Kyrgyz Republic - Country Commercial Guide
Investment Climate Statement

The Investment Climate Statement Chapter of the CCG is provided by the State Department. 

Last published date: 2021-10-05

The U.S. Department of State’s Investment Climate Statements provide information on the business climates of more than 170 economies and are prepared by economic officers stationed in embassies and posts around the world.  They analyze a variety of economies that are or could be markets for U.S. businesses. Topics include Openness to Investment, Legal and Regulatory systems, Dispute Resolution, Intellectual Property Rights, Transparency, Performance Requirements, State-Owned Enterprises, Responsible Business Conduct, and Corruption.

These statements highlight persistent barriers to further U.S. investment.  Addressing these barriers would expand high-quality, private sector-led investment in infrastructure, further women’s economic empowerment, and facilitate a healthy business environment for the digital economy.  To access the ICS, visit the U.S. Department of Department of State’s Investment Climate Statement website. 

The U.S. Department of State’s Investment Climate Statements provide information on the business climates of more than 170 economies and are prepared by economic officers stationed in embassies and posts around the world.  They analyze a variety of economies that are or could be markets for U.S. businesses. Topics include Openness to Investment, Legal and Regulatory systems, Dispute Resolution, Intellectual Property Rights, Transparency, Performance Requirements, State-Owned Enterprises, Responsible Business Conduct, and Corruption.

These statements highlight persistent barriers to further U.S. investment.  Addressing these barriers would expand high-quality, private sector-led investment in infrastructure, further women’s economic empowerment, and facilitate a healthy business environment for the digital economy.  To access the ICS, visit the U.S. Department of Department of State’s Investment Climate Statement website. 

Against the backdrop of the worst economic downturn since 1991, a looming debt crisis, and a deteriorating COVID-19 situation in the region, the Kyrgyz Republic faces daunting prospects in 2021 to stabilize the economy and recuperate investor confidence. In October 2020, the toppling of the government under former President Soorenbai Jeenbekov in a populist uprising against vote-buying and administrative corruption created the path for the installation of a populist administration under President Sadyr Japarov, who quickly reorganized the government and enacted sweeping constitutional reforms. The Japarov administration, while maintaining its partnerships with key economic partners Russia and China, also seeks financial support and foreign investment from the United States and other Western countries to support economic recovery.  However, under the auspices of a sweeping anti-corruption campaign, detentions and aggressive tactics against private businesses have increased, raising serious concerns among foreign investors about the security of their investments. In May 2021, the government levied a $3 billion fine against the country’s largest foreign investor, Centerra Gold Inc, and installed external management for a three-month period. The government and Centerra Gold Inc. have entered into arbitration proceedings, but the matter will likely have long-lasting repercussions on the country’s already challenging investment climate.

The Kyrgyz economy significantly contracted by 8.6 percent of GDP in 2020, mainly due to decreases in construction, tourism, and non-gold exports. Total inbound foreign direct investment in 2020 shrank by over 50 percent, due to reduced inflows across the board among the country’s main investors: Canada, China, the United Kingdom, and Russia. The International Monetary Fund projected growth is expected to rebound in 2021 and with a full recovery to pre-pandemic levels by 2023, barring a severe resurgence of COVID-19 or political turbulence. The government’s focus on reducing public debt, which is currently 68 percent of GDP, may restrict fiscal space in the short to medium term to move forward on public investments and public private partnerships approved in 2019.

Corruption and government gridlock are major impediments to prospective investment and business development. Since February, the new government has undergone a mass re-structuring of ministries and state agencies, including re-organization of state bodies for economic policy formation such as the State Committee for Information and Communications Technology and the Investment Promotion and Protection Agency, as well as law enforcement oversight by disbanding the Financial Police. Until permanent leadership is assigned for new state bodies, the new government’s short-term priorities and internal capacity continue to be in a state of transition, which may increase some administrative costs for doing business. While the legal and regulatory framework is set up to be in accordance with international norms, poor implementation and weak enforcement, particularly with respect to intellectual property rights protection, and transparency in extractive licensing, are endemic problems. Since October 2020, President Japarov’s anti-corruption campaign resulted in a significant uptick in business investigations and detentions of business executives on criminal charges. Although the government extended the moratorium on business inspections until January 1, 2022, state security services are increasingly involved in economic crime cases, raising concerns about deteriorating transparency and oversight of business regulations.

The Kyrgyz Republic remains a frontier market, oriented towards higher-risk investors seeking to capitalize on the country’s minimal market entry barriers, lack of restrictions on foreign ownership, and export-oriented tax incentives to establish a foothold in Central Asia. Although FDI has historically targeted mining-related sectors, finance, and petroleum product manufacturing, the new government’s stated commitment to develop the country’s digital economy and to enhance regional trade integration presents numerous long-term investment opportunities in agribusiness and food processing, ICT infrastructure, energy, and transit and customs. The Kyrgyz Republic’s participation in the newly launched CASA-1000, a regional electricity transmission project, may increase the country’s export capacity and investment opportunities in the power sector.  This also may catalyze political will to pursue energy tariff reform and leverage new investment with the country’s largely untapped hydro resources. In order to unlock these opportunities, it will be contingent on the new government to prevent backsliding in structural reforms to increase competitiveness and transparency in the investment climate to unlock these opportunities.

*Some information in the report may be subject to change upon date of publication and will be updated in the ICS 2022.