According to the National Statistical Committee, the share of industry in GDP of Kyrgyzstan in 2015 amounted to 16.7 percent. After the accession to EEU, our market even wider opened the door for manufacturers from Russia, Kazakhstan and Belarus. Will the local industry withstand the competition? And how the government should support the domestic producers? 24.kg news agency asked its respondents.
Maria Kapustina, executive director of the Association of clothing manufacturers and tailoring services:
- Domestic producers primarily need lending at low interest rates with a long repayment period, for example, 5-7 years at 7 percent per annum. Kyrgyz-Russian Development Fund issues loans at 12 percent not directly but through banks and, taking into account services of a financial institution, it is more than 12 percent.
Another important factor is state support of the producers'participation in international trade fairs in order the entrepreneurs can promote their goods for export, because participation in them is a very expensive event. I wish that the existing tax rates were not increased, and if there is an opportunity - to reduce some of them. Frequent checks also play a negative role in business development, so we need to reduce their number. We do not see the results of work of the Agency for Attracting of Investments at the Ministry of Economy. We attract investments mainly to those industries that are already relatively developed, for example, to the mining industry. Investors put money mainly in sectors with a quick return. For example, our sphere can not ensure a quick return, so we need a real support of the state to revive the production of silk, textile.
Rasulzhan Katibov, CEO at Kyrgyzmebel:
- One of the major obstacles for the development of the furniture industry is a shadow economy. Under the law, furniture manufacturers should register a LLC, but the majority of private manufacturers are working with a license or do not pay taxes at all. According to our calculations, the annual volume of produced furniture by officially working enterprises is 800 million soms, while the volume of private businesses amounts to about 2.5 billion. A half of imported from China furniture is cleared through customs at the minimum rate.
The law on public procurement stipulates that 20 percent of the purchased products should be produced locally. However, this support is weakened by the only word "may" in this document. Procurement Department at the Ministry of Finance may give preference to domestic producers, and may not give. Several times we submitted to the government a proposal to remove the word. But it has not yet been removed from the text of the document. Recently, the Prime Minister said that government procurement should be canceled, and we support his initiative.
Public procurement can be used for very large purchases only. Kyrgyz-Russian Development Fund does not give the desired effect. For example, it gives credits only for the purchase of equipment and does not give it for the purchase of raw materials. We need a differentiated approach to lending to production enterprises, agricultural producers, trade and so on. For example, a loan at 24 percent is preferable for the traders. Manufacturers can not afford such a high interest rate.
Farkhad Tologonov, chairman of Light Industry Association:
- To protect and develop the domestic light industry, we have to solve two problems. First, to fix clear "game rules" and cancel the sales tax. "Clear game rules" is determining of a fixed, government-guaranteed price for a license for 5 years. In other words, all the sewers that are in the "shadow," will know that for the next five years they will work under the license, and its price is unshakable. This would help to come out of the shadow. Second, many countries- exporters have no sales tax. Our products are mainly exported, and the abolition of this tax would significantly help to develop the domestic light industry.
Daniyar Saifulin, a private entrepreneur:
- Situation with WTO is unclear now. It is necessary to give an explanation on doing business within the two organizations - WTO and the EEU. In general, to support the domestic manufactures it is necessary to retain the existing electricity prices and tax rates as our main advantages. Another important factor - is use of capacity of international organizations. I wonder why the government has not adopted a program of the European Union Open Skies, which provides customs-free passage of our goods to the EU countries. And this, in its turn, would open up tremendous opportunities for investors, because they would have invested huge sums of money in the opening of industrial enterprises in our country to sell their products in Europe. I have read the terms of lending by the Kyrgyz-Russian Development Fund and concluded that it would be very difficult for a small business to meet the requirements of the fund.
Zhyrgalbek Sagynbaev, President of the Kyrgyz Union of Manufacturers and Entrepreneurs:
- Support of domestic manufacturers requires a set of measures, because it is not a single problem, but the whole chain.
First, it is necessary to provide tax incentives for local producers, especially at the initial stage of the organization of production, minimizing inspections of businesses by the fiscal authorities, more widely and quickly inform the entrepreneurs about changes in legislation.
Another important step is the optimization of the domestic producers' access to soft loans, especially to the so-called long-term money, and establishing of close business ties between manufacturers and the business environment through associations, unions of manufacturers and other public associations.
We should abolish the sales tax, to amend Government Procurement Law and return to domestic manufacturers the stipulated in the previous variant.
It is necessary to strengthen the work of the state bodies on regulation of customs and other permitting procedures under the EEU, in order the domestic producers and entrepreneurs to successfully enter the markets of the countries of the Union.
And the last one. On the basis of Public-Private Partnership law , it is necessary to extend involvement of the public and private productive sectors in the implementation of the program "Main directions of industrial cooperation within EEU", approved by the heads of state on September 8, 2015 in Grodno. It should be borne in mind that the effect of economic growth through trade liberalization under the EEU will be short-term, that is quickly exhausted. It is therefore necessary to involve a long-lasting growth factors and in the first place - industrial cooperation.