Kyrgyzstan: Investing

FDI in Figures

According to UNCTAD's World Investment Report 2023, FDI flows to Kyrgyzstan reached USD 291 million in 2022, up by 28.6% compared to the level recorded one year earlier. At the end of the same period, the stock of FDI reached USD 3.7 billion, or around 34.1% of the country’s GDP. According to data from the National Statistical Committee, FDIs are mostly directed towards the mining industry, followed by manufacturing and financial intermediation and insurance. The main investing countries are Russia, China, Kazakhstan, the U.S., and the UK. Preliminary data from the National Statistics Committee indicates that China emerged as the primary source of foreign direct investment (FDI) in Kyrgyzstan in 2023. The total inflow of FDI into the Kyrgyz economy amounted to USD 798.2 million, with China's contribution reaching USD 220.8 million, surpassing investments from Russia and Kazakhstan, which were USD 180.3 million and USD 132.1 million, respectively. Significantly, China directed the majority of these funds towards key sectors such as manufacturing, mining, and financial intermediation, with investments of USD 226.4 million, USD 169.2 million, and USD 156.8 million, respectively. The rise of China as the leading investor in Kyrgyzstan marks a notable transformation in the economic dynamics, amplifying the competition with Russia for influence in the region. While Russia has upheld strong economic and security partnerships with Kyrgyzstan, it encounters obstacles in countering the expanding cultural cooperation and linguistic changes facilitated by China's increasing presence.

Facilitating the entry of FDI flows into the country has been a key priority of the Kyrgyz government in recent years. However, improvements have been slow, and the business legal and regulatory framework is still considered inadequate, the same as for infrastructure. Environmental disputes over mining activities have been multiplying in recent years. In May 2021, the Kyrgyz government took control of the Kumtor gold mine owned by Centerra Gold after the passage of a law allowing it to impose external management for up to three months on mining companies operating under a concession agreement if it was found to have violated environmental regulations or endangered the environment. In October, the government announced that the state-owned company Kyrgyzgeologiya would be responsible for all precious metals mining in the country, and in April 2022, the Kyrgyz government and Centerra reached a conditional agreement by which the Kyrgyz government will take full control of the mine and give up its 26% stake in Centerra; while in June 2022, the President approved revisions to the "On Subsoil Exploitation" law, stipulating that a minimum of 30% state involvement is required to obtain a license for subsoil resource utilization. Furthermore, the country’s judicial system is not fully independent and susceptible to external political influence, and investors denounced a lack of transparency in the public procurement process (in the last five years, foreign investors have filed twenty different lawsuits against the Kyrgyz government). At the moment, there are five Free Economic Zones (FEZs) in the Kyrgyz Republic: Bishkek, Naryn, Karakol (Issyk-Kul province), Leylek (Batken province), and Maimak (Talas province). By law, the country guarantees equal treatment to investors and places no limit on foreign ownership or control. Moreover, the Kyrgyz Republic does not have any FDI screening processes in place, and the tax burden on the repatriation of profits by foreign investors has been reduced to conform to the tax rate for domestic investors. Kyrgyzstan ranks 141st among the 180 economies on the 2023 Corruption Perception Index and 112th out of 184 countries on the latest Index of Economic Freedom.

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Latest Update: May 2024