Chinese business footprint grows in Kyrgyzstan

Trend has supporters and naysayers

By Ulan Nazarov and Aibek Karabayev

2010-03-22

KARA-SUU, Kyrgyzstan -- Kyrgyzstan has a love-hate relationship with the arrival of Chinese business people.

On the one hand, “If it hadn’t been for cheap Chinese goods, I don’t think we would have survived the first years of independence”, said Damir Kochkorov, director of a Bishkek company.

But, on the other hand: “The Chinese undersell us”, complained Ainura Tabaldieva, who sells children’s toys at the Kara-Suu market. “They peddle their stuff almost for free”.

If someone closed his eyes and just listened, it would not sound like a problem. At sprawling wholesale markets, the air rings with the shouts of entrepreneurs making money.

But when one opens his eyes at the Dordoi market near Bishkek and the Kara-Suu market, one sees that much of the business is linked to importers of Chinese goods.

The dividing line for opinions on this so-called “Chinese invasion” is starkly drawn. Kyrgyz competitors are irate, while vendors of Chinese merchandise view the growing Chinese economic presence as benign. Chinese traders at the Kara-Suu market refused to comment.

More than 300 Sino-Kyrgyz joint enterprises now operate in Kyrgyzstan. They include the Kyzyl-Kyia cement factory, the construction firm working on the international Osh-Sary-Tash-Erkechtam highway, a manufacturer of small aircraft, and a construction firm working on seven hydropower stations and modernising the Tamchy airport in Issyk-Kul.

“Any company that enters the Kyrgyz market must comply with regulations when hiring personnel”, said Aigul Ryskulova, Kyrgyz minister of labour, employment and migration. “Even if the investor is a major company, we demand that 80 percent of the personnel are Kyrgyz citizens”.

But Askarbek Asanaliyev, director of the Ideas and Economy Centre, said these rules don’t always work.

“Chinese companies usually don’t have a huge staff. That’s why only the Chinese work there”, Asanaliyev said. “This doesn’t happen legally all the time. More than 25 percent of the Kyrgyz market is in the shadows, so they have a place to hide. And the lion’s share of this shadow market is in the trade sphere. That’s where the Chinese work”. Ryskulova agrees that “this creates serious problems”.

There are no statistics on how many Chinese citizens work in Kyrgyzstan, but Ryskulova says it is approximately 100,000.

In 2008, a member of the Zhogorku kenesh (parliament) from the Ak Zhol presidential party, Beishenbek Abdrasakov, said, “If we don’t stop the creeping migration of Chinese to Kyrgyzstan, after ten to 15 years, the entire local market will consist of Chinese products”.

China is interested in developing projects in Kyrgyzstan’s uranium, chemical, mining and light industries, according to the Kyrgyz Ministry of Trade and Industry.

China is third behind Britain and Kazakhstan in foreign investment in Kyrgyzstan, according to the National Statistical Committee’s 2009 data. China’s investment grew 89% from 2008 to 2009 — reaching about US $51 billion.

Kyrgyzstan’s foreign debt to China’s Export-Import Bank is US $760m —up US $10m from 2009, according to the Kyrgyz Ministry of Finance.

In 2009, China -- second only to Russia -- produced 13.6% of the goods and services Kyrgyzstan imported, according to the Kyrgyz Ministry of Trade and Industry; conversely, China is not one of the five largest customers for Kyrgyz exports.

This tips the balance of trade hugely in China’s favour.

But statistics cannot capture the true extent of Kyrgyz-Chinese trade, said Bishkek-based political analyst Mars Sariev.

“A major part of the goods passing through the Chinese-Kyrgyz border goes through illegally”, he said.

More visible to the average bystander than investments in infrastructure are the ubiquitous cheap goods —clothes, toys and hardware —that fill Kyrgyz markets.

With China’s increasing presence in Kyrgyz business, concern is growing that Kyrgyzstan may be regressing into colonial status because Chinese investment is tantamount to control of the infrastructure.

Kyrgyzstan — where only 7% of the land is arable and which has no hydrocarbon deposits — may have few alternatives to doing business with the Chinese. Indeed, sometimes such partnerships even benefit Kyrgyzstan.

One example of that is the planned Chinese-Kyrgyz-Uzbek railway, which would bind Kyrgyzstan more closely to China. The cost of the Kyrgyz portion is estimated at US $2 billion.

Potential benefits for Kyrgyzstan are sizable, as reported by the Eurasia Daily Monitor, since the railway would link the Naryn and Osh oblasts and maybe even serve Issyk-Kul, a scenic lake that lacks a railway to bring in tourists. Kyrgyzstan stands to collect transit fees on cargo, too.

The question of how Kyrgyzstan intends to pay China to build the Kyrgyz segment is a sensitive one, with some fearing Chinese domination of the country’s natural resources. One reported offer by Kyrgyzstan was to let China obtain control of a Naryn coal mine.

Other Central Asian nations have had Sinophobic reactions to perceived Chinese economic encroachment. For example, a crowd of Kazakhs demonstrated in January in Almaty at the prospect of leasing farmland to the Chinese.

Other countries with an economic stake in Kyrgyzstan reportedly have reason to worry about the flowering of Sino-Kyrgyz trade. The Kremlin reportedly dislikes the prospect of Beijing gaining influence within a former Soviet republic but has not objected publicly. The Kazakhs would see their own rail link to China lose importance if the Chinese-Kyrgyz-Uzbek railway is built, said Sariev.

Build that railway, and Kyrgyzstan will “fall under the Chinese umbrella”, Sariev warned.

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Reader Comments

  • While the Kyrgyz and Uzbeks are discussing the subject, Kazakhstan is completing the second railroad from China linking Yining, Khorgos and Almaty!

    January 1, 2012 @ 10:01:05AM МаратД