Kyrgyzstan's economic week, May 8-13

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The past week was highlighted by the fact that China officially announced the growth of exports to the countries of Central Asia and Kyrgyzstan, in particular, textiles and clothing from the Xinjiang Uygur Autonomous Region. According to data of the Government of the Autonomous Region, the growth in exports made 20%. Given the fact that China has become the main financial sponsor of Kyrgyzstan earlier, such a significant growth of export of ready products to the republic may have a certain impact on the development of local producers. Due to the fact that the sewing branch of Kyrgyzstan mainly works for export, that is, the Kyrgyz ready products is exported to the Eurasian Economic Union countries and further, the Chinese exports coming to the republic cannot but affect the Kyrgyz garment makers. However, the textiles and ready-made garments coming from China yield to domestic products in terms of quality and price, and therefore the main buyers are low-income families, which are still many in the country.

According to data of Chinese sources, exports of textiles and clothing from Xinjiang amounted to 10.24 billion yuan, that is by 23% more compared to the same period in 2016. And Urumqi city customs said that, the main markets for such products are Kyrgyzstan and Kazakhstan. At the same time, it is known that the system of calculating customs fees between China and Kyrgyzstan varies by almost 4 times. In this case, out of 10.24 billion yuan of exports, which are equal to 1.5 billion dollars, at least half remains in Kyrgyzstan, because according to Chinese sources, goods come mainly through Torugart and Irkeshtam checkpoints, which are located on the Chinese-Kyrgyz border. Therefore, the delivery of these goods to the Kyrgyz markets has been greatly simplified, which play into the hands of both businessmen and local buyers.

Meanwhile, Xinjiang's economic potential is growing at a rapid pace. Only in the first quarter, capital investments in fixed assets in the textile and clothing industry in Xinjiang amounted to 3.74 billion yuan, an increase made almost 40%. And in 2017, investments in fixed assets in this industry in the autonomous region should exceed 72 billion yuan. All these data must necessarily be taken into account by Kyrgyz producers and relevant government bodies in order to be prepared for a more significant export influx from China in the near future.

Another important event of the week was the presentation in Bishkek of new large capacity buses. For the first time, a private company in Kyrgyzstan demonstrated the example of a large and specific investment of own means by buying 12 new buses in order to solve the problems of public transport in the capital.

Buses are delivered in accordance with the Memorandum of Cooperation signed in December 2016 between the Bishkek Mayor’s Office and Shydir Jol KG LLC. This company plans to deliver up to 100 new buses to Bishkek.

The Hengtong buses are designed for 80 seats and run on gas. They are also equipped with surveillance cameras and suitable for transportation of passengers with disabilities.

Kyrgyzstan continues its activity to attract potential investors to the republic. This week the Embassy of the Kyrgyz Republic in South Korea participated in the investment seminar devoted to Kyrgyzstan. South Korean companies were presented the investment opportunities of Kyrgyzstan.

The event was held with the assistance of the Korean Food Association jointly with Vision K with the participation of more than 30 Korean investors and companies.

Adviser of the Embassy Atai Namatbayev briefed the seminar participants on the current economic situation and ways and directions of investments in Kyrgyzstan. He spoke about the advantages of the country within the framework of the EEU and the preferences of the export of Kyrgyz products to the EU countries within the framework of the GSP + status.

Korean entrepreneurs who took part in the seminar showed interest and agreed on the possibility of organizing a study tour to Kyrgyzstan in the near future.

This week the IMF representative office in Kyrgyzstan was active. Deputy Director of the IMF’s Department for the Middle East and Central Asia Juha Kahkonen said that despite the fact that the external environment in the Caucasus and Central Asia has improved somewhat, the outlook for growth remains limited by historical standards. The risks of slowing growth continue to predominate in the countries of the region. He also stressed the necessity of comprehensive package of reforms to overcome the consequences of past shocks.

"Strong financial sector is crucial for the much-needed economic reforms. However, the decline in economic activity and the weakening of currencies against the US dollar since 2014 have created additional stress for many over-burdened and largely dollarized financial sector, with the result that they are too weak and cannot provide active growth. Without an early restoration of the financial sector, the budget will be subjected to even greater pressure, and economic transformation will be a torpedoed," said Kahkonen.

This week it became known that the volume of trade turnover between Kyrgyzstan and Iran makes 14.8 million US dollars and has a huge potential for growth. This became known during a round table in Bishkek with the participation of Iranian businessmen to enhance trade and economic cooperation between the two countries.

Iranian Ambassador to Kyrgyzstan Ali Mojtaba Ruzbehani, businessmen from both sides and representatives of the state structures of the republic took part in it. They discussed various problems faced by entrepreneurs in doing business in Kyrgyzstan. The Kyrgyz side proposed to create Iranian trading house in Kyrgyzstan.

Iranian President Hassan Rouhani's official visit at the end of last year and the official visit of Iranian Foreign Minister Zarif, Mohammad Javad in Kyrgyzstan this spring, along with representatives of 10 companies and more than 30 businessmen from Iran also gave impetus to the development of trade and economic relations between the two countries. The first results of such contacts are encouraging, since 120 tons of frozen meat were exported to Kyrgyzstan from Iran in a short period of time.

International financial organizations were also active this week. The European Bank for Reconstruction and Development announced the allocation of EUR 22 million end USD 7 million for water supply to 4 cities in Kyrgyzstan. The agreement on this was signed in early May in Cyprus between the Government of Kyrgyzstan and the EBRD, which provides for the implementation of water supply and sanitation projects for 4 cities in the country - Mailuu-Suu, Uzgen, Toktogul and Balykchy.

Financing will allow these cities to make necessary repairs and rehabilitation of water supply systems, install modern water meters and update the equipment necessary for the operation of the system.

In general, over the past year, Kyrgyzstan's cooperation with the EBRD has significantly intensified.

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