rainy spring made possible for our regional neighbors to purchase less energy from us. It naturally resulted in lagging of energy sector – just 83% of last year level of output was produced by the industry in the 10 months. The third is the decrease in the level of gold mining due to accident in the Kumtor gold mine. Energy and gold mining industries are the ones to account for over 50% of GNP. It is extremely hard for the other industries to compensate for the losses.
However, there are yet some opportunities for the sectors to catch up. For instance, fuel industry has a good performance in 2002. 234.2 thousand tons of coal was extracted from the Kyrgyz mines in the 10-month period. It is almost 100% of the 2001 level (183 thousand tons of coal had been quarried by this time of the year in 2001). We also have 200 thousand tons of coal in the stores this year and it is in demand. Government has subsidized the miners with 20 mln soms for re-equipment. So far, they have received a little over 13 thousand soms.
Machine-building and metalworking industry. Ministry of Industry is establishing contacts with Russia, Kazakhstan and other CIS countries. A sustained tie between our countries is a straight path to the foreign producers. Kyrgyz industry is slowly recovering and the army of unemployed is shrinking. This is the MoFTI contribution to the National Poverty Reduction Strategy within the CDF framework.
Possibly it’s not long before domestic cars will flood our roads. Russia and Kyrgyzstan have agreed that the Bishkek automobile assembly plant produces GAZ dump trucks and Gazel-based refrigerators. Trial samples have been already assembled.
The Oremi plant, former Tyazelectromash, has started to manufacture transformer substations under the ADB-loan-funded project. It can potentially manufacture 1200 units per year and sell them to Russia. It is likely that in the near future Oremi will export its products to Siberia within the Interelectro program.
Three pillars of the Kyrgyz industrial policy:
First – negotiating with potential partners.
Second – recovery of suspended production through the investors’ funding or through the internal resources of the companies. The Chinese paper factory, launched in the Chui Oblast recently depicts the investor type. Tokmak glass factory, rehabilitated and re-equipped with support of some major German investors is another example.
Third – seeking for partners to sell them the controlling block of shares or transfer the companies under contract management.
At the beginning of 2002 the Ministry of Industry has developed a program including 25 enterprises that can actually be supported at the present time. Among them is the open-pit mine “Taldy Bulak Levoberejniy”, a gold mine that the Republic can develop on its own. Government has already signed a resolution on the gold deposit. However, if any investment proposals come up in the future, the Ministry will consider them.
Small black-oil producing enterprises are operating as well. Kant Cement and Slate Combined Plant, which has had problems with the Kazakh anti-dumping law, is in the program as well.
Light industry is represented by the still operating Osh JSC “Tekstlilshik”. The Bishkek worsted-woolen factory, now completely private, having sold part of its assets to cover the debts, has managed to attract a Russian investor.
…Competitive environment is the best development incentive for any enterprise. Everybody remembers rumors around the dairy producer “Wimm-Bill-Dann” that has recently entered the Kyrgyz market. Under pressure of competitors JV “Elvest” was forced to improve quality, design and assortment of its products. The Ministry of Industry’s objective is to encourage and attract those who are capable to breath in life into the Kyrgyz production and provide export growth.
A&F Kyrgyzstan No. 47, November 2002