Domestic economic investment declined precipitously in the early
1990s, with government investment falling 55 percent in 1994 alone.
In the first quarter of 1995, total public and private investment
was reported to be 391 million som, of which about 75 percent
went to the Kumtor joint-venture gold field. To stimulate foreign
investment, the Kyrgyz government has adopted a series of measures
to improve the republic's deteriorating economic environment.
In the late 1980s, the republic already had begun creating a legal
infrastructure to support private investment. The Basic Foreign
Investment Law, adopted in June 1991, has been amended several
times since that time. In general, this law allows foreign investors
full use of their profits, including unlimited export of profits
in the form of foreign currency or merchandise.
Foreign firms also enjoy considerable tax advantages, which extend
to Kyrgyzstani partners in joint ventures. Investors are granted
relief from import duties on materials needed to establish a business,
and they continue receiving tax relief for up to five years, depending
on their type of business. After that time, several other types
of tax relief are available, including various forms of reinvestment
in Kyrgyzstan's economy.
As of April 1995, some 328 joint ventures were registered, but
only 128 were actually in operation, the vast majority in trade.
Only thirty-eight joint ventures were active in manufacturing
or mining. At that time, sixty-eight foreign firms (outside the
CIS) were registered, the majority of which were Chinese, Afghan,
and Turkish. Some fifty-two Russian and thirty-six United States
firms were present in some capacity. Kyrgyzstan was among the
first of the former Soviet republics to create free economic zones,
on the Chinese model, where taxes would be abated and duties waived.
The government initially created two such zones, in Naryn and
Osh, with another under consideration in Bishkek. The zones became
the object of heated debate, however, and by 1995 only the Naryn
zone had taken form as planned. The only large-scale foreign investment
has been in the gold industry, where the Cameco and the United
States Morrison-Knudson Corporation are participating in joint
Data as of March 1996