2015年-世界发展银行全球_Investment_Climate_in_Kyrgyz_Republic___Views_of_Foreign_Investors_90页_12mb

Summary of the Investment Climate in Kyrgyz Republic – Views of Foreign Investors

Core Content

The document presents the results of a survey conducted by the World Bank Group's Investment Climate Project in the Kyrgyz Republic, in partnership with the United Kingdom and Switzerland. The survey aimed to assess the investment policy and legal environment from the perspective of both operating and non-operating foreign investors, identifying the factors that influence investment decisions, the ease of market entry, investor protection, incentives, and the market exit process.

Main Aspects of the Survey

The survey focused on the following five key aspects:

1. Factors Influencing Investment Decisions
2. Market Entry – Registering a Company
3. Investor Protection and Confidence
4. Investment Incentives
5. Market Exit

Key Findings

Factors Influencing Investment Decisions

• The top five factors for both operating and non-operating investors are:

  • Importance of investing in the domestic market
  • Ease of company registration procedures
  • Ease of obtaining necessary permits and licenses
  • Business-friendly legislation
  • Access to cheap labor

• Personal relations were emphasized by both groups as a critical factor. Investors often rely on friends, relatives, or the diaspora for reliable information about the market, which can help mitigate risks and reduce the cost of business intelligence.

• Only 30% of investors consider non-tax incentives as important, while 62% and 53% of operating and non-operating investors respectively find tax and customs-related incentives important, indicating the complexity of these regulations.

Market Entry – Registering a Company

• The average time to register a company is 14 days, while re-registration takes at least one day.

• Obtaining all necessary licenses and permits can take up to two years, highlighting the inefficiency in the licensing process.

• Access to information remains a challenge:

  • 50% of investors had no difficulty
  • 40% found access to information just satisfactory
  • 11% encountered difficulties in obtaining necessary information

• OECD and other country investors are more likely to face difficulties in accessing information, while CIS investors find it satisfactory due to shared language, traditions, and legal systems.

• Law firms are the most common source of assistance in the registration process, with 66% of investors using them, compared to 32% who registered on their own.

• Coordination between state agencies is satisfactory for 58% of investors, but 23% consider it poor, indicating a need for better inter-agency communication.

• Unofficial payments during the registration process were reported by 20% of investors, with some making payments even after the process was completed.

Investor Protection and Confidence

• Corruption and low transparency are the main issues affecting investor confidence.
• Legal environment and dispute resolution are identified as key areas for improvement.
• Judicial processes are perceived as not transparent or fair by many investors, which undermines their confidence in the business environment.

Investment Incentives

• Investors generally do not require special incentives, as long as the legal and operating environment is clear, predictable, and transparent.
• Tax and customs-related incentives are considered more important, suggesting that simplifying these regulations would be more effective in attracting investment.

Market Exit

• The market exit process is seen as difficult and costly.
• Investors report high costs and complex procedures for closing a business, which can deter them from investing in the first place.

Demographics of Survey Participants

• 201 operating companies and 103 non-operating companies participated in the survey.
• 83.9% of participants are small businesses.
• 10.4% are medium-sized businesses.
• 5.7% are large businesses.

Policy Recommendations

• Simplify and streamline registration and licensing procedures.
• Improve access to clear and accurate information.
• Enhance transparency and predictability of the legal and regulatory environment.
• Strengthen judicial processes to ensure they are transparent and fair.
• Simplify tax and customs regulations.
• Consider preferential benefits in tax and customs areas.
• Improve inter-agency coordination to reduce bureaucratic hurdles.

Investment Climate Overview

• The Kyrgyz Republic has made some progress in improving the investment climate, but significant challenges remain.
• The economy is vulnerable to external shocks and political instability.
• The business environment is still weak and nontransparent, which affects investor confidence.
• The country's competitiveness is low, with poor innovation and business sophistication.
• Despite improvements in business registration, taxation, and minority investor protection, tax and customs regulations remain burdensome.

Economic Context

• From January to September 2014, foreign investment inflow increased by 15.7% to USD 3,735.8 million.
• Foreign direct investment (FDI) decreased by 35.4% compared to 2013, with mining, processing, and financial intermediation being the main sectors.
• Non-CIS countries (especially China and Canada) contributed significantly to FDI inflows, but their investments declined sharply.
• CIS countries (particularly Kazakhstan and Russia) are still major sources of FDI, though Russian investments dropped significantly.

Investor Sentiment

• Investors are not strongly motivated by non-tax incentives, indicating that the legal and regulatory environment is more critical.
• Personal connections and trust in local networks are important in reducing risks and navigating the business environment.
• Corruption and inefficient bureaucracy remain major deterrents to investment, despite some legal reforms.

Conclusion

The survey highlights that while the Kyrgyz Republic has made progress in improving its investment climate, bureaucratic inefficiencies, corruption, and complex regulations continue to hinder foreign investment. To attract more investment, the government must focus on streamlining procedures, enhancing transparency, and simplifying tax and customs regulations. The report also underscores the importance of investor-friendly legislation and predictable governance in fostering a more competitive and attractive business environment.