One of the main directions of the significant economic reforms in the Kyrgyz Republic is considered to be the creation of the open market economy. As a result of the successful implementation of privatisation of state owned enterprises, active promotion of foreign direct investment, development of small and medium size businesses and the role of the private sector in GNP, the country has changed significantly. The aim of the government's activities is to form a real basis for the stable development of a social-oriented market economy.

At the very beginning, the Government of the Kyrgyz Republic identified priorities, stages, forms and methods for privatisation. For example, during the first stages of privatisation between 1992 and 1993, it was planned to privatise the entities of the retail trade and food industry. At the present time, the level of privatisation in these sectors is 96.4 per cent. The main aim of the privatisation policy of the second period, 1994-1995, was to reorganise medium size companies operating in the industrial, transport and construction sectors of the economy. This reorganisation included reorienting production for new markets and forming new business relationships with suppliers of raw materials. For these purposes, the State Property Fund of the Kyrgyz Republic used the method competitive selling of state owned shares of the companies. To make it more efficient, the above mentioned selling was based on the preparation of business plans and competitive bidding. At the present time, the level of privatised companies is as follows: industry - 79.2 per cent; construction - 56.3 per cent; transport - 47.1 per cent. The level of privatisation averaged across these sectors is 60.7 per cent.

Nevertheless, the process of privatisation of state property in the Kyrgyz Republic has not achieved adequate competitive conditions to increase the efficiency of the local economy. For the purpose of resolving such strategic problems, the Government decided to demonopolise the largest companies in such sectors of the economy as telecommunications, printing, aviation, energy and recreation, through privatisation. The main idea of this demonopolisation is segmentation of the strategically important national companies in order to attract foreign direct investors who will bring to these new segmented companies their skills in international management, marketing, new technologies and financial expertise.

This type of privatisation has become the main reason for changing the privatisation strategy. The main principles of the new policy are as follows:

• decreasing the speed of privatisation due to the complexity of the companies;
• using a case by case method of privatisation;
• attracting strategically important foreign and local investors.

Case by case privatisation includes financial diagnostics for companies and corporatisation of companies into state owned joint-stock companies, and/or the introduction of corporate governance. After implementing all the necessary procedures, the government shares in these companies may be sold through:

1. commercial tender (level of price plays the key role);
2. investment tender (future investment conditions are the main criteria);
3. open auction.

In August 1996, the State Property Fund formed a list of companies that will be privatised using case by case privatisation methods and are deemed to be attractive to foreign investors. To co-ordinate all of the steps effectively in the process of case by case privatisation, the State Property Fund created the Case By Case Privatisation department. The first tender for these companies is planned to be conducted in October 1997. In order to make the privatisation process of these companies more efficient, the State Property Fund plans to attract international consultancies that will provide all the necessary assistance in informing the world about investment opportunities in the Kyrgyz Republic.

A list of companies for case by case privatisation

For inquiries please contact:

A Chukin,
Deputy Chairman
State Property Fund,
57 Erkindik Ave.,
Bishkek,
720040 Kyrgyz Republic
Tel: 7-3312-228346
Fax: 7-3312-620136
Email: atc@spf.bishkek.su