BISHKEK (TCA) — Summing up the 2014 results, the business community noted not only achievements but also negative aspects of the investment climate and business environment in Kyrgyzstan.

Business is concerned about the situation in the mining sector, especially in holding tenders because only small deposits were tendered, while there were no applicants for a significant gold deposit, Jerooy.

The business community is also deeply concerned about arbitration cases in which Kyrgyzstan has to pay multimillion-dollar compensation to foreign companies. “We believe that it was possible to settle the overwhelming majority of arbitration disputes at an early stage by means of negotiation and compromise,” Executive Director of the International Business Council (IBC) based in Bishkek, Aktilek Tungatarov, said. In its letter to the country's leadership the business community proposed to create a body including representatives of the business community and high officials for talks on investors’ disputes.

Customs Union and Eurasian Economic Union

The accession of Kyrgyzstan to the Customs Union and Eurasian Economic Union is planned for May of 2015. However, the business has a lot of questions on this issue, as investors do not like surprises and risks. Existing investors’ activity is now pending, because they do not know how to work on, when Kyrgyzstan becomes a full CU member and new rules, especially in foreign trade, will start operating. Investors want to have clear rules of the game including stability of legislation and predictable business environment.

Having conducted a survey among its members, the IBC sent a letter to the Economy Ministry (which is a coordinating body for Kyrgyzstan’s accession to the CU) with a detailed list of issues requiring clarification.

As there is no specific scheme of customs clearance of imported goods after Kyrgyzstan’s joining the CU, the business asked, “How will customs at the CU borders and customs within the country distribute their responsibilities and powers if goods are imported from non-CU countries?”

Mining companies also have many questions. Recently, the Kyrgyz Government has cancelled the mandatory confirmation of compliance for imported products subject for use in Kyrgyzstan. Mining companies ask whether the same order will act in other CU countries, otherwise the companies’ operations may stop.

Old problems

There are problems that cannot be solved over the years, such as operating of the Workers’ Recovery Fund (WRF). Business believes that the very creation of this fund is illegal, because it is a private foundation and, under the law, other funds, except for the Social Fund and the Mandatory Health Insurance Fund, cannot act in the country. Meanwhile, all taxpayers pay 0.25% of wages fund to the WRF.

In 2014, there was no understanding between business and the Ministry of Labor, Employment and Migration. Now things seemed headway, but throughout the year many companies had problems with obtaining work permits for their qualified foreign specialists, mainly top managers and leading experts.

The issue of customs duties on the export of gold ore has not been solved over the past few years. As a result of long discussions between the business, government and parliament, in March of 2014 it was decided not to impose this fee as long as the country cannot build a plant to process such ore in the new future. But recently a new group of deputies went into the same song and dance about customs duties. Business associations will have to start all over again, to persuade MPs and the Government that this initiative will have a very negative impact on the business. “MPs sometimes are too active in economic issues while it is the Government that should initiate bills on economic affairs related to business and investment,” believes Tungatarov.

Construction

A lot of construction companies are operating in Kyrgyzstan, and this sector is growing more than others. However, the sector faces many problems, such as the recent moratorium on building in Bishkek when the Architecture Agency suspended accepting applications for development of technical documentation, coordination of projects and issuance of permits for construction of high-rise residential buildings. The moratorium has been removed recently, but it created difficulties for construction companies.

The construction industry is still working according to Soviet-era construction regulations, while international standards are also used because Kyrgyzstan is a WTO member.

First, all the rules should be aligned with the law, and only then the introduction of international standards will make sense, experts say.

Accumulated over the years, the problems are worsening, and if they are not solved soon, in a few years the construction industry may become as problematic as the mining sector is now.

Open skies policy

The Transport Ministry and Economy Ministry planned that from January 1, 2015, Kyrgyzstan will introduce an open skies policy. By that time, the two ministries had to make changes and amendments to the Air Code of Kyrgyzstan, but the document is still under discussion. The advantages of open skies have been discussed a lot. The new regime would help increase the passenger traffic, improve services, and increase the number of air routes.

An important task for Kyrgyzstan is to leave the blacklist of the European Union which prohibits Kyrgyzstan airlines from flying over the EU territory. Inspection of Kyrgyz airlines by the International Civil Aviation Organization was planned for August 2014 but it was postponed for 2015 because legal documents had not been brought into compliance with international standards.

URL: http://www.timesca.com/news/14852-unsolved-problems-hindering-business-development-in-kyrgyzstan.