The investment climate in Kyrgyzstan has been increasingly discussed in recent years. It is said that investments are definitely needed, however, a number of factors prevent the arrival of new finance. The current year has become even more terrifying. The pandemic has put investors in a situation where it is necessary to think not about making money, but about preserving their capital. And for this reason investors do not go to any country in the Central Asian region, as well as to other developing countries. Now the money is invested mainly in those projects that have already yielded results and proved themselves. The second unpleasant factor is the unstable political situation in the country. It also strongly discourages potential experts because money loves stability and calmness.
Nevertheless, there is need to get out of this situation. It is necessary to change and become a more attractive country for investors. The expert community decided to discuss ways for this at a conference entitled "Prospects of investment market development in Kyrgyzstan in new political situation: forecast and possible ways to stabilize the socio-economic situation" organized by the Pikir club of regional experts.
This year's capital outflow is really very noticeable and that is not critics’ words, but experts’. This was influenced by many factors, which were discussed at the conference by Advisor to the republic’s economy minister Nurgul Akimova.
“This is a really transitional time. We are now talking about capital outflows; all developing countries have faced this problem. Such processes always occur during a crisis, when investors leave the emerging market and go to stable countries to save their money. Since early July, there has been a 3.5 times larger outflow of capital. This has been one of the reasons for the devaluation of the som [national currency of Kyrgyzstan]. Besides, we know that our economy is highly dependent on migrants' remittances. Decrease of transfers had a negative impact on the currency rate. Also, quarantine restrictions on the border with China adversely affected the economy and the national currency rate," Akimova said.
The expert added that the Economy Ministry is currently working on a project to support small and medium businesses. And it will not only provide financial support, but also create adequate competition in the market, in order to increase quality and unlock export potential.
“We have set an ambitious goal for ourselves - to try to attract foreign investments. Small and medium business needs it. We understand that an investor, before starting negotiations, must have an idea of the country and safety for invested money invested," Akimova added.
As mentioned above, many factors are important for the development of investment climate. One of them is a strong government, which will keep everything under control, and under which laws will work as they should. This view was expressed by economist Kubat Umurzakov.
"The investment climate is a very important issue that the government and businessmen have been dealing with in Kyrgyzstan in recent years. Investments require order and strong power. This is our main problem. We have good laws, but they work for individuals, not for everyone. Many foreign investors do not want such approaches, they want a legal system and a dictatorship of law that we do not have. Until the political situation stabilizes, it is difficult to expect investors to come," Umurzakov said.
The expert noted that many problems must be solved for investors’ arrival. However, it is necessary to start with global problems and only then take on small ones.
"One of the main issues is judicial reform. The law cannot enter into force until the judicial system works as it is provided by law", Umurzakov added.
With regard to laws and shortcomings, experts pointed out that some laws either do not work or work but not for everyone. In order to make the investment market more attractive, these factors should be disposed of.
"We are now witnessing a generally traditional picture for the whole post-Soviet space. I would like to dwell on the moments related to the investment climate. The pandemic and other negative factors, chronic problems of the country negatively affect the investment factor of the republic. The following basic problems should be emphasized: the inviolability of the institution of property rights. In any country, first of all, an investor considers this factor to be a determining factor in terms of stimulating long-term investment. Short-term investments have prevailed in Kyrgyzstan since the early 2000s," economist Aza Migranyan shares.
Migranyan added that there are problems related to policy and legislation that hinder the inflow of foreign investors.
"The second negative factor is the system of contradictions in the national legislation. There are quite liberal and attractive conditions at the state level. However, project implementation forms a rather powerful barrier to local projects as the local authorities are in charge of regulation. If we talk about long-term projects, there are a number of issues to be settled. The third limiting factor is political instability. There is no continuity of power and no obligations to investors," the expert added.
According to PhD in Economics Gulnaza Supayeva, it is also important to make economic forecast and analysis to track the market potential. But in turn, it is impossible to predict all factors, for example, the forecasts for 2020 did not take into account the pandemic factor.
"In recent days we have been trying to analyze our economy in the post-Pandemic period. At first we tried to make an economic model based on 7-year data. As a result, we got an assessment of the paired regression, where it is noted that the average GDP growth in the Kyrgyz Republic is about KGS 40 billion. Based on this analysis, we made a forecast for the future. But the difference between forecast and real figures this year is KGS 307 billion. It is impossible to get these funds till the end of the year. This has been significantly affected by the pandemic. The most affected sectors of the economy were tourism, construction. Each sector has very large losses. It should be understood that many factors, including political instability, cannot be predicted when forecasting,” shared Supayeva.
Kabar News Agency
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