Focus on support for small business

With more than half of southern Kyrgyzstan’s population still mired in poverty, the government of the Central Asian country needs to support and facilitate the development of small business in the region in order to tackle poverty and unemployment, activists say. Those issues were discussed at a recent training course jointly organised by the Organisation for Security and Cooperation in Europe (OSCE), the International Labour Organization (ILO) and the Kyrgyz agency for migration and employment in the southern Kyrgyz city of Osh. The 10-day gathering of representatives of local businessmen associations, civic groups and government bodies also looked into training disadvantaged groups to establish and run their own business, with some plans to conduct similar seminars in the rest of the country as part of the initiative. "The purpose of the course was to unite the efforts from the local communities and government in the development of small and medium-sized enterprises [SMEs] as an effective tool of reducing poverty and unemployment," Jerome Bouyjou, head of the local OSCE office in Osh, said. The World Bank says that some 40 percent of Kyrgyzstan’s 5.1 million population live below the national poverty line, with the ratio of poor in the south even higher. Umar Shadiev, deputy section head at the governor’s office in the southern province of Osh, said that with over 60 percent of its population living below that line, southern Kyrgyzstan remained one of the poorest regions in the country. Moreover, the proportion of extremely poor people was more than 25 percent of the population, while the situation with regard to unemployment remained equally problematic. Although statistics indicate that the official unemployment rate is 2.8 percent, Mirzaolim Khalilov, a rights activist from the southern Jalal-Abad city, claimed that the actual figure was 10 times that rate. MAJOR BARRIERS FOR ENTREPRENEURS A lack of start-up capital, high taxes and expensive bank loans are some of the major barriers for many hoping to become entrepreneurs in the former Soviet republic. “In some countries, entrepreneurs who are just starting their business are relieved of any taxes for a certain period of time to allow them to establish themselves. In our case, everything is upside down - taxes are literally killing entrepreneurs,” Aisuluu Meimankanova, an official from the Small and Medium-sized Business Support Centre in Jalal-Abad, said. Large industrial plants and factories in Kyrgyzstan have been badly affected by the collapse of the Soviet Union in 1991. The entire Soviet economy was closely interlinked and most of the industrial facilities in Kyrgyzstan had their major clients in other Soviet republics, primarily in Russia. “Large enterprises where thousands of people used to work went bankrupt and were closed down. Only small and medium-sized business can now provide work and bread for the people. Therefore, new programmes for supporting and promoting these business spheres are needed,” Almaz Arynov, a senior official from the Nookat district of Osh province, said. SIGNIFICANCE OF SMEs IN ECONOMY Although the proportion of SMEs in relation to total economic activity varies across countries, they play a significant role in virtually every economy and represent a large segment of the private sector, according to the World Bank. In low-income countries with an annual Gross National Income (GNI) per capita between US $100 and $500, SMEs account for over 60 percent of GNI and 70 percent of total employment, according to a report published in the World Bank Group’s Development Outreach magazine in March. Kyrgyzstan’s GNI per capita was $400 in 2004. JOINT EFFORTS AND ECONOMIC REFORMS NEEDED A group of participants in the training course in Osh complained that there was no real cooperation between entrepreneurs and the government. Each side is dealing with the challenges on their own, while entrepreneurs are trying to survive and move their business forward, they say. The Congress of Kyrgyzstan’s Business Associations, a civic group representing the country’s businessmen and entrepreneurs, says that strengthening the partnership among business circles, civic society and the government is their top priority. “New knowledge opens new opportunities in business. And the utilisation of these opportunities depends on joint efforts and mutual understanding from these three parties - business, government and civic society,” Emil Umetaliev, president of the successful local travel agency KyrgyzConcept, said in Osh, capital of the province with the same name, earlier this month. The businessmen also mentioned the shortcomings of the previous regime as one of the major reasons for the current problems in starting and sustaining businesses. “They provided a lot of privileges to big businesses close to the former regime, but they did not show real interest in establishing favourable conditions for ordinary businesses, including SMEs,” the business leader claimed. As a result of that government policy, many entrepreneurs had no other choice than to bribe officials. FIGHT AGAINST CORRUPTION NEEDS TO BE PRIORITY Some entrepreneurs say tax reforms are urgently needed, saying that they would contribute to creating a better investment environment so that businesses could thrive and prosper. “We need such an atmosphere so that people do not evade taxes, but are interested in paying them to the government’s treasury rather than bribing officials,” Aibek Alimjanov, a successful entrepreneur from Osh, said. Others agree, saying that corruption, which had been rife under former president Askar Akaev’s regime, continued unabated, claiming that in some instances it even increased. Akaev's successor, President Kurmanbek Bakiev, has put the fight against corruption as one of the key major tasks on his agenda, pledging that it would be curbed in the former Soviet republic. But some businessmen note they haven't seen tangible results of the announced battle against corruption. “The fight against corruption announced by the new authorities in reality is simply a ‘cosmetic’ campaign,” a group of businessmen who did not wish to be identified, claimed. “Before, we at least knew whom to, when and how much to give in bribes for certain ‘services’. Now the rates have increased. They demand bribes whenever they want and amounts are whatever they want,” they maintained. Some unconfirmed reports suggest that the most problematic area is the customs service, where bribes are said to have grown exponentially.