Kyrgyz Republic - Country Commercial Guide
Distribution and Sales Channels

Discusses the distribution network within the country from how products enter to final destination, including reliability and condition of distribution mechanisms, major distribution centers, ports, etc.

Last published date: 2020-08-28

Around 80% of the foreign investment in the country is centered in Bishkek, with the majority of the remainder focused on extractive industry firms and production plants operating in the regions.  Most U.S. firms currently operating in the country have not expanded their businesses significantly outside of the capital because of limited market capacity.  Many imported products come overland from China, Kazakhstan and Uzbekistan to the Bishkek market.  The road network for distribution of goods is largely sub-standard.  A recently constructed highway connecting Bishkek to western China is by far the best road in the country.  According to the World Economic Forum’s Global Competitiveness Index for 2018, the Kyrgyz Republic  ranks 118 out of 140 countries by quality of roads[1].

Using an Agent to Sell U.S. Products and Services

Business in the Kyrgyz Republic is largely based on personal relationships.  In an economy where rule of law is not yet firmly established, the quality and depth of business relationships are often the best protection against loss and are key to market access.  Selection of a local partner (or partners) is probably the most important decision a company makes in its market entry.  Though on-the-ground contacts are important, some firms choose to cover the Kyrgyz market from a regional office in Kazakhstan or Russia.

A reliable distributor is the best way to address challenges including communicating with clients and providing after sales service.  Many exporters designate a local trading company as their local sales agent responsible for handling customs clearance of imported goods, dealing with established wholesalers and/or retailers, marketing the product directly to major corporations or the government, and handling after-sales service.  Many Almaty-based distributors cover the Kyrgyz market.

Establishing an Office

In order to start operating in the Kyrgyz Republic, a legal entity must be registered with four governmental bodies[2]:

  • The Ministry of Justice (receives registration certificate containing the registration number as well as entry of data into the Unified State Register of Legal Entities);
  • The National Statistics Committee (receives statistical registration card as well as entry of state registration data into the Uniform State Register of Statistics);
  • The State Tax Inspectorate (receives a unique identification number that is to be entered in all financial, accounting, and customs documents); and,
  • The Social Fund.

Individual entrepreneurs, however, need only to register with the Statistics Committee and the Tax Inspectorate.

A one-stop shop concept was re-introduced in 2015 under the aegis of the Investment Promotion and Protection Agency (IPPA), which works to ease the process of opening a company.  Registration with the Ministry of Justice automatically registers the company with the other agencies.  For commercial companies, the registration takes approximately three days, while for financial and credit institutions or non-commercial organizations the registration process is typically 10 days[3].  According to the World Bank’s Ease of Doing Business rankings, the Kyrgyz Republic ranked 42nd out of 190 countries for Starting a Business[4].

An enterprise can operate as a limited liability company, additional liability company, joint-stock company, general or limited partnership, foreign enterprise, or enterprise with foreign participation.  There are some additional types such as individual entrepreneur, representative office, branch office, commercial cooperative, and credit union.  All incorporating documents should be in Russian or Kyrgyz and be notarized by a notary office.

Franchising

Franchising is not widespread, but is growing in the Kyrgyz Republic.  A number of Western firms such as Coca-Cola, Hyatt, Baskin Robbins, Yum! Brands (KFC),[WS1]  Papa John’s, Nathan’s Famous Hot Dogs and officially licensed retailers and distributors including Levi’s, Nike, New Balance, and Crocs currently have a presence or affiliates in the country.

Direct Marketing

Direct marketing is gradually becoming more popular in the Kyrgyz Republic, due in part to increased internet penetration and the expansion of mobile networks  It is common for entrepreneurs to distribute samples and promotional materials at business events and forums, but the primary channels for advertisement remain television, newpapers, and the internet .  There are no international advertising companies currently operating in the Kyrgyz Republic, but local firms should be able to assist in direct marketing activities.

An enterprise can operate as a limited liability company, additional liability company, joint-stock company, general or limited partnership, foreign enterprise, or enterprise with foreign participation.  There are some additional types such as individual entrepreneur, representative office, branch office, commercial cooperative, and credit union.  All incorporating documents should be in Russian or Kyrgyz and be notarized by a notary office.

         Joint Ventures/Licensing

Joint ventures are the most proven strategy for entry into the Kyrgyz market.  Foreign investors are generally protected by the inclusion of a well-positioned national investor familiar with the local system.  Furthermore, Kyrgyz  law gives more protection to joint ventures than to representative offices or international businesses.

Several commercial activities require government licenses.  The list below is not exclusive:

  •   Exploration, prospecting and use of mineral deposits
  • Manufacture and sale of pharmaceuticals, medicine, perfume-cosmetic and chemical substances, and medical equipment, except enterprises that sell soap, cleanser and perfume-cosmetic goods with a certificate of quality from the manufacturers
  • Production of beer, wine, champagne, vodka, cognac and other alcohol
  • Organization of gaming and gambling establishments
  • Urban planning, drafting and design of housing, public buildings or industrial construction
  • Building and assembly jobs, excluding individual residence buildings construction
  • Banking operations, credit union and pawnshop activities
  • Securities
  • Insurance
  • rade in alcohol
  • Private educational institutions

        Express Delivery

DHL, UPS, and Federal Express are all present in the Kyrgyz Republic, though their reach does not extend outside the cities of Bishkek and Osh.  Overnight service is not available and packages usually require three to four days to arrive from the United States.

         Due Diligence

Due diligence remains challanging in the Kyrgyz Republic, but a number of western oriented legal and consulting firms are in a position to assist foreign companies with this requirement.  Market research capacity is underdeveloped and reliable information can be difficult to find.  Reliable economic information is also produced by aid and humanitarian organizations operating within the country, including the UNDP, USAID projects, the World Bank and the IMF.  The American Chamber of Commerce in the Kyrgyz Republic and the U.S. Embassy can provide advice to firms planning to conduct business in the Kyrgyz Republic.

 

 


Ok like this? KFC is Yum brands so seems strange to have them separate [WS1]