2014年-世界发展银行全球_Kyrgyz_Republic_-_The_Garment_Sector___Impact_of_Joining_the_Customs_Union_and_Options_to_Increase_Competitiveness_37页_1mb

Summary of the Kyrgyz Republic's Garment Sector and Impact of Joining the Customs Union

Core Content

The garment sector in the Kyrgyz Republic has been a significant contributor to economic growth and employment over the past two decades. However, joining the Eurasian Customs Union (ECU) is expected to have a negative impact on the sector due to increased production costs and reduced competitiveness. The report outlines the economic context, the development and importance of the garment sector, the potential impact of ECU membership, and strategies to enhance the sector's competitiveness.

Main Points

Economic Context

• The Kyrgyz Republic has experienced steady economic growth since the 1990s but remains one of the lowest-income countries in the ECA region.
• Trade has grown significantly, making up 140% of GDP in 2012.
• The country has attracted increasing foreign direct investment (FDI), currently ranked 36th on the UNCTAD FDI performance index.
• The business climate has improved in some areas, such as starting a business and getting credit, but still faces challenges in resolving insolvency, paying taxes, and accessing electricity.

Development of the Garment Sector

• The garment industry in Kyrgyzstan has grown rapidly, with exports increasing over tenfold from 2004 to 2012.
• The sector is dominated by small and medium-sized enterprises (SMEs), with around 3,000 operating in the industry.
• Garment production is more labor-intensive and relies on low-skilled labor, which is a key factor in attracting the industry to the country.
• The sector has historically focused on niche markets, particularly in Russia and Kazakhstan, due to better market knowledge and the presence of Kyrgyz diasporas in these countries.
• The industry has benefited from simplified customs procedures and a patent system that offers favorable tax treatment.

Importance of the Sector to the Economy

• The garment sector contributes significantly to GDP and employment, with estimates ranging from 5 to 15% of GDP and between 90,000 to 300,000 jobs.
• Many firms are owned by women, who make up 70 to 85% of the workforce.
• The sector plays a vital role as a gateway to manufacturing, especially for workers with limited alternative employment options.

Impact of Joining the Customs Union

• Joining the ECU will lead to higher tariffs on imported textiles and more formalized border procedures.
• These changes will increase the cost of raw materials and production, potentially reducing the competitiveness of Kyrgyz garments in international markets.
• Simulations suggest that production costs may rise by between 3.6% and 7.7%, placing downward pressure on exports.
• The current simplified tariff regime allows for lower costs, but joining the ECU will likely replace this with a more standardized Common External Tariff (CET), increasing the cost of imported textiles.

Constraints to Competitiveness

• Skills and Education: A lack of training and education is a major constraint, despite relatively high wages in the sector.
• Access to Finance: Garment firms face significant difficulties in accessing financing for new equipment and technology.
• Technology Adoption: The sector lags in the adoption of new technology and production processes.
• Corruption: This is a major obstacle to business operations.
• Electricity Access: Limited access to reliable electricity is a key issue for garment firms.
• Infrastructure: Land and transport infrastructure are not major constraints.

Recommendations

To enhance competitiveness and mitigate the negative impact of joining the ECU, the report recommends the following interventions:

1. Improve Market Information: Establish trade promotion services to help firms better understand and serve international markets.
2. Strengthen Skills and Education: Increase funding for education and training programs, with a focus on design and marketing skills.
3. Promote Technology Adoption: Provide industrial extension services to advise firms on adopting new equipment and production processes.
4. Create Lease-Financing Programs: Support firms with financing options that reduce the risk of investing in new technology.
5. Strengthen Institutional Support: Develop permanent institutions and leverage industry associations to promote cooperation and support.
6. Ensure Sustainable Funding: Improve the sustainability of funding for the garment sector through strategic partnerships and policy reforms.

Conclusion

The garment sector is a crucial part of the Kyrgyz Republic's economy, but joining the ECU is likely to increase production costs and reduce competitiveness. To maintain success, the sector must address existing constraints through targeted interventions that improve market knowledge, skills, and technology adoption. These actions will be essential for ensuring the sector remains viable in the face of increased international competition.