The Real Sector
Kyrgyzstan is a frontier economy with much undiscovered potential.
Kyrgyz real sector is dominated by mining, with opportunities open for investments of any size. Large scale mining concessions are available through government tenders, and smaller ones are obtainable via auctions or by direct negotiation with the regulating authority. There is a vibrant market for already licensed projects, both in exploration and production phase. Geological expertise is widely available – a legacy of the great exploration effort undertaken by the Soviet Union in Kyrgyzstan.
Agriculture is the investment of choice in Kyrgyzstan for many local and international players. The lack of financing at the ground level present opportunities for capitalists to profit from huge price differences in the product sale chain.
Financial services are a growth industry in Kyrgyzstan. With population on the rise and getting more mobile and entrepreneurial, cross border transfers, micro-credit services, mortgage and commercial lending and other financial products enjoy a steady growth year by year.
Tourism is a promising industry regarded by many as one of the potential drivers of Kyrgyz economy. While Kyrgyzstan is yet to see large scale (100m$+) investments in hotels and infrastructure, smaller investment is flowing into the hospitality industry daily. Hotels and guesthouses are being developed in Bishkek, on the Issyk Kul lake and in more remote places. Innovative travel products are introduced to cater for international tourist interest.
Regional Investment Hub
Besides being home to many exciting investment opportunities in the real sector, Kyrgyzstan is the Central Asian investment hub whose investment outreach by far exceeds the country itself.
Being a WTO member and firmly on route to join the Customs Union and Eurasian Economic Union (with Russia, Belarus and Kazakhstan), Kyrgyzstan is in a unique position to profit from both associations.
Episodes of political turbulence which occurred here during the past 10 years never changed the country’s commitment to maintaining liberal and investor-friendly legislation and openness to international business. Presidents changed, but not the drive to develop a very open and efficient international infrastructure.
Kyrgyzstan has the most liberal and open capital market framework in Central Asia: there are no exchange controls, the tax system is simple and not burdensome, local companies and individuals are free to transact business internationally, with minimum reporting and taxation in Kyrgyzstan.
Local Stock Market
Kyrgyz stock market has very limited liquidity and is mostly of interest to local and regional investors.
However, the country with its progressive and liberal tax and legal framework is an ideal place to organize private and public securities issues aimed at international investors, create securitization vehicles and issue structured instruments.
Kyrgyzstan is a tax efficient and convenient gateway to the financial markets of Russia, Kazakhstan, Ukraine as well as international markets.
KLS Securities is working closely with Kyrgyz legislators to make the country an even more attractive place for international investment business by developing better legislation and industry guidelines.
- 10% profit tax (legal entities), but many zero-rate exemptions
- 10% income tax (individuals), but many zero-rate exemptions
- 12% VAT, but irrelevant for investment transactions
- 2-3% Sales tax, but only on domestic sales for cash
- Up to 10% withholding tax on interest and dividends, subject to tax treaties
- No withholding tax on capital gains
- Tax holidays for leasing firms, zero tax on certain Kyrgyz Stock Exchange trades etc.
- Availability of free zones – taxation from 1% to 2% of gross sales
Securities Market Regulation
- Prudential norms to protect investors are in place
- Foreign clients are free to use Kyrgyz financial market infrastructure with fewer restrictions
- Anti money laundering laws are in line with FATF standards, and the country is making constant efforts to upgrade its legislation ensuring that only clean money flows through its financial institutions
- Listing at the local stock exchange is open for foreign securities; there are very limited requirements for ‘technical’ listings in subprime sections of the exchange
- Capital gains from trading at the local stock exchange are tax exempt (prime section only)