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TRANSCRIPT
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Textile and Apparel Cluster in Kyrgyzstan
Laura Birkman Maria Kaloshkina Maliha Khan Umar Shavurov Sarah Smallhouse Harvard Kennedy School Harvard Business School May 2012
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Table of Contents Executive summary .................................................................................................................................................. 3 1 Competitiveness of Kyrgyzstan ................................................................................................................. 4 1.1 Country Overview ................................................................................................................................... 4 1.1.1 History and Modern Political Economy of Kyrgyzstan .................................................. 5 1.1.2 Kyrgyzstan Economic Performance ....................................................................................... 7 1.1.3 International and Regional Trade ........................................................................................ 11
1.2 National Competitiveness Analysis .............................................................................................. 12 1.2.1 Endowments ................................................................................................................................. 12 1.2.2 Macroeconomic Conditions .................................................................................................... 13 1.2.3 Microeconomic Conditions ..................................................................................................... 14
2 Kyrgyz Textile and Apparel Cluster ..................................................................................................... 20 2.1 Highlights and Economic Performance ...................................................................................... 20 2.1.1 History of Cluster Development ........................................................................................... 23 2.1.2 Textile and Apparel Cluster Value Chain .......................................................................... 25 2.1.3 Regional Competitors of the Cluster ................................................................................... 27 2.1.4 Cluster Map .................................................................................................................................... 28
2.2 Textile and Apparel Cluster Business Environment Analysis .......................................... 29 2.2.1 Context for Firm Strategy and Rivalry ............................................................................... 30 2.2.2 Factor Conditions ........................................................................................................................ 32 2.2.3 Demand Conditions .................................................................................................................... 34 2.2.4 Related and Supporting Industries ..................................................................................... 34
Recommendations ................................................................................................................................................. 36
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Executive summary
This report is an analysis of the textile and clothing cluster in the Kyrgyz Republic. This has
been the fastest growing segment of the economy over the last decade and holds special promise
as a contributor to future economic development.
Kyrgyzstan is a parliamentary republic, the only one in the region. It has undergone
considerable political turmoil since its independence in 1991, and has suffered multiple regime
changes and enjoyed little continuity of leadership. The current government has adopted
liberalization and privatization policies, and has prioritized infrastructure development and
attracting foreign investment. Corruption, low productivity and little available capital are
obstacles that must be overcome. There is a new hopefulness about what is possible even though
many challenges remain for this economy. Medium and long term strategies must be developed
and consistently implemented to achieve sustained competitive advantages.
Kyrgyzstan is a small and low-‐income country bordered by much larger and wealthier
countries. It has turned this into an advantage by adeptly participating in regional trade. While
local demand for products remains limited, Russian and Kazakhstani demand is quite large and
consumers have shown a preference for products from Kyrgyzstan. The textile and apparel cluster
has grown rapidly by focusing on these markets.
The study concludes with some specific recommendations for the government, the private
sector, and not-‐for-‐profit organizations that will accelerate further development of this cluster.
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1 Competitiveness of Kyrgyzstan
1.1 Country Overview
Kyrgyzstan covers 198,500 square kilometers of Central Asia, bordered by China, Tajikistan,
Uzbekistan, and Kazakhstan. The estimated GDP (2011) is $4.7 billion USD, with real annual GDP
growth rate of roughly 5.7% over the past five years.1 The population is 5.5 million with a GDP per
capita (adjusted for purchasing power parity) of $ 2,4302 placing it 183rd in the world.3 It is a
mountainous country with mineral and water resources, but highways over passes close under
heavy winter conditions, and miners contend with glacial flows. There is only one rail line and one
international airport, which is located in the nation’s capital of Bishkek.
Kyrgyzstan has a highly multi-‐ethnic population, with over 80 different ethnicities. Slightly
over a third of its people live in urban areas. Bishkek, located in the north near Kazakhstan, and is
the country’s largest city. It is located on the ancient Silk Road, the most important historical over-‐
land trade route in Asia. Osh is the second largest city, and is located near the southern border
with Uzbekistan.
Employment is principally in agriculture (48%), with industry employing 12.5% and services
39.5%. Gold is the most important export product, and oil the largest import.
1 EIU statistics, 2001 2 Ibid 3 CIA World Factbook 2 Ibid 3 CIA World Factbook
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1.1.1 History and Modern Political Economy of Kyrgyzstan
The history of the country’s territory goes back many centuries and has known many rulers
and formed part of the Chinese and Russian Empires before it joined the Soviet Union.
In 1924, the Kara-‐Kirgiz Autonomous Region was formed (renamed Kirghiz Autonomous
Region in 1925), creating the borders of what is present-‐day Kyrgyzstan. Traditionally the people
led a nomadic lifestyle of herders, but Soviet land reforms in the 1920s and 1930s dramatically
changed the traditional way of life. Many formerly nomadic people settled as part of the land
reforms. In 1936, the Kirghiz Soviet Socialist Republic (SSR) – also known as Kirghizia – became
formally a constituent republic within the USSR and part of the planned economy.
The region remained stable for decades until 1990, when a state of emergency was
imposed after several hundred people were killed in inter-‐ethnic clashes between Uzbeks and
Kyrgyz in the southern capitol of Osh. Askar Akaev, a reformist liberal member of the Kyrgyz
Communist Party, was elected to the newly-‐created post of President.
In 1991, the Kyrgyz Republic declared its independence after the collapse of the USSR and
joined the Commonwealth of Independent States (CIS). President Akaev won another term in
office that same year. In 1992, Kyrgyzstan joined the UN and the OSCE and launched its first
economic reform program. In 1993 the som replaced the Russian ruble as the main unit of
currency.
In 1995, Akaev won another term in office with nearly 70% of the vote and anchored his
position. Soon thereafter, with the help of a referendum, he approved constitutional amendments
to concentrate more power in the hands of the presidency and reduce powers of the legislature.
In 1998, a constitutional court approved Akaev’s appeal to run for a third term in 2000, and in
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November he was re-‐elected for another five years (though international observers deemed the
election results suspect).
Increasing dissent with the government marked the early 2000’s and a number of
opposition leaders were arrested and given long prison sentences for alleged abuses of office. In
2002, opposition protestors marched on Bishkek demanding President Akaev’s resignation. In
early 2003, a referendum approved another constitutional change intended to hand some of the
president’s powers back to parliament, but was seen by many as a farce. Protests amplified as
numerous independent and opposition candidates were prevented from participating in the
parliamentary elections. Masses rioted demanding Akaev’s resignation, and he fled to Moscow.
Parliament appointed the opposition leader, Kurmanbek Bakiev, the acting Prime Minister.
Bakiev became President in a landslide victory in 2005, but political upheaval continued.
There were five prime ministers in four years. Protests demanding Bakiev’s resignation took place
and when constitutional changes were made in the latter half of 2007; many opposition members
considered it a step closer to authoritarian rule.
Turbulence between 2005-‐2009 finally came to a head in a full-‐blown revolution in 2010.
Bakiev was forced to resign and fled to Belarus. In ensuing days of political power vacuum
hundreds of people were killed and thousands displaced in clashes between the Kyrgyz and Uzbek
ethnic communities of Osh and Jalalabad. Roza Otunbaeva served as interim President until 2011,
when Almazbek Atambaev was elected.
The President was the undisputed leader in Kyrgyzstan until 2010 when a constitutional
referendum moved the country to a parliamentary system, placing greater power in the
parliament and the cabinet and less in the presidency. Conditions in Kyrgyzstan have steadily
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improved under the new system. The new Prime Minister-‐ Omurbek Babanov has shown
commitment to building the economy through market forces and the economy is recovering from
what was a destructive and violent period. His administration is showing fiscal restraint and has
kept inflation in check. It has begun implementing policies aimed at further liberalizing the
economy and strengthening trade relationships. Most industry has been privatized, and there is a
concerted effort to stimulate foreign direct investment. Infrastructure investment, diversification
of the economy, and improved governance are the highest economic development priorities.
The turmoil of the last ten years, while harmful to growth, remarkably did not deter
progress in all areas. Literacy remained consistently high and savings and investment both
increased. Prior investments in physical infrastructure have improved key logistics. But power
outages, limited capital, and exogenous factors (notably Russian immigration policy, Russian and
Kazakhstani FDI, and the prices of gold and oil) continue to contribute to ongoing economic and
political vulnerability. Perception of corruption continues to be a serious concern.
1.1.2 Kyrgyzstan Economic Performance
Kyrgyzstan had erratic real GDP growth over the last decade, with a brief period of
negative growth in 2010, due to political instability and a down-‐cycle of the Kumtor gold mine4,
however in 2011 real GDP growth was 9%.5 Inflation peaked sharply in 2008 and 2011 following
years of major revolts, exacerbated by high international prices for food and fuel (Figure 1).
4 The Kumtor gold mine generates 30% of country’s foreign currency reserves and 9% of Kyrgyzstan’s GDP. 5 Economist Intelligence Unit
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Figure 1: Real GDP Growth and Inflation Rate in Kyrgyzstan
Source: Economist Intelligence Unit
Difficulties raising revenue and high levels of social spending have produced, and are
expected to continue to produce, budget deficits. FDI inflow has been volatile and stayed below
10% mainly due to political instability in the country and failure to enforce investors’ rights. The
government has embarked upon an anti-‐corruption drive to make the country more attractive to
foreign investors.
Remittances constitute a high and increasing percentage of GDP – 27% in 2010 (Figure 2).
The sources of remittances are transfers from Kyrgyzstan citizens working abroad as well as
unregistered trade. Remittances increases have coincided with an increase in the trade deficit
likely due to growth in unregistered exports. What is both captivating and potentially dangerous
about remittances is how they “simultaneously represent the ability of vulnerable populations to
help themselves and reflect the danger of institutional capture of a phenomenon that should be
Real GDP growth, %
-‐5
0
5
10
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
CPI, %
0
10
20
30
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
9
uniquely the realm of vulnerable populations”.6 In other words, remittances cannot be part of a
country’s sustainable growth strategy.
Figure 2: Remittances to Kyrgyzstan as percent of GDP
Sources: World Bank, Economist Intelligence Unit
Labor productivity (GDP per employee) remains a key challenge in Kyrgyzstan, with the
country lagging behind its regional neighbors as well as other prominent textile-‐producing
countries such as India, China and Turkey (Figure 3). According to the Global Competitiveness
Report, Kyrgyzstan also lags behind the same countries in its competitiveness scores, which
encompass basic requirements, efficiency enhancers, and level of sophistication of the economy.
6 Rosser, Ezra, Remittances (October 24, 2007). American University, WCL Research. Available at SSRN: http://ssrn.com/abstract=1024177
Remittances, % of GDP
0
10
20
30
20012002200320042005200620072008200920102011
Foreign trade balance, % of GDP
-‐40
-‐20
0
20
20012002200320042005200620072008200920102011
10
Figure 3: Productivity and competitiveness scores of Kyrgyzstan in comparison to other economies
*Labor productivity = current GDP / (labor force x (1 – unemployment rate)) Source: Global Competitiveness Report 2011-‐12, World Bank
Even more worrisome is the stagnation of labor productivity over the past decade (Figure
4). The productivity drop in the beginning of the 90’s can be partially explained by the growth of
the informal economy after the Soviet Union collapse. 50%-‐60% of the economy in Kyrgyzstan is
informal, and thus output and productivity are underestimated. Additionally entrepreneurs have
been attracted to less productive labor-‐intensive industries, such as trade and apparel, as these
sectors have had low barriers to entry. And finally, the general use of modern technology is low
and equipment is often obsolete.
The widening gap between labor productivity and salary growth can likely be explained by
social policy. In 2002 the share of the population living for less than $2 a day (PPP) was 67%, which
3.8 3.54.2 3.6 4.3 3.9
5.34.2 4.2 4.3
0
2
4
6
Tajikistan Kyrgyzstan Vietnam Pakistan India Moldova China Kazakhstan Russia Turkey
Labor productivity*, current USD
1,845 2,064 2,122 2,870 3,156 3,954 6,632
14,491 17,551
29,016
-‐
10,000
20,000
30,000
Tajikistan Kyrgyzstan Vietnam Pakistan India Moldova China Kazakhstan Russia Turkey
GDP per employeeGDP per capitaGDP per capita @ PPP
% of U.S. productivity 1.9% 2.1% 2.2% 3.0% 3.2% 6.8% 29.9%
Competitiveness scores
4.1% 14.9% 18.1%
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by 2007 decreased to 29%; share of population living for less than $1.25 a day (PPP) dropped
dramatically from 34% to 2% over the same period.7
Figure 4: Labor Productivity Evolution in Kyrgyzstan Over the Past 20 Years
Sources: World Bank, EIU; Ministry of Economy; press search www.apn.kz/publications/article5878.htm
1.1.3 International and Regional Trade
Despite formidable challenges facing Kyrgyzstan as it transitioned from the Soviet-‐style
planned economy, it became a member of the WTO in 1998 and has developed the most liberal
trade regime in the Central Asian region. An estimated 75% of Kyrgyz imports from China are re-‐
exported to neighboring countries, with substantial amounts destined for Russia. The remaining
imports are consumed domestically or used in local production of clothing in value-‐added
activities.8
Foreign trade in the Central Asian economies goes through three main channels: formal or
standard trade; large bazaar trade; and cross-‐border trade. The last two often go unmonitored
and unreported, which makes it very difficult to measure the true extent of Kyrgyzstan’s trade.
Bazaars play a central role in the economy. These marketplaces go considerably beyond the notion 7 World Bank, 2011 8 Interviews with industry associations
Labor productivity, USD per person
0
50
100
150
200
-‐
500
1,000
1,500
2,000
2,500
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Nominal GDP per employeeReal GDP per employee (2000 USD)Average real wage index (LCU, 2005=100)
Real wage index, percent
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of a central market. They range in size and are quite diverse in terms of what they offer, with
some specializing to a high degree. Some are oriented internationally, others for local goods only.
Some offer a wide range of products; others are focused on a particular sector. Most are logistics
centers, offering warehousing and transportation services. They are largely unregulated and
traders are relatively unhampered by government officials. The Dordoi bazaar, in Bishkek in the
north, and Kara-‐Suu market, in Osh province in the southwest, have become regional trading
centers. This business and service support aids the growth of manufacturing and re-‐export
activities.
1.2 National Competitiveness Analysis
Sources of competitiveness are endowments, macroeconomic, and microeconomic
conditions.
1.2.1 Endowments
The Kyrgyz Republic is fortunate to have an abundance of natural resources. Mineral
resources contribute significantly to exports: gold, mercury, uranium are the three most
important. The Kumtor gold mine is the second largest producer in the world, and gold is the
largest export product. Gold prices have been rising, but a downturn could have a large negative
effect on the country’s balance of trade and foreign exchange earnings.
The high elevation and glacial rivers in Kyrgyzstan provide excellent sites for hydroelectric
power generation and there is opportunity to expand production capability. The government is
currently working on building two additional hydro power stations on the Naryn River with the
ultimate goal of electricity exports to neighboring countries.
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Kyrgyzstan’s central location in the Central Asian neighborhood makes it a critical land link
between China and other CIS countries. A highly entrepreneurial and bi-‐lingual population is a
significant asset that facilitates present-‐day trade relationships and business with the huge
Russian and other CIS markets.9
Agriculture employs just under half the total population, and the vast majority of rural
people. Most production is for local consumption; cotton, tobacco, wool, and meat are the most
important products, but only tobacco and cotton are significant exports.
1.2.2 Macroeconomic Conditions
Regarding social infrastructure and political institutions (SIPI), Kyrgyzstan has some
strength but faces significant challenges. In terms of human development, the literacy rate is 99%
but there is high youth unemployment and substantial out-‐migration for better paying jobs. As for
institutional development, the country has open trade policies that have facilitated growth, but
has a substantial percentage of companies that operate in the informal economy because the
costs of formalization are too high. In 2010 Kyrgyzstan was ranked 164th out of 178 countries
regarding rule of law.10
Corruption remains a key long-‐term challenge. Kyrgyzstan is doing better than its
immediate neighbors, Uzbekistan and Tajikistan, but the country has slipped 8 points on
corruption control in country competitiveness rankings.11 Low confidence in courts and the justice
system is pervasive. The perception of corruption remains a serious issue in doing business in
Kyrgyzstan compared to most other countries in Central Asia. For example, a higher percentage of
9 Nearly 70% of the local population speaks Russian 10 ISC Country Competitiveness Model 11 Global Competitiveness Report 2011-‐12
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firms in Kyrgyzstan are expected to give gifts in meetings with tax inspectors and to secure
government contracts, compared with Eastern Europe, Central Asia and low-‐income countries.12
The current government’s focus on reducing corruption is promising, but consistent enforcement
is key and it will take time for the country to establish a new reputation.
In terms of macroeconomic policies, Kyrgyzstan benefits from its membership in the WTO,
and is the only CIS country in the region to have joined. The government has been tightening fiscal
policy to strengthen the macroeconomic stability. Tax collection as a percentage of GDP has
begun to increase, but revenue has not been sufficient to cover the growing national budget. The
government developed its most recent policy program in conjunction with the IMF, which focuses
on preventing the external deficit from widening, fiscal consolidation, and restoring the economy
to faster growth.
1.2.3 Microeconomic Conditions
According to the Global Competitiveness Index, Kyrgyzstan dropped in its competitiveness
ranking from 95 to 103 (out of 142) in the period 2005-‐2011. 13 The country’s business
environment (Figure 5) has especially been affected by a weak context for firm strategy and rivalry
and the limited factor conditions. International donors pledged fiscal support until 2012, but in the
medium term, governmental fiscal discipline is needed to manage the public debt level. All these
factors play a critical role in enabling Kyrgyzstan to design a long-‐term investment plan that will
strengthen the fundamentals critical to the further development of its national diamond.
12 WB World Economic Forum: Doing Business Report 13 ISC Country Competitiveness Model
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Figure 5: Kyrgyzstan’s national business environment (national diamond).
Source: Interviews; Global Competitiveness Index; GTZ; World Bank, Enterprise Surveys, Running a Business in the Kyrgyz Republic, 2011
1.2.3.1 Context for Firm Strategy and Rivalry
Kyrgyzstan suffers from inadequate rule of law as a result of the political turbulence of the
2000’s marked by numerous dissolutions of government, rapid successions in leadership and an
overall lack of continuity in policy implementation. Socio-‐political instability has fostered
widespread corruption and left investors unprotected. On the positive side, Kyrgyzstan’s open
trade regime and the overall ease of starting a new business have enabled the country to attract
foreign aid for new projects geared at attracting more FDI. For example, the EBRD undertook 73
projects in 2010 with a total project value of $749 million USD centered on fostering the private
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sector, in particular through “support for micro, small and medium-‐sized enterprises, alongside
support to strengthen the financial sector and develop critical infrastructure”.14
Kyrgyzstan’s economy is heavily dependent on informal players, or firms and employees
that are not part of the official economy. The informal economy is the “diversified set of economic
activities, enterprises, and workers that are not regulated or protected by the state”.15 It affects
the entire national diamond, but specifically the context for firm strategy and rivalry. Originally
applied to self-‐employment in small, unregistered enterprises, the concept of informality has since
expanded to include wage employment in unprotected jobs. Martha Chen, Professor at Harvard
Kennedy School, sums up the importance of addressing the issue of informality as follows: "The
informal economy is where the energy is, where the productivity is, where the risk is being
taken."16 Reducing the cost of formalization, or the barriers preventing firms and workers from
participating in the formal economy, is critical if the country is to transform itself into a productive
and growth-‐oriented nation. Figure 6 shows comparison of the costs and benefits of formalization.
Figure 6: Costs and benefits of formalization
Source: interviews, team analysis
14 EBRD Factsheet Kyrgyz Republic, www.ebrd.com/kyrgyzrepublic 15 http://wiego.org/informal-‐economy/about-‐informal-‐economy 16 Quote taken from an interview with Martha Chen conducted on March 5, 2012 at Harvard Kennedy School.
• Have to pay taxes and social contributions• Avoid audits and reduce compliance costs (e.g. accounting) for business 100% working informally
• Need to deal with complicated administrative procedures, e.g. the process of VAT refund
• Subject to possible raider take-‐over without political protection once the business is sizeable and profitable
Costs of formalization
• Access to credit• Decreased burden of audits for firms transitioning from partial to full formalization
• No issues with proving the origin of goods for export
• Legal protection for contracts• Access to IFC support in the form of trainings and marketing efforts in foreign markets
Benefits of formalization
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1.2.3.2 Factor (Input) Conditions
Kyrgyzstan has underdeveloped physical and capital infrastructure and this has limited the
ability of the country to reap the benefits of political and economic reforms. The country’s
mountainous terrain requires ongoing and large investments in road and rail networks. Recently
there have been some improvements in transport network infrastructure (Figure 7). The capital
infrastructure is limited by low savings, high capital flight, and heavy dependence on remittances.
Figure 7: Global competitiveness rankings on infrastructure development
Source: ISC Country Competitiveness Model
1.2.3.3 Demand Conditions
Local demand conditions are not favorable for cluster development. Regulatory and other
standards are low and worsening (Figure 8), and firms do not consistently feel market pressure to
produce goods of high quality. Environmental regulations are often ignored, and compliance is
nearly impossible to achieve for many smaller-‐sized firms. On the positive side, the diverse
population embodies a variety of tastes, contributing to buyer sophistication relative to income.
99 71 107 8928
79
0100200
Roads (+1) Railroads (+1) Air transport (-‐19) Electricity (-‐7) Transport Network (+35)
Phone lines (-‐2)
Global Competitiveness Rankings(Lower rank better, value in parenthesis indicates change between 2005 – 2010)
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Figure 8: Changes in regulatory standards
Source: Global Competitiveness Index, 2011
1.2.3.4 Related and Supporting Industries
Bazaars are an integrating factor between local and regional business. In addition to the
importance of bazaars, a growing number and quality of local suppliers has enabled the national
economy to retain more of the value-‐added created by trade. Despite these positive
developments, the overall state of Kyrgyzstan’s cluster development remains low. There are few
partnerships between clusters. At the same time there is a large number of associations and
business organizations that mostly represent the narrow focus of a particular interest group.
There are few institutions for collaboration (IFCs) with broad economic competitiveness focus.
1.2.3.5 State of Cluster Development
The state of development of clusters in Kyrgyzstan is limited (Figure 9). Traditionally,
Kyrgyzstan’s abundance of gold has enabled the country to develop its jewelry and precious
metals cluster. It is now the biggest cluster in the country. In 2010 gold production contributed
more than 9% to the country’s GDP and more than 8% to labor productivity.17 The second largest
17 Based on Ministry of Economy data
40
50
60
70
80
90
100
110
2005 2006 2007 2008 2009 2010 Kyrgyzstan
Tajikistan
Kazakhstan
China
Russia
Regulatory Standard Index, rank
19
cluster by volume of export is the hospitality and tourism cluster, which has not declined despite
the political turmoil in the country. The third largest cluster is textiles and apparel, which has seen
a rapid overall rise in the last decade. The textile segment has shrunk due to increased regional
competition, while the apparel segment is growing. However, official statistics underestimate the
actual volume of export trade, as the level of informality in cross-‐border and bazaar trade is very
high.
Figure 9: Kyrgyzstan’s State of Cluster Development 2000-‐2010
Sources: Prof. Michael E. Porter, International Cluster Competitiveness Project, Institute for Strategy and Competitiveness, Harvard Business School; Richard Bryden, Project Director. Underlying data drawn from the UN Commodity Trade Statistics Database and the IMF Balance of Payments statistics; team estimates – see back up.
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1.2.3.6 Sophistication of Company Strategy
Kyrgyzstan’s business environment is characterized by the presence of a few large firms
and a large number of small or micro-‐sized firms (Figure 10). According to N. Bloom and J. Van
Reenen, “taxes and other distortive policies that favor family-‐run firms appear to hinder better
management, while general education and multinational presence seem valuable in improving
management practices”.18 A tax system that favors small firms disincentivizes growth because it
punishes firms that exceed a certain size with higher corporate taxes. High level of informality also
makes it difficult for firms to develop and promotes inefficient use of resources. Low market
capitalization decreases economic incentives for businesses to improve performance.
Figure 10: Sophistication of companies in the economy of Kyrgyzstan
Sources: Report on patent system for SMEs; Ministry of Economy; press search www.kyrtag.kg/?q=ru/viewpoint/14325
2 Kyrgyz Textile and Apparel Cluster
2.1 Highlights and Economic Performance
The textile and apparel cluster is concentrated around Bishkek and contains 96% of the
companies. The remaining companies are located in Osh, in the south of the country about 8
hours away by car. The majority of employees and business owners in the cluster – approximately
70-‐85% – are women. The cluster predominantly consists of micro (<10 people) and small (10-‐50 18 Nicholas Bloom, John Van Reenen. Why Do Management Practices Differ across Firms and Countries? http://www.stanford.edu/~nbloom/JEP.pdf
State-‐owned enterprises, percent contribution to GDP, 2010
10
3555
SOE in goldOther SOEsPrivate sector
Small and medium enterprises,percent contribution to GDP, 2010
31
15
54
SMEsFarmersFirms >200 ppl
Market capitalization, percent of GDP, 2010
1.71Capitalization
21
people) enterprises, with some medium (50-‐200 people) and large (> 200 people) firms. Of the
740 officially registered enterprises in apparel, 87% are registered as sole proprietorships and by
law are limited to 30 employees. It is estimated there are several thousand informal enterprises in
business today.19 In addition, many of these businesses have unregistered production. The share
of informal firms in the cluster is on the magnitude of 60-‐80%.
Apparel production and exports have been increasing steadily with a CAGR of 25-‐26%
(based on official 2004-‐2009 data, Figure 11). Official employment in the sector declined starting
in 2007, though this is likely a reflection of a shift in employment to the informal sector. According
to expert estimates, employment in the sector may be as high as 300,000, or 12% of country’s
labor force.20 Estimates of the apparel cluster’s contribution to GDP range from 5% to 15% (a
detailed explanation of the methodology used for this study is provided below). The textiles
portion of the cluster is 5-‐6 times smaller than that of apparel in terms of their contribution to
GDP and employment.
19 Economic effect of participation of Kyrgyz Republic in World Trade Organization. Textile and apparel. Preliminary results. SIAR. 20 Interview with President of Legprom
22
Figure 11: Kyrgyz apparel cluster production and employment (official data)
Sources: EBRD, Union of Textile (Souyztextile), interviews
It is possible to estimate the production and export value of the informal portion of the
apparel cluster using employment figures (see Figure 12). This approach requires estimating labor
costs for the entire cluster based on the number of employees, monthly salary and number of
months employed. Labor costs are used to estimate total cluster turnover and export based on the
typical labor cost share in revenues.
Figure 12: Estimate of the Size of Unregistered Apparel Export
Item Conservative Aggressive Average Number of employees, thousand people 150 300 225 x Average monthly salary, US$ 11121 200 155 x Average # of months worked per year (due to seasonality)
9 11 10
= Cost of labor, million US$ 150 660 350 ÷ Percent of labor costs in revenue 50% 50% 50% = Estimated turnover, million US$ 300 1,320 700 x Percent of production exported 95% 95% 95%
21 2009 International Trade Center apparel industry mapping reported 2008 salary of 2,660 SOM. This number was converted to US dollars and extrapolated to 2010 using real wage index. Assuming that the ITC data was based on annual salary, the monthly number was adjusted for 9-‐month employment.
-‐
50
100
150
200
250
-‐
20
40
60
80
100
120
140
2003 2004 2005 2006 2007 2008 2009
Thousand people Million US$ Production Export Employment
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= Estimated export 285 1,254 665 Official data for Textile and Apparel, million US$ 160 160 160 Share of informal export, percent 64% 88% 81% Key assumptions explained. The estimates of the number of employees in the apparel cluster vary between 150,000 and 300,000, respectively “conservative” and “aggressive” estimates. An “average” scenario is based on average values used in the assumptions of the other two scenarios. The estimate for average monthly differs depending on the source. The conservative estimate is based on extrapolation of 2008 reported salary data ($73 per month). The aggressive estimate was chosen at $200 per month (roughly in line with the most recent 2011 national monthly earnings as reported by EIU), though some sources claim that average salary may be as high as $300-‐400. Seasonality was factored into the analysis assuming on average 9 and 11 months of work, respectively. The next important assumption is cost of labor in turnover. A 2009 ITC industry survey found that labor cost varies between 40% and 60% for different types of companies, so 50% was assumed for the cluster in both scenarios. It was established from interviews that 95% of production goes to export. As a final assumption, the share of informal export was estimated based on the difference over the official export statistics. Sources: ITC textile industry mapping; team analysis
Kyrgyzstan’s apparel production has predominantly specialized in women’s apparel (about
40% of the total product mix) and undergarments (about 30% of product mix). Hosiery has been
the fastest growing category over the past several years, and the relative share of men’s apparel in
total production has declined. Typical product mix in women’s apparel consists of dresses, blouses,
jackets, skirts and trousers as well as woolen products – coats and sweaters.
2.1.1 History of Cluster Development
Industrial production of textiles and apparel emerged in Kyrgyzstan during the Soviet times.
The first textile manufacturing plant in the country was set up in the 1930s. During World War II
more textile and apparel manufacturing plants were relocated to Kyrgyzstan from Russia. In the
1990s Kyrgyzstan specialized in textiles, representing more than 80% of the country’s light
industry production. Apparel constituted about 15% of light industry and specialized in hosiery
and woolen clothes.
24
The collapse of the Soviet Union disrupted all major economic links in the post-‐soviet space
and led to a general economic collapse of ex-‐soviet republics. The Kyrgyzstani textile and apparel
cluster went into a sharp decline with the rest of the economy. Between 1990 and 1995 real labor
productivity in the country dropped by 40%. However, alongside these economic challenges there
were also growth opportunities through development of international trade (Figure 13). Goods
from China and re-‐exported to Russia and Kazakhstan grew rapidly in the 1990s fueled by the
favorable geographic position of Kyrgyzstan and the cultural and language familiarity both with
Chinese and Russian/Kazakh vendors. Bazaar trade and accession to the WTO played critical roles
in the country’s trade development.
The final step in the re-‐emergence of the apparel cluster in Kyrgyzstan was stimulated by
increased demand for higher quality goods from Russia and Kazakhstan that Chinese producers
could not satisfy. Most sophisticated Chinese factories were located in the eastern part of the
country and higher quality production sold predominantly to developed markets of Europe and
U.S. The goods that importers were able to procure for post-‐soviet markets in the CIS countries
consisted mostly of lower quality items from the less developed western part of China. These
items quickly earned a reputation for inferior quality and non-‐durability. Setting up apparel
production in Kyrgyzstan allowed better control over the quality and a shorter procurement cycle.
As a result, the apparel cluster was reinvigorated in the early 2000s and the cluster has seen
significant growth ever since. Today China is catching up in terms of quality of apparel and Kyrgyz
products often have a reputation of insufficient quality22 which can threaten the growth of the
cluster going forward.
22 2010 ITC Market Survey for Russia
25
Figure 13: Timeline for textile and apparel cluster re-‐emergence
Sources: interviews, industry publications
Unlike the apparel, textiles never fully recovered from the economic collapse of 1991.
Textiles share in light industry production was below 15% in 2010 and continues to decline. The
biggest cotton textile producer in the country went bankrupt in early 2012. The major reasons
behind this the decline of textiles are lack of capital and stiff foreign competition. Textile
production requires significant investment in new technologies and equipment on the magnitude
of several million dollars per firm.23 Local business owners do not have sufficient profits or access
to low-‐cost financing, and potential foreign investors are deterred by political risks. Consequently,
textiles and thread are now supplied to the cluster mostly by importers.
2.1.2 Textile and Apparel Cluster Value Chain
A simplified value chain for textile and apparel is shown in Figure 14. Some raw materials
for the cluster – cotton and wool – are produced in the country, but are mostly exported to China
and Kazakhstan. Other raw materials like silk and synthetic fibers are not produced in Kyrgyzstan
are imported. Fabric and textiles are increasingly imported as well. The quality of local fabric is
very low compared to modern standards and as a result the cluster heavily depends on Chinese
23 Interview with President of Legprom
26
fabric materials. A significant portion of fabric is purchased in the Dordoi Bazaar in Bishkek. Some
thread production is done successfully in Kyrgyzstan with the help of Kazakhstani capital. The
presence of raw material producers and the recent positive experience with local thread
production indicate it might be possible to again capture more of the value chain by expanding
local fabric production.
Apparel production is currently the core activity of the cluster. The majority of enterprises
in Kyrgyzstan are small and the share of informality in the economy is high. Most foreign investors
in apparel left the country after the 2010 revolt. 95% of apparel production is exported to Russia
and Kazakhstan, and 90% of products are exported via logistics agents, with one company – BIEK
Cargo -‐ being the dominant player in the cluster. The remaining 10% is sold to exporters
associated with the Dordoi and other bazaars in Bishkek and Osh.
Figure 14: Textile and Apparel Value Chain
* Based on knitwear value chain analysis, apparel value chain analysis and estimates Source: 2008 knitwear value chain analysis for GTZ ; Broader strategy for the textile and clothing industry in Kyrgyzstan 2009 to 2011: Strength of the Value Chain; interviews
Apparel producers suffer from a high level of “seasonality” of orders that peaks between
April and October. As a consequence, producers go through periodic lay-‐offs that drive down
production efficiency and harm the long-‐term quality of the labor force. This seasonality is driven
by different consumption patterns over the course of the year. Lack of sophisticated long-‐term
contracts with large clients in principal export markets exacerbates the problem. Development of
Raw materials Thread & fabric Apparel Distribution
9-‐15% 18-‐28% 40-‐50% 13-‐20% (and higher if exported)
% of value added in the chain*
3-‐10% 23% 25% 10% (and higher if exported)
Profitability, %*
– Not well developed in the country
27
customer relations, and better production and inventory planning would help with this problem
and improve operational efficiency.
2.1.3 Regional Competitors of the Cluster
Kyrgyzstan is estimated to take 2-‐6% of the $25 billion Russian apparel market (production
plus re-‐labeled goods from China). However, according to a 2010 ITC Market Survey for Russia, in
the category of women’s apparel (blouses and shirts) Kyrgyzstan is the second biggest supplier
after China.
China, Bangladesh, Turkey and India are the biggest textile and apparel exporters in the
region (Figure 15). These producers focus mostly on the European and American markets,
however they also export to Russia and Kazakhstan and create significant competition for
Kyrgyzstan firms given their large export volumes. Immediate neighbors of Kyrgyzstan – Tajikistan
and Uzbekistan – export almost exclusively to Russia and Kazakhstan, but focus mainly on textiles.
Figure 15: Competing textile and apparel clusters in the region
Turkey 28 bln
Tajikistan and Uzbekistan – two closest competitors – are primarily focused on upstream textile manufacturing and have weaker apparel segment in structure of export products
Source: Nations Online Map; UNDP; ITC Data; Textile World; Prof. Michael E. Porter, International Cluster Competitiveness Project, Institute for Strategy and Competitiveness, Harvard Business School; Richard Bryden, Project Director.
6 bln
20 bln33 bln
Kyrgyzstan 0.2 bln
(officially)
2 bln
207 bln
Total export value in $USD bln in 2010
0.1 bln
1 bln
28
2.1.4 Cluster Map
The cluster is in early phase of development (Figure 16). There is a large concentration of
apparel manufacturers but few upstream fabric manufacturers. Fashion houses and design studios
reflect the unique local culture and at the same time, having a good understanding of tastes in the
export markets in Kazakhstan and Russia, are able to respond to their more sophisticated demand.
Transportation and logistics companies are a particularly important part of the cluster because
product distribution is complex.
Figure 16: Textile and apparel cluster map of Kyrgyzstan
Source: Interviews, desk research
Suppliers are broken down into two segments: local producers and importers. The local
producers of raw materials are few and have limited presence. Most fabric is imported, largely
from China. Wholesale and retail distributors are well represented in the cluster. The traditional
29
markets and bazaars provide an important channel for meeting domestic and foreign demand of
consumers. The tourism and agriculture clusters have linkages to the textile and apparel cluster.
Government, both at central and local levels, has provided important support to this
cluster. Implementation of a simplified tax regime for small firms is an example. Customs
procedures have also been streamlined directly benefiting this cluster. International organizations
also provide both policy recommendations and financial resources to the cluster. The key cluster-‐
related IFCs are focused mainly export-‐promotion.
2.2 Textile and Apparel Cluster Business Environment Analysis
The textile and apparel cluster is surviving – in fact growing -‐ in a tough competitive
environment (Figure 17). The policies in place since late 1990’s and early 2000’s have helped build
a competitive foundation. The cluster is becoming more specialized despite the shortcomings of
the business environment. The textiles segment currently cannot compete with tough regional
competition from producers in China, Korea, and Turkey, but this may represent an opportunity
for investment and capacity development.
30
Figure 17: Kyrgyzstan’s textile and apparel business environment
Source: Interviews, WB Country Data, WTO Report, and Other Reports
2.2.1 Context for Firm Strategy and Rivalry
The current multi-‐tier tax system is a serious deterrent to the growth and competitiveness
of the cluster participants, mainly for micro, small and medium businesses (Figure 18). Kyrgyzstan
has a “simplified tax regime” procedure for sole proprietors employing less than 30 employees
that simplified the payment of profit and sales tax and decreased the effective tax rate. In addition,
a special license (“patent”), based on lump sum payment, was instituted specifically for the textile
and apparel sector in December 2005 (further amended in 2008 and 2009). This property-‐based
tax further simplified and reduced payments of income, sales and social taxes. The major issue
with the existing tax tiers is that companies quickly grow out of their tax bracket and immediately
face higher payments and a more cumbersome payment procedure.
31
In addition, the new tax regime was not very efficient in encouraging formalization. The
main goal of licensing system was to relieve compliance burdens and incentivize informal entities
to legalize, however not as many formalized as had been hoped. The issue is that when smaller
businesses formalize and begin to operate under the general tax regime, they face not only the
burden of tax payment but also have to face regulators. Visits from tax inspectors can lead to
payoffs thus adding more cost to doing business. The mandatory social contributions (27%),
shared by both workers and employers, are an additional barrier to formalization.
Figure 18: Tax regime is a serious impediment to growth of cluster
Sources: Legprom; Soyuztextile; Social Fund of Kyrgyzstan website; press search http://www.kyrgyzembassy.com.pk/ru/taxesru.htm
32
The high costs of complying with administrative procedures and regulations drives
informality. The number of public inspections by fire departments, sanitations, labor, and many
other agencies create a headache at best, and encourage corrupt activities at worst. This adds to
uncertainty for workers, suppliers, and consumers and affects the total factor productivity.
2.2.2 Factor Conditions
Access to more affordable financing is one of the biggest challenges faced by the cluster
participants (Figure 19). This is mainly due to: a) relatively underdeveloped financial infrastructure
and an ineffective credit registry system; b) financial intermediation services are as low as 13% of
total GDP; c) poor collateral recovery mechanisms; and d) overall business environment risks
stemming from macroeconomic policies and political uncertainty. Interest rates have risen in past
few years as high as 20-‐30%. This makes it prohibitively expensive for the small and medium-‐sized
cluster participants to borrow. To satisfy their capital needs, small firms work with microfinance
institutions at higher than commercial bank rates, but with less paperwork and collateral security
required. Middle-‐size businesses however are caught in being too big to qualify for microfinance
and too small to qualify for commercial bank loans. Informality of businesses further exacerbates
this situation.
33
Figure 19: Cluster Players Face Exorbitantly High Cost of Financing
Source: WB, Interview with microfinance organization
Another serious problem is lack of enough well-‐trained workers. There are several reasons
for this. One is inadequately equipped schools and institutions with properly tailored curriculum
that meets business needs. The training programs are often excessively long, do not utilize
modern equipment, and fail to train for a short production cycle. Currently, only two centers
(Shveya Profi and StylOn) provide tailored training programs. These are not enough to satisfy the
growing demand for trained workers. Additional training in business management, supply chain
management, marketing, and accounting is needed. Two main IFCs, The Union of Textile
(Souyztextile) and the Association of Light Industry (Legprom), are trying to fill this gap but not
enough has been accomplished. Most businesses end up using on-‐the-‐job training for 2-‐3 months.
34
However, after employees are trained they can decide to leave the country for more lucrative
work; higher paying textile and apparel jobs outside Kyrgyzstan can be quite attractive to skilled
workers. When employees leave, firms incur the full training cost but not get the downstream
productivity gains.
2.2.3 Demand Conditions
The local demand for this cluster is approximately 5-‐7% of the total output. The cluster has
been able to use its local advantages of multi-‐ethnic and multi-‐lingual customers to test products
before shipping to Russia (90%) and Kazakhstan (3-‐5%), the two largest export markets. The
consumers in these markets have high standards and expectations. Hence great efforts of the
cluster firms, IFCs, and the government so far have been geared toward promoting the “Made in
KG” brand in these markets. To better develop demand within the country, increasingly more
textile and apparel industry shows have been organized to entice local consumers with the latest
clothing and apparel designs. In addition to consumers, such events attract local suppliers,
producers and IFCs creating opportunities for cluster linkages to develop. Bi-‐annual fashion shows
also play a significant role in driving innovation and competition.
2.2.4 Related and Supporting Industries
The redevelopment of the textile and apparel cluster after the collapse of Soviet Union
occurred in a nearly “no policy” environment. Since the 1990s, the government has taken a more
supportive and active role. However, the Ministry of Economic Development and Antitrust Policy
is charged with developing policy for all manufacturing in the country and lacks the resources and
political clout to champion all proposed reforms. The private sector IFCs have been successful in
providing some targeted support, mostly in education, marketing and promotion. The Association
35
of Light Industry, established in 2005, enjoys a membership of nearly 600, mostly apparel
businesses. Every year since 2006 it has conducted a trade show: “Fashion Industry: Products and
Equipment” attracting local and foreign buyers. Its activities are export-‐oriented; it has nearly two-‐
dozen representative offices in Russia and Kazakhstan aimed at promoting the products of its
membership. The Union of Textile brings together 32 entities and focuses more on developing the
local conditions. The international donor institutions are important stalwarts behind the
development of textile and apparel. Most of their efforts are geared towards export promotion.
36
Recommendations
The overarching goal of this section is to suggest incremental changes that can help
Kyrgyzstan build long-‐term and sustainable productivity growth. A sound macroeconomic
foundation and improved business environment conditions must be established to accomplish this.
Because there are so many challenges that must be met sequencing actions is a practical necessity.
The economy is still in an early stage of transition and the recommendations that follow
reflect this (Figure 20). Fundamentals such as control of corruption, improvements in physical
infrastructure, updated education and training, expanded access to capital, and the reduction of
unnecessary regulatory burdens and simplification of tax system are the first steps toward greater
long term prosperity. These may seem overwhelming when listed this way, but a long term plan
and consistent commitment to implementation are the keys to success.
Although the textile and apparel cluster has some weaknesses it provides an enormous
opportunity to be a key driver of economic growth and employment. One strategic action that
could quickly enhance the apparel and clothing cluster would be to recruit an international
apparel manufacturer into the Bishkek cluster. This would have multiple benefits: such a firm
could bring technology and management know-‐how into the cluster, they would likely bring
consistency and quality standards up, and they would support local suppliers with purchases and
service needs. Such a firm might be a catalyst to consolidation activity within the cluster and add
credibility to the “Made in Kyrgyzstan” brand. Added employment would create immediate term
political support for leaders trying to address unemployment concerns, while at the same time
help the cluster build strong long term competitiveness and sustainable profitability that can
37
survive the day when tariff advantages diminish or disappear. The central government,
international donors, and all cluster participants should work together to determine what steps
can be taken immediately to make such an investment more attractive to a potential investor firm.
However, firm-‐specific incentives should be resisted – much better to take steps to improve the
overall investment environment. Streamlining regulatory burdens and customs procedures are
examples of two such measures that would not require great expense.
The current trade regime is predicated on favorable tariff differences. Kyrgyzstan, as a
WTO member, imports from China at a low tariff rate, and can re-‐export to other CIS countries
profitably because of the favorable terms with China. This advantage is artificial and reliance on it
is not a good long-‐term strategy for the cluster. The government should aim to modify tariffs over
time, growing exports through productivity improvements and expansion into new markets. The
cluster needs to become more efficient and innovate to build sustainable competitive advantages.
Figure 20: Challenges and Recommendations
Challenge Existing Policies Level Recommendations Priority • Corruption deters foreign investment
• Crime, theft and disorder are business constraints
• Joined ADB OECD 2001 Anti-‐corruption Initiative; UN Convention (2005)
• Anti-‐corruption unit within National Security Committee
Gov • Continued commitment for new Anti-‐corruption Unit
• Fully implement existing policy
• Criminalize any form of corruption
• Increase transparency mechanism
1 1 1 2
• Lack of macro economic stability
• Managed floating of exchange rate
Gov • Continue prudent fiscal policy
• Reduce dependency on oil imports
1 3
Macro Level
38
• Excessive focus on industry as opposed to cluster productivity
• Current strategy if focused on broad national textile/apparel industry
• All key stakeholders, except some players (upstream and downstream) and informal businesses, in the industry are at the table
All • Create cluster based strategy for Bishkek and Osh
• Involve missing critical cluster stakeholders to address the cluster related challenges (e.g. exporters to tackle seasonality of order and lack of standards)
• Intensify cross-‐institutional alignment
1 2 2
• Seasonality of orders
• Poor marketing and under-‐investment in coordinated quality standards
• Obsolete technology and low automation reduce productivity
• IFCs conduct limited number of seminars on management best practices including performance management systems and basic marketing
• Zero-‐VAT for equipment introduced recently
All • Recruit international manufacturer to invest in cluster to bring state of the art technology and production practices
• Create a leasing facility for equipment
• To address the seasonality problem create long –term contracts with major distributors in specific markets
• Improve the VAT exemption for imports of new equipment
2 2 2 2
• Higher regulatory burden for small entities limits company growth and formalization
• Multi-‐tier tax system in place with increasing tax burden for small firms under general tax regime
• Licensing introduced to facilitate formalization
• Audits temporarily banned
• Risk-‐based audit system in pilot
Gov Gov Cl Gov
• Introduce incentives to formalization (eg. tax credits for capital investment and training for firms that transitioned to a higher tier)
• Simplify business reporting and foster self-‐declaration process
• Communicate benefits of formalization (e.g. access to trainings and industry marketing
2 1 1
Micro level: Level of Custer
Development
Micro level: Sophistication of
Company Operations and Strategy
Micro level: Context for firm
strategy and rivalry
39
mode in Bishkek efforts abroad) • Introduce risk-‐based audit system for all forms of government control
2
• Presence of foreign capital in cluster is limited
• International organizations supporting trade missions and linkages with potential investors
• Reform of judiciary
All Gov
• Further strengthen the judiciary to guarantee security and safety of capital and property
• Strengthen the rule of law to grandfather old agreements and stabilize regulations
1 2
• Kyrgyzstan has to balance joining Customs Union with Russia (to secure export channel) and WTO membership (to secure lower cost of import of fabric and other supplies)
• The government of Kyrgyzstan is legally reviewing, timing of accession remains uncertain
Gov • Delay process of joining into CU until Russia joins WTO (projected: fall 2012)-‐ then reassess cost and benefits
• Create special trade regime with the customs union that would operate under the rules of the current BKR Common Economic Space (CES) without seeking full membership
1 2
• Heavy concentration of exports to Russia in hands of one firm
• IFCs trying to encourage direct linkages with buyers in main trade markets
Cl • Stimulate greater competition among logistical agents
2
• Access to financing is limited due to prohibitively high interest rates collateral
• Credit registry by private banks –does not coverall entire system
• Microfinance companies fund small firms
All Gov
• Establish a specialized fund that provides seed capital and attracts private finance (private, gov’t, donor)
• Reform laws to make collateral recovery easier
3 2
• Lack of tailored training programs hampers business productivity
• Two centers provide limited tailored programs
• Nationwide vocation school
All • Upgrade the curriculum of universities and vocational schools to meet short term demand in training
2 Micro level: Factor
conditions
Micro level: Context for firm
strategy and rivalry (continued)
40
reform by donors programs • Current physical infrastructure is inefficient, unreliable
• Two hydro-‐power stations built along Naryn
• Railway connection projects
Gov • Upgrade and expand electricity generation and transmission lines
2
• Lack of quality standards and consistency in the cluster
• Technical regulation reforms are ongoing but enforcement remains weak
Cl • Develop quality guidelines and act as quality assurance agents
• Adopt the standards of destination markets
1 2
• Bazaar trade is vulnerable to excessive regulation and quality of physical infrastructure
• Bazaars are moderately regulated
• Infrastructure development projects are planned but need financing
All • Balance regulatory and tax burden on bazaars, while maintaining regulations for safety and consumer protection
• Invest in infrastructure services such as road, trade infrastructure, and streamlined customs procedures
3 3
Cl-‐cluster; Gov-‐Government; All-‐ All stakeholders including IFCs.
Micro level:
Dem
and
conditions
Micro level: Related
and Supporting
Industries
Factor
conditions
(cont-‐d)
41
Bibliography
1. Reports and publications 1.1. Union of Textile (Soyuz Textile) reports and presentations 1.2. International Trade Center (ITC) Russian Market Survey. Q1 2010 1.3. SIAR report on the situation and perspective of apparel industry in Kyrgyz Republic.
Prepared for USAID. September 2011. 1.4. Economic effect of participation of Kyrgyz Republic in World Trade Organization. Textile
and apparel. Preliminary results. SIAR. 1.5. IREX Research Brief on Kyrgyz apparel industry by Gary Roseman. June 2011 1.6. iCap value added chain analysis for women’s knitwear. November 2008 1.7. Broader strategy for the textile and clothing industry in Kyrgyzstan 2009 to 2011.
Strength of the Value Chain. Promotion of sustainable economic development program (GTZ). November 2009
1.8. Industry profile for textile and apparel industry of Kyrgyzstan. International Trade Center (ITC). Trade promotion program in Kyrgyzstan. December 2009
1.9. Nicholas Bloom, John Van Reenen. Why Do Management Practices Differ across Firms and Countries? http://www.stanford.edu/~nbloom/JEP.pdf
1.10. The Ministry of Economy of Kyrgyzstan -‐ http://mineconom.kg/ 1.11. Bazaars and Trade Integration in CAREC Countries. Report prepared by the World Bank.
May 13, 2009 1.12. Kyrgyzstan: Recent Developments and U.S. Interests. Jim Nichol, Specialist in Russian and
Eurasian Affairs. Congressional Research Service. January 19, 2012 1.13. Customs Union between Belarus, Kazakhstan and Russia. Potential Impact on Kyrgyzstan
and Tajikistan by Bartlomiej Kaminski and Yulia Mironova under leadership of Ekaterine Vashakmadz. ECA, World Bank. Final Draft, July 22, 2011.
1.14. Country Report – Kyrgyz Republic. Economist Intelligence Unit. November 2011. 1.15. Transition Report 2010: Recovery and Reform. European Bank for Reconstruction and
Development. Kyrgyz Republic, March 2011. 1.16. IMF Country Report No. 11/354. International Monetary Fund December 2011. 1.17. Research Country: Kyrgyzstan. Junisbai, Azamat. Pitzer College, Scholar Research Brief:
Perceptions of Economic Inequality in Central Asia. November 14, 2011 1.18. “Remittances from Russia Vital To Kyrgyz Stability” by Farangis Najibullah. Radio Free
Europe, Sunday, March 25, 2012. 1.19. Economic and Social Commission for Asia and the Pacific. Trader’s Manual for Landlocked
Countries, Kyrgyzstan. United Nations. 2007. 1.20. “Economic Consequences of the Customs Union for the Kyrgyz Republic”. Prepared for
the Ministry of Economic Regulation by Allen M. Shinn, Chief of Party, USAID Regional Trade Liberalization and Customs Project, Askar Beshimov, Project Manager, Fund “Project of the Future”, and Azamat, Economist. Final Report April 19, 2010
1.21. Doing Business in a More Transparent World. Economy Profile: Kyrgyz Republic. World Bank 2012.
1.22. World Bank Group – Enterprise Surveys, Country Note Series. Running a Business in the Kyrgyz Republic. Country Report N. 10 2011
42
1.23. Kyrgyz Republic Country Profile 2009. World Bank/International Finance Corporation, World Bank Group. Enterprise Surveys.
1.24. Employment Services and Active Labor Market Program in Eastern European and Central Asia by Arvo Kuddo. The World Bank – Social Protection & Labor, October 2009
1.25. Kyrgyz Republic – Running a Business in the Kyrgyz Republic. Country Note No. 10. World Bank Group. Enterprise Surveys Country Note Series.
1.26. World Justice Project. Rule of Law Index 2011. Compiled by David Agrast, Juan Carlos Botero, and Alejandro Ponce
2. International organizations websites
2.1. Doing Business Project (World Bank) – http://www.doingbusiness.org/ 2.2. IMF -‐ www.imf.org/external/country/index.htm 2.3. International Financial Statistics (IMF) -‐ www.imf.org/external/country/index.htm 2.4. UN Data: A World of Information – www.data.un.org 2.5. EIU Country Data -‐ www.library.hbs.edu/go/EIUcountrydata.html 2.6. EIU Country Reports -‐ www.library.hbs.edu/go/EIUcountryreports.html 2.7. CIA World Factbook -‐ www.cia.gov/library/publications/the-‐world-‐factbook/ 2.8. UNDP Human Development Indicators -‐ hdr.undp.org/ 2.9. UNCTAD/WTO ITC -‐ www.intracen.org/menus/countries.htm 2.10. UN statistics -‐ www.oecd.org/department/0,2688,en_2649_34409_1_1_1_1_1,00.html 2.11. UNCTAD World Investment Report 2.12. World Bank economic indicators database -‐ http://data.worldbank.org 2.13. US Department of State – www. state.gov/r/pa/ei/bgn/5755.htm
3. Team Interviews 3.1. Government
3.1.1. Deputy Prime Minister of the Kyrgyz Republic 3.1.2. Advisor to the President of the Kyrgyz Republic 3.1.3. Advisor to Prime Minister of the Kyrgyz Republic 3.1.4. Head of Tax Chamber of Kyrgyzstan 3.1.5. Deputy Minister of Economic Development of the Kyrgyz Republic
3.2. Local experts 3.2.1. Head of industry association “Legprom” 3.2.2. Head of industry association “Soyuztextil” 3.2.3. Head of Textile-‐ Art Department, Kyrgyz Technical University 3.2.4. GIZ Coordinator of Textile and Apparel Project 3.2.5. Head of Microfinance Company “Bai -‐Tushum” 3.2.6. Representative of US Embassy in Bishkek
3.3. Local firms 3.3.1. BIEK Cargo President
3.4. Other 3.4.1. HKS Professor Martha Chen, expert on informal economy 3.4.2. Assistant Professor, HKS-‐ Juan Pablo Chauvin 3.4.3. Senior Investment Policy Officer, IFC-‐ Sebastian James, PhD