A new author for our website — Aaron Odum. He is an applied development practitioner and socio-economic analyst. Aaron lives and works in Kyrgyzstan and is dedicated to the sustainable development of its culture and economy. He also has a YouTube channel, @aarontripsasia. In this article, he will discuss why Kyrgyzstan is a great destination for foreign businesses.
Aaron Odum, practitioner, analyst, city — Bishkek, YouTube
In the post-COVID world, growth-focused firms actively seek new locations to expand their branches, develop customer bases, and explore new and fertile adjacent markets. In Asia, Kyrgyzstan is a rising contender in the competition to attract foreign firms. A business climate sustaining rapid small and medium-sized business growth, a growing pool of well-educated professionals, a geographic and geopolitically strategic location, and international flows of credit and finance contribute to the Kyrgyz Republic's ability to overshadow regional competitors.
The National Statistical Committee of the Kyrgyz Republic evaluates the number of SMEs in Kyrgyzstan, which grew nearly 20% from 2017 to 2022. Most of these were in the information technology sector, which saw an 89% increase, finance and insurance activities at 67%, and wholesale and retail trade with a 37% increase. Conversely, communication firms decreased by 45%, driven by complete saturation in the mobile phone and 5G internet market. Construction firms were reduced by nearly 24% due to decreasing remittances during COVID.
The International Trade Administration explains, "The Kyrgyz Republic's emerging ICT sector is poised to be a major economic driver to power modernization and regional development, offering significant investment and trade opportunities. The IT sector is one of the fastest growing industries in the Kyrgyz Republic." The High Park of Kyrgyzstan is emblematic of this phenomenal IT success and growth, with an annual revenue of over $87 million and over 30% of products exported to the United States. Kyrgyzstan is no one trick pony, however. The real secret of its success is not the firms driving growth in the country but the individuals working in the firms.
Recent figures from the World Bank point to over 40% of Kyrgyz adults having a diploma, certificate, or degree from a post-secondary educational institution. Moreover, higher learning institutions, including the University of Central Asia, Kyrgyz Russian Slavic University, and other leading universities, create globally-minded and technically proficient students capable of supporting foreign firms by applying technical knowledge to meet the unique demands of the Kyrgyz market. The technology sector of Kyrgyzstan is currently in the early drive to maturity, with many technical startups focused on training and upskilling the workforce, expanding and exporting services, and developing a professional IT ecosystem. Two examples of these startups are Geeks and Codify. These two local IT companies support young professionals via comprehensive IT educational programs, place graduates in suitable firms, and have branched into other countries to develop new cohorts of IT professionals. In addition to the higher- education environment and development of home-grown IT professional firms, Kyrgyzstan benefits from international support in developing its human capital.
Development and aid organizations from Europe, Eurasia, and East Asia pour resources into maximizing the potential of human capital in the Kyrgyz Republic. For example, the Japanese International Cooperation Agency hosts exchange programs for business executives between the two countries and "a practical, three-month mini-MBA course at the KRJC since 2004 that covers topics like Japanese-style management and developing entrepreneurial skills." Additionally, Swiss and Russian development and aid organizations work to enhance the institutional and public-private cooperation capacity. The Ministry of Labor and Social Protection of the Russian Federation partnered with Kyrgyzstan to analyze gaps between university programs and industry needs, providing essential insights for aligning education with labor market demands. These insights provided crucial data to policymakers and empowered them to make necessary changes to their technical and vocational educational training.
Nargiza Turkebekova of the Employment Promotion Department of the Ministry of Labor for the Kyrgyz Republic explained: "I would like to point out that until now, the Ministry of Labor and Social Development of the Kyrgyz Republic did not have detailed information about the labor market and employment situation in the Chuy oblast." Consistent SME growth, a burgeoning technical industry capable of self-sustainment, and international inflows of vocational expertise, funding, and strategic guidance are crucial. However, Kyrgyzstan as a business hub may be the most significant reason it is chosen as the next destination for many firms.
Kyrgyzstan is a party to four regional trade organizations outside the World Trade Organization. These trade organizations link them tightly with countries in Central and South Asia, Eurasia, parts of Europe, and the Middle East. Five of these fellow members, China, India, Russia, Turkey, and Iran, constitute nearly a quarter of global gross domestic product. Only Kazakhstan and Tajikistan can make the same claim. Unlike Kazakhstan and Tajikistan, however, Kyrgyzstan has developed robust and far-reaching trade agreements with China.
The Two Countries: Two Parks program connects the Kashgar Bonded zone in China from its counterpart in Naryn, Kyrgyzstan, a mere 170 kilometers away. The agreement boosts cross-border e-commerce between Kyrgyzstan and China with minimal customs intervention and improved warehouse, logistics, and processing cooperation. The deal mandates warehouse-to-warehouse transport within 48 to 72 hours to ensure expedient transport of goods between the bonded zones. China's primary products of interest are agricultural, handicraft, and consumer goods. Not satisfied with merely trading goods, Kyrgyz officials have met with Iranian counterparts to begin discussing joint projects in the technological realm. At the Asia-Pacific Ministerial Conference on Digital Inclusion and Transformation on September 6, Minister of Digital Development of the Kyrgyz Republic, Nuria Kutnaeva, "expressed interest in defining joint projects and developing scientific cooperation" with firms in Iran. While no projects are definite, this speaks to the collaborative nature of Kyrgyzstan in developing relationships and encouraging growth with partners across the globe.
With all these benefits, contrarians dismiss Kyrgyzstan as a destination for business due to alleged business-related corruption and lack of financial resources for SMEs in the country. On these fronts, the public and private sectors have addressed these challenges head-on. According to the Ministry of Digital Development of the Kyrgyz Republic, "From August 27, 2024, the Ministry of Justice has implemented an online system for filing applications for the legal registration of organizations." Forthcoming digitization measures will reduce the need to deal with government bureaucrats directly and minimize opportunities for bribery and extortion in new business development. Kyrgyz government officials are often the victims of fallacious and slanderous attacks regarding alleged nepotism, bribery, illicit government intervention, and human rights violations. However, they are the number one defenders of anti-corruption in the country. President Japarov personally oversees the State Anti-Corruption Strategy initiative and "has tasked the group with formulating an effective plan for implementing anti-corruption measures." This top-down leadership ensures that individuals most knowledgeable in these practices direct the resources where they are most needed.
Concerning finance, Hungary, Russia, and Uzbekistan have all contributed to improving the business-related financial ecosystem in Kyrgyzstan. Each of these countries hosts a Kyrgyz Development Fund with loans from $50 000 to $1 million, depending upon the size of the company. Certain caveats exist. For example, the loans often require purchasing inputs from these countries. However, 5 to 7% annual percentage rates from a reputable lender make these loans a viable solution for expanding operations.
My professional experience in education in Kyrgyzstan has also highlighted these same qualities. As a field researcher and trainer at the American University of Central Asia, Bishkek, I met with other qualified professionals worldwide. While there, I attended technical certification workshops and symposiums hosted by the Central Asian University Partnerships Program and in partnership with esteemed U.S. universities, including Michigan State and Pace University. As a teacher in the primary and secondary school settings, I was equally impressed to be in the company of highly qualified teachers from across the world, many of whom had Master's and Bachelor's degrees and are more than capable of providing students with the global mindset and technical and soft skills necessary to contribute to foreign firms looking to do business in Kyrgyzstan.
Businesses seeking to expand their branches into Central Asia must look at Kyrgyzstan. The robust increase of existing SMEs points to a fertile environment. Upon closer inspection, it is evident that dynamic human capital, improved by international cooperation and development organizations, is well-situated to lead, guide, direct, and manage foreign firms in this country. Global partnerships and alliances with the most significant economies on Earth are conducive to all sorts of businesses, including agricultural trade to the East and technological exports to the Americas. Having experts on corruption leads the charge to minimize its effect on business, and the presence of foreign financial capacities also ensures businesses are well-situated to succeed and thrive. With these necessary ingredients, the Kyrgyz Republic is a gateway to the world. Businesses can not only expand but thrive in the heart of Central Asia's booming economic landscape.