Unido Proposal for Attracting FDI

Times of Central Asia , Kyrgyzstan
April 29 2004

Unido Proposal for Attracting Fdi

BISHKEK (TCA). On April 28, an investment round table organized by
UNIDO in cooperation with the UNDP and the government of Kyrgyzstan,
with the participation of Deputy Prime Minister Djoomart Otorbayev
and Minister for Economic Development, Industry and Trade Amangeldy
Muraliyev, various Ambassadors and representatives of the private
business sector, took place in Bishkek.

The Comprehensive Investment Promotion Program undertaken by UNIDO
aims to develop a new strategy capable of attracting much needed
Foreign Direct Investment to Kyrgyzstan. Although the statistics on
foreign investment attraction in 2003 show a remarkable increase, the
figure is still far below the required level and Kyrgyzstan needs to
develop a proper strategy with a suitable business approach.

According to statistics for 2002, global Foreign Direct Investment
amounted to US $651 billion and of this only $4 billion was directed
to Central Asia, or only 0.6 % of the world total. In 2002, $2.5
billion in FDI went to Kazakhstan, about 64% of the total amount
directed at Central Asia, 26% went to Azerbaijan and the remainder
was split between Armenia, Georgia and Turkmenistan, while Tajikistan
and Kyrgyzstan received very little.

It is clear that the main attraction for FDI in Central Asia is oil
and gas and other natural resources, and a country with low natural
resources like Kyrgyzstan will find it difficult to compete.
According to Mr. Daly, UNIDO expert for Kyrgyzstan, attraction of
foreign investment is becoming more competitive every day and a
business approach capable of developing a suitable results-oriented
marketing policy is needed.

There is a need to review the institutional system, streamlining the
process of investment approval and promotion. At present there are
about 15 different institutions in the country that have some
responsibility for the attraction of foreign investment, and only a
single body responsible for the overall investment policy of the
country can provide the necessary coordination. Although some
institutions may continue to contribute to the overall process, a
single Investment Promotion Agency with an independent board
consisting of public officials, private sector and multilateral
representatives is much needed, and would be able to combine the
expertise of the private and the public sectors.

Of course this will require a review of the functions of various
ministries but overall it will bring considerable benefit to the
country and to the development of a direct dialogue with potential
foreign investors. The proposed agency should be properly staffed,
and have the budget to pay salaries that are competitive with the
private market, and should be funded by several donors in addition to
the Kyrgyz government since it is expected that the initial budget
for a preliminary period of three years will not be less than $1.5

Given the various priority areas, such as reform of the tax system,
reform of bureaucratic procedures and the legal system, if the
proposed project is approved Kyrgyzstan can expect an improved
investment climate, with an effective deregulation of the economy and
of course more foreign investment.