Overview

The Kyrgyz Republic has been home to a notable garment manufacturing industry since Soviet times. Since independence, the sector experienced rapid development, fueled by comparative advantages such as low labor costs, favorable customs agreements, and historical ties to large, post-Soviet consumer markets. Since 2014, the sector has grown by approximately 190 percent.[1]

The sector remains fragmented, comprised predominantly of numerous small- and medium-sized enterprises (SMEs), with many manufacturers operating informally. As a result, estimates of both the market size and the number of workers employed in the sector vary widely.[2]  In 2019 the total export of the textile industry amounted to $118.6 million[3] (around 6 percent of total exports[4]), whereas in 2020 it reached only $63.3 million. Nearly 90 percent of Kyrgyz textile products are exported to Russia, and the rest to Kazakhstan. In 2019, an estimated 200,000[5] people worked in the garment manufacturing sector in the Kyrgyz Republic,[6] or between 8-8.5 percent of the total labor force, but this number shrank by over 70 percent due to the COVID-19 pandemic.[7]

The vast majority of Kyrgyz companies in the industry operate as “cut-make-trim” garment manufacturers, while actual domestic textile manufacturing has virtually ceased. After years of producing for the bazaar trade, Kyrgyz garment manufacturers are now beginning to fulfill “cut-make-trim” contracts with fabric and fixtures provided by clients, with some matured firms now involved in design, branding, and production. As global competition in the sector has accelerated in recent years, Kyrgyz garment manufacturers have been forced to adapt to shifts in global supply chains and are now positioning themselves to meet international demand.

USAID has partnered with SMEs in the garment and apparel industry to increase their export potential. Through this cooperation, Kyrgyz apparel manufacturers underwent Business Social Compliance Initiative (BSCI) social and labor audits and certification, enhanced their quality control systems, and expanded their base of suppliers as well as international buyers.

However, several short- and medium-term challenges persist, including a lack of access to finance and modern inputs, and technical barriers to successfully market to prospective buyers outside the CIS region. The Kyrgyz Republic’s accession to the Eurasian Economic Union in August 2015 raised tariffs on several inputs into the garment manufacturing process, and the country continues to harmonize its laws and regulations to conform to the standards of the EAEU.

Opportunities

The garment and apparel manufacturing industry presents numerous opportunities for U.S. retailers to diversify their supply chain away from countries with troubling labor standards, and particularly those seeking to export to the larger, nearby markets of Russia and Kazakhstan. U.S. retailers committed to low carbon footprints will also be encouraged by the fact that nearly 90 percent of electricity is generated from renewable hydro-power assets. Opportunities also exist for professional service providers that specialize in certification and standardization and assist garment manufacturers in navigating the export process. On balance, the sector requires significant capital expenditures to upgrade machinery to remain competitive, which offers prospects for U.S. producers of advanced and specialized sewing, processing, and cutting equipment.