A survey conducted by the United Nations Industrial Development Organization (UNIDO) revealed that the leading foreign investors in Kyrgyzstan - Kumtor Operating Company, Reemtsma-Kyrgyzstan, Pinara Bishkek, Wimm Bill Dann, Demir Kyrgyz International Bank, and others - think Kyrgyzstan still does not have a favorable environment for direct foreign investments. The survey of UNIDO can help the Kyrgyz government expose the barriers to direct foreign investments and implement a new investment program, the so-called Matrix.
The participants in the recent international investment conference in Kyrgyzstan have developed concrete recommendations for the Kyrgyz Cabinet. Before the forum, German Ambassador Klaus Achenbach said that if the Matrix has been implemented, Kyrgyzstan would become a market-economy model for its neighbors. The conference participants were unanimous that the main barrier to foreign investments in Kyrgyzstan is corruption. International experts consider Kyrgyzstan one of the most corrupt countries in the CIS. Here are the opinions of some participants in the conference.
Takao Otsuka, industrial development officer (Japan): The government of Japan, through UNIDO, has decided to support Kyrgyzstan's special agency attracting foreign investments. It will work for three years. Your country has strong corruption, but we do not have any concrete proposals and mechanisms to combat it. This is the business of government officials: corruption grows in the state administration system and officials must eradicate it themselves. The Cabinet has to develop a concrete plan. This phenomenon must be considered not in the political but regulatory and institutional spheres. If these areas have been improved, corruption would disappear or at least reduce. The UN can only advise what it is better to do.
Wojciec M. Hubner, chief technical adviser for the Trade Promotion Program in Central Asia: Attraction of foreign investments is largely dependent on trade development. Investors must see that they will work not only for your narrow market with a low purchasing power of local population. Kyrgyzstan must develop the national strategy for trade development in accordance with the Investment Matrix. You must show investors that the government is interested in private business development.
Nurkali Isayev, head of the DFID office: Political will is needed for eliminating trade barriers. The main task today is to solve the transport problem. The IMF thinks the cost of cargo transportation between Kyrgyzstan, Kazakhstan, and Russia is very high. This hinders mutual trade - the price of the same goods in these countries is different. Investors pay attention to this problem that must be solved at the regional level.
As to creating of the special investment attraction agency in Kyrgyzstan, it is necessary to carefully determine its functions. If the agency is semi-governmental, the ministries would hardly pass its functions to it. The state can not pass all of its authorities to the private sector. If the agency regulates, registers and issues licenses, it would not be a non-governmental structure. It must be a consultant and assistant to the ministries, not duplicating their functions. In this case, the agency is quasi-governmental and it would be easier to attract donors. Financial support from the state would make the work of the agency stable.
Djoomart Otorbayev, Kyrgyz Deputy Prime Minister on Economic Development, Trade and Investments: The Kyrgyz parliament has not passed the Law on One Window, which is unpleasant. We have to work with the parliament members who have probably not studied this issue very good. It is good for us that Kyrgyzstan has been chosen a pilot CIS country for investment attraction. Over the past two years we have made a breakthrough in this area since we have found a coordinating mechanism for investment attraction. Now we have suggested a project to meet the requirements of our economy. We would complete the first stage of the project by the end of 2004. This process involves an authoritative international organization - UNIDO, an intermediary between donors and the government. During the next three years investors are going to invest in Kyrgyzstan US $700 million. The conference has helped us develop our investment policy for the next year. Our main task is to create an efficient state administration system and combat corruption.
By Albert Bogdanov,
The Times of Central Asia, June 19, 2003