Document 1632741

 Textile and Apparel Cluster in Kyrgyzstan Laura Birkman Maria Kaloshkina Maliha Khan Umar Shavurov Sarah Smallhouse Harvard Kennedy School Harvard Business School May 2012 1 Table of Contents Executive summary .................................................................................................................................................. 3 1 Competitiveness of Kyrgyzstan ................................................................................................................. 4 1.1 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 2 Country Overview ................................................................................................................................... 4 National Competitiveness Analysis .............................................................................................. 12 1.2.1 Endowments ................................................................................................................................. 12 1.2.2 Macroeconomic Conditions .................................................................................................... 13 1.2.3 Microeconomic Conditions ..................................................................................................... 14 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 2 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. 3 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 4 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 5 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 6 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 7 Figure 1: Real GDP Growth and Inflation Rate in Kyrgyzstan Real GDP growth, % 10
5
0
-­‐5
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
CPI, %
30
20
10
0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
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 8 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 Remittances, % of GDP
30
20
10
0
20012002200320042005200620072008200920102011
Foreign trade balance, % of GDP
20
0
-­‐20
20012002200320042005200620072008200920102011
-­‐40
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 9 Figure 3: Productivity and competitiveness scores of Kyrgyzstan in comparison to other economies Labor productivity*, current USD
30,000 20,000 29,016 GDP per employee
GDP per capita
14,491 GDP per capita @ PPP
10,000 2,122 2,870 3,156 3,954 Tajikistan Kyrgyzstan Vietnam
Pakistan
India
Moldova
1,845 2,064 17,551 6,632 -­‐
% of U.S. productivity
1.9%
Competitiveness scores
6
3.8
4
2.1%
3.5
2.2%
4.2
3.0%
3.6
3.2%
4.1%
4.3
3.9
India
Moldova
China
6.8%
5.3
Kazakhstan
Russia
Turkey
14.9%
18.1%
29.9%
4.2
4.2
4.3
Kazakhstan
Russia
Turkey
2
0
Tajikistan Kyrgyzstan Vietnam
Pakistan
China
*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 10 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 Labor productivity, USD per person
2,500 Real wage index, percent
200
Nominal GDP per employee
Real GDP per employee (2000 USD)
Average real wage index (LCU, 2005=100)
2,000 150
1,500 100
1,000 50
500 -­‐
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Sources: World Bank, EIU; www.apn.kz/publications/article5878.htm Ministry of Economy; press 0
search 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 11 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. 12 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 13 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 14 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 15 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 Costs of formalization
Benefits of formalization
• 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
• 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
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. 16 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 Global Competitiveness Rankings
(Lower rank better, value in parenthesis indicates change between 2005 – 2010)
200
99
100
71
107
89
28
79
0
Roads (+1)
Railroads (+1) Air transport (-­‐19) Electricity (-­‐7)
Source: ISC Country Competitiveness Model Transport Network (+35)
Phone lines (-­‐2)
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. 17 Figure 8: Changes in regulatory standards Regulatory Standard Index, rank
2005
2006
2007
2008
2009
2010
40
Kyrgyzstan
Tajikistan
50
Kazakhstan
60
China
70
Russia
80
90
100
110
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 18 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. 19 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 Market capitalization, percent of GDP, 2010
1.71
Small and medium enterprises,
percent contribution to GDP, 2010
Capitalization
31
54
15
SMEs
Farmers
Firms >200 ppl
State-­‐owned enterprises, percent contribution to GDP, 2010
10
55
35
SOE in gold
Other SOEs
Private sector
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 20 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 21 Figure 11: Kyrgyz apparel cluster production and employment (official data) Million US$ Production Export Employment Thousand people 140 250 120 200 100 80 150 60 100 40 50 20 -­‐ -­‐ 2003 2004 2005 2006 2007 2008 2009 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 Number of employees, thousand people 150 x Average monthly salary, US$ 11121 x Average # of months worked per year (due to 9 seasonality) = Cost of labor, million US$ 150 ÷ Percent of labor costs in revenue 50% = Estimated turnover, million US$ 300 x Percent of production exported 95% Aggressive 300 200 11 Average 225 155 10 660 50% 1,320 95% 350 50% 700 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. 22 = 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. 23 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 24 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 25 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 – Not well developed in the country
Raw materials
% of value added in the chain*
Profitability, %*
Thread & fabric
Apparel Distribution
9-­‐15%
18-­‐28%
40-­‐50%
13-­‐20% (and higher if exported)
3-­‐10%
23%
25%
10% (and higher if exported)
* 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 26 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 Total export value in $USD bln in 2010
Tajikistan and Uzbekistan – two closest competitors – are primarily focused on upstream textile manufacturing and have weaker apparel segment in structure of export products
Turkey 28 bln
0.1 bln Kyrgyzstan 0.2 bln (officially)
2 bln 207 bln
1 bln 6 bln 33 bln
20 bln
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.
27 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 28 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. 29 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. 30 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 31 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. 32 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. 33 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 34 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. 35 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 36 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. Macro Level Figure 20: Challenges and Recommendations Challenge Existing Policies Level Recommendations Priority • Corruption deters • Joined ADB OECD Gov • Continued commitment 1 foreign 2001 Anti-­‐
for new Anti-­‐corruption investment corruption Unit • Crime, theft and Initiative; UN • Fully implement existing 1 disorder are Convention (2005) policy business • Anti-­‐corruption • Criminalize any form of 1 constraints unit within corruption National Security • Increase transparency 2 Committee mechanism • Lack of macro • Managed floating Gov • Continue prudent fiscal 1 economic stability of exchange rate policy • Reduce dependency on 3 oil imports 37 Micro level: Level of Custer Development Micro level: Sophistication of Company Operations and Strategy Micro level: Context for firm strategy and rivalry • Excessive focus on industry as opposed to cluster productivity • Seasonality of orders • Poor marketing and under-­‐
investment in coordinated quality standards • Obsolete technology and low automation reduce productivity • Current strategy if All 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 • IFCs conduct All limited number of seminars on management best practices including performance management systems and basic marketing • Zero-­‐VAT for equipment introduced recently • Higher regulatory • Multi-­‐tier tax burden for small system in place entities limits with increasing tax company growth burden for small and formalization firms under general tax regime • Licensing introduced to facilitate formalization • Audits temporarily banned • Risk-­‐based audit system in pilot Gov Gov Cl Gov • 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 • 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 • 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 2 2 2 2 1 1 38 Micro level: Factor conditions Micro level: Context for firm strategy and rivalry (continued) mode in Bishkek • Presence of foreign capital in cluster is limited • International organizations supporting trade missions and linkages with potential investors • Reform of judiciary • Kyrgyzstan has to • The government balance joining of Kyrgyzstan is Customs Union legally reviewing, with Russia (to timing of secure export accession remains channel) and uncertain WTO membership (to secure lower cost of import of fabric and other supplies) All Gov • Heavy • IFCs trying to concentration of encourage direct exports to Russia linkages with in hands of one buyers in main firm trade markets • Access to • Credit registry by financing is private banks –
limited due to does not coverall prohibitively high entire system interest rates • Microfinance collateral companies fund small firms Cl • Lack of tailored • Two centers training programs provide limited hampers business tailored programs productivity • Nationwide vocation school All Gov All Gov efforts abroad) • Introduce risk-­‐based audit system for all forms of government control • 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 • 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 • Stimulate greater competition among logistical agents 2 • Establish a specialized fund that provides seed capital and attracts private finance (private, gov’t, donor) • Reform laws to make collateral recovery easier • Upgrade the curriculum of universities and vocational schools to meet short term demand in training 3 2 1 2 1 2 2 2 39 Factor conditions (cont-­‐d) reform by donors • Two hydro-­‐power Gov stations built along Naryn • Railway connection projects • Lack of quality • Technical Cl standards and regulation reforms consistency in the are ongoing but cluster enforcement remains weak • Bazaar trade is • Bazaars are All vulnerable to moderately excessive regulated regulation and • Infrastructure quality of physical development infrastructure projects are planned but need financing • Current physical infrastructure is inefficient, unreliable programs • Upgrade and expand electricity generation and transmission lines Micro level: Related and Supporting Industries Micro level: Demand conditions • Develop quality guidelines and act as quality assurance agents • Adopt the standards of destination markets • 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 Cl-­‐cluster; Gov-­‐Government; All-­‐ All stakeholders including IFCs. 2 1 2 3 3 40 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 41 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 42