Kyrgyz businessmen seek better working conditions

BISHKEK – As the number of small and medium-sized enterprises (SMEs) in Kyrgyzstan grows, entrepreneurs have been asking for more help, and authorities have promised to come to their aid.

“The main objective of the government is to create favourable conditions for conducting business,” Prime Minister Omurbek Babanov said when he announced the government’s aim to improve the country’s business environment at a cabinet meeting in May. Indira Arunova, the head of the Economic Regulation Ministry’s administration for entrepreneurship policy, told Central Asia Online about some of the government programmes.

“One of these measures was the 100-day programme, called ‘Stability and a Decent Life,’ accepted in February. Also this year, the government formed the Inter-Agency Commission for Reforming the System of State Regulation of Entrepreneurial Activity … to optimise public services, remove excessive administrative barriers, prevent government interference in business and eradicate corruption,” she said.

The 100-day programme seeks to reduce the number of government employees and increase the quality of government agency efficiency, as well as take steps to limit bribe-seeking by officials.

The government now considers SMEs a substantial economic sector. In the past two years, despite the recession, the number of SMEs has grown by more than 10% to 11,351 and employ some 600,000 people. In addition there are some 263,100 self-employed individuals, according to the Ministry of Economy and Antitrust Policy.

In 2011, SMEs accounted for 39.2% of GDP (up from 31.2% in 2010) and 19.4% of the country’s production of goods, according to the Statistics Committee.

Improvements noted

One initiative, a government-backed low-interest loan programme, is helping the agribusiness sector, consultant and Bishkek Business Club Executive Director Uluk Kydyrbayev said.

And Kydyrbayev now has the opportunity to work to improve the business environment, he said, something that wouldn’t have been possible a few years ago.

“We facilitated passage of the law on the procedure for conducting inspections,” he said of one effort. “The law requires that inspection bodies give notice of their arrival 10 days in advance, which means that an inspection body cannot come without prior warning, and if an inspector commits a violation, he/she is personally liable. This was not the case beforehand.”

His lobbying has not always been successful, though.

“We fought a proposed law on tourism, that mandated accreditation for travel agencies and a voucher system for licencing them,” he said, but that law took effect anyway.

Open discussion

The problems faced by businessmen are undergoing discussion in parliament and even by a nationwide kurultai, or people’s assembly, that convened in May.

Ata-Meken MP Omurbek Abdrakhmanov said parliament is discussing possible measures to improve the business climate. Among them are simplification of taxes, inspection systems and procedures for lodging complaints against inspectors who break rules or demand bribes.

“For example, a month and a half ago, an entrepreneur from Osh came to me to complain that authorities were delaying passage of a truck filled with cargo,” Abdrakhmanov said. “He wanted to ship the cargo to Tajikistan, but bureaucrats barred him from doing it, saying he needed to collect various permits. After we came to his aid, it turned out that he’d had all the necessary documents in hand and that the prohibition was illegal. The truck soon went to Tajikistan.”

“I constantly speak in parliament to propose ways of simplifying the bureaucratic procedures governing businesses,” he said. “… Those changes are occurring but very slowly.”

Challenges still exist

Entrepreneurs complain about the tax system and government regulations.

“There are many problems facing business, especially in laws governing the business environment,” Kydyrbayev said. “The number of taxes should be reduced. As of now, paying taxes requires many small steps and a lot of time and paperwork.”

Excessive government openness to imports is a problem, too, said Murat Ibrayev, owner of a confectionery in Mayevka.

“I have been working in the confectionery business for four years, a highly promising business that’s as big as the alcohol industry,” he said. “But we cannot expand, as our state won’t protect the domestic market. For example, I do not see any big problems with taxes or with paycheck deductions for social welfare; I am more concerned that a lot of sweets are imported from Russia, Ukraine and Kazakhstan. We have great potential, but we can’t grow because of the pressure from foreign exporters.”

The state should increase duties on foreign sweets, he argued, saying, “The state, above all, must protect its own producers and help them to enter the markets of neighbouring countries.”

Some improvement has been noticed, though.

Under former president Kurmanbek Bakiyev (2005-2010), organised crime pressured small businesses, said Erkin Muratov, owner of several internet cafes and IP phone centres in Bishkek. Now, that problem has gone away, but endless inspections hamper business, he said.

“This is a constant source of problems – the city tax office, the district tax office, the fire department and city hall regularly come and inspect us and find some reason to take some money for themselves, which they pocket,” he said. “Naturally, we get really tired of it.”