Current condition of FDI in Kyrgyzstan

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Current condition of the FDI in the Kyrgyz Republic is evaluated as of follows.

Figure 1.

Source: The National Statistical Committee of the Kyrgyz Republic.

The information presented in Figure 1 shows that the Kyrgyz Republic demonstrates good results in attracting the FDI relative to its GDP. However, for more sureness, we have to consider the FDI outflows and calculate the net FDI inflows as percentage of GDP. For example, according to the National Statistical Committee of the Kyrgyz Republic, in 2009, the FDI inflow was equal to 660.9 million USD and the FDI outflow - 471.5 million USD. Therefore, the net FDI inflow was 189.4 million USD or 28.7 percent of the FDI inflow in 2009. In 2011, the net FDI inflow was equal to 693.5 million USD or 81.7 percent of the FDI inflow. In 2014 - 248 million USD or 34.1 percent of the FDI inflow. In 2015 - 1141.7 million USD or 72.6 percent of the FDI inflow. And in 2016 the net FDI inflow was equal to 466.8 million USD or 71.3 percent of the FDI inflow.

After calculating the net FDI inflows as percentage of GDP, we have obtained the following results. In 2009, this indicator was equal to 6.4 percent, in 2011 – 16.6 percent, in 2014 – 4.2 percent, in 2015 - 18.2 percent, and in 2016, it was equal to 7 percent. Therefore, as we can see, the new numbers are significantly different from those on the graph.

In order to enhance our evaluation, as alternative, we have considered the international sources, such as the World Bank and UNCTAD as well.

According to the World Bank, the FDI net inflows as percentage of GDP in the Kyrgyz Republic, on average, for the period 2005 through 2015, equal to 7.3 percent (Figure 2).

It worth noting, that the data of the World Bank for the Kyrgyz Republic differs just a bit from those of the National Statistical Committee of the Kyrgyz Republic.

Figure 2.

Source: The World Bank.

Since the Kyrgyz Republic became a member of the Eurasian Economic Union, it is important to consider and compare the country’s economic indicators within the Union in order to see our advantages and disadvantages, threats and opportunities. Therefore, we have compared the same indicator, the FDI net inflows as percentage of GDP, among the EAEU countries.

According to the World Bank, as presented in Figure 3, the Kyrgyz Republic has the most volatile indicator compared to the rest of the EAEU countries. For the period from 2005 to 2015, within the Union, the Republic of Kazakhstan takes predominantly the leading positions on the given indicator, but its FDI net inflows as percentage of GDP tend to fall. The Kyrgyz Republic dominates in 2010, 2011, 2013, 2014, and 2015. The Republic of Armenia ranks third after the Republic of Kazakhstan and the Kyrgyz Republic, the Russian Federation ranks fourth. And, finally, the Republic of Belarus takes predominantly the lowest positions on the given indicator within the Union and given period.

The indicators of the Republic of Armenia, Russian Federation, and the Republic of Belarus are relatively the most stable.

Figure 3.

Source: The World Bank.

The data of the World Bank on the FDI inflows as percentage of GDP for the Kyrgyz Republic are more close to those of the National Statistical Committee of the Kyrgyz Republic than the data of UNCTAD.

UNCTAD shows us a slightly different from the World Bank picture as illustrated in Figure 4. Here, again, for the period of 2005 - 2015, the Kyrgyz Republic’s indicator is the most volatile in comparison with the EAEU countries. The Republic of Kazakhstan takes predominantly the leading positions. The Kyrgyz Republic dominates in 2010, 2011, 2013, and 2015. The Republic of Armenia ranks second, the Kyrgyz Republic - third, the Republic of Belarus - fourth, and the Russian Federation takes predominantly the lowest positions within the Union and for the period of 2005 - 2015 on the given indicator.

Figure 4.

Source: UNCTAD.

According to the National Statistical Committee of the Kyrgyz Republic, the foreign direct investment consists of the following components:

  1. Joint Stock.
  2. Financial Leasing.
  3. Reinvested Profit.
  4. Trade Credits, and
  5. Received credits from Foreign Joint Owners.

As presented in Figure 5, for the period of 2005 - 2016, in the structure of the FDI inflows into the Kyrgyz Republics the following tendency was observed. The Kyrgyz Republic attracted predominantly the FDI in the form of the Received Credits from Foreign Joint Owners, then, in the form of the Reinvested Profit, and Trade Credits. And there was a minimum amount of the FDI inflows in the form of the Financial Leasing within the given period.

Figure 5.

Source: The National Statistical Committee of the Kyrgyz Republic.

As presented in Figure 6, for the period 2005 through 2016, the FDI inflows into the Kyrgyz Republic were predominantly from the non - CIS countries. The Kyrgyz Republic has received 72.3 percent and 27.7 percent of the total FDI inflows within the given period from the non - CIS and CIS countries, respectively.

Within the considered period, among the non - CIS countries, in the Kyrgyz Republic the investment activity was predominantly undertaken by the following countries:

  1. The People’s Republic of China (23 percent of all the FDI inflows within the period of 2005 - 2016).
  2. Canada (17 percent).
  3. The United Kingdom (9.8 percent).
  4. The Republic of Turkey (3.8 percent).
  5. The Federal Republic of Germany (3.5 percent).

The investment from the People’s Republic of China was mainly concentrated in the geological exploration and manufacturing enterprises, from the United Kingdom – in the geological exploration, and from Canada – in the manufacturing enterprises[1].

For the period from 2005 to 2015, among the CIS - countries, the investment activity in the Kyrgyz Republic was predominantly undertaken by the following countries:

  1. The Republic of Kazakhstan (13.6 percent of the total FDI inflows within the period of 2005 - 2016).
  2. The Russian Federation (13.5 percent).

The Republic of Kazakhstan mainly invested in financial activity and insurance, wholesale and retail trade enterprises, and manufacturing enterprises; the Russian Federation - in electricity, gas, steam, and air conditioning supply enterprises[2].

The Kyrgyz Republic has attracted just 0.6 percent of the total FDI inflows within the period of 2005 - 2016 from the Republic of Belarus and 0 percent from the Republic of Armenia.

Figure 6.

Source: The National Statistical Committee of the Kyrgyz Republic.

As illustrated in Figure 7, within the considered period, 2005 through 2016, in the FDI inflows into the Kyrgyz Republic by regions the following tendency has been observed:

  1. Bishkek city has attracted 43.3 percent of the total FDI inflows within the given period.
  2. Chui oblast - 20.9 percent.
  3. Issyk - Kul oblast - 16.5 percent.
  4. Djalal - Abad oblast - 12.3 percent.
  5. Talas oblast - 3.1 percent.
  6. Batken oblast - 1.7 percent.
  7. Osh oblast - 1.1 percent.
  8. Osh city - 0.2 percent.

Figure 7.

Source: The National Statistical Committee of the Kyrgyz Republic.

According to the National Statistical Committee of the Kyrgyz Republic, from 2005 to 2013, the most attractive economic activities in the Kyrgyz Republic for the FDI were the followings:

  1. Manufacturing that has received 38.9% of the total FDI inflows within the given period.
  2. Renting operations, renting and consumer services - 25.1%.
  3. Financial activity - 18.3%.
  4. Trade; repair of automobiles, households’ products, and goods for personal use - 7.4%.

The least attractive economic activities were the followings:

  1. Public administration - 0.006% of the total FDI inflows within the considered period.
  2. Healthcare and social services - 0.03%.
  3. Utilities, social, and personal services - 0.05%.
  4. Education - 0.1%.
  5. Agriculture, hunting, and forestry - 0.2%.

Within the period of 2013 - 2016, the following tendency has been observed:

  1. Manufacturing - 33.4% of the total FDI inflows.
  2. Professional, scientific, and technical activities - 26.8%.
  3. Financial and insurance activity - 18.3%.
  4. Electricity, gas, steam, and air conditioning supply - 6.8%.

The least attractive economic activities for the FDI were the followings:

  1. Public administration and defense, compulsory social security - 0%.
  2. Healthcare and social services - 0%.
  3. Administrative and support service activities - 0.002%.
  4. Water supply; sewerage, waste management and remediation activities - 0.005%.
  5. Arts, entertainment, and recreation - 0.006%.
  6. Agriculture, forestry, and fishing - 0.02%.

Statistical review of current condition of the FDI in the Kyrgyz Republic has revealed that FDI inflows into the Kyrgyz Republic by type of economic activity and regions are disproportional. Such tendency in turn may cause negative economic consequences for the country.

Author - Malika Mamtylaeva

Analytical Center «BizExpert»

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