Around 80 percent of the foreign investment in the country is centered in Bishkek, with the majority of the remaining investiment in the regions, particularly in extractive industry firms and production plants. Most U.S. firms currently operating in the country have not expanded their businesses significantly outside of the capital because of limited market capacity. Many imported products come overland from China, Russia, Kazakhstan and Uzbekistan. The road network for distribution of goods is largely sub-standard. A recently constructed highway connecting Bishkek to western China is by far the best road in the country.
Using an Agent to Sell U.S. Products and Services
Business in the Kyrgyz Republic is largely based on personal relationships. In an economy where rule of law is not strictly followed, the quality and depth of business relationships are often the best protection against loss and are key to market access. Selection of a local partner (or partners) is one of the most important decisions a company makes in its market entry. Though on-the-ground contacts are important, some firms choose to cover the Kyrgyz market from a regional office in Kazakhstan or Turkey.
A reliable distributor is the best way to address challenges including communicating with clients and providing after sales service. Many exporters designate a local trading company as their sales agent responsible for handling customs clearance of imported goods, dealing with established wholesalers and/or retailers, marketing the product directly to major corporations or the government, and handling after-sales service. Many distributors covering the Kyrgyz market are based in Almaty, Kazakhstan.
Establishing an Office
In order to start operating in the Kyrgyz Republic, a legal entity must be registered with four governmental bodies.[1]
- The Ministry of Justice (receives registration certificate containing the registration number as well as entry of data into the Unified State Register of Legal Entities);
- The National Statistics Committee (receives statistical registration card as well as entry of state registration data into the Uniform State Register of Statistics);
- The State Tax Inspectorate (receives a unique identification number that is to be entered in all financial, accounting, and customs documents); and,
- The Social Fund.
Individual entrepreneurs, however, need only to register with the Statistics Committee and the Tax Inspectorate. A one-stop shop concept was re-introduced in 2015 under the aegis of the Ministry of Economy and Investment, which works to ease the process of opening a company. Registration with the Ministry of Justice automatically registers the company with the other agencies. For commercial companies, the registration takes approximately three days, while for financial and credit institutions or non-commercial organizations the registration process is typically 10 days.[2]
An enterprise can operate as a limited liability company, additional liability company, joint-stock company, general or limited partnership, foreign enterprise, or enterprise with foreign participation. There are some additional types such as individual entrepreneur, representative office, branch office, commercial cooperative, and credit union. All incorporating documents should be in Russian or Kyrgyz and be notarized by a notary office.
Ministry of Economy published a guide on how to register the company online on its website https://mineconom.gov.kg/ru/direct/385/398. However, regardless of announced digitalization of business registration, most registration procedures still requires a personal presence.
Please see the State Department’s Investment Climate Statement for more information on the investment and business environment.
Franchising
Franchising is growing in the Kyrgyz Republic. A number of Western firms such as Coca-Cola, Hyatt, Sheraton, , Yum! Brands (KFC), Papa John’s, Nathan’s Famous Hot Dogs and officially licensed retailers and distributors including Levi’s, Nike, New Balance, and Crocs currently have a presence or affiliates in the country.
Direct Marketing
Direct marketing is gradually becoming more popular in the Kyrgyz Republic, due in part to increased internet penetration and the expansion of mobile networks. It is common for entrepreneurs to distribute samples and promotional materials at business events and forums, but the primary channels for advertisement remain television and the internet. There are no international advertising companies currently operating in the Kyrgyz Republic, but local firms should be able to assist in direct marketing activities.
Joint Ventures/Licensing
Joint ventures are the most proven strategy for entry into the Kyrgyz market. Foreign investors are generally protected by the inclusion of a well-positioned national investor familiar with the local system. Furthermore, Kyrgyz law gives more protection to joint ventures than to representative offices or international businesses.
Several commercial activities require government licenses. The list below is not exhaustive; more information can be found on the Ministry of Justice website:
· Exploration, prospecting and use of mineral deposits
· Manufacture and sale of pharmaceuticals, medicine, perfume-cosmetic and chemical substances, and medical equipment, except enterprises that sell soap, cleanser and perfume-cosmetic goods with a certificate of quality from the manufacturers
· Production of beer, wine, champagne, vodka, cognac and other alcohol
· Organization of gaming and gambling establishments
· Urban planning, drafting and design of housing, public buildings or industrial construction
· Building and assembly jobs, excluding individual residence buildings construction
· Banking operations, credit union and pawnshop activities
· Securities
· Insurance
· Trade in alcohol
· Private educational institutions
Express Delivery
DHL, UPS, and Federal Express are all present in the Kyrgyz Republic, though their reach does not extend outside the cities of Bishkek and Osh. Overnight service is not available and packages usually require three to four days to arrive from the United States.
Due Diligence
Due diligence remains challanging in the Kyrgyz Republic, but a number of Western-oriented legal and consulting firms are able to assist foreign companies with this requirement. Market research capacity is underdeveloped and reliable information can be difficult to find. Reliable economic information is also produced by aid and humanitarian organizations operating within the country, including the UNDP, USAID projects, the World Bank and the IMF. The American Chamber of Commerce in the Kyrgyz Republic (AmCham) and the U.S. Embassy can provide advice to firms planning to conduct business in the Kyrgyz Republic.
[1] http://www.inform.kg/ru/registratsiya_osoo/
[2] https://www.doingbusiness.org/en/data/exploretopics/starting-a-business