Doing Business In Kyrgyz Republic Essay

Issyk-Kul Lake is the 2nd largest mountain lake after the Lake Titicaca in South America and the 2nd largest saline lake in the universe after the Caspian Sea. It is one of the most sacred topographic points for Kyrgyz state. Since olden times our ascendants asked for blessing from the lake, sterile adult females prayed before Issuk-Kul and asked for babe. The most high and ill-famed poets and authors of Kyrgyz state like Alykul Osmonov and Chingiz Aitmatov glorified Issyk-Kul Lake in their novels and verse forms. There are many fables and narratives about it in our folklore. Therefore, Issyk-Kul is the pearl, pride and national patrimony of Kyrgyz people.

Today many environmental protection organisations are sounding the dismay because Issyk-Kul Lake is in danger. Its H2O degree is droping by 5 centimetres on norm every twelvemonth! [ 12 ] The thaw of glaciers is the chief cause of shrinkage of our national pride. Ecologists are concerned with the eventual sinking by two to three metres which will hold impossible catastrophic effects for wildlife in the part. Ecologists believe that human activity is the chief ground for such a drastic lessening in mountain ice. Kyrgyz Canadian gold excavation company Kumtor is one of the companies specializers blame for ecologic catastrophe. Suited up in the really high height, Kumtor company generates wastes that are non recycled. These wastes reach the extremums of glaciers and do them melt!

Another issue is a crisp addition of hotels and guest houses on the shore of Issyk-Kul. I had a opportunity to interview one of the members of Kyrgyz Association of Tour Operators ( KATO ) who emphasized that bulk of these hotels and invitee houses do non work purifiers or any type of cleansing installations to recycle rubbish and chemicals. So, these enterprisers that quickly arose like mushrooms after rain on the shore of Issyk-Kul are problem enterprisers. One would oppugn why we have such irresponsible problem enterprisers. What forces or causes them to be so apathetic to the fortunes of their workss? To to the full understand the cause one should first analyse the conditions of making concern in Kyrgyzstan.

Status Quo: Making Business in Kyrgyz Republic

Unfortunately, today concern moralss are non the strongest quality of Kyrgyz enterprisers. Harmonizing to World Banks Ease of Doing Business rank, Kyrgyzstan holds the 97th topographic point out of 125 states all around the universe. Out of 125 states Kyrgyzstan holds the hundred-and-twentieth topographic point when mensurating the conformity with the regulation of jurisprudence. Harmonizing to corruptness control index, one can happen that corruptness is about non controlled in Kyrgyzstan, so our mark is 119 ; the protection of physical belongings index in 114. [ 5 ] Unfortunately, these indexes objectively reveal the state of affairs and jobs within the Kyrgyz Republic. From this fact one can do a decision that the biggest issues of Kyrgyzstan are the absence of the regulation of jurisprudence, delicate protection of physical belongings rights and booming corruptness.

Truly, one of the sore points is belongings rights protection. The most recent instances of Kumtor Gold Operating Company, Kyrgyz Telecom ( the largest supplier of telephone communicating ) , Kyrgyz Severoelectro ( the largest electricity administering company ) prove this statement. Kumtor is the largest subscriber to Kyrgyz GDP from private sector. [ 8 ] However, when new governments came to power after the Tulip Revolution of March 2005, the being of Kumtor company was put under the inquiry. New governments annulled Kumtor s contract with old governments and declared that it will be nationalized. The tribunal trail has been in advancement until our 2nd President- Kurmanbek Bakiev on the 7th of April, 2010 was overthrown. Recently, the Interim Government that came to power has declared that Kyrgyz Severoelectro and Kyrgyz Telecom will be privatized with the list of many other companies that were sold to private sector during the disposal of former President Bakiev.

Probably the most burning job in Kyrgyzstan is corruptness. Corruptness is damaging for entrepreneurship because it destroys just competition. Thus, in corrupted society companies that base their fight on corruptness and sell their merchandises through corruptness destroy other more efficient companies that want to come in the market. The worst thing about corruptness in Kyrgyzstan is that people are used to it and perceive as normal mundane pattern. Harmonizing to Human Development Report of UN, 47, 5 % of all income in the state belongs to 20 % of population [ 3 ] . However, many economic experts claim that these figures in world are worse: therefore, 90 % of all income within the state belongs to 5 % of the richest percentile of population. Harmonizing to UNDP Poverty Reduction Program about 40 % of population in Kyrgyzstan lives beyond the poorness line. [ 10 ] Peoples are deprived from ordinary life conditions: minimum nutrition, most crude signifiers of medical scrutiny, higher instruction and etc.

Under the Poverty Reduction Program in Kyrgyzstan I had a opportunity to study small towns in the southern portion of the state. One of the most cherished things about Kyrgyz civilization is that people are really hospitable. So, whenever person visits your house, mean Kyrgyz household would offer the visitant to halt by and hold a tea. Therefore, people show respect and cordial reception. While study many families would ask for our squad to imbibe tea. However, many of that tea imbibing turned out to be existent tea drinking- people had nil else to offer but for staff of life and tea. Again, naked truth- many can t afford meat, fruits, veggies and other critical merchandises.

Another national catastrophe is the high rate of unemployment which is the hindering barrier for state s economic development and solution of societal issues. Our working force is forced to travel to other states. Harmonizing to the National Statistical Committee of Kyrgyz Republic here are about one million Kyrgyz immigrants in Russian, Kazakhstan and other CIS states seeking occupation and better life [ 6 ] . Another important minute is that unemployment and corruptness force brightest heads of my state to travel to other states where they have better opportunities to carry through their dreams. This is due to the fact that many companies, particularly those in public sector engage their relations and friends or merely those who offer more money for occupation vacancy. So, nepotism and cronyism unluckily, are a common pattern.

High corruptness, absence of the regulation of jurisprudence, nepotism, unemployment and poorness cause political instability. Political instability has black effects on concern. Since 2005 Kyrgyzstan faced two detrimental for concern revolutions. After the revolution of 7th of April, 2010 due to terrible robberies in Bishkek, capital of Kyrgyz Republic, over 134 large and average size concerns, over 400 little size concerns, about 10 authorities edifices were ruined. The approximative harm is $ 12 million. Today, many of those concerns that were looted are wholly destroyed and burned down. Many are non sing get downing concern once more.

The last issue that I would wish to advert is an inefficient revenue enhancement system in Kyrgyz Republic that creates room for corruptness and waste of enterpriser s clip and money. Harmonizing to World Bank s Doing Business ranking, Kyrgyzstan scored the 156th topographic point out of 183 economic systems. This ranking was estimated in conformity with the frequence of payments that medium sized concern has to do ( 75 payments per twelvemonth ) and waste of clip to fix and register revenue enhancement returns and to pay the corporate income revenue enhancement ( 202 hours or 8.4 yearss per twelvemonth ) [ 5 ] .

From the described position quo we can uncover the undermentioned jobs: unprotected belongings rights, terrible corruptness, political instability and heavy revenue enhancement.

Now we should oppugn whether any enterpriser would wish to get down his venture in such instable political conditions where corruptness flowers, Torahs decide nil, onerous revenue enhancements are smothering and where any political authorization every bit easy as the catch of fingers can take away everything you have created, built and grown with sudating your backbones out. How can we even talk about responsible enterprisers or concern moralss? Such conditions are the cause of the absence of long-run responsible enterprisers because here they are ne’er certain what will go on to concern tomorrow, whether it will be nationalized, looted or merely taken away by lumpy representative of governments. Therefore, concerns every bit shortly as they start working are hotfooting to cover initial investings and are non caring about societal issues.

The function of enterprisers in deciding societal issues:

Surely, deciding societal issues is non something that can be rapidly achieved ; in fact societal issues require long-run committedness. It should be noted that any concern that is projecting long-run prosperity will be strategically interested in deciding nucleus societal issues of its community. This is because companies by responsible attitude straight benefit by set uping long-run client dealingss and therefore raising demand for its merchandises, making company s good will and indirectly by raising the buying power of its current and possible clients. For illustration, when the corporation s societal scheme is to contend poorness, the successful result of this scheme will intend that some part of population that before couldn T allow this company s merchandises will be able to make so. Therefore, the function of enterprisers in communities where the regulation of jurisprudence is the male monarch and where belongings rights are guaranteed by Constitution is huge. Entrepreneurs are the engines of economic system because they create value, competition, inventions, working topographic points and therefore, by straight prosecuting their ain involvements contribute indirectly to economic development and therefore solution of societal jobs. A adult male can non last without O, the same with entrepreneurship: society can t be without enterprisers. Entrepreneurship is critical for human capital development, and hence should be protected, supported, promoted, encouraged and rewarded every bit much as possible.

However, the most important part of entrepreneurship is what was foremost stated by one of leaders of the Austrian School of economic sciences, Ludwig von Mises, in his book Liberty and Property where he considered a really cardinal inquiry of any free society – the right to vote [ 7 ] . Ludwig von Mises found certain causing between the right to elect governmental functionaries and the right to take goods in the market. He argues that the capitalistic Western market construction gave an chance for ordinary people to take any goods in the market. He indicates that in free market an mean individual is a picker. The same happens in political relations because when consumers have a right to take goods in the market they will hold a opportunity to elect politicians. So, enterprisers are the 1s who offer us an chance to take. Therefore, their function within the society is to guarantee our civil rights and therefore, democracy.

Because enterprisers resolve societal issues as unemployment ; facilitate to the development of inventions and human capital, authoritiess should be interested in promoting and widening entrepreneurship. Unfortunately, Kyrgyz authorities has been unsuccessful in making so. From the paragraph where we discussed jobs of making concern in Kyrgyzstan, we can reason that traditional concern in Kyrgyzstan is missing foundations of carry oning concern and this is the major cause why concerns in Kyrgyzstan Don T contribute to society. Indeed, why would any entrepreneur lift a finger and attention about society which in bend doesn T attention about enterpriser?

So, what should be done in order to excite concern for long-run committedness? First, basic conditions vital for carry oning concern such as belongings rights protection, just competition and regulation of jurisprudence should be provided, so concerns would want to lend to the development of their community if non straight but at least indirectly by making occupations, value and inventions.

Battling heavy revenue enhancement:

There is no such thing as a good revenue enhancement

– Winston Churchill

As it was written above, one of the obstructions that prevent enterprisers to get down concern and therefore forestall them from lending to society is non-transparent and heavy revenue enhancement. So what should be done in order to promote entrepreneurship development in Kyrgyzstan? The authorities should do the revenue enhancement codification as simple and crystalline as possible. Therefore simple revenue enhancement system will avoid loopholes for excess corruptness chance because every citizen will be able to grok the significance on the words in the revenue enhancement codification. Transparency is besides necessary to avoid revenue enhancement without representation. Therefore, one of the most just and at the same clip efficient revenue enhancements is one gross revenues revenue enhancement of 10 % for case. One revenue enhancement is easy to administrate and besides transparent. In add-on low revenue enhancement rate will hike economic growing because one of the economic effects of revenue enhancement is that it distorts monetary values, rewards and incomes from optimum degrees, therefore doing deadweight losingss.

Another advanced method of battling unneeded and onerous revenue enhancements was proposed in the Liberty Act of the Government of Georgia where it says: No new revenue enhancements or increase in the revenue enhancement rates may be imposed other than following an affirmatory ballot in a countrywide referendum. [ 2 ] From my point of view this type of revenue enhancement referendums would truly get by with the chief intent of revenue enhancement: just redistribution of income from hapless to rich and bar of revenue enhancement maltreatment.

Battling misdemeanor of belongings rights:

Merely as adult male can non be without his organic structure, so no rights can be without the right to interpret one s rights into world, to believe, to work, and maintain the consequences, which means: the right of belongings.

Ayn Rand, Atlas Shrugged

Private belongings is one of the cardinal elements of the development of entrepreneurship and hence, authorities must guarantee the full protection of belongings rights through clear and simple reading of statute law. The Law On investings in Kyrgyz Republic prohibits the nationalisation or expropriation of belongings by the province except when national involvements are under menace. But how national involvement is defined? Such loopholes in statute law should be described in item.

Battling corruptness as a responsible concern pattern:

Since governments are the 1s who are involved in corruptness, they can non contend against themselves. Therefore, the most efficient manner of battling corruptness and at the same clip being responsible towards society is when an enterpriser themselves combat corruptness. Therefore, corporations could use anti-corruption scheme by distributing the corporate civilization of transparence, answerability, honestness, duty and whistle blower protection. Another manner to decide the issue of corruptness is to unify in concern associations. Harmonizing to Gagik Poghossin, one of the laminitiss and the Deputy Chairman of the Board of Association for Foreign Investment and Cooperation ( AFIC ) in Armenia, most concerns would prefer to run in a competitory, corruption-free environment, but frequently they are deterred from making so by a captive s quandary: if one concern choruss from corruptness but everybody else does non, that concern finds itself at a competitory disadvantage. [ 9 ] The solution is to decide the common job jointly. An first-class illustration of such association in Kyrgyzstan is the International Business Club ( IBC ) which acts as an mediator between authorities and concern. Today this association is recommending for revenue enhancement system reforms due to its complexness, weightiness and besides loopholes that create chances for corruptness. Such associations need farther publicity among concerns.

So far we have discussed issues within the traditional entrepreneurship because of myriads of jobs within it. However, one should maintain in head that traditional enterprisers contribute to society s development indirectly by straight prosecuting their ain involvements. There is a clear difference between traditional and societal entrepreneurship. Bill Drayton, the laminitis and chair of Ashoka non-profit-making organisation devoted to developing of societal entrepreneurship emphasized that: “ Social enterprisers are non content merely to give a fish or learn how to angle. They will non rest until they have revolutionized the fishing industry. “ [ 1 ] Therefore, the primary differentiation between traditional enterpriser and societal enterpriser is that the first touches upon societal issues indirectly, whereas societal enterpriser uses the income generated straight for his mission. Surely, societal entrepreneurship should be a paradigm of any concern venture since the aims of socially oriented concern are empyreal. But how to make favourable conditions so entrepreneurs with elevated powers will jump up all over?

In Kyrgyzstan instruction could be one of methods of promoting societal entrepreneurship.

Kerry Smith, in his research work named Social benefits of instruction: Feedback effects and environmental resources discovers relationship between instruction and environmental protection. [ 11 ] Thus, writer argues that the more literate society is the more it is likely to be concerned with environmental protection. Today, many secondary schools in Kyrgyzstan Teach categories that are leftovers of USSR and hence are non in demand any longer. One illustration is the compulsory class named Prewar developing where high school pupils are taught how to transport weaponries, how to blow up grenades and etc. Why non learn classs that are genuinely in demand? My solution is that secondary school pupils alternatively of Prewar preparation should be instructed classs where they will be taught rules of entrepreneurship, concern moralss and leading. So, harmonizing to K. Smith, if we educate our childs, shortly we will be able to harvest the fruits of socially oriented entrepreneurship since new coevals will be more concerned with environment and other societal issues in general.


If one to measure the position quo of entrepreneurship in Kyrgyzstan, due to many jobs he/she will be regretful for my state. However, one must understand that Kyrgyzstan doesn T lack traditional and societal enterprisers. Rather entrepreneurship activities exist, but are non sagely managed and provided with basic conditions for realisation of and therefore is non contributing to economic development.

Our state due to its heavenly mountains, virgin woods, brilliant vegetations and zoology is called 2nd Switzerland. Truly, there are still many natural resources and therefore, entrepreneurial chances that are yet to be discovered. For societal enterprisers, there are many community issues that are waiting to be resolved. Ludwig von Mises made a witty remark when stated that the concern of concern is concern. So, allow s let our concern to make their concern. I strongly believe that if authorities could supply basic conditions for carry oning concern, enterprisers will lend more. The lone thing we need to make as Christopher Columbus noted is to happen bravery to go forth old shores. So, I invite you to hold an unbelievable seafaring towards new shores, new chances!

Thank you for your attending!

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