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Thesis: The Legal Framework for Foreign Direct Investments in
Kyrgyzstan: Analysis of Present Investment Climate and Problems
A thesis submitted to the Bucerius/WHU Master of Law and Business Program in partial fulfillment of the requirements for the award of the Master of Law and Business (“MLB”) Degree
Askarova Aidai July 16, 2010
17 908 words (excluding footnotes) Supervisor 1: Pr. Peter Witt Supervisor 2: Mr. Abdygulov
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Table of Contents Table of Contents...................................................................................................................2 List of Acronyms ....................................................................................................................3
A. Introduction........................................................................................................................................4
B. Background Information about Kyrgyzstan .........................................................................................7
I. Basic facts ...............................................................................................................................7 II. Economy ................................................................................................................................9 III. International cooperation.....................................................................................................13 IV. Investment policy................................................................................................................15
1. Business attractions ...........................................................................................................15 2. State policy toward foreign direct investments...................................................................17 3. Major investors..................................................................................................................19
C. Legal framework for foreign direct investment ................................................................................23
I. International legal regime .....................................................................................................23
1. World Trade Organization initiatives ...............................................................................23 2. Regional Agreements.......................................................................................................25 3. Bilateral Investment Treaties ...........................................................................................25
II. Domestic legal regime .........................................................................................................26 1. Constitution of the Kyrgyz Republic ................................................................................26 2. Law “On foreign investments in Kyrgyzstan” ..................................................................26 3. Law “On investments in the Kyrgyz Republic”................................................................27 4. Other acts ........................................................................................................................35
III. Investment dispute settlement..............................................................................................37 IV. Free Economic Zones..........................................................................................................40 V. Legal status of foreign nationals ..........................................................................................43 D. The Doing Business Report..............................................................................................................46
E. Selected Issues ................................................................................................................................51
F. Conclusion .......................................................................................................................................55
Bibliography..........................................................................................................................56
Explanatory note Both conventional long form, which is the Kyrgyz Republic, and short form, which is Kyrgyzstan, are of use in this Master Thesis.
The legal acts are cited in accordance with the established norms of the Kyrgyz Republic. For further references, please visit the legal database www.toktom.kg
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List of Acronyms BIT
Bilateral Investment Agreement
CIS
The Commonwealth of Independent States
FDI
Foreign Direct Investment
GATS
General Agreement on Trade and Services
GDP
Gross Domestic Product
HDI
Human Development Index
IBC
International Business Council
IFC
International Finance Corporation
UNDP
United Nations Development Program
WTO
World Trade Organization
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A. Introduction
Within the relatively short period of independence Kyrgyzstan has experienced two
bloody revolutions. The first one, frequently referred to as a Tulip Revolution, took place in
March 2005 and ended up with the escape of the president Askar Akayev, his family and
supporters outside of the country. The corruption which developed around Akayev’s family was
a main cause of his fail1. The revolution brought former Akaeyv’s Prime Minister Kurmanbek
Bakiev to the presidency. In scenes reminiscent of the Tulip Revolution five years earlier on
April 6-7, 2010 spontaneous clashes erupted across Kyrgyzstan as protesters demanded the
resignation of President Kurmanbek Bakiev, leaving 81 dead and over 1.000 wounded2.
The events of April 2010 led to loss of life and injuries to persons, damage to
infrastructure and destruction of private and public property, weakening of confidence within the
private sector and to economic and fiscal pressures3. Since April 8 country is governed by the
Interim Government. The new government repeatedly assures that it will work on creation of
comfortable conditions for foreign investors and will continue to observe its obligations in
respect of business sector. Despite of its efforts to stabilize the business environment, including
the adoption of the Investment Protection Decree4, the investment climate seriously deteriorated
in the country, and that is quite powerfully shown in the investment survey conducted by the
International Business Council (IBC)5 in April and May of 20106. The reasons for this are the
introduction of external control in some financial institutions, resulting in a partial paralysis of
the financial system; the seizure of property and ownership of some companies in the regions;
unjustified inspections and pressure from the fiscal and law-enforcement agencies on private
1 International Crisis Group, Kyrgyzstan: After the Revolution, Executive Summary, “Crisis Group Asia Report N
97”, 2005, p. 1 2 Annete Bohr, Revolution in Kyrgyzstan –Again, (REP Programme Paper 03/10, Chatham House), p. 2 3 The Kyrgyz Republic: Joint Economic Accessment : Reconciliation, Recovery and Reconstruction, ADB - IMF -
The World Bank, July 21, 2010, p. 9 4 The Decree of the Interim Government of the Kyrgyz Republic “On protection of investments” from April 26,
2010 N 23 5 The International Business Council (IBC) is a business association, established in December 2000, whose
membership includes a wide range of local and international businesses who have created thousands of jobs and
have a combined investment of over one billion USD in the Kyrgyz economy. As well as promoting the common
interests of business investors and providing members with relevant information and advice to support their business
operations, IBC’s mission is to make the Kyrgyz Republic a more attractive investment location by promoting good
business legislation and efficient business practices, working in partnership with the government of the Kyrgyz
Republic and other local and foreign organizations. See: official site of the IBC at http://www.ibc.kg 6 Kurban Ashyrkulov, “We are contemporaries of the new Kyrgyzstan,” Investment now, 2.2010, p. 2
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companies7. Political instability has stipulated the outflow of deposits from the banking system
that was recently admitted by the first vice-prime-minister of the Kyrgyz Republic Amangeldi
Muraliev8. Apart from political instability, that is already enough to influence negatively minds
of investors, Kyrgyzstan suffers from high level of corruption, traditional to this part of the
world, unpredictable and uncertain economical policy, high financing costs and legal
uncertainties and hurdles.
As it is known, trade and investment will flow toward efficient, supportive, and
facilitative locations. At the same time, they will rapidly ebb away from locations perceived by
business as being bureaucratic, lacking in good governance, short on transparency and
synonymous with high costs9. This Master Thesis is aimed to provide an evaluation of the
existing investment climate in the Republic, mainly from the legal prospectus, and propose an
overview of the major guarantees for the foreign investors operating on the territory of
Kyrgyzstan. This work will not touch the issues of intellectual property law, constantly arising
when carrying out the investment activities in a foreign country, for the reasons of topic
complexity and ambiguous situation with the observance of author rights in Kyrgyzstan.
The Master Thesis consists of 5 chapters, each of them dealing with the selected aspect
of the state policy and legal framework for foreign direct investment in the Kyrgyz Republic.
The Chapter B presents an introductory minimum of information about the Kyrgyz
Republic, which is often a “terra incognita” for a western reader. Geographical location, key
economic indicators and major processes, in which the country was involved starting from the
times of Soviet past till modern days, international relations and membership – are the topics that
are briefly discussed in this Chapter.
The Chapter C, which is the core part of this Thesis, provides an overview of a legal
framework for foreign direct investments in the Kyrgyz Republic, formed by the international
law as well as domestic legislation. The multinational and regional agreements on treatment and
protection of foreign investors, bilateral investment treaties with particular countries on
promotion and assistance to investors, the Constitution of the Kyrgyz Republic and other
relevant legal acts are carefully analyzed and summarized in order to present the essential
freedoms and guarantees of the foreign investors. This Chapter also includes information on the 7 Kurban Ashyrkulov, “We are contemporaries of the new Kyrgyzstan,” Investment now, 2.2010, p.3 8 Aizada Kutueva, “Amangeldi Muraliev: Political instability stipulated the deposit outflow from the banking system
of Kyrgyzstan,” 24.kg news agency, at http://www.24.kg/economics/85842-amangeldi-muraliev-nestabilnaya-
politicheskaya.html 9 Robert Z. Lawrence, Margareta Drzeniek Hanouz, John Moavenzadeh, ed., The Global Enabling Trade Report
2009, World Economic Forum, p. 46
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means of dispute settlement available for foreign investors, including right of arbitrage. The part
IV offers a short summary on free economic zones, as the most welcoming and investor-
attractive areas in the country. The last part is about the legal status of foreign nationals in the
Kyrgyz Republic.
The following Chapter examines the dynamics of development of the Kyrgyz Republic
under the Doing Business report10, which is internationally recognized as a solid source for
measurement of an attractiveness of a particular country for conduction of business. The
characteristic feature of the Doing Business Report, making it worth to be mentioned in this
Master Thesis, is that the compiling group of authors takes into consideration the legal
framework for foreign direct investments in countries. This makes possible for developing
countries that have no extensive resources to invest in infrastructure or make promotion
campaigns to improve the country score by making the legislation more investor-attractive. The
Government under the former president of the Kyrgyz Republic Kurmanbek Bakiev has
substantially improved the performance of the Kyrgyz Republic and in 2008/2009 Kyrgyzstan
was recognized as a one of the top-reformator countries in the world.
The Chapter D, points to the problematic issues in the present legislation that need
further perfection and improvement for the purposes of investment attraction. These issues
include land acquisition rights by the foreigners and insurance of the property rights.
The Final Chapter provides a short conclusion, based on the international liberalization
trend.
10 The Doing Business report is an annual report by the World Bank Group, investigating the regulations that
enhance business activity and those that constrain it.
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B. Background information about Kyrgyzstan
This Chapter provides a short overview of the basic information related to the
geographical location, demographic setting, economic situation, foreign policy, investment
strategy and opportunities of the Kyrgyz Republic. The aim of this chapter is to transmit some
background information about the existing situation in Kyrgyzstan to the reader and prepare for
the better understanding of the following chapters.
I. Basic facts
Kyrgyzstan, also referred to as the Kyrgyz
Republic, is a mountainous landlocked country in
Central Asia. Mountains cover more than 90 percent
of the territory and arable land, mainly concentrated
in the valleys, composes only about 7 percent of the
total area. The territory of Kyrgyzstan is of the size
of the England and Scotland or the U.S. State of
Washington11. Kyrgyzstan is bordered by Kazakstan to the north, Uzbekistan to the west,
Tajikistan to the southwest and People's Republic of China to the east. The national referendum,
conducted on June 27, 2010 established a new form of government – a parliamentary republic.
The table on the right illustrates the main economical indicators for Kyrgyzstan as for the year
2009.
Russian and Kyrgyz are two official languages in the country. Although majority can
speak both languages, Russian language is widely used in business correspondence and official
life.
According to the last census of 2009, the total population equals to 5.418.300, of which
65.9 percent live in rural areas and 34.1 percent in towns12. The population is multinational,
comprised of the following major ethnic groups: 71% Kyrgyz, 14.3% Uzbek, 7.8% Russian,
1.1% Dungan, and 0.9% Uyghur etc.13
11 Eric G. Postel and Yuri Nevenchanny, “Kyrgyzstan – a jewel of Central Asia” 12 Quantity and population density. The National Statistic Committee of the Kyrgyz Republic 13 The national composition of the population. The National Statistic Committee of the Kyrgyz Republic
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The Human Development Report 2009 Overcoming barriers: Human mobility and
development14 ranked Kyrgyzstan as a country of a Medium Human Development with a Human
Development Index (HDI) of 0.59415.
Below are the selective rankings other than the HDI, demonstrating Kyrgyzstan’s
performance in important sectors, such as trade, business and freedom, measured by the
reputable international institutions.
Corruption Perceptions Index16 1.9 (ranked 162 out of 180) Ease of Doing Business Rankings17 68 (ranked 68 out of 181) Freedom of the Press18 72 (ranked 158 out of 195) Global Competitiveness Report19 3.36 (ranked 123 out of 133)
14 Human Development Report is an independent publication commissioned by the United Nations Development
Programme (UNDP). 15 Human Development Index is a summary composite index that measures a country’s average achievements in
three basic aspects of human development: health, knowledge, and income. It was introduced in 1990 for the first
Human Development Report as an alternative to conventional measures of national development, such as level of
income and the rate of economic growth. See: “The Human Development Index,” UNDP 16 The Corruption Perceptions Report is an annual report by the Transparency International, an organization that
monitors and publicizes corporate and political corruption in international development. The Corruption Perceptions
Index draws on 13 different expert and business surveys to measure perceived levels of public sector corruption in a
given country. Data collected in 2009. See: “Corruption Perceptions Index 2009,” Transparency International 17 The Doing Business report is an annual report by the World Bank Group, investigating the regulations that
enhance business activity and those that constrain it. Doing Business 2009 presents quantitative indicators on
business regulations and the protection of property rights that can be compared across 181 economies and over time.
Regulations affecting 10 stages of the life of a business are measured: starting a business, dealing with construction
permits, employing workers, registering property, getting credit, protecting investors, paying taxes, trading across
borders, enforcing contracts and closing a business. Data in Doing Business 2009 are current as of June 1, 2008.
See: “Doing Business 2009,” Doing Business-World Bank Group 18 The Freedom of the Press Survey is an annual report by The Freedom House, an organization that promotes and
researches advocacy of freedom across countries. The Press Survey assesses the degree of print, broadcast, and
internet freedom in every country of the world. Data collected in 2009. See: “Full report,” Freedom House 19 The Global Competitiveness Report is complied yearly by the World Economic Forum, an independent
international organization based on 12 pillars of competitiveness for countries at all stages of development. The
pillars include: Institutions, Infrastructure, Macroeconomic Stability, Health and Primary Education, Higher
Education and Training, Goods Market Efficiency, Labor Market Efficiency, Financial Market Sophistication
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Global Enabling Trade Report20 3.43 (ranked 101 out of 121) Index of Economic Freedom21 61.8 (ranked 74 out of 179) II. Economy
For more than 70 years, from 1919 to 1991, Kyrgyzstan was a part of the Russian
Empire and later the Soviet Union; it did not play any significant role by itself. After acquiring
the independence in 199122 Kyrgyzstan has started its own path to build a democratic society.
As a part of the centralized soviet economic system, Kyrgyzstan had a highly
specialized economic niche. It was a supplier of agricultural production, energy, machinery, rare
minerals especially antimony, mercury, lead, and zinc. Of greatest significance economically,
however, was gold, of which Kyrgyzstan was the Soviet Union's third-largest supplier23. Forced
industrialization with an accent on labour – consuming, agricultural processing and military
production enterprises was the prevailing economy policy of the soviet leadership with respect to
Kyrgyzstan. This policy was an attempt to utilize the specificity of Kyrgyzstan: labour
abundance, natural conditions and agricultural specialization, and the remote geographical
location of the republic24.
The breakup of the Soviet Union brought severe consequences for the economy of a
small agrarian country. Kyrgyzstan's mining and industrial enterprises underwent rapid
contraction due to the loss of orders from buyers and the inability of the existing transportation
Technological Readiness, Market Size, Business Sophistication and Innovation. Data collected in 2009. See:
“Global Competitiveness Report 2009 - 2010,” World Economic Forum 20 The Global Enabling Trade is published yearly by the World Economic Forum, an independent international
organization based in Geneva, Switzerland. The Global Enabling Trade Report analyzes which countries around the
world enable trade from country to destination. Data collected in 2009. See: “The Global Enabling Trade Report,”
World Economic Forum 21 The Index of Economic Freedom is reported annually by the Heritage Foundation, a research and educational
institute. The highest ranked country is the country with the most economically free society; individuals are free to
work, produce, consume, and invest in any way unconstrained by the state. Data collected in 2009. See: “2009 Index
of Economic Freedom,” Heritage Foundation 22 Declaration “On independent statehood of the Republic Kyrgyzstan” from August 31, 1991 N 578-XII 23 Lydia M. Buyers, Central Asia in focus: political and economical issues (New York: Nova Science Publishers,
2003), p. 143 24 Gur Ofer and Richard W.T. Pomfret, The economic prospects of the CIS: sources of long term growth
(Massachusetts: Edward Elgar Publishing Limited), p. 225
10
infrastructure to make possible a rapid entrance into other markets25. Mainly agriculture oriented
republic had to experience difficult times adapting to the rapidly changing environment. Thus,
the nation's economic performance in the early 1990s was worse than in any other former Soviet
republic except war-torn Armenia, Azerbaijan and Tajikistan, as factories and state farms
collapsed with the disappearance of their traditional markets in the former Soviet Union26.
The history of the economic development of Kyrgyzstan at the times of “perestroika”
differs little what was experienced by the majority of post-Soviet countries. Liberalization of the
economy, privatization of state property, deregulation of prices, openness of trade, and reduction
of state intervention in favor of a free market – all these features became the principal
manifestations of economic reforms during the transition period. Despite the difficult position
that confronted Kyrgyzstan because of the high degree of its dependence on the Soviet economy,
its reforms followed the path of “shock therapy”27. In the opinion of the International Monetary
Fund (IMF), Kyrgyzstan’s policy in the sphere of structural transformation of its economy was
the most progressive among all the countries of the region, particularly with respect to the
liberalization of prices and privatization28.
Following independence, Kyrgyzstan was progressive in carrying out market reforms
such as an improved regulatory system and land reform29. At the urging of international financial
institutions, the government took steps to liberalize its foreign trade relations. These steps
included eliminating some tariff restrictions (1991 - 1992), eliminating certain highly
bureaucratic export registration requirements (1998), and eliminating export duties (1999)30.
With the fulfilment of obligations to the World Trade Organization (WTO), the Kyrgyz Republic
has substantially liberalized its formal trade regime by reducing tariff rates and eliminating most
non-tariff barriers31. Simultaneously, the government of Kyrgyzstan encountered problems that
were associated with the assertion of sovereignty, the need to pursue a policy aimed at
25 “Kyrgyzstan – Overview of economy,” Encyclopaedia of the Nations, at
http://www.nationsencyclopedia.com/economies/Asia-and-the-Pacific/Kyrgyzstan-OVERVIEW-OF-
ECONOMY.html 26 Bureau of South and Central Asian Affairs, Background Note: Kyrgyzstan, U.S. Department of State 27 Gulnara Kalikova, “Investment, Investment Policies and the Future of Kyrgyzstan: In search of new approaches,”
Central Asia and South Caucasus Affairs: 2002, Tokyo, 2000, p.137 28 International Monetary Fund, Economic Review: Kyrgyzstan (1992), pp. 8, 13. 29 Central Intelligence Agency, The CIA World Factbook 2010 (Skyhorse Publishing, 2009), p. 383 30 “Kyrgyzstan – Overview of economy,” Encyclopaedia of the Nations, at:
http://www.nationsencyclopedia.com/economies/Asia-and-the-Pacific/Kyrgyzstan-OVERVIEW-OF-
ECONOMY.html 31 WTO Secretariat, Trade policy review, Kyrgyz Republic, 2006
11
macroeconomic stabilization and economic reform, and the establishment of a new posture with
respect to foreign policy and foreign trade32.
As it is common for developing countries in the transitional period, agriculture
accounted for the largest share of the Kyrgyz economy and was the most significant source of
nation’s gross domestic product (GDP). Pursuant to the IMF data, the agricultural sector
represented slightly more than 35 percent of the country’s GDP in 2001, a modest increase from
the last year of soviet administration, when agriculture contributed just over 34 percent of the
Kyrgyz Soviet Socialistic Republic’s economic production33. The role of the service sector has
grown meanwhile, and according to the National Statistic Committee of Kyrgyz Republic in
2009 GDP was composed for the 53.4 percent by the service sector. GDP is highly influenced by
the changes of gold price. It grew more than 6 percent annually in 2007-08, partly due to higher
gold prices internationally, but GDP fell 1 percent in 2009, due to declines in remittances and
investment following the global financial crisis and to lower gold production34. In 2007, 27
percent of its GDP, US$322 million, was sent as remittances from Kyrgyz working abroad, most
notably in the Russian Federation35.
The Kumtor gold mine run by Canada's “Centerra Gold” is the country’s most important
enterprise contributing greatly to the economic progress of Kyrgyzstan. It is said to be the
seventh - largest gold deposit in the world with an estimated value of US$5.5 billion36, the
enterprise contributes 10 percent of GDP and accounts for 40 percent of the country's industrial
production37. The drop in output at the Kumtor gold mine sparked a 0.5 percent decline in GDP
in 2002 and a 0.6 percent decline in 200538. The figure below demonstrates the dynamic of GDP
of Kyrgyz Republic for the years from 1991 to 2008 with and without consideration of Kumtor’s
contribution to the economy39.
32 International Monetary Fund, Economic Review: Kyrgyzstan (1992), pp. 8, 13. 33 Reuel R. Hanks, Central Asia: a global studies handbook (ABC-CLIO, Inc., 2005), p. 334 34 Kyrgyzstan Economy Profile 2010, Index Mundi, at:
http://www.indexmundi.com/kyrgyzstan/economy_profile.html 35 Dr. John CK Daly, The truth behind the recent unrest in Kyrgyzstan 36 Lydia M. Buyers, Central Asia in focus: political and economical issues (New York: Nova Science Publishers,
2003), p. 144 37 Dr. John CK Daly, The truth behind the recent unrest in Kyrgyzstan 38 Central Intelligence Agency, The CIA World Factbook 2010 (Skyhorse Publishing, 2009), p. 383 39 Kudabaeva Meerim, “Economical growth of Kyrgyzstan: tenderncies and particularities”, Perspectives of
Innovations, Economics & Business, Volume 1, 2009
12
5060708090
100110
1991 1993 1995 1997 1999 2001 2003 2005 2007
GDP dynamic (1990=100%)
GDP (incl. Kumtor)
GDP (witho. Kumtor)
Major industries include small machinery, textiles, food processing, cement, shoes,
sawn logs, refrigerators, furniture, electric motors, gold, rare earth metals etc. In 2009
Kyrgyzstan exported cotton, wool, meat, tobacco; gold, mercury, uranium, natural gas,
hydropower; machinery; shoes for the US $1.334 billion. Country imported oil and gas,
machinery and equipment, chemicals and foodstuffs. The following tables represent the structure
of the main trading partners and exports and imports by sector as for the year 2007.
The government with assistance of international financial institutions has been engaged
in a comprehensive medium - term poverty reduction and economic growth strategy40. In 2005
Bishkek agreed to pursue much - needed tax reform and in 2006 became eligible for the heavily
indebted poor countries (HIPC) initiative41. Progress fighting corruption, further restructuring of
domestic industry and success in attracting foreign investment are keys to future growth42.
40 Kyrgyzstan, Foundation for International Community Assistance (FINCA) at:
http://www.finca.org/site/c.6fIGIXMFJnJOH/b.6088573/k.348A/Kyrgyzstan.htm 41 Central Intelligence Agency, The World Factbook 2008 (Washington: the Government Printing Office,2007), p.
328 42 Central Intelligence Agency, The CIA World Factbook 2010 (Skyhorse Publishing, 2009), p. 383
13
III. International cooperation
On 21 December 2001 together with the other four Central Asian Republics Kyrgyzstan
entered the new Commonwealth of Independent States (CIS)43. In the adopted Declaration the
participants of the Commonwealth declared their interaction on the basis of sovereign equality.
In September 1993 the Heads of the CIS States signed an Agreement on the creation of
Economic Union to form common economic space grounded on free movement of goods,
services, labour force, capital; to elaborate coordinated monetary, tax, price, customs, external
economic policy; to bring together methods of regulating economic activity and create
favourable conditions for the development of direct production relations.
Because the CIS has remained essentially a regional forum, progress toward the
integration of its member nations has tended to take place outside the organization44. In October
2000 the Heads of five countries (Belarus, Kazakhstan, Kyrgyzstan, Russia, and Tajikistan)
signed an Agreement on creation of Eurasian Economic Community. The key purpose of the
EurAsEC, which is a prototype of the European Union on the Eurasian Continent, is to
encourage closer co-operation between the members through adoption of the regime of free
trade, formation of united custom tariff and harmonization of laws.
One of the major factors of development of Kyrgyzstan during all years of
independence has been massive financial and technical assistance from the international
Community. The total amount of international aid received by Kyrgyz Republic in 1992-2000
reached US $1695.7 million45. Major partners and donors are: Asian Development Bank, World
Bank, European bank of Reconstruction and Development, Islamic Bank of Development,
USAID, European Union, Governments of Germany and Denmark, Japan and Switzerland (see
the figure below).
43 The Commonwealth of Independent States (CIS) was established on December 8, 1991, in the Belovezh Accords,
which also brought an end to the Soviet Union. These accords were signed by leaders from Russia, Ukraine, and
Belarus, and on December 21, 1991, in the Almaty Declaration and Protocol to these accords, eight additional states
(Moldavia, Armenia, Azerbaijan, Kazakhstan, Turkmenistan, Uzbekistan, Tajikistan and Kyrgyzstan) confirmed
their intention to join the CIS and accept the demise of the Soviet state. Georgia joined the CIS in December 1993,
bringing total membership to twelve states. The main goal of the CIS is a promotion of cooperation among its
members in a variety of fields. See: Pau Kubicek, “Commonwealth of Independent States,” Encyclopedia of
Russian History, 2004. at: http://www.encyclopedia.com/topic/Commonwealth_of_Independent_States.aspx 44 “Commonwealth of Independent States,” The Columbia Electronic Encyclopedia, 6th ed. 2008 at
http://www.encyclopedia.com/topic/Commonwealth_of_Independent_States.aspx 45 Gur Ofer and Richard W.T. Pomfret, The economic prospects of the CIS: sources of long term growth
(Massachusetts: Edward Elgar Publishing Limited), p. 235
14
Source: Database at UNDP office in Kyrgyzstan
15%
15%
5%
23%4%
15%
4%
4%
15%ADB
IMF
EBRD
WB
EU
Japan
Switzerland
Germany
Other donors
Kyrgyzstan has a Partnership and Cooperation Agreement46 with the European Union
and has been part of North Atlantic Treaty Organization (NATO) Partnership for Peace
programme47. Kyrgyzstan is a member of the post-Soviet Collective Security Treaty
Organization, along with Russia, Armenia, Belarus, Kazakhstan, Tajikistan and Uzbekistan and
the Shanghai Cooperation Organization (SCO), which includes China and Russia. Kyrgyzstan is
the first CIS country to be accepted into the World Trade Organization48. Kyrgyzstan is member
of the Organization for Security and Cooperation in Europe, the Partnership for Peace Program,
the Economic and Social Commission for Asia and the Pacific Ocean, the Islamic Conference
Organization, the International Labour Organization, the Asian Development Bank, the
European Bank for Reconstruction and Development, the United Nations, The World Bank
Group and the International Monetary Fund, Food and Agriculture Organization, International
Atomic Energy Agency, International Criminal Police Organization (Interpol), International
Development Association, International Finance Corporation, International Monetary Fund,
United Nations Committee on Trade and Development, World Health Organization.
46 Agreement “On partnership and cooperation” between the European Union and the Kyrgyz Republic from
February 9, 1995 47 Partnership for Peace Framework Document from June 6, 1994. 48 Protocol “On accession of the Kyrgyz Republic to the Marrakesh Agreement on Establishment of the WTO” from
October 14, 1998, the Law of the Kyrgyz Republic “On ratification of the protocol on accession of the Kyrgyz
Republic to the Marrakesh Agreement on Establishment of the WTO” from November 17, 1998 N 146
15
IV. Investment policy
This Chapter aims to provide answers on the following questions, what are the main
factors of attraction for foreign business people in Kyrgyzstan, who are the main investors and
what are the state bodies, dealing with the issues of foreign investment attraction.
1. Business Attractions
Kyrgyzstan certainly has factors that create a favourable environment for investment;
some of them are highlighted below.
Centralized geographical location. From the ancient times, the territory of what is at
present referred to as Kyrgyzstan was on the way of trade routs from Europe to Asia. Three main
branches of the Great Silk Road, the one of the world’s oldest and most historically important
trade tracks, used to cross this area. The huge bazaars and caravan – sarais for travelling
merchants were located once in the ancient cities, turning Kyrgyzstan in a strategic outpost for
controlling trade and commerce. The landlocked countries have not traditionally been seen as
attractive FDI destinations. Inherent geographical disadvantages compounded by structural
weaknesses have hampered their economic performance49. Despite of it’s remoteness from see
ports, Kyrgyzstan’s location in the very heart of the Central Asia means closeness to the
developing markets of Russia, Central Asia, China and India. The importance of the centralized
location of the country is emphasized by the fact, that Kyrgyzstan is the only country in the
world hosting military bases of both Russia and the USA. The US Commander in Manas Air
Base, Dwight Sones, recently said, that “Kyrgyzstan in itself is really the crown jewel of Central
Asia, in terms of its location, its sphere of influence with the surrounding countries”50. The
geographical position contains also some growth potential connected to plans for construction of
Eurasian transport and telecommunication highways through the territory of Kyrgyzstan, which
would connect Europe with China and other Asian countries51.
Natural resources. Unlike its neighbours Kazakhstan and Uzbekistan, Kyrgyzstan does
not have essential oil and gas resources, but it has significant deposits of metals including
deposits of beryllium, tungsten, tin, rare-earth elements and other minerals. Kyrgyzstan’s gold
deposits are one of the largest proven ones in the world; the Soviet Union's largest gold mine was
located at Makmal in Kyrgyzstan and in the Soviet period Kyrgyzstan's 170 proven deposits put
49 World Investment Report 2010: Investing in a low-carbon economy, United Nations Publication, p. 23 50 M K Bhadrakumar, “Kyrgyzstan’s Rosa at the heart of matter”, Asia Times Online 51 Gur Ofer and Richard W.T. Pomfret, The economic prospects of the CIS: sources of long term growth
(Massachusetts: Edward Elgar Publishing Limited), p. 233
16
it in third place behind only Russia and Uzbekistan in gold production in the union52. Kyrgyzstan
ranks as the 22nd in the world for gold production, by providing 18 tons of gold per year. The
Republic has a potential to increase the production to 44 tons of gold per year and improve its
score to the 15th in the world53.
There are significant coal deposits in the republic, including ones of the high class
quality, however, the vast majority is located in the out of the way places that makes the
exploitation process non rentable.
Abundant water resources are used in production of hydro energy and for the irrigation
of the arable land of the neighbouring countries; plans on export of water are being discussed in
a moment.
Human resources. According to the Human Development Report 2007, 99 percent of
Kyrgyz population at the age of 15 and older is literate. This rate ranks Kyrgyzstan as the 16th
country in the world with the highest adult literacy rate. A high level of education of the
population in comparison to countries with similar GDP per capita is characteristic to
Kyrgyzstan54 and is partly due to the inherited soviet educational traditions. The number of
universities and educational institutions in the Republic is more than in any other central-asian
republic. Although the quality of education is questionable, there are enough highly skilled
professionals.
Tourizm.Kyrgyzstan enjoys 14 resort-recreational zones, 10 mountain tourist and
alpinist zones, one of the tallest mountains Pobeda Peak (7439m), Lenin Peak (7134m), Khan
Tengri (6995m). The lake Isssyk-Kule, which is the second highest navigable land in the world,
attracts tourist from all over the world. Although Kyrgyzstan’s mountains and lakes are an
attractive tourist destination, the tourism industry has grown very slowly because it has received
little investment55. The foreign investments into tourism sector are highly welcomed.
Free currency regime. Foreign exchange is widely available, and the local currency, the
som, is freely convertible.
Low costs of doing business. In 2009 the average monthly wage in Bishkek, capital of
Kyrgyzstan, was 8 041soms (about 130 Euro)56. The costs of doing business are considered to be
one of the lowest in the region. 52 Taru Bahl and M.H. Syed, ed., Encyclopaedia of the Muslim World (Delhi: Anmol Publications Pvt. Ltd, first
edition 2003), p. 45 53 “IBC has discussed development perspectives of the mining sector,”Sobytiya MDS, September-October 2010, p. 1 54 Gur Ofer and Richard W.T. Pomfret, The economic prospects of the CIS: sources of long term growth
(Massachusetts: Edward Elgar Publishing Limited), p. 241 55 Country Profile: Kyrgyzstan, Library of Congress – Federal Research Division, January 2007, p. 9 56 Average monthly wage by regions. The National Statistic Committee of the Kyrgyz Republic
17
Liberal legal regime. Some of the attractive features of the legal regime include: “One
Stop Shop” registration, minimization of inspections by the state bodies of the business entities,
possibility for incorporation and functioning of companies with 100% foreign participation,
investment preferences and liberation of duty and taxes in free economic zones.
2. State policy toward FDI
Foreign direct investment impacts the economy of country in many ways, it creates
new jobs, boosts wages, accelerates the formation of equity capital, promotes the normalization
of the balance of payments, strengthens country’s manufacturing and service, transfers new
research, technology and skills, improves productivity and competitiveness, technological
upgrading and innovation, increases export opportunities, as well as provides long-term
economic growth and rapid social modernization. Pursuant to the data of the United Nations the
Kyrgyz investment climate is characterized as one of the less favorable in the region. As it can
be concluded from the tables below, the Kyrgyz Republic was one of the least favorable
investment inflow destinations in 2009 among the CIS and South-East Europe countries as well
as also the landlocked countries57.
In connection with the abovementioned the Country Development Strategy, which is the
main document for defining directions for development and activity of the country for the period
till the year 2011, tasks Kyrgyzstan to significantly improve the investment climate in the
country by the year 2010.
In the 2006 Message to the Nation “On national strategy of development and immediate
tasks”, the then president Kurmanbek Bakiev identified the priority directions for economical
57 World Investment Report 2010: Investing in a low-carbon economy, United Nations Publication, pp. 50, 64
18
growth of republic. The principal role was given to the attraction of investments into Kyrgyz
economy. As it was noted by the President Bakiev later on the meeting with the new parliament
structure:
“The attraction of investments demands special attention from the side of the
Parliament. I do mention about it every time, in my Message to the Nation I asked the
Parliament to determine tasks on investment attraction for each region, for each segment of
economy and I asked them to work on everyday basis. Nothing was done till today. We just talk
on favorable investment climate and make projections, on who will come to us, and what they
will build here. There is no substantial cooperation even with those, who do really want to invest
money into our country; we can not even adopt such laws that will enable private capitals to
come here. We can just sign memorandums.”58
The key ministries and other government bodies involved in investments facilitations
are as follows:
The Ministry of Economic Regulation of the Kyrgyz Republic is the central executive
authority involved in the development and implementation of a unified state policy in economic
development, foreign economic relationships and trade, attracting investment, technical
regulation, business development and support and the development of free economic zones. The
Ministry was a major developer of government decisions aimed at a radical improvement of
public administration, including the laws “On procedures for conducting businesses inspections”
and “On the optimization of the legal and regulatory framework of governing business activity”
and other acts establishing further improvements in public policies, in particular improving
inspections on optimizing a permit-regulatory system, to improve export-import procedures in
the field of urban development and improvement of the licensing and permit procedures of
construction process59.
Direct investment attraction Centre under the Ministry of Economic Development,
Industry and Trade of the Kyrgyz Republic is responsible for realization of the national
programs, regarding investment attraction and development of free economic zones of the
Kyrgyz Republic60. The main tasks of the Centre include: implementation of the national
programs on investment attraction based on the external marketing strategy and ensuring
58 “Kyrgyzstan’s investment policy”, Kyrgyz Tuusu, 12.2006, p. 3 59 Nurmambet Toktomatov, “Public policy in economic development,” Investment Now, 2.2010, p. 14 60 Article 1 of the Regulations “On Direct Investment Attraction Centre under the Ministry of Economical
Development, Industry and Trade of the Kyrgyz Republic”
19
conditions for the easy and smart entrance of investors to the domestic market of the Kyrgyz
Republic with the help of the “One stop shop” structure.61
The Council on Development of Business and Investments under the Government of the
Kyrgyz republic was established by the Resolution of the Government of the Kyrgyz Republic in
August 2010. Main directions of the Council’s activity include: protection of property rights and
improving the efficiency of its use, issues of inspection of business enterprises, development of
anti-corruption mechanisms etc.
The State Commission of the Kyrgyz Republic on Foreign Investments and Economical
aid under the President of the Kyrgyz Republic is formed of ministers, heads of departments, and
local authorities under the chairmanship of the Prime Minister. The commission is responsible
for formation and implementation of a united state policy for the foreign investments attraction
and effective realization of the foreign economical and technical assistance, ensuring large scaled
and operative participation of foreign investors in reformation of the economy of the Kyrgyz
Republic62.
The position of the Special Representative of the President of the Kyrgyz Republic on
Investment Attraction is introduced for coordination and assistance on ensuring the control of the
activities of the state bodies of the executive authority, organs of local authority on creation of
favourable conditions for investment attraction to the Kyrgyz Republic63.
3. Major investors
Investment volume has grown gradually each year since the Kyrgyz Government
adopted policies that would attract foreign investors. Over the past five years there was an
increase in FDI by a factor of almost 3 times, with a peak in the year 2008, when the volume of
FDI amounted to US $866.2 million. In 2009 there was a slight decline in FDI, due to the global
financial crisis. However, income of US $661 million in 2009, in a difficult time, also indicates
the strengthening of investor confidence towards the Government. The chart below illustrates the
dynamic of FDI inflow to the economy64.
61 Article 4 of the Regulations “On Direct Investment Attraction Centre under the Ministry of Economical
Development, Industry and Trade of the Kyrgyz Republic” 62 Article 6 of the Regulations “On State Commission of the Kyrgyz Republic on foreign investments and
economical aid” 63 Article 1 of the Regulations “On special representative of the President of the Kyrgyz Republic on investment
attraction” 64 Nurmambet Toktomatov, “Public policy in economic development,” Investment now, 2.2010, p. 15
20
Bishkek and the surrounding Chui region absorbed more than 80 percent of the total
556.7US $ million. FDI in 2007. An additional 10 percent went to the Jalalabad region, with the
remaining amounts scattered among the other five regions of the country, primarily the Osh and
Talas regions. (See the chart below)
Regional Division of FDI
20,459,5
1,2 0,4 29,4 11,3 29,6
416,1
0,70
0,20,40,60,8
11,2
Batken
Jalal
-Abad
Issyk
-Kol
Naryn
OshTala
sChui
Bishkek
city
Osh ci
ty
Volu
me
of F
DI
050100150200250300350400450
The most attractive sectors for investing in 2009 were: financial sector (42.4 % from the
total volume of FDI), services (27.4%), manufacturing industry (12.2%) and trade (8.4%)65. The
following countries were the largest sources of FDI in 2009: Kazakhstan 34%, Russia 34%, UK
18.1%, China 9.2%, Turkey 6.3%, US 4.2%66.
The number of companies with a foreign participation has increased from 1882 in 2004
to 2721 in 2008. Most of “newcomers” are concentrated in the following spheres: manufacturing
industry, trade, construction and services sector. Joint ventures and foreign companies include
Plaskap Bishkek Company, the Central Asian Group, the Hyatt Regency Bishkek, the Kyrgyz
Petroleum Company, the Coca-Cola Bishkek Bottlers, the Centerra Gold 67. The Reemtsma
Kyrgyzstan Company is another prominent example of foreign investments to the local
65 Investment report. The National Statistic Committee of the Kyrgyz Republic 66 Ib. 67 Bureau of Economic, Energy and Business Affairs, 2010 Investment Climate Statement – Kyrgyz Republic, U.S.
Department of State
21
economy. During 12 years of operation on the Kyrgyz market it has invested about US $120
milliard for development of the tobacco sector68.
In 2008 among the joint ventures there were 377 with the Chinese, 330 Turkish, 544
Russian, 397 Kazakh participation69.
China. As the first Vice Prime Minister of Kyrgyzstan Akylbek Japarov has mentioned
during the Kyrgyz – Chinese Economic Forum 2009, China became the main trading partner of
Kyrgyzstan70. Since 1995, the Republic has received US $163.5 million of Chinese foreign
direct investment, representing 5.3 percent of total FDI in the Kyrgyz economy. According to
Chinese data, the trade turnover between the two countries reached US $7.33 billion in 2008,
four times more than in 2006. In 2009, despite the global crisis, the figure continued to grow71.
Turkey. Kyrgyz-Turkish relationships have a solid contractual and legal basis,
consisting of more than 100 treaties, agreements and protocols, regulating the issues of present
and perspective cooperation in different sectors including political, economical, trade, cultural,
schientific, educational and military projects. The ground conditions for mutual cooperation of
Kyrgyzstan and Turkey are reflected in the Agreement “On eternal friendship and cooperation”
between the Kyrgyz Republic and Turkey72 and Mutual Statement of the Heads of two Countries
“Kyrgyzstan and Turkey: together in the 21 century”73. Starting from the very first days of
acquisition of independence by Kyrgyzstan, Turkey has invested more than US $450 million to
the economy of the Republic. In 2008 the trade turnover between Kyrgyzstan and Turkey
reached US $136 billion.74 For the purposes of facilitating the economical interaction the “Long
term Program for Development of Trade and Economic Interaction for the period till 2010” was
adopted during the official visit of the President of the Kyrgyz Republic to Turkey in 2002. One
year later during the visit of the Prime – Minister of the Kyrgyz Republic the “Plan of Actions on
Realization of the Present Program” and “Protocol of the Third Meeting of Interdepartmental
68 “Governmental meeting at JS “Reemstma-Kyrgyzstan,” Sobytiya MDS, September-October 2010, p.2 69 Investment report. The National statistic Committee of the Kyrgyz republic 70 Daniyar Karimov, “Japarov: China – main trading partner of Kyrgyzstan,” 24.kg news agency at:
http://eng.24.kg/business/2009/11/16/9643.html 71 “China Now Kyrgyzstan’s major trade partner”, Tradingmarkets.com, posted on: Nov.26, 2009 at:
http://tradingmarkets.com/.site/news/Stock%20News/2681831/ 72 Agreement “On eternal friendship and cooperation” between the Kyrgyz Republic and Turkey from October 24,
1997 73 Mutual Statement of the Heads of Kyrgyzstan and Turkey “Kyrgyzstan and Turkey: together in the 21 century”
from July 1, 1999 74 “Kyrgyz-Turkish business investment forum,” Sobytiya MDS, September 2009, p. 4
22
Commission on Trade and Economic Interaction”, containing practical measures on
implementation of directive tasks and goals were signed.
23
C. Legal framework for foreign direct investment
Foreign investments in Kyrgyz Republic are regulated by a number of international
treaties and agreements involving Kyrgyzstan as well as domestic legal acts.
I. International legal regime
The international treaties that have entered into force and became binding for
Kyrgyzstan constitute the legal system of the Republic75. According to the hierarchy of legal
acts, the international law prevails over the domestic law of the Kyrgyz Republic. The country
declares its commitment for the strict observance of the norms of the international law and
reasserts its adherence for the core principle of the international law –principle of bona fide
fulfillment of international obligations76. The international agreements entered by the Kyrgyz
Republic are to be rigorously and obligatory observed by the Kyrgyz Republic in accordance
with norms of the international law and legislation of the Kyrgyz Republic77.
Kyrgyzstan is a member to several multilateral conventions, dealing with the rights of
foreign investors, and it has also entered into numerous international agreements and bilateral
treaties on protection and insurance of the rights and freedoms of investors.
1. World Trade Organization Initiatives
Upon the joining the WTO in 1988, Kyrgyzstan became a party to the WTO initiatives,
including those concerning investment regulations. The three main areas of work of WTO on
trade and investment include: a Working Group on the relationship between trade and
investment78, the General Agreement on Trade in Services and the Agreement on Trade-Related
Investment Measures.79
The General Agreement “On Trade in Services” (GATS) is a product of the Uruguay
Round, developed to bring rules on services into the multilateral trading system. The Mode 3 of
the Agreement covers the supply of services by a foreign company setting up subsidiaries or
branches to provide services in another country (commercial presence) – i.e. through foreign 75 Article 3.6 of the Constitution of the Kyrgyz Republic 76 Preamble of the Law of the Kyrgyz Republic «On international agreements of the Kyrgyz Republic” 77 Article 28.1 of the Law of the Kyrgyz Republic “On international agreements of the Kyrgyz Republic” 78 The Working Group on the Relationship between Trade and Investment was established during the 1996
Ministerial Conference in Singapore to examine the relationship between trade and investment. 79 “Trade and investment,” WTO at: http://www.wto.org/english/tratop_e/invest_e/invest_e.htm
24
investment. The Article II (Most- Favored-Nation Treatment) of the GATS contains the basic
most-favored-nation (M.F.N.) obligation, stating that each Member “shall accord immediately
and unconditionally to services and service providers of any other Party, treatment no less
favorable than that it accords to like services and services providers of any other party”. This
provision deals only with the discrimination among investors from different countries, but not
with the unequal treatment of domestic and non domestic providers, which occurs more often.
Upon the ratification of the agreement, the Kyrgyz Republic takes a duty not to discriminate
among the investors from the Member States, and to treat them equally, subject to the
exceptions, which may take place when the requirements of the Article XVII (General
exceptions) are met80.
The Agreement “On Trade Related aspects of Investment Measures” emphasizes the
importance of non-application by the Member States of the measures inconsistent with Art. III
(National Treatment) and XI (Prohibition of Quantitative Restrictions) of the GATT81. Such
measures, as spelled out in the Annex's Illustrative List, may include: requirement of particular
levels of local procurement by an enterprise (local content requirements) or restriction of the
volume or value of imports such an enterprise can purchase or use to an amount related to the
level of products it exports (trade balancing requirements).
After accession to the WTO, Kyrgyzstan has introduced amendments to the internal
laws and regulations in order to bring the legislation into coherence with its international
80 Article XVII (General Exceptions) Subject to the requirement that such measures are not applied in a manner
which would constitute a means of arbitrary or unjustifiable discrimination between countries where like conditions
prevail, or a disguised restriction on trade in services, nothing in this Agreement shall be construed to prevent the
adoption or enforcement by any Member of measures: (a) necessary to protect public morals or to maintain public
order [the public order exception may be invoked only where a genuine and sufficiently serious threat is posed to
one of the fundamental interest of the society]; (b) necessary to protect human, animal or plant life or health; (c)
necessary to secure compliance with laws or regulations which are not inconsistent with the provision of this
Agreement including those relating to: (I) the prevention of deceptive and fraudulent practices or to deal with the
effects of a default on services contracts; (ii) the protection of the privacy of individuals in relation to the processing
and dissemination of personal data and the protection of confidentiality of individual records and accounts; (d)
inconsistent with Article XVII, provided that the difference in treatment is aimed at ensuring the equitable or
effective imposition or collection of direct taxes in respect of services or service suppliers of other Members; (e)
inconsistent with Article II, provided that the difference in treatment is the result of an agreement on the avoidance
of double taxation or provisions on the avoidance of double taxation in any other international agreement or
arrangement by which the Member is bound. 81 Article 2: National Treatment and Quantitative Restrictions.
25
obligation. At present, Kyrgyzstan conducts a policy of being in line with the prescriptions of the
abovementioned WTO agreements and till now was not accused to be in violation of any of its
obligations.
2. Regional Agreements
The convention “On protection of Investors Rights” 82 was ratified by the Kyrgyz
Republic on the March 3, 2000. This document defines legal bases for realization of different
types of investments, registered on the territory of the Member States, as well as guarantees of
investor’s rights on realization of investments and the gain83. The Member state must provide the
treatment for foreign investors not worse than the one guaranteed for the domestic legal entities
and legal persons, allowing for the exceptions. Those exceptions are to be established by the
national legislation of the Member State and may include certain economic sectors, enterprises,
organizations that are not subject to privatization, going public or any other forms of divestment
of government property84.
The agreement “On cooperation on investment activities” was concluded between the
CIS States. It declares the commitment of the Member States for the observance of the basic
rights and freedoms of the foreign investors on the territory of the Member States. For the
particular issues, such as the labour law regulations, use of land, natural resources the agreement
refers to the national legislation. 3. Bilateral Investment Treaties
The international investment regime is evolving rapidly through both the conclusion of
new treaties and an increasing number of arbitral awards. In 2009, 211 new International
Investment Agreements were concluded (82 bilateral investment treaties, 109 double taxation
treaties and 20 other investment agreements) – on average about four new agreements per week.
In all, the total number of agreements rose to 5,939 at the end of the year85.
82 The convention “On Protection of Investor Rights” was signed by CIS countries on March 28, 1997.
Turkmenistan, Uzbekistan and Ukraine, however, did not sign this Convention. 83 Article 2 of the Convention “On Protection of Investor Rights” 84 Article 5 Ib. 85 World Investment Report 2010: Investing in a low-carbon economy, United Nations Publication, p. 81
26
Kyrgyzstan has entered into bilateral agreements on mutual support, encouragement and
protection of investments with the following countries: USA (1992), Armenia (1995), Azerbaijan
(1997), White Russia (2001), China (1995), France (1997), Georgia, Germany (1998), India
(2000), Indonesia, Iran (2005), Kazakhstan (2005), Malaysia, Mongolia (2007), Pakistan,
Switzerland (2003), Tajikistan (2001), Turkey (1996), Ukraine and Uzbekistan, Finland (2004),
Moldova (2004), Sweden (2003), United Kingdom (1998), Korea. Most agreements contain
provision of the same set of guarantees, typically including fair and equitable treatment,
protection from expropriation and nationalization, free transfer of means and full protection and
security, on the mutual basis.
II. Domestic legal regime
The Kyrgyz Republic has adopted a number of laws and regulations on the protection
and promotion of investments. The present legislation governing the investment regime consists
of the Constitution of the Kyrgyz Republic, the Law “On investments” (the Investments law) as
well as other laws regulating specific sectors of Kyrgyz economy.
1. Constitution of the Kyrgyz Republic
The present Constitution, which enjoys a status of the chief legal document, was
adopted as a result of the National Referendum, conducted on June 27, 2010. The act stipulates
that government guarantees the equal protection of all types of property and that no one can be
deprived of his property arbitrarily without any legitimate grounds because the property rights
are inviolable86. The government takeover can take place only in exceptional cases, prescribed
by the laws, on conditions of preliminary and equivalent compensation87.
2. Law “On foreign investments in Kyrgyzstan”
Before the introduction of the actual law “On investments”, the foreign investments in
Kyrgyzstan were governed by the “Law on foreign investments in Kyrgyzstan”, that was adopted
by the Resolution of the Supreme Council of Kyrgyz Republic on 28 of June 1991 under the
number N 537 – XII. This law, which was introduced right after the collapse of the Soviet
Union, inherited the soviet regulative character. According to this act foreign investments in
86 Article 4.1 and 4.2 of the Constitution of the Kyrgyz Republic 87 Article 4.3 Ib.
27
Kyrgyz Republic, no matter of their legal form, had to undergo state registration at the State
commission of Kyrgyz Republic on foreign investments and economical support in accordance
with the procedure, established by the Government of the Kyrgyz Republic. The Article 14
points to the fact, that the requirement of state registration does not bear permissive character,
but rather done in order to prove the correctness of execution of constitutive documents.
However, in case if on the expiry of 12 month from the date of state registration the investor can
not present the documentary evidence of investment of not less than 50% of volumes, stated in
the registration documents, the state body may find the investment to be failed and adopt a
decision for it’s liquidation.
At the same time, the legislators recognized the importance of foreign participation in
the economical growth and made efforts to attract foreign capitals. The Article 20 describes the
tax benefits for foreign investors in Kyrgyz Republic. In case if the company with foreign
investments has complied with certain payment rules, it enjoyed profit tax exemption for the
period of 2-5 years, depending on the subject of activity. After that period the company was
obliged to pay reduced profit tax. Objectively, tax exemptions attracted foreign business people,
by creating more favourable conditions for foreigners. However, after succession of Kyrgyzstan
to WTO and subsequent accidence to the international treaties, limiting the unequal treatment of
enterprises, the Government was obliged to annihilate this provision.
Another example of legislator’s attempt to attract foreign capital is the exemption of
custom duties for the import of stocks of materials and capital equipment, raw materials and
components, designated for formation of authorized capital stock, special-purpose deposits.
In connection with the globalization of world economy and conduction of market
oriented reforms Kyrgyzstan together with other developing countries took steps to revise old
investment policy and come to the more liberalized and less regulative regime, which included
the adoption of a new law governing foreign direct investment in Kyrgyzstan.
3. Law “On investments in the Kyrgyz Republic”
The main domestic legal act governing the functioning of investments in Kyrgyzstan is
the Law “On Investments in the Kyrgyz Republic” dated by March 27, 2003 under the
number 66. The law determines the main principles of state investment policy, directed to the
development of investment climate in the republic together with the mobilization of domestic
and foreign investments, by means of provision of fair, equal legal regime for investors and
28
guarantees for protection of attracted investments88. There were 6 amendments introduced to the
law, the last one was made in 2009.
The actual law consists of 25 articles split into the following 5 chapters:
Chapter 1. General Provisions
Chapter 2. Legislative guarantees for investors
Chapter 3. State support of investors and investments
Chapter 4. Labour law regulations for investors
Chapter 5. Conclusive Provisions
Chapter 1 contains the definitions of the basic terms used in the legal act, description of
the legislation of Kyrgyz Republic on the investments, hierarchy of legal acts and international
law and purview of present law.
Chapter 2 describes the major rights and freedoms of the investors in the Kyrgyz
Republic, such as the economical independence, free asses to information, freedom of currency
transactions and main guarantees assured by the State.
Chapter 3 sets the purposes of state –investor relations, establishes the main functions
of the authorized state body responsible for promotion of investments and protection and
assistance to investors.
Chapter 4 gives a short overview of the labor relations between the foreign investor and
his employees, also social security and insurance matters.
Chapter 5 concentrates on the issues that were not covered by the previous parts of the
law. It includes provisions on dispute settlement, investment insurance and other topics.
In case if the contradictions between provisions of the present law and the ones of the
international agreements entered by the Kyrgyz Republic are arising, the international law should
prevail89.
The law provides for the following definition of investments and investors, investments
are the material and non material types of actives that are owned or controlled directly or
indirectly by the investor, in the objects of economical activity for the purposes of gaining profit
and/or achievement of other useful effect90. Investor is the subject of investment activity, who
carries out investments of own, loaned or attracted funds in the form of direct investments91. The
law distinguishes between two types of investors: domestic investor and foreign investor.
Domestic investor – is a legal entity or natural person of Kyrgyz Republic, carrying out
88 Law of the Kyrgyz Republic “On investments in Kyrgyz Republic” 89 Article 2.3 of the Law of the Kyrgyz Republic “On Investments in Kyrgyz Republic” 90 Article 1.1 Ib. 91 Article 3.1 Ib.
29
investment activity on the territory of Kyrgyz Republic. Foreign nationals and nationals without
citizenship, possessing a residence permit for the Kyrgyz Republic, are also considered as
domestic investors. Foreign investor – is a legal entity or natural person, carrying out
investment activity on the territory of Kyrgyz Republic, and who can not be considered as a
domestic investor.
The Law “On investments” proclaims the following guarantees for the investors in
Kyrgyzstan, no matter of their legal form or type of business engaged in: most favorable regime,
non-discrimination policy, national treatment of business activities, investment preferences,
freedom of investments, profit repatriation, monetary transactions, use of income, protection
against expropriation, right for objective compensation.
1. MOST FAVOURABLE REGIME
The law guarantees that in case if there are amendments or addendums introduced to the
investment, tax, customs legislation of the Kyrgyz Republic, investors enjoy a right of choice of
the most favourable conditions92. However, the legislation changes should not be related to the
Constitution of the Kyrgyz Republic, laws of the Kyrgyz Republic on issues of national security,
public health and environmental protection. This right of choice is granted for the limited period
of 10 years (or any other period that is prescribed by the Investment Agreement) from the
moment of launching the investment activity.
The most favourable regime provision provides an opportunity for potential investors to
create more realistic projections, accurate and precise cost evaluation and decide for a more
appropriate legal and taxation form, related to launching a project in Kyrgyzstan.
2. NATIONAL TREATMENT OF BUSINESS ACTIVITIES
"National Treatment" is the commitment by a country to treat enterprises operating on
its territory, but controlled by the nationals of another country, and foreign nationals not less
favourably than domestic enterprises and nationals in like situations. National Treatment has
become a well-established principle among many countries. Exceptions are typically limited to
certain sectors, notably mining, transport, fisheries, broadcasting and telecommunications93.
92 Article 2.2 of the Law of the Kyrgyz Republic “On investments in the Kyrgyz Republic” 93 National Treatment for Foreign-Controlled Enterprises. OECD
30
Kyrgyz Republic stipulates the same national treatment of economical activity, carried
out by the foreign investors on the territory of the Republic, as applied toward domestic nationals
and legal entities94.
Investors are granted an access to the overwhelming majority of economic sectors; they
may purchase shares and securities of the Kyrgyz companies subject to the limitations prescribed
by the law. Foreign participation in enterprises may reach 100% or less. Restricted list of
economical activities requires an obligatory participation of the Kyrgyz partner.
Kyrgyz Republic declares its commitment for granting equal investment rights for
foreign and domestic investors and undertakes not to discriminate investors on the basis of
citizenship, nationality, language, sex, race, religion, and place of business activities, country of
origin of investors or investments95.
In respect to the investors, whose investments in the Kyrgyz Republic has suffered
damage as a result of the war or other armed conflict, revolution, state of emergency, civil
disturbances and other similar conditions, the same legal status and conditions, not less
favourable, then applied to domestic enterprises and nationals, must be applied.
3. INVESTMENT PREFERENCES
Investment preferences may be granted for investors making investments into
economical and social sectors of high importance, also on the certain territories of republic, in
accordance with the state programmes (projects) of development96. Investor, no matter of the
activity subject, nationality, type of business, has a right to apply for investment preferences.
Kyrgyz legislators stipulated two types of investment preferences, which might be granted for
investors. They are advantages of selective character in the form of custom preferences and state
investment subsidies in a non-monetary form.
The law provides the following definition for the custom preferences. It is a partial or
full exemption from payment of customs for the equipment (including machinery, mechanisms,
and vehicles97), raw materials and components98 of the equipment entering the territory of the
Kyrgyz Republic, which are intended to be put into operation pursuant to the Investment
94 Article 4.1 of the Law of the Kyrgyz Republic “On Investments in the Kyrgyz Republic” 95 Article 4.3 Ib. 96 Article 4.7 of the Law of the Kyrgyz Republic “On Investments in the Kyrgyz Republic” 97 With an exclusion of motor cars and passenger transport 98 With an exclusion of the materials, and components subject to excise duty
31
Agreement99. Custom preferences are granted during the period of implementation of the
investment project, but not later than 2 years after the day of financing start and from the
moment of the registration of the Investment Agreement. In exceptional cases of the high priority
industrial investment projects with the realization period of more than 2 years, the Government
of the Kyrgyz Republic may take a decision to prolong the duration of custom preferences.
State investment subsidies in a non-monetary form are expressed in a form of property
or property right, transferred to investor in a non-monetary form with a right of possession, usage
and running for the realization of the investment project. Following means can be transferred as
the state investment subsidies: buildings, constructions, machinery and equipment, transport
vehicles100, tool ware, industrial and economical stock. Total value of the state investment
preferences in a non-monetary form may reach 40% of investments into fixed assets101.
The detailed application procedure is set by the Regulation “On procedure for granting
investment preferences for investors”.
Before launching business in Kyrgyz Republic the interested investor must submit the
following package of documents to the state body:
1. Application for investment preferences;
2. Business plan or technical and economic reasoning of investment project;
3. Documents, proving the budget, equipment and technology expenditures;
4. Original documents, proving the financial resources of investor;
5. Certificate of state registration of a legal entity by the Ministry of Justice of Kyrgyz
Republic;
6. In case if investor operates in a form of a foreign legal entity, the legalized extract from
trade register or any other legalized document, certifying the fact that the constituter is
considered to be a legal entity in accordance with the legislation of that state, is needed. It
should also contain notary attested translation on Kyrgyz or Russian language;
7. In case if investor is to conduct business as a foreign natural, the copies of passport and
other documents, identifying the identity of a foreign natural, are needed. It should also
contain attested translation on Kyrgyz or Russian language;
8. Additional documents, upon the request of State body.
99 Article 5.1 of the Regulations “On procedure of granting investment preferences for investors”. 100 With an exception of automobiles 101 Article 7 of the Regulations “On procedure of granting investment preferences for investors”
32
The law binds the state body to conduct an expertise and present the decision not later
than 15 days from the date of application receipt. Investment preferences are granted for
investors depending on the following factors: investment volumes (investment preferences are
granted for the investors making investments for the total value exceeding US $100 000102),
priority level of economic sector (the list of first-priority economic sectors is defined by the
Government of The Kyrgyz Republic, at present it includes: energy sector, mineral resource
industry, tourism, processing industry and transport103), quantity of workplace, presence of the
documents, prescribed by the Article 26 of the Law “On investments in the Kyrgyz Republic”104.
Providing the decision is positive, the state body refers the Preliminary Conclusion “On
Investment Project” to the competent state bodies for technical, financial, economic and
organizational expertise. Within a month period, experts should clarify the objective payback
periods and volumes of investment preferences. An agreement “On granting the investment
preferences” must be prepared by the authorized state body on the basis of the decision of the
Inter-departmental Commission in 15 days period.
Investment preferences become invalid upon the expiry of the Investment Agreement or
upon the early termination of the Agreement with a mutual consent of the parties or unilateral
termination by the state body, proving the investor did not fulfil its obligations under the
Agreement, or on the basis of the acts of judicial bodies and arbitrage. In last case investor is
obliged to pay the sums of unpaid custom duties, plus the penalty and to return the property
obtained as state investment subsidies in a natural form with reimbursement of loss of profit105.
4. FREEDOM OF INVESTMENTS
Foreign investors are free to choose their economical activity, starting from choosing
the form of business operation, capital structure and partners. Investors are free to invest in any
form into objects and activities, which are not prohibited by the legislation of Kyrgyz Republic,
including activities that are to be licensed in accordance with the corresponding laws.
As a general rule, foreign legal entities and nationals obtain license permits on the same
conditions and in the same order as the legal entities and nationals of the Kyrgyz Republic106.
102 Article 4.4 of the Regulations “On Procedure of Granting investment preferences for investors” 103 Article 4.3 Ib. 104 Article 4 Ib. 105 Article 3 Ib. 106 Article 1.7 of the Regulations “On licensing the certain types of business activities”
33
The licenses issued in foreign states are to be recognized in the Kyrgyz Republic upon the
presence of corresponding intergovernmental agreements107.
For the purposes of facilitating business activity in the country, and avoiding the
unnecessary and hampering hurdles, the reform of the license/permit system started in 2009,
under which the number of licenses has been reduced by 77 percent and permits - by 51 percent.
5. FREEDOM OF PROFIT REPATRIATION
Investors have a right for free export or repatriation of compensation, in case of
expropriation, and profit, gained from investment activity on the territory of Kyrgyz Republic.
The profit may include: gain from investments in the form of dividends, interest payments and
other forms of proceeds, funds, obtained by the investor after partial or complete cessation of
investments activity in Kyrgyz Republic or disposal of investments, property or property rights,
without prejudice to the interests of Kyrgyz Republic or other creditors.
There are no restrictions on the amount of profit repatriated. The sum can be exported in
a free convertible currency. The currency exchange transactions are governed by the law “On
operations in foreign currency”. Pursuant to this law, currency export and import are not subject
to any limitations provided the amount of currency was declared on the stations of the custom
control108. The general rule is that both residents and non – residents of the Kyrgyz Republic
have a right to purchase and sell foreign currency without any restrictions and delays. The recent
amendment to this law stipulates that in case if the sum exceeds the threshold value, established
by the law of the Kyrgyz Republic “On opposition to terrorism financing and money laundering”
the person, who is willing to purchase or sell such amount of money, must present the identity
document.
Investor, who initially imported to the territory of Kyrgyz Republic property and
information in a form of a document or on the electronically gadgets as a means of investment,
has a right to export (disregarding the quota, licensing or any other non-tariff regulations of
foreign trade activities) it out of Kyrgyz Republic.
5. PROTECTION AGAINST EXPROPRIATION
The legislation provides for protection against nationalization, requisition, or other
equivalent measures, including action or omission on the part of authorized government bodies
107 Article 8 of the Law of the Kyrgyz Republic “On licensing” 108 Article 4 of the Law of the Kyrgyz Republic “On operations in a foreign currency”
34
of the Kyrgyz Republic that has resulted in seizure of investor’s funds or investor’s deprivation
of the possibility to use the results of their investment.109 The only case when the expropriation
can be justified and conducted is the protection of public interests on the basis of the
indiscrimination principle with an observance of the appropriate legal order and payment of
opportune, proper and real indemnification, including lost profit.
6. RIGHT FOR OBJECTIVE COMPENSATION
Compensation should be equivalent to the objective market value of the expropriated
investment or its part, including lost profit as of on the date of the decision on expropriation
taken. The objective market price should not be affected by the changes in value as a
consequence of a market, being informed about expropriation110. The compensation should
include LIBOR percents corresponding to the period for which the compensation is charged. In
case if that period is more than 1 year, the 12 month LIBOR rate is used.
The law guarantees the investor the right to bring the claim for the consequences of
expropriation, including issues of investment evaluation and compensation payment, before the
judicial bodies or other competent bodies of the Kyrgyz Republic. However, it is quite
understandable, that in case if the state is taking part in the process, by being a source for
nationalization process, it is highly unlikely that the investor will think about addressing to the
local bodies. One should also take into account, the closeness and often instability of the judicial
systems in the developing regions, such as Kyrgyzstan. In the other words, the provision
stipulating the right of investor to turn for the national court system seems to be not of high
actual need for investors.
The other issue that may arise in connection of the property expropriation is the
definition of the “ambiguous” terms as objective market value and lost profit. The legislation
does not provide a clear guideline on how to calculate the real value of business. Thus, the
appearance of a dispute between the state bodies and business owners is unavoidable.
7. FREEDOM OF MONETARY TRANSACTIONS
In case if the amendments limiting the money transfers in a foreign currency to the
Kyrgyz Republic and outside of the country are introduced, they do not apply to the foreign
109 Kalikova&Associates, Business in the Kyrgyz Republic: Legal Aspects, 2009, p.16 110 Article 6.2 of the Law of the Kyrgyz Republic “On investments in the Kyrgyz Republic”
35
investors111. Such limitations must apply to investors on the basis of the law for the purpose of
prevention of terrorism financing and money laundering operations.
8. FREEDOM OF USE OF INCOME
Investors enjoy the right to freely and on own discretion possess, use and dispose their
investments and income obtained from investment activity for any purpose, not prohibited by the
legislation of the Kyrgyz Republic.
For the purposes of keeping and using income and other means, investors are entitled to
open bank accounts on the territory of the Kyrgyz Republic in national and foreign currency in
accordance with the legislation of the Kyrgyz Republic.
4. Other Acts
Right after the April Revolution 2010, to keep foreign investors from retreating, the
Interim Government adopted the Decree of the Kyrgyz Republic VP #23 as of April 26, 2010,
"On protection of investments". It has a provision, that the Interim Government adopts the decree
“to decide that the officials and other persons who interfere with investment attraction, who take
actions to illegally seize state, municipal, private, public and other forms of equity, including
interference in activities, resolutions on personnel matters or assistance to others to undertake
such actions (corporate raiding) will bear criminal and civil responsibility.”112 The decree also
guarantees the government’s commitment to the obligations it took under the international
treaties and agreements.
For the purposes of deliverance of entrepreneurs, including foreign investors, from
heightened interest and interference from the side of supervisory bodies, which often misuse
their position, the Parliament of the Kyrgyz Republic has passed several legal documents, aimed
at limitation of business inspections. The law of the Kyrgyz Republic “On procedure for
conducting inspections of business” was designated to protect business from illegitimate
interference from the side of state organs. It introduces the guideline for conduction of business
inspections, to be strictly adhered by the authorized state bodies. The law limits the number of
inspections to the 5 types, and specifies in details the frequency and procedure of each. The
111 Article 8 Ib. 112 Article 7 of the Decree of the Kyrgyz Republic "On protection of investments".
36
unscheduled check-outs should take place, only if the requirements set up by the Law are met. 20
state organs are granted an exclusive right to conduct inspections113.
The mining law provides that the foreign nationals and legal entities are entitled to be
the subsoil users114 in the Kyrgyz Republic115. Foreign investors are guaranteed the right of
capital repatriation, and also export of income or part of it in the form of foreign currency,
production as a result of an exploration and processing of minerals, including gold116.
Concession is a special type of permission issued by the Government of the Kyrgyz
Republic for the realization of a certain type of entrepreneurial activity, related to the allocation
of the property, land and subsoil for the temporary use to investor117. The concession agreement,
which is the main document regulating the concession relations between its subjects, is to be
concluded with the investors upon the results of the contest among the applicants for the period
from 5 to 50 years. Concession payments are to be established in accordance with the natural
value of the deposit and can not be lower than the rental profit from its exploration on the
moment of contract signature118.
Agreement “On production division” is another important document, concluded by the
investor and the authorized state body, which provides a detailed and concrete description of
conditions and order of extracted production division between the parties. In case if the investor
does not stand by its commitments, the agreement can be revised or terminated earlier. The
particularity of such an agreement is that it can not be concluded for the term exceeding 10
years119. In case if the investor is a foreign national or legal entity, the agreement is to be ratified
by the Parliament of the Kyrgyz Republic120.
Other legal acts, that have a direct influence on the regulation of the foreign business
activities on the territory of the Kyrgyz Republic include: the Tax Code of the Kyrgyz Republic,
113 Decision of the Parliament of the Kyrgyz Republic “On List of authorized state bodies, which a granted a right
to conduct inspections of enterprises” from March 12, 2009 N 1037 – IV 114 Subsoil user – is a legal entity or natural person performing geological exploration and/or technical reclamation
of subsoil. Article 1 of the Law of the Kyrgyz Republic “On mining” 115 Article 8 Ib. 116 Article 20.2 Ib. 117 Article 1 of the Law of the Kyrgyz Republic “On concessions and foreign concession enterprises in the Kyrgyz
Republic” 118 Article 15 of the Law of the Kyrgyz Republic “On mining” 119 Article 5.1 of the Law of the Kyrgyz Republic “On agreements on production division” 120 Article 6.5 Ib.
37
the Customs Code of the Kyrgyz Republic and other.
III. Investment dispute settlement
Judicial authority is vested in the Supreme Court of the Kyrgyz Republic and the local
courts. The lowest stage is represented by the District Courts, including district courts in
Bishkek, city courts, military garrison courts, interdistrict courts, where the cases are considered
in essence. Regional courts, including the Military Court of the Kyrgyz Republic and Bishkek
city court, review the judgments rendered by the courts of first instance upon the newly-
discovered circumstances. The Supreme Court of the Kyrgyz Republic is the court of the highest
instance. It supervises the functioning of the lower instance courts by reviewing the judgments
upon the claims of the process participants. The verdicts and decisions rendered by the Supreme
Court are not subject to review.
The respondents of the Economic Freedom of the World: 2010 survey, have
characterized the judiciary in the Kyrgyz Republic as heavily influenced from political
influences of members of government, citizens or firms and the legal framework for private
businesses to settle disputes and challenge the legality of government actions and/or regulations
as inefficient and subject to manipulation121. Besides the distrusting reputation of the courts, the
foreign investors are frightened off by the perspective of having the protracted judicial
proceedings and high costs of litigation.
The Kyrgyz Law provides for an alternative to the traditional settlement of disputes
before the judicial bodies of the country, which is the right to turn to arbitrage. According to the
definition, given by the law “On investments in the Kyrgyz Republic”, the investment dispute is
a dispute arising from realization of investments between the investor, state body, public officer
of the Kyrgyz Republic and other participants of the investment activity122. The major guideline
for settlement of investment disputes is set by the Article 18 of the law “On investments in the
Kyrgyz Republic” and the law “On arbitral courts in the Kyrgyz Republic”. The legislators 121 First component is from the Global Competitiveness Report’s survey question: “Is the judiciary in your country
Independent from political influences of members of government, citizens, or firms? No—heavily influenced
(= 1) or Yes—entirely independent (= 7).” Kyrgyzstan scored 2.19 Second component is from the Global
Competitiveness Report’s survey question: “The legal framework in your country for private businesses to settle
disputes and challenge the legality of government actions and/or regulations is inefficient and subject to
manipulation (= 1) or is efficient and follows a clear, neutral process (= 7).”Kyrgyzstan scored 2.57. Economic
Freedom of the World: 2010 Annual Report page 94, 221 122 Article 1 of the law of the Kyrgyz Republic “On investments in the Kyrgyz Republic”
38
distinguish between disputes involving state bodies, public officers on one hand and disputes
involving domestic investors. The general rule is that- the parties are free to agree on any
legitimate and applicable procedure for dispute settlement beforehand. The agreement may take
a form of the separate contract on procedure of dispute settlement, or may be incorporated in a
form of an arbitration clause or prorogation of jurisdiction to the main contract. In absence of
such an agreement or clause, investment dispute is to be settled to the extent possible by the
means of consultations and negotiations. Parties are given 3 month time to conduct negotiations.
In case if they will not come to the peaceful settlement at the end of that period, investment
dispute between investor and state body of the Kyrgyz Republic is to be settled by the judicial
bodies of the Kyrgyz Republic. In case if the arbitrage as a mean of dispute settlement was not
agreed between the foreign investor and the Kyrgyz Republic, the investor can initiate hearings
in front of the arbitration tribunal. The Kyrgyz Republic is deemed to consent123.
Investment disputes arising between the foreign and domestic investors are to be set in
accordance with the national legislation by bringing the case before the judicial bodies of the
Kyrgyz Republic, unless both parties will agree on any other procedure for dispute settlement,
including internal and international arbitrage.
The functioning of the arbitrage court is based on the following principles: equality of the
parties before the law and the court, adversary nature of the trial and obligatory execution of the
decision rendered by the arbitrage. Pursuant to the agreement on arbitration, the arbitration
clause or the law, the disputes can be settled by the established arbitrage court or by the ad hoc
tribunal, formed by the parties for the consideration of the certain case and for the period of
trial124. The law allows for domestic and international arbitration of disputes. The decision of the
arbitrage court is final and not subject to appeal.
The International Arbitration Court under the Chamber of Trade and Industry of the
Kyrgyz Republic has joined the judicial system of the country in September 2002. It provides an
opportunity for investors to minimize the commercial risk of irrecoverable losses of invested
means by guaranteeing the independence of arbitrage awards. At present there are 112
professionals from 15 countries of Europe, USA and Asia, including 53 international arbiters
from UK, Sweden, Russia, Kazakhstan, USA, France, Ukraine, Uzbekistan, Holland, White
Russia, Turkey, India, Rumania and Croatia employed by the International Arbitration Court.
Decision of the International Arbitration Court comes into effect immediately after being
rendered and is not subject to appeal.
123 Article 46 of the Law “On arbitral courts in the Kyrgyz Republic” 124 Article 3.1 Ib.
39
The Kyrgyz Republic is a member of the International Center for the Settlement of
Investment Disputes (ICSID). It has signed the ICSID agreement on June 9, 1995, and ratified it
on July 5, 1997. As for investor - state dispute settlements, at least 32 new cases were initiated in
2009 worldwide and 44 decisions rendered. The number of countries that have been involved in
investment treaty arbitrations grew to 81. The overwhelming majority of the claims were
initiated by investors from developed countries, with developing and transition countries most
often on the receiving end125.
Another important issue coming out of the decision to settle the case in front of the
foreign court is the enforcement of foreign awards on the territory of the Kyrgyz Republic. The
Code of Civil Procedure of the Kyrgyz Republic provides that the awards of foreign courts are to
be recognized and enforced in the Kyrgyz Republic, if it is stipulated by the laws or international
agreements, entered by Kyrgyzstan, or on the mutual basis.126 However, up to this date there is
no specialized law on the recognition and enforcement of foreign awards. As for the international
agreements, the Kyrgyz Republic has ratified limited number of regional agreements on judicial
assistance and cooperation, including the Convention “On legal assistance and legal relations on
civil, family and criminal cases of the Commonwealth of the Independent States” (Minsk, 1995),
the Convention “On legal assistance and legal relations on civil, family and criminal cases”
(Chisinau, 2002), the Agreement “On procedure for economic dispute settlement”(Kiev, 1991),
the Agreement “On procedure for mutual enforcement of awards, rendered by the arbitral,
economic courts on the territory of the CIS States”(Moscow, 1998). To enforce the foreign
awards, rendered by the courts of the countries, not covered by the abovementioned agreements,
the Kyrgyz Republic should rely on bilateral agreements or the reciprocity principle.
The treatment of foreign arbitral is governed by the United Nations Convention “On the
recognition and enforcement of foreign arbitral awards” and the Law “On arbitral courts in the
Kyrgyz Republic”. As a party to the Convention, Kyrgyzstan undertakes to recognize the foreign
arbitral awards and to enforce them, and in no case to conduct a discriminatory policy toward
enforcement of non domestic decisions. The grounds for refusal to enforce and recognize the
foreign award are described in the Article 5 of the Convention. However, up to this date the
Kyrgyz Republic has never invoked the provision of this article.
125 World Investment Report 2010: Investing in a low-carbon economy, United Nations Publication, p. 83 126 Article 380 of the Code of Civil Procedure of the Kyrgyz Republic
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IV. Free Economic Zones
The free economic zones are isolated areas singled out on the territory of certain
oblasts127, regions and cities of the Kyrgyz Republic, with specific legal regimes, stipulating
preferences in the sphere of foreign-economic and economic activity and corresponding
withdrawals and additions in legal regulation of labor relations128. The law of the Kyrgyz
Republic “On free economic zones in the Kyrgyz Republic” identifies the legal bases for
establishment and functioning of the free economic zones in the Kyrgyz Republic. The
enterprises operating on the territory of the zones are subject to the following limitation of
activities: the subjects of FEZ129 are restricted from import, storage, production and sale of
excisable goods (alcohol, petroleum, tobacco) on the territory of the free economic zones of the
Kyrgyz Republic130and the sale of goods, produced in FEZ, on the domestic market of the
Kyrgyz Republic, is forbidden, unless the value added cost of goods comprise more than 30
percent and for household appliances more than 15 percent131.
Free economic zones offer the following range of benefits for the investors: simplified
and fast registration, tax preferences (the subjects of FEZ, with an exception of companies,
providing services for the domestic market of the Kyrgyz Republic132, are exempted from
payment of all types of taxes, duties and dues for the whole period of operation133 within the
FEZ134), special custom regime(goods imported to the FEZ or goods destined for reexportation
and transshipment, as well as export of goods manufactured in FEZ are exempted from payment
of custom duties; the free movement of goods through the border and the abolition of the non
tariff limitations on export and import operations is in force135), special currency regime (foreign
127 For administrative purposes, Kyrgyzstan is divided into seven provinces, called “oblasts”. 128 Article 1 of the Law of the Kyrgyz Republic “On free economic zones in the Kyrgyz Republic” 129 Organizations registered with the FEZ General Directorate shall be the FEZ subjects. Article 373 of the Tax Code
of the Kyrgyz Republic 130 Article 1 of the Law of the Kyrgyz Republic “On free economic zones in the Kyrgyz Republic” 131 Article 1 Ib. 132 Services and works provided by the FEZ subjects for consumption in the KR domestic market shall be taxable
under the general tax regime. Services and works supplied for consumption in the KR domestic market are the
services and works that are purchased by organizations or physical persons, other than FEZ subjects, in the FEZ
territories or in the rest of he KR territory. Article 375.5 of the Tax Code of the Kyrgyz Republic 133 There is no limit on the length of stay within a FEZ 134 Unless otherwise provided by this Chapter, the FEZ subject’s activity that meets requirements of Para 1, Art. 372
of this Code shall be exempt from any tax payment. Article 375.1. of the Tax Code of the Kyrgyz Republic
135 Article 6 of the Law “On free economic zones in the Kyrgyz Republic”, see also Order “On movement of goods
and transport facilities to/from the territory of the free economic zones”
41
currency is to be freely circulated and used136), limited number and scope of inspections(it is
restricted to conduct tax and financial-economical inspections of the FEZ companies more than
once a year. Intervention by any state authority to the economical activity of the subject of FEZ
is strictly forbidden, unless there is special decision rendered by the Government of the Kyrgyz
Republic137).
For the granted tax preferences and use of facilities and services, the subjects of the FEZ
have to pay from 0.1 to 2 percent of income from the sale of goods and services138.
The legislation of the Kyrgyz Republic should govern the territory of the FEZ, in so far it
does not contradict to the Law of the Kyrgyz Republic “On free Economic Zones in the Kyrgyz
Republic”.
Apart from the core document – the law “On free economic zones in the Kyrgyz
Republic”, there is a number of regulations on certain economic zone (f.i. Regulation “On free
economic zone Bishkek”), which specify the particularities and advantages of each zone. Thus,
the free economic zone “Bishkek” provides a guaranteed protection of foreign investments on
the territory of the Free Economic Zone from being an object of nationalization. If the foreign
investment creates a threat for the health and lives of the citizens, state and public safety, the
foreign investor is to be notified by the General Directorate of the FEZ about terms on
elimination of the threat. In case of refusal or inability to liquidate the threat, the General
Directorate is entitled to take measures to liquidate the threat by the means of the foreign
investor139.
4 FEZ on the territory of the Kyrgyz Republic, “Naryn”140, “Karakol”141, “Bishkek142”
and “Maimak”143, have attracted investors from over 30 countries. Despite of the apparent
achievements in attraction of foreign investors, the FEZ are being heavily criticized for non
fulfillment of the major missions of the free economic zones. There are widely spread
suspicions, also stated by the then Prime Minister of the Kyrgyz Republic Daniyar Usenov144,
136 Article 7 of the Law “On free economic zones in the Kyrgyz Republic” 137 Article 12 Ib. 138 Article 8 of the Law “On free economic zones”, see also Temporary regulations “On order of calculation and levy
of payment for the tax preferences granted to the subjects of the free economic zones of the Kyrgyz Republic”
139 Article 11 of the Regulations “On free economic zone Bishkek” 140 Regulations “On free economic zone in the Naryn oblast of the Kyrgyz Republic” 141 Regulations “On free economic zone “Karakol” 142 Regulations “On free economic zone “Bishkek” 143 Regulations “On free economic zone “Maymak”” 144 “Kyrgyz Prime Minister against free economic zones,”24.kg news agency at:
http://eng.24.kg/politic/2010/03/17/10630.html
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that FEZ are being used as a sort of off-shore zones for the money-laundering transactions and
evasion of duties and taxes. The operation of two of the free economic zones, namely FEZ
“Karakol” and FEZ “Naryn” were suspended owing to the infringement of regulations regarding
trade in petroleum, intoxicating liquor, tobacco and tobacco products145. At the moment the
future of the FEZ in Kyrgyzstan, at least in the same format as they have been operating from
1993, is being discussed by the legislators and politicians.
145 “IV. Kyrgyzstan,” United Nations Economic and Social Commission For Asia and The Pacific, p.113 at:
http://www.unescap.org/tid/publication/tipub2437_kyrgyz.pdf
43
V Legal status of foreign nationals in the Kyrgyzstan
According to the National Statistic Committee, in 2009 slightly more than 2 million
foreign nationals have entered the territory of Kyrgyzstan, half of them entered from Kazakhstan,
the northern neighbour country. The national legislation governing the legal status of the foreign
nationals in the Kyrgyz Republic consists of the Constitution of the Kyrgyz Republic, the Law of
the Kyrgyz Republic “On the legal status of the foreign nationals in the Kyrgyz Republic” and
other legal acts.
There are 28 countries whose citizens are exempt from obtaining visa or able to obtain
one upon arrival to Kyrgyzstan. It the highest indicator among Central Asian Republics, that
demonstrates Kyrgyzstan’s policy for openness. Nationals of the following countries, holding
passports of any category, may enter the Kyrgyz Republic visa-free: Albania, Armenia,
Azerbaijan, Belarus, Bosnia and Herzegovina, Bulgaria, Croatia, Cuba, Czech Republic,
Georgia, Japan, Kazakhstan, Macedonia, Malaysia (for business purposes or tourism for the
period up to 1 month), Moldova, Mongolia (up to 3 months), Northern Korea, Poland, Romania,
Russia, Slovakia, Slovenia, Tajikistan, Turkey (up to 1 month), Ukraine (up to 90 days),
Vietnam, and Yugoslavia. Nationals holding diplomatic and service passports of the following
countries enjoy visa-free entry into the Kyrgyz Republic for the term up to one month: China,
Hungary, Iran, Turkmenistan, and Uzbekistan. Nationals holding diplomatic passports of the
following countries enjoy visa-free entry into the Kyrgyz Republic: Austria, Belgium, Canada,
Denmark, Finland, France, Germany, Greece, Iceland, Italy, Luxembourg, the Netherlands,
Norway, Portugal, Spain, Sweden, the United Kingdom, and the United States.
Visas for entering Kyrgyzstan are issued by the Kyrgyz Embassies and Consulates in
foreign countries. According to the corresponding agreement146, in the countries, where there is
no Embassy or Consulate of the Kyrgyz Republic, the diplomatic representative bodies of the
Republic of Kazakhstan provide services on visa issuance.
Foreign nationals, who have been staying in the Kyrgyz Republic for more than 6
month, have a right to apply for either temporary or permanent residence permit. The first type
of permit is issued for the period of 1 year with a prolongation possible for the purposes of
carrying out labour activity on the territory of the Kyrgyz Republic or studying at the local
146 Agreement “On delegation of powers on protection of rights and interests of the nationals and legal entities of the
Kyrgyz Republic abroad and issuance of entry visas for the Kyrgyz Republic” between the Ministry of Foreign
Affairs of the Kyrgyz Republic and the Ministry of Foreign Affairs of Kazakhstan from July 26, 1996
44
educational institution upon the request of that institution and the Ministry of Education, Science
and Culture of the Kyrgyz Republic147. The permanent residence permit is issued for the period
of 5 years148 for the individuals, who stay on the territory of the Kyrgyz Republic, but do not
want to be naturalized, or whose Kyrgyz legal nationality was ceased pursuant to the laws and
for the foreign nationals staying permanently on the territory of the Kyrgyz Republic, after they
get 16 years old149.
The foreign nationals enjoy the same rights and bear the same obligations as do the
Kyrgyz nationals, subject to limitations established by the laws or international treaties150.
Foreign nationals in the Kyrgyz Republic are not to be discriminated on the basis of their origins,
social position and status, religious and national affiliation, sex, education, language, attitude to
religion, occupation, business and other conditions.
The use of rights and freedoms by the foreign nationals in the Kyrgyz Republic must not
cause damage to the rights and legitimate interests of the nationals of the Kyrgyz Republic and
other individuals, public and state interests151.
Following are the basic rights, freedoms and duties of the foreign nationals in the Kyrgyz
Republic: right to work152, right to have a rest153, health protection154, social maintenance155,
right to education156, non-property and property rights157, use of cultural achievements158, right to
147 Article 3 of the Regulations “On temporary and permanent residence permit for the foreign nationals, stales
person and identification for the stateless person in the Kyrgyz Republic” 148 The permit may not be issued for the period longer than the term of validity of the foreign passport. If the
applicant is older than 45 years, the permit is issued for the same period as the term of validity of the foreign
passport. Article 18 Ib. 149 Article 4 Ib. 150 Article 19 of the Constitution of the Kyrgyz Republic 151 Article 3 of the Law “On legal status of the foreign nationals in the Kyrgyz Republic” 152 Foreign nationals are entitled to work when it is compatible with the purpose and timeframe of their visit to the
Kyrgyz Republic, or when a respective permit has been issued. Subject to the limitation applied for certain positions,
if pursuant to the legislation such positions are to be occupied by the nationals of the Kyrgyz Republic. Article 7 of
the Law “On legal status of the foreign nationals in the Kyrgyz Republic” 153 Article 8 Ib. 154 Article 9 Ib. 155 Article 10 Ib. 156 Article 12 Ib. 157 Article 11 Ib. 158 Article 13 Ib.
45
participate in the public associations159, freedom of conscience160,right to enter and dissolve
marriage161, personal immunity and sanctity of the home162, freedom to choose a place of
residence and to move on the territory of the Kyrgyz Republic163, judicial and state protection of
the personal, family, property and other rights164 , duty to pay taxes and dues165, duty to respect
the Constitution of the Kyrgyz Republic and comply with the laws of the Kyrgyz Republic166.
159 Provided those associations do not pursue political goals. Article 14 of the Law of the Kyrgyz Republic “On legal
status of the foreign nationals in the Kyrgyz Republic”. “Foreign legal entities, nationals, foreign states and
international organizations are restricted from financing political parties, public associations, which pursue political
goals. Article 161.2 of the Civil Code of the Kyrgyz Republic”, “The activity of foreign political parties, public and
religious organizations, their representative offices and branches, which pursue political goals on the territory of the
Kyrgyz Republic is restricted” Article 8.5 of the Constitution of the Kyrgyz Republic 160 Article 15 of the Law of the Kyrgyz Republic “On legal status of the foreign nationals in the Kyrgyz Republic” 161 Article 16 Ib. 162 Article 17 Ib. 163 Limitations on the movement and choice of place of residence might take place in case if it is needed for
protection of the state security, public order, health and morality of the population, protection of the rights and
legitimate interests of the nationals of the Kyrgyz Republic and other persons. Article 18 Ib. 164 Foreign nationals and legal entities enjoy the same procedural laws and obligations as the nationals and legal
entities of the Kyrgyz Republic. Article 367.2 of the Code of Civil Procedure of the Kyrgyz Republic. Foreign
nationals in the Kyrgyz Republic must be granted a possibility to contact with the diplomatic or consular
representation of its State, in the absence of such – with the diplomatic or consular representation of another State,
which is authorized to protect the rights and legitimate interest of the nationals of the first state. Article 20 Ib. 165 Article 19 Ib. 166 Article 4 Ib.
46
D. Doing Business Report
Kyrgyzstan is the one of the most conducive countries in Central Asia for doing
business, the World Bank Doing Business 2010 report states. Despite protracting economic
difficulties, Kyrgyzstan has improved its international score in Doing Business significantly,
moving from 80th position to 41th in one year.
Kyrgyzstan is convinced that foreign direct investments should be an important
component of the country’s growth strategy. To encourage FDI, the government is working on
improving the overall business climate in the country and making it more attractive for investors.
The then President of Kyrgyzstan Kurmanbek Bakiev presented an initiative to improve the
rating of Kyrgyzstan at the Doing Business Index on the meeting of the Investment Council on
9th of November, 2007. For that purpose, Kyrgyzstan introduced numerous amendments to the
laws governing business activity and became one of the top 100 reformers in 2008/2009
according to the Doing Business report (See the table below).
The following chart illustrates rankings of Kyrgyzstan’s performance by the indicators,
composing the total the Doing Business Ease index.
47
1. Starting a business. Economies with efficient business registration have a higher entry
rate as well as greater business density167. Another study found that in relatively poor but well-
governed economies, a 10-day reduction in start-up time was associated with an increase of 0.4
percentage points in the growth rate and 0.27 percentage points in the investment rate.168
Kyrgyzstan introduced 13 reforms in 2008/2009 to make starting business easier. It has
eliminated the minimum capital requirement. Armenia, the Kyrgyz Republic and Slovenia
reformed outdated company seal requirements. The Kyrgyz Republic accelerated registration,
reduced the documents required and abolished the fees for statistical and tax registration.169At
present, it requires 3 procedures and takes 15 days to start-up business in Kyrgyzstan.
2. Dealing with construction permits. The construction industry accounts for 5–7% of
GDP in most economies and for almost a third of gross capital formation globally170. In
2007/2008 Kyrgyzstan was the top reformer by the dealing with construction permits indicator.
167 Entry rate refers to newly registered firms as a percentage of total registered firms. Business density is defined as
the number of businesses as a percentage of the working-age population (ages 18–65). Leora Klapper and others,
“Entrepreneurship and Firm Formation across Countries,” Policy Research Working Paper 4313, World Bank,
Washington, D.C. 168 Eifert, Benjamin P., “Do Regulatory Reforms Stimulate Investment and Growth? Evidence from the Doing
Business Data, 2003–07.” Department of Economics, University of California at Berkeley. 169 Doing Business Report 2010,Reforming through Difficult Times, the World Bank, IFC,Palgarve MacMillan,p. 12 170 Kenny, Charles. 2007. “Construction, Corruption, and Developing Countries.” Policy Research Working Paper
4271, World Bank, Washington, DC.
48
Regulations let over from Soviet times had required builders to obtain separate
preapprovals from each utility authority. Now a one-stop shop issues all approvals, including
construction permits (see the chart above). Another big change: a presidential decree eliminated
the location permit, which had required the signature of Bishkek’s mayor and took 60 days to
obtain171. The Kyrgyz Republic and Montenegro both introduced risk-based approvals for
construction permits. Simpler construction projects now undergo a less cumbersome approval
process, and building authorities can focus more on reviewing projects with potential
environmental or public safety impacts172.
3. Registering property. Making property registration simple, fast and cheap allows
entrepreneurs to focus on their business. Property owners with formal title invest up to 47%
more in their property, a study in Argentina finds173.
The Kyrgyz Republic simplified documentation and notarization requirements, cutting
the time required to register a title almost in half—from 8 days to 5174. The police makers made
the involvement of notars optional.
4. Protecting investors. By guaranteeing the protection of shareholders, State facilitates
investment flows and grants confidence for investors. A recent study finds that the presence of
legal and regulatory protections for investors explains up to 73 percent of the decision to
invest175. In Kyrgyzstan shareholders can now sue in their own name directors whose actions
damage the company.176 In 2009 Kyrgyzstan was the country with the most protected investors
among the landlocked countries177.
171 Doing Business 2009, the World Bank –IFC - Palgrave Macmillan, p. 15 172 Doing Business Report 2010, Reforming through Difficult Times, the World Bank– IFC-Palgarve MacMillan, p. 18 173 Sebastian Galiani and Ernesto Schargrodsky, “Property rights for the Poor: Effects of Land Titling,” Business School Working Paper 06/2005, Universidad Torcuatno Di Tella, Buenos Aires 174 Doing Business Report 2010,Reforming through Difficult Times, the World Bank, IFC and Palgarve MacMillan ,28 175 Craig Doidge, Andrew Karolyi and Rene M. Stulz.2007, “Why Do Countries Matter So Much for Corporate Governance?” Journal Financial Economics 86 (1): 1-39. 176 Doing Business in Landlocked Economies Report 2009, the World Bank, the International Finance Corporation, 8 177 Doing Business in Landlocked Economies Report 2009, the World Bank, the International Finance Corporation,
17
49
5. Paying taxes. Businesses from around the world have identified taxation as an area in
which they would most like to see their governments improve178. Kyrgyzstan is considered to
have the one of the least attractive tax regimes. It requires 202 hours for a standard medium-size
company to make the average 202 payments per year. The total tax rate might be quite high and
comprise 61.4 percent of profit.
According to another research conducted in the frame of the Global Competitiveness
Index 2010-2011, Kyrgyzstan ranks as the 106th among the 139 countries, where the research
was conducted, on the level of influence of the taxation system on business environment. The
rating was done in reverse order, thus the 1st place implied that the taxation system does not
affect the activities of entrepreneurs. The results of the research have shown that the taxation
issues might create obstacles for actual businesspeople and hinder potential investors from
entering Kyrgyz market. A recent study finds that higher tax rates are associated with less private
investment, fewer formal businesses per capita and lower rates of business entry179.
The Kyrgyz Republic has signed double taxation treaties with Armenia, Austria,
Belarus, Canada, Finland180, Germany, India, Kazakhstan, Malaysia, Mongolia, Pakistan,
Poland, Russia, Switzerland181, Tajikistan, Turkey, Ukraine, and Uzbekistan. The U.S.-U.S.S.R.
treaty on double taxation, which was signed in 1973, remains in effect between the U.S. and the
Kyrgyz Republic.
The new Tax Code of the Kyrgyz Republic that came into force at the beginning of
2009 substantially reduced the tax burden and liberalized the tax system for foreign investors.
The number of taxes was reduced from 16 to 8, and the VAT rate - from 20 to 12 percent.
The attractiveness of new Kyrgyz tax system in comparison to the other countries of the
region was accented by some business people, operating in the region. As Mr. Dekel Golan,
CEO and Director of Chaarat Gold Holdings Ltd182 mentioned in his recent interview: “I think
178 Paying taxes 2010. Global picture. PricewaterhouseCoopers , 10 179 Djankov Simeon and others, The effect of Corporate Taxes on Investment and Enterpreneurship, NBER Working
paper 13756. Cambridge, MA: National Bureau of Economic Research. 180 Agreement “On avoidance of double taxation with respect to income taxes” between the Kyrgyz Republic and
Finland from April 3, 2003 181 Agreement “On avoidance of double taxation in respect to income and capital taxes” between the Kyrgyz
Republic and Swiss Confederation from January 26, 2001 182 Chaarat Gold Holding Ltd. is a gold exploration and development company operating in the Kyrgyz Republic,
which is listed on London’s Alternative Investment Market (AIM) (ticker symbol CGH) See: official site at
http://www. Chaarat.com
50
Kyrgyzstan is very welcoming, their tax strategy is definitely the best in the region and one of
the best in the world”183
6. Employing workers. The amendments introduced to the Labour Code of the Kyrgyz
Republic make workers more flexible and allow choosing the weekly rest day. Redundancy
procedures for one or more workers were eased: notification requirements, priority rules and
obligations to retrain or reassign redundant workers no longer apply184.
7. Getting credit. Access for credit creates possibilities for new entries to the market and
potential for business expansion. The 2008-2009 years were rich for reforms, aimed at making
an access to credit available in Kyrgyz Republic. The amendments to the Civil Code of the
Kyrgyz Republic and the Law of the Kyrgyz Republic “On pledge” include: expansion of the
range of revolving movable assets that can be used as collateral and allowance of maximum
rather than specific amounts in debt agreements. The taken measures let Kyrgyzstan be among
the top five countries (Hong Kong Chinese, Kenya, Malaysia, Singapore), where the legislation
provides for the most credit information and legal rights for borrowers and lenders.
8. Trading across borders. Where the trade environment is more favourable, businesses
are better positioned to take advantage of new opportunities, to grow and to create jobs when the
global economy picks up again185. In 2009-2010 Kyrgyzstan reduced number of trade documents
and introduced (or improved) risk-based inspections.
9. Enforcing contracts. Recent research shows that a country’s ability to enforce
contracts is an important determinant of its comparative advantage in the global economy:
among comparable economies, those with good contract enforcement tend to produce and export
more customized products than those with poor contract enforcement.186
10. Closing a business. Kyrgyzstan occupies one of the lowest positions by the closing a
business. This indicator measures the time, cost and outcome of a bankruptcy of a local
company. In Kyrgyzstan the insolvency proceedings in average take 4 years.
Improving the ranking of the Kyrgyz Republic in the Doing Business Rating implies the
promotion of the investment attractive image of the country in a global context, increase of
investment flows, activity of the business community and reduction of legal, tax, administrative
barriers for entrepreneurial activities. 183 “Stans energy offers perspective on doing business in Kyrgyzstan,” at:
http://www.stansenergy.com/interviews/stans-energy-offers-perspective-on-doing-business-in-kyrgyzstan 184 Doing Business Report 2010,Reforming through Difficult Times, the World Bank-IFC-Palgarve MacMillan,p. 24 185 Doing Business Report 2010,Reforming through Difficult Times, the World Bank- IFC-Palgarve MacMillan,p. 49 186 Nathan Nunn, “Relationship-Specificity, Incomplete Contracts, and the Pattern of Trade,” Quarterly Journal of
Economic 122 (2), pp. 569-600
51
D. Selective issues
As a landlocked economy, Kyrgyzstan faces special
challenges in competing globally—with trade involving
greater distances and greater obstacles due to border
crossings. Good regulation is important for attracting foreign
direct investment, boosting trade and enhancing economic
growth. Indeed, among landlocked economies, those with a
better business environment trade more than those with a
weaker one (see figure on the right)187.
The Economic Freedom of the World: 2010 Annual Report188 ranked Kyrgyzstan 62nd,
up from 74th spot last year. The report revealed the weak points of Kyrgyz system, Achilles heel
are legal structures and the security of property rights. Protection of persons and their rightfully
acquired property is a central element of economic freedom and a civil society. Indeed, it is the
most important function of government. When individuals and businesses lack confidence that
contracts will be enforced and the fruits of their productive efforts protected, their incentive to
engage in productive activity is eroded.189 To this end, the Central Asian Free Market Institute
encourages Kyrgyzstan’s government to ensure rule of law, security of property rights and
independence of judiciary. Ensuring a secure legal system is momentous in the interests of
ensuring civil and prosperous Kyrgyzstan and even more so in the face of recent economic and
political turmoil.190
The other important issue of ensuring land property rights, that is often faced by the
business people, thinking about coming to the Kyrgyz market, was introduced by the IBC at the
first meeting of the Business Development and Investments Council under the Government of
the Kyrgyz Republic, which took place on August 27, 2010 under the chairmanship of the
187 Doing Business in Landlocked Economies Report 2009, the World Bank- IFC ,p. 1 188 Economic Freedom of the World measures the degree to which the policies and institutions of countries are
supportive of economic freedom. This year’s publication ranks 141 nations representing 95% of the world’s
population for 2008, the most recent year for which data is available. The annual report is produced by the Fraser
Institute, Canada’s leading public policy think-tank, in cooperation with independent institutes, including the Central
Asian Free Market Institute.
189 Economic Freedom of the world Report 2010, Fraser institute, p. 5
190 “Kyrgyzstan rated 62 in Economic Freedom: Needs Much Improvement in Security of Property Rights,”
Central Asian Free Market Institute, at http://freemarket.kg/node/344
52
President of the Kyrgyz Republic191. The legal framework for regulation of land possession
rights is set by the Land Code of the Kyrgyz Republic, which was adopted in 1999. According to
the legislation, the land resources of the Kyrgyz Republic are divided into the following
categories depending on the purpose of use:
1) agricultural land192
2) lands of settlements (in the cities, urban and country settlements)193
3) lands of industrial, transportation, communication, defense194, and other purposes
4) lands of specially protected natural conservation areas195
5) land of the forest resources196
6) land of the water resources197
7) land of the reserve198 199
As a result of the referendum, conducted in October 1998, the right for private land
possession applicable for Kyrgyz citizens was introduced, whereas till nowadays foreign
investors are restricted from being in possession of any types of land plots.
The foreign naturals and legal entities are restricted from being in possession of lands of
agricultural use200. There are following two exceptions to that rule. The first one applies to the
191 The first meeting of the Business Development and Investments Council,“Investment now”, 2.2010, p. 43 192 Agricultural land – land plots for the needs of agriculture and intended for the purposes of husbandry. Article
72.1 of the Land Code of the Kyrgyz Republic 193 Lands of settlement embraces all land plots, located within the centres of population. Article 76.1 Ib. 194 Lands for the defense purposes are the land plots of dislocation and permanent establishment of military divison,
military-educational institutions and other organizations of the military forces and army, engaged in performing
tasks in defense and security area. Article 83.1 Ib. 195 Especially natural conservation areas include lands of state nature reserves, national parks, wildlife preserves
(except game parks), natural monuments, botanical gardens, dendrology and zoologic parks, territories of health-
improving purpose, also land plots with natural complex and objects, that have special ecological, nature
conservation, scientific, historical, cultural, recreational and medical purposes. Article 84 Ib. 196 Land of the forest resources are the land plots covered by the forest, and also not covered by the forest, but
intended for the needs of forestry. Article 86 Ib. 197 Land of the water resources include land, occupied by the water reservoirs (rivers, lakes, storage ponds, canals),
glaciers, bogs, hydro technical and other water industry constructions and also lands, allocated for the public right-
of –way. Article 89 Ib. 198 Land of the reserve embraces all lands, not in possession or use. This category of the land is owned by the State.
Article 93 Ib. 199 Article 10 Ib. 200 Article 5.1 of the Land Code of the Kyrgyz Republic
53
foreign bank and specialized finance-credit establishments, which may have a limited right of
property for the agricultural land for the period of 1 year, if that land plot was callable as a result
of creditor’s failure to remit a debt. The second exception takes place if the foreign national or
legal entity obtained a land plot as a result of legal succession by inheritance or reorganization of
the entity. In both cases the foreign national or legal entity has a one year time to dispose the
land plot to the national of the Kyrgyz Republic. If it fails to comply with the time limitations,
the property disposal is to be conducted in accordance with the procedure prescribed by the
article 283 of the Civil Code of the Kyrgyz Republic. Upon the decision of the court, the land
plot is to be forcibly sold out or transferred to the state or municipal property. The compensation
minus the costs for property disposal is to be paid to the owner of the land.
The foreign naturals may own the lands of settlements in case of crediting the
hypotecary housing construction201. In other cases they have a right for temporary use of the
lands of settlements.
The right of temporary use of the other types of land resources is to be granted by the
Government of the Kyrgyz Republic or as a result of universal legal succession by inheritance or
reorganization of the legal entity202. In the last case the foreign national or legal entity should
dispose the land plot in a 1 year time. The temporary use is limited to the maximum of 50
years203, the prolongation is possible.
The foreign nationals are discriminated in assess to the land in the Kyrgyz Republic, by
that that they have to pay the rental payments for the temporary use of land plot, with an
application of the coefficient, specially established by the Government of the Kyrgyz Republic in
regard of foreign investors.204
The Land code of the Kyrgyz Republic provides for the following characteristics of the
foreign legal entity: a) established and registered in accordance with the legislation of the foreign
country; b) 100% owned by one or more foreign naturals or legal entities; c) controlled or
managed by one or more foreign naturals or legal entities on the base of: written contract, right
to realize the majority of the voting rights, right to appoint the majority of executive or
supervisory organ members; d) registered in the Kyrgyz Republic and not less than 20% of the
authorized capital belongs to the foreign nationals, legal entities or stateless naturals; e)
established on the base of the intergovernmental agreement or treaty205.
201 Article 5.2 Ib. 202 Article 5.3 Ib. 203 Article 7.2 Ib. 204 Article 8 Ib. 205 Article 1 Ib.
54
The limitations regarding the ownership of land in the Kyrgyz Republic apply to the
legal entities that fit into one of the descriptions above. Thus, the change of the structure of the
authorized capital even for 1 percent, may totally disallow the company to own the land.
In the process of the survey, conducted by the International Business Council, 27
percent of respondents said that it is necessary to provide foreign investors with equal rights for
acquisition of all categories of lands. Exceptions are territories used for ensuring security and
defense of the country. 50 percent of respondents noted the necessity of equaling of all in rights
to land within settlements. Interest of approximately 15 percent of respondents is focused on
farmlands, about 10 percent – on lands outside settlements206. The discrimination of the foreign
investors in relation to their access to land resources means insecurity and instability for
business. If the right of land ownership will be granted for the foreign investors they will be
confident in tomorrow and express more interest in investment. “In its turn, it will serve as an
impulse to full-scale development of various sectors of economy and will solve many social
problems. The opportunity for foreign persons to take possession of lands of certain categories
will give wide guarantees and exclude many risks at conducting business in Kyrgyzstan”, reads
the research of the IBC.
206 Irina Dudka,“Foreign Investors want the equal land rights,” 24.kg news agency, at:
http://www.24.kg/economics/75153-inostrannye-investory-v-kyrgyzstane-schitayut.html
55
F. Conclusion
National investment regimes continued to become more favourable towards foreign
investment, while governments have increasingly reemphasized regulation. Out of the 102 new
national policy measures affecting foreign investment that were identified in 2009, the majority
(71) were in the direction of further liberalization and promotion of foreign investment. This
confirms that the global economic and financial turmoil has so far not resulted in heightened
investment protectionism.207 Kyrgyzstan was not outside of the international trend for
liberalization. The country’s attitude toward foreign direct investment reflected in its investment
policy and legislation has been constantly changing and improving over the recent years. Former
soviet country, which was used to its highly specialized and limited economic niche, dictated
from Moscow, had to transform toward the market economy and adopt the investor friendly
attitude. As a result, last years were marked with the successful improving of the Kyrgyzstan’s
performance under the Doing Business Report. To reach that, the government facilitated
procedures for business registration, procedures for license obtainment and decreased and
limited number and scope of business inspections. However, there are still many things to
improve. As the Executive Opinion Survey 2007, 2008 at the World Economic Forum has
shown, Kyrgyzstan was ranked as the 123 among 133 countries on the business impact of rules
on FDI. It scored 3.9, showing that rules governing foreign direct investments are more likely to
discourage than attract investments.
This Master thesis aimed to provide an overview of the legal framework for foreign
direct investments in the Kyrgyz Republic, as well as to point to the disadvantages of the present
system, like the limited land acquisition rights or weak property rights, that were discussed in the
previous Chapter. The constant work for perfection of the investment policy and creation of
favourable conditions, as well as securing political stability and promoting open and democratic
image of the Republic are the next tasks of the Government of the Kyrgyz Republic
207 World Investment Report 2010: Investing in a low-carbon economy, United Nations Publication, p.24
56
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Legislation:
United Nations Convention “On the recognition and enforcement of foreign arbitral
awards” from June 10, 1958
Agreement “On trade related aspects of investment measures”
Agreement “On visa-free movement of the nationals of the Member States of the
Commonwealth of Independent States within the territory of the Member States” from
October 9,1992
Agreement “On reciprocal visa-free movement of nationals” between the Governments
of Whiterussia, Kazakhstan, Kyrgyzstan, Russian Federation and Tajikistan, from
November 30, 2000
Agreement “On mutual encouragement and protection of investments” between the
Government of the Kyrgyz Republic and the Government of France from June 2, 1994
Agreement “On encouragement and mutual protection of investments” between the Swiss
Federal Council and the Government of the Kyrgyz Republic from January 29, 1999
57
Agreement “On encouragement and protection of investments” between the Government
of the Kyrgyz Republic and the Government of Finland from April 3, 2003
Agreement “On mutual cooperation and protection of investments” between the Kyrgyz
Republic and the Republic of Turkey from April 28, 1992
Agreement “On cooperation and protection of investments” between the Government of
the Kyrgyz Republic and the Government of the Sweden Kingdom from March 8, 2002
Agreement “On encouragement and protection of investments” between the Government
of the Kyrgyz Republic and the Government of the Republic Korea from November 19,
2007
Agreement “On avoidance of double taxation with respect to income taxes” between the
Kyrgyz Republic and Finland from April 3, 2003
Agreement “On partnership and cooperation between the European Union and the
Kyrgyz Republic” from February 9, 1995
Agreement “On eternal friendship and cooperation” between the Kyrgyz Republic and
Turkey from October, 24 1997
Mutual Statement of the Heads of Kyrgyzstan and Turkey “Kyrgyzstan and Turkey:
together in the 21 century” from 1 July 1999
General Agreement “On Trade in Services”
The Convention “On protection of investors rights” from March 28, 1997
Declaration “On independent statehood of the Republic Kyrgyzstan” from August 31,
1991 N 578-XII
Declaration “On state sovereignty of the Republic Kyrgyzstan”, from December 15, 1990
N 273-XII
Declaration “On independent statehood of the Republic Kyrgyzstan” from August 31,
1991 N 578-XII
The Country Development Strategy 2007 – 2010 from May 16, 2007 N 249
The Civil Code of the Kyrgyz Republic from May 8, 1996 N 16
The Land Code of the Kyrgyz Republic from June 2, 1999 N 45
The Tax code of the Kyrgyz Republic (effective 1 January 2009)
The Customs Code of the Kyrgyz Republic (effective 1 January 2005)
Resolution of the Supreme Council of the Republic of Kyrgyzstan “On ratification of the
law on free economic zones in the Kyrgyz Republic” from December 16, 1992 N 1077-
XII
58
Resolution of the Supreme Council of the Republic of Kyrgyzstan “On adoption of the
Declaration on independent statehood of the Republic of Kyrgyzstan” from August 31,
1991 N 577-XII
Constitutional Law of the Kyrgyz Republic “On referendum of the Kyrgyz Republic”
from October 23, 2007 N 159
Law of the Kyrgyz Republic “On free economic zones in the Kyrgyz Republic” from
December 16, 1992 N 1076 – XII
Law of the Kyrgyz Republic “On statutory acts of the Kyrgyz Republic” from July 20,
2009 N 241
Law of the Kyrgyz Republic “On order of conduction of business inspections” from May
25, 2007 N 72
Law of the Kyrgyz Republic “On agreements on production division” from April 10,
2002 N 49
Law of the Kyrgyz Republic “On entering in a legal force of the Constitution of the
Kyrgyz Republic” from June 27, 2010
Law of the Kyrgyz Republic “On licensing” from March 3, 1997 N 12
Law of the Kyrgyz Republic “On external labor migration” from January 13, 2006 N 4
Law of the Kyrgyz Republic “On international agreements of the Kyrgyz Republic” from
July 21, 1999 N 89
Law of the Kyrgyz Republic “On mining” from July 2, 1997 N 42
Law of the Kyrgyz Republic “On operations in foreign currency” from July 5, 1995 N 6-I
Law of the Kyrgyz Republic “On the Supreme court of the Kyrgyz Republic and local
courts” from July 18, 2003 N 153
Law of the Kyrgyz Republic “On concessions and concession enterprises in the Kyrgyz
Republic” from March 6, 1992 N 850-XII
Law of the Kyrgyz Republic “On arbitration in the Kyrgyz Republic” from July 30, 2002
N 135
Law of the Kyrgyz Republic “On foreign investments in Kyrgyzstan”, from June 28,
1991 N 537 – XII. Expired.
Law of the Kyrgyz Republic “On investments in the Kyrgyz Republic” from March 23,
2003 N 66
Law of the Kyrgyz Republic “On protection of rights of entrepreneurs” from February 1,
2001 N 15
59
Law of the Kyrgyz Republic “On streamlining legislative framework for regulation of
entrepreneurial activities” from April 5, 2008 N 55
Law of the Kyrgyz Republic “On ratification of the protocol on accession of the Kyrgyz
Republic to the Marrakesh Agreement on Establishment of the WTO” from November
17, 1998 N 146
Law “On legal status of the foreign nationals in the Kyrgyz Republic” from December
14, 1993 N 1296-XII
Resolution of the Legislative Assembly of the Parliament of the Kyrgyz Republic from
May 17, 1995 N 79-1 and Assembly of People’s Representative of the Parliament of the
Kyrgyz Republic from May 31, 1995 N 62-1 “On accession to the New York Convention
on the Recognition and Enforcement of Foreign Arbitral Awards”
Resolution of the Government of the Kyrgyz Republic “On adoption of the coefficient for
establishing the rental payments of the foreign nationals for the use of lands of settlement
and lands of non-agricultural” from April 12, 2006 N 260
Decree of the President of the Kyrgyz Republic “On additional measures for protection of
entrepreneurial activity and streamlining of the inspecting bodies’ work” from April 1,
1997 N 71
Decree of the President of the Kyrgyz Republic “On the ratification of the regulations on
special representative of the President of the Kyrgyz Republic on investment attraction”
dated August 22, 2001 N 254
Decree of the President of the Kyrgyz Republic “On zone of foreign investment attraction
in Bishkek” from December 9, 1994 N УП-319
Decree of the President of the Kyrgyz Republic “On measures for improving the order of
conduction of business inspections” from July 2, 2007 N 330
Decree of the President of the Kyrgyz Republic “On implementation of united
registration of the order of conduction of business inspections” from May 14, 2009 N 237
Regulations “On special representative of the President of the Kyrgyz Republic on
investment attraction” from January 24, 2002 N 35
Regulations “On licensing the certain types of business activity”
Regulations “On free economic zone in the Naryn oblast of the Kyrgyz Republic”
Temporary regulations “On order of calculation and levy of payment for the tax
preferences granted to the subjects of the free economic zones of the Kyrgyz Republic”
Regulations “On free economic zone “Karakol””
Regulations “On free economic zone “Bishkek””
60
Regulations “On free economic zone “Maymak””
Regulations “On order of establishment, reorganization and liquidation of free economic
zones in the Kyrgyz Republic”
Regulations “On Direct Investment Attraction Centre under the Ministry of Economical
Development, Industry and Trade of the Kyrgyz Republic” from June 18, 2004 N 72
Regulations “On State Commission of the Kyrgyz Republic on foreign investments and
economical aid” from April 5, 2001 N 115
Regulations of the Kyrgyz Republic “On free economical zone Bishkek” from November
11, 1995 N 474
Regulations “On temporary and permanent residence permit for the foreign nationals,
stales person and identification for the stateless person in the Kyrgyz Republic” from
June 8, 2000 N 324
Regulations “On licensing the certain categories of entrepreneurship”
Protocol “On accession of the Kyrgyz Republic to the Marrakesh Agreement on
Establishment of the WTO” from October 14, 1998
Protocol “On order and norms of free export of foreign currency by the nationals of the
Custom Union States to the third countries” from May 23, 2000
Interpretation by the Interim Government of the Kyrgyz Republic to the Decree “On
referendum” from April 21, 2010 N 20
Order of the Ministry of Finance of the Kyrgyz Republic “On ratification of the order on
movement of goods and transport facilities to/from the territory of the free economic
zones” from February 15, 2005 N 40-П
Order “On movement of goods and transport facilities to/from the territory of the free
economic zones”
Decision of the Parliament of the Kyrgyz Republic “On List of authorized state bodies,
which a granted a right to conduct inspections of enterprises” from March 12, 2009 N
1037 – IV
Decision of the Parliament of the Kyrgyz Republic “On ratification of the list of
authorized state bodies, which a granted a right to conduct inspections of enterprises”
from June 20, 2008 N 553 –IV
Resolution of the Government of the Kyrgyz Republic “On the Council on Development
of Business and Investments under the Government of the Kyrgyz republic” from August
5, 2010, N 149
61
Decree of the Government of the Kyrgyz Republic “On ratification of the regulations on
licensing the certain types of business activity” from May 31, 2001 N 260
Decree of the Government of the Kyrgyz Republic “On order of conduction of business
inspections and formation of the list of the authorizes state bodies, entitled to conduct
inspections of business subjects” from November 6, 2007 N 533
Decree of the Government of the Kyrgyz Republic “On ratification of rules on
registration of acts on assignment and appointment of business inspections” from
September 18, 2009 N 591
Decree of the Government of the Kyrgyz Republic “On ratification of the Agreement on
reciprocal visa free movements of nationals between the Government of Whiterussia,
Government of Kazakhstan, Government of Kyrgyzstan, Government of Russian
Federation and Government of Tajikistan, from April 25, 2001 N 190
Decree of the Government of the Kyrgyz Republic “On ratification of the temporary
regulations on order of calculation and levy of payment for the tax preferences granted to
the subjects of the free economic zones of the Kyrgyz Republic” from April 14, 1997 N
220
Decree of the Government of the Kyrgyz Republic “On ratification of the regulations on
free economic zone in the Naryn oblast of the Kyrgyz Republic” from April 19, 1993 N
160
Decree of the Government of the Kyrgyz Republic “On ratification of the regulations on
licensing the certain categories of entrepreneurship” from May 31, 2001 N 260
Decree of the Government of the Kyrgyz Republic “On licensing of subsoil use and
utilization of small scale deposits of widespread minerals in the Kyrgyz Republic” from
June 14, 2000 N 338
Decree of the Government of the Kyrgyz Republic “On ratification of the regulations on
free economic zone “Bishkek”” from November 11, 1995 N 474
Decree of the Government of the Kyrgyz Republic “On ratification of the regulations on
free economic zone “Maymak”” from June 20, 1997 N 357
Decree of the Government of the Kyrgyz Republic “On ratification of the regulations on
free economic zone “Karakol”” from January 12, 1994 N 13
Decree of the Government of the Kyrgyz Republic “On ratification of the regulation on
order of establishment, reorganization and liquidation of free economic zones in the
Kyrgyz Republic” from March 12, 2002 N 133
62
Decree of the Interim Government of the Kyrgyz Republic "On protection of
investments" from April 26, 2010 N 26
Articles:
“Kyrgyz-Turkish investment forum. Sobytiya MDS, September 2009
“MDS has discussed development perspectives of the mining sector”. Sobytiya MDS,
September-October 2010
“Governmental meeting at JS “Reemstma-Kyrgyzstan”. Sobytiya MDS, September-
October 2010
Nurmambet Toktomatov, “Public policy in economic development,” Investment now,
2.2010,
Postel, Erik and Nevenchanny, Yuri. “Kyrgyzstan – A Jewel of Central Asia.”
(at http://www.pangaeapartners.com/kyrgyz1.htm)
“IBC has discussed development perspectives of the mining sector, Sobytiya MDS,
September-October 2010
M K Bhadrakumar, “Kyrgyzstan’s Rosa at the heart of matter”, Asia Times Online,
(at: http://www.atimes.com/atimes/Central_Asia/LI25Ag02.html)
Dr. John CK Daly, “The truth behind the recent unrest in Kyrgyzstan”,
(at: http://oilprice.com/Geo-Politics/Europe/The-Truth-Behind-The-Recent-Unrest-in-
Kyrgyzstan.html)
Kurban Ashyrkulov, “We are contemporaries of the new Kyrgyzstan,” Investment now,
2.2010
Articles from magazines:
Gulnara Kalikova.“Investment, Investment Policies and the Future of Kyrgyzstan: In
search of new approaches,” Central Asia and South Caucasus Affairs: 2002, Tokyo,
2000
Kudabaeva Meerim, “Economical growth of Kyrgyzstan: tendencies and particularities”,
Perspectives of Innovations, Economics & Business, Volume 1, 2009
Nunn, Nathan.“Relationship-Specificity, Incomplete Contracts, and the Pattern of Trade,”
Quarterly Journal of Economic 122 (2)
Doidge, Craig and others. “Why Do Countries Matter So Much for Corporate
Governance?” Journal Financial Economics 86 (1)
63
Publications:
International Crisis Group. Kyrgyzstan: After the Revolution. Executive Summary.
“Crisis Group Asia Report N 97”, 2005.
(at: http://www.merln.ndu.edu/archive/icg/kyrgyzstanaftertherevolution.pdf)
ADB - IMF - The World Bank. The Kyrgyz Republic: Joint Economic Assessment:
Reconciliation, Recovery and Reconstruction. July 21, 2010
Kalikova&Associates. Business in the Kyrgyz Republic: Legal Aspects. 2009
Bureau of Economic, Energy and Business Affairs. 2010 Investment Climate Statement –
Kyrgyz Republic. U.S. Department of State
(at: http://www.state.gov/e/eeb/rls/othr/ics/2010/138095.htm)
WTO Secretariat. Trade policy review, Kyrgyz Republic. 2006.
(at: http://www.wto.org/english/tratop_e/tpr_e/s170-00_e.doc)
International Monetary Fund. Economic Review: Kyrgyzstan. (1992)
OECD. National Treatment for Foreign-Controlled Enterprises.(2010)
(at: http://www.oecd.org/dataoecd/32/21/1954854.pdf)
Bureau of South and Central Asian Affairs. Background Note: Kyrgyzstan.
U.S. Department of State
(at: http://www.state.gov/r/pa/ei/bgn/5755.htm)
Reports:
World Investment Report 2010: Investing in a low-carbon economy. United Nations
Conference on Trade and Development
Doing Business 2009. The World Bank – IFC - Palgrave Macmillan
(at: http://www.doingbusiness.org/reports/doing-business)
Doing Business Report 2010, Reforming through Difficult Times. The World Bank – IFC-
Palgarve MacMillan
(at: http://www.doingbusiness.org/reports/doing-business)
Doing Business in Landlocked Economies Report 2009. The World Bank – IFC
(at: http://www.doingbusiness.org/reports/doing-business)
Paying taxes 2010. Global picture. PricewaterhouseCoopers
Human Development Report 2009, overcoming barriers: Human Mobility and
Development. UNDP
(at: http://hdr.undp.org/en/statistics/hdi/)
64
The Global Enabling Report 2010. World Economic Forum
(http://www.weforum.org/documents/getr2010_explorer/index.html)
The Global Enabling Report 2009. World Economic Forum
(http://www.weforum.org/documents/getr2009_explorer/index.html)
Economic Freedom of the World 2010. Heritage Foundation
(at: http://www.heritage.org/index/download)
The Freedom of the Press Survey 2009. The Freedom House
(at: http://www.freedomhouse.org/template.cfm?page=350&ana_page=372&year=2009)
Global Competitiveness Report 2009-2010. World Economic Forum
(at: http://www.weforum.org/documents/GCR09/index.html)
Corruption Perceptions Index 2009, Transparency International
(at: http://www.transparency.org/policy_research/surveys_indices/cpi/2009)
Papers:
Bohr, Annete. Revolution in Kyrgyzstan –Again. REP Programme Paper 03/10, Chatham
House.
(at: http://www.chathamhouse.org.uk/files/16508_0410pp_kyrgyzstan.pdf)
Djankov, Simeon and others. The effect of Corporate Taxes on Investment and
Enterpreneurship. NBER Working paper 13756. Cambridge, MA: National Bureau of
Economic Research.
Galiani, Sebastian and Schargrodsky, Ernesto. “Property rights for the Poor: Effects of
Land Titling.” Business School Working Paper 06/2005, Universidad Torcuatno Di
Tella, Buenos Aires
Kenny, Charles. “Construction, Corruption, and Developing Countries.” Policy
Research Working Paper 4271, World Bank, Washington, DC
Eifert, Benjamin P. “Do Regulatory Reforms Stimulate Investment and Growth?
Evidence from the Doing Business Data, 2003–07.” Department of Economics,
University of California at Berkeley.
Leora Klapper and others. “Entrepreneurship and Firm Formation across Countries.”
Policy Research Working Paper 4313, World Bank, Washington, D.C.
Quantity and population density. The National Statistic Committee of the Kyrgyz
Republic
65
The national composition of the population. The National Statistic Committee of the
Kyrgyz Republic
Average monthly wage by regions. The National Statistic Committee of the Kyrgyz
Republic
Investment report. The National Statistic Committee of the Kyrgyz Republic
Data may be obtained at the official site of the National Statistic Committee of the
Kyrgyz Republic www.stat.kg
