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Kyrgyzstan Table of Contents


Foreign Investment

Domestic economic investment declined precipitously in the early 1990s, with government investment falling 55 percent in 1994 alone. In the first quarter of 1995, total public and private investment was reported to be 391 million som, of which about 75 percent went to the Kumtor joint-venture gold field. To stimulate foreign investment, the Kyrgyz government has adopted a series of measures to improve the republic's deteriorating economic environment. In the late 1980s, the republic already had begun creating a legal infrastructure to support private investment. The Basic Foreign Investment Law, adopted in June 1991, has been amended several times since that time. In general, this law allows foreign investors full use of their profits, including unlimited export of profits in the form of foreign currency or merchandise.

Foreign firms also enjoy considerable tax advantages, which extend to Kyrgyzstani partners in joint ventures. Investors are granted relief from import duties on materials needed to establish a business, and they continue receiving tax relief for up to five years, depending on their type of business. After that time, several other types of tax relief are available, including various forms of reinvestment in Kyrgyzstan's economy.

As of April 1995, some 328 joint ventures were registered, but only 128 were actually in operation, the vast majority in trade. Only thirty-eight joint ventures were active in manufacturing or mining. At that time, sixty-eight foreign firms (outside the CIS) were registered, the majority of which were Chinese, Afghan, and Turkish. Some fifty-two Russian and thirty-six United States firms were present in some capacity. Kyrgyzstan was among the first of the former Soviet republics to create free economic zones, on the Chinese model, where taxes would be abated and duties waived. The government initially created two such zones, in Naryn and Osh, with another under consideration in Bishkek. The zones became the object of heated debate, however, and by 1995 only the Naryn zone had taken form as planned. The only large-scale foreign investment has been in the gold industry, where the Cameco and the United States Morrison-Knudson Corporation are participating in joint ventures.

Data as of March 1996