OREANDA-NEWS. April 12, 2011. 2010 was a difficult year for the Kyrgyz Republic on the whole, and the business community in particular. Political instability, the tightening of trade barriers, investment outflows and falling incomes have led to a situation that many businesses have suffered great losses and have begun to lose confidence in the future. Now, after the formation of legitimate authorities, the business community of the country expects from the new with Government efficient and prompt reforms aimed at improving the economic situation and business climate in the country, reported the press-centre of IBC.

According to the IBC investment survey, the main criteria affecting the decision of investors are as followed:

1. Safety and security of property;

2. Predictability of laws and regulations;

3. Predictability and consistency in judgments;

4. The fight against bureaucracy;

5. Corrupt officials;

6. Availability of qualified personnel;

7. Tax rates

IBC offers a range of activities/ reforms at every point (Annex 1) to help improve the country's investment attractiveness and ultimately lead to the welfare of the Kyrgyzstan’s people. These reforms will certainly require a lot of time. Therefore, today it is important to take a number of priority measures to address the most pressing problems. These measures will enable the Government to obtain the trust of the business community to carry out further economic reforms, improve the investment climate and promote new investment.  The measures will also be a signal to businesses that the changes taken by the Government,  were really aimed at building a truly free economy and improving the social and economic status of Kyrgyzstan.

It is vital to take urgent measures to improve the business environment in order to gain the confidence of businesses, and  allow businesses to make sure that the Government has chosen the right course of economic development.

In this regard, the business community recommends:

On nationalized objects:

Since the grounds of nationalization of 47 property objects were the decrees of the Provisional Government issued without sufficient study of property rights, it would be fair to give the former owners the opportunity to review the decisions of the Provisional Government through open trials.

To accelerate the privatization of the nationalized facilities in order the inactive sites have started to work. It will create jobs and generate government’s revenue as taxes and other deductions. This is more concerned to tourist facilities that are at risk of not having time to prepare for the tourist season of 2011.

To implement the privatization of these objects through auctions and open bidding.

To conduct  these activities transparently with the participation of representatives of business community and civil society, and to give them media coverage.

To accelerate the privatization of nationalized facilities in order the inactive sites have started to work.

On the state budget:

Despite the problems connected with the budget deficit and validity of the profitable part of the draft budget, it is necessary to urgently approve it and start its execution.

To adopt measures to increase the tax base and tax collection, but not at the expense of tax rates increase. In 2011, it is planned to increase the budget revenues at 30 percent while the GDP growth is expected at 5 or 6 percent. Therefore, the business community is concerned that the major share of revenues will be obtained due to the growth of tax revenues (25 percent).

To ensure transparency of the budget. All public bodies should publish data on the budget performance.

On the mining industry:

To resume the activity of the Ministry of Natural Resources on issuing new licenses and renewing the existing ones.

To cancel the amendments to the Law "On Subsoil", adopted by Jogorku Kenesh in first reading. of The amendments will:

- Increase the bureaucratic procedures;

- Complicate the application process, obtaining licenses and approval of working programs submitted by investors;

- Complicate the work of the Commission for consideration and issuance (renewal) of licenses;
- Discredit the Ministry of Natural Resources as a separate executive body authorized by law to issue (renew) licenses.

To assist existing and future investors in their contacts with local population.
 
On taxation: 
The main purpose of the government is to create new jobs for population. To this end, the state needs to attract both foreign and domestic investment. To attract investors, the government should offer firms that build larger businesses in the KR some kind of “tax holiday”.  The tax holiday would exempt new companies from paying Profit based tax, from the start of operation, for a defined period of “time”.  The “time” could be based on the number of jobs established for a defined period of time; and the size of the investment (e.g. USD 500,000 provides a one year holiday, USD 10million is a 2 one year holiday, USD 25million is a three year holiday, etc).  The company would still be subject to various personal taxes and social fund taxes.

In the property tax, tax holidays should be set in case of a revolutions and similar situations.

The tax authorities should be returned under the jurisdiction of the Law "On procedure of inspection..."

In the compulsory social insurance, we propose to revise the article. 17 of the Law “On personalized registration of citizens..."   and replace the five percent sanction in favor of the Workers Recovery Fund by a more reasonable and valid sanction.

On the corruption of officials and the bureaucracy: 
 
The more the system of governance is bureaucratized, the higher the level of corruption is in society. A huge number of laws, regulations and rules complicate and delay the establishment and approval of business structures. The speeding up process ends with bribery. All the procedures should be simplified and a formal bid for an urgent consideration of applications should be established, and the proceeds should go to the state budget.

To establish (tighten) the criminal liability of public officials for corruption.

On the legislation, regulations and continuity of government decisions:

To declare a moratorium on changes in legislation, which could worsen the working conditions of entrepreneurs over the next five years if it does not threaten national security.

To ensure succession of Government's commitments to investors. The Government assumes all the powers and obligations of its predecessors; to respect and follow the terms of existing agreements and arrangements.

On the judicial reforms:
Wide media coverage of court cases related to the consideration of disputes on private property rights. To provide media access to judicial materials and archives related to the cases on the consideration of disputes on private property rights.

To transfer part of the legal disputes into arbitration courts through the provision of compulsory enforcement of arbitral decisions.

 To change the civil procedure legislation by expanding the rights of the parties to choose the judges when submitting a claim.