Kyrgyzstan

Since January 2016, the Kyrgyz Republic benefits from preferential access to the EU market as a beneficiary of the EU's GSP+ which requires the ratification of 27 core international conventions on human and labour rights, environmental protection, and good governance. Kyrgyzstan is a lower-middle income economy with a per-capita income of $1,240 in 2019. Total EU imports from the Kyrgyz Republic amounted to about €819 million in 2019, however, only about €4.5 million where imported using GSP+ preferences as most imports benefit from most favoured nation duties. Although the country faces a number of structural challenges, such as a high dependence on remittances and a large informal sector, GDP growth has been very steady over the recent years with an average between 4-5%.

What is the GSP+?

The GSP+ is a special incentive arrangement for Sustainable Development and Good Governance that supports vulnerable developing countries. Next to fulfilling the eligibility requirements of the Standard GSP, GSP+ countries are required to ratify 27 international conventions on human rights, labour rights, environmental protection and climate change, and good governance. In order to ensure effective implementation of the conventions as well as compliance with reporting obligations, the EU engages in monitoring activities with the GSP+ countries. GSP+ beneficiaries can benefit from complete duty suspensions for products across approximately 66% of all EU tariff lines.

Kyrgyzstan flag

At a glance: GSP+ beneficiaries' preferential imports to the EU

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6.33 million

Population

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Parliamentary Republic

Government

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4.5%

GDP Growth

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1.1%

Inflation

money

$ 8.45 bn

GDP

Facts about the Kyrgyz economy

Landlocked Economy

The Kyrgyz Republic is a landlocked economy, interspersed with mountains which set the basis for the country's high potential for hydropower generation. Kyrgyzstan also has a number of natural resources like gold, rare earth metals, coal, oil, and natural gas.

Export Products

The main export products of the Kyrgyz Republic are gold and other precious-metal ores and medium oils. Important agricultural products for export are dried kidney beans and raw cotton.

Trade Partners

A large part of Kyrgyzstan's trade is accounted for by regional trading partners - China, Russia, and Kazakhstan in particular. The UK is the most important export destination with a share of over 36%, followed by Kazakhstan and Russia.

Economic Structure

Services (54%) contributes the largest share to the Kyrgyz GDP, followed by the industry sector (30%), which is dominated by mineral extraction. Other industries include small machinery, textiles, and food processing.

Usage of GSP+ Preferences

Only about 1% of overall EU imports from the Kyrgyz Republic make use of trade preferences granted under the GSP+. This can be explained, however, by the small fraction of only 2% of all EU imports eligible for GSP preferences.

Trade with the EU

Total trade with the Kyrgyz Republic amounted to € 433 million in 2019. With a share of 5%, the EU only plays a minor role in Kyrgyzstan's total trade.

The Kyrgyz Republic and the EU

Imports from the Kyrgyz Republic by product section

Imports from Kyrgyz Republic over time (in € m)

THE KYRGYZ REPUBLIC AND THE EU’s GSP

Economic Impact

The Kyrgyz economy can be considered vulnerable and is, with a vulnerability score of 0% noticeably below the threshold of 7.4%. In addition, Kyrgyzstan's economy is mostly concentrated on a small bandwidth of products. The country's diversification percentage stood at 84.8% in 2019 with the minimum diversification threshold standing at 75%.

1%

Only a small fraction of the Kyrgyz Republic’s current exports to the EU are eligible for tariff reductions under the GSP. With only 1%, the Kyrgyz Republic is the country with the smallest share of eligible imports under the GSP+.

59%

The Kyrgyz Republic currently only makes use of the tariff reductions under GSP+ for about 59% of its eligible exports.

Preference utilisation and export diversification

Kyrgyz imports to the EU

Preference Utilisation vs. total eligible imports

The preference utilisation rate of the Kyrgyz Republic fluctuated considerably over the regarded period, particularly between 2011 and 2014. Since then, the rate has been rather stable with an average of about 62%. The transition of the Kyrgyz Republic to GSP+ status in January 2016 had a notable impact. The preference utilisation rate increased by 7 percentage points between 2016 and 2018. Likewise, total imports from Kyrgyzstan increased ninefold since the transition to €630 million in 2018. However, only a fraction of these were imported under GSP+ reduced duties as most imports already benefited from MFN zero tariffs. The largest product group imported using GSP+ preferences are fruits, nuts, and vegetables (02b). The preference utilisation rate of this section increased substantially between 2016 and 2018 and currently stands at 77%.

The largest product sections under the GSP+

Preferential imports under the GSP remain concentrated on fruit and vegetable imports, which make up almost 60% of all preferential imports. Nonetheless, about 20% of preferential imports is accounted for by base metals, followed by tobacco (about 12%). A number of product sections could still make better use of their preferential access to the EU market. This includes for example tobacco, where less than 50% of imports use GSP+ preferences, as well as chemical and machinery imports, which currently do not make use of the reduced duties at all.

SUSTAINABLE DEVELOPMENT AND MONITORING PRIORITIES

The Kyrgyz Republic ratified 27 core conventions on human rights, labour rights, environmental protection, and good governance. The Kyrgyz Republic maintained ratification of all international conventions included in the GSP regulation and stepped up its engagement with different UN mechanisms. Likewise, the Kyrgyz Republic demonstrated commitment by sending all outstanding reports on the implementation of ILO and UN conventions. The reporting situation related to environmental conventions remains difficult. Several reports are overdue, including reports on the Illicit Trade Convention and the Framework Convention on Climate Change.

Monitoring priorities during the reporting period 2018-2019

Prevention of Torture

Gender-based violence

Anti-discrimination legislation

Limitations to labour inspections

Transparency of the criminal justice system

Corruption

For the reporting period 2018-2019, the EU has focussed its monitoring activities on six priority areas and cooperated closely with the government, local NGO's, and trade unions. The overall situation with regards to human rights and good governance improved due to the introduction of relevant legislations. Challenges remain with the effective implementation as well as the reporting on some conventions.

1. HUMAN RIGHTS

The Kyrgyz Republic has maintained ratification of all core UN human rights conventions and has additionally ratified the UN conventions on the rights of migrant workers and people with disabilities, which are not covered under the GSP+ regulation. Kyrgyzstan made notable progress in the area of human rights particularly through the strengthening of the legal framework. The government introduced a number of policies including a Human Rights Action Plan 2019-2021, a plan on the implementation of the recommendations by the monitoring body of the Convention on the Elimination of Racial Discrimination (CERD) as well as plan to implement the provisions under the UN Convention on Rights of People with Disabilities. Kyrgyzstan still faces challenges in addressing under-age and forced marriage, where existing regulations do not seem to be sufficient. In addition, there has been no progress on drafting an anti-discrimination law. With regards to the prevention of torture, the responsible agency (the Centre for Prevention of Torture) remains institutionally weak and is not well-known among local stakeholders which impedes the effective work of the institution. Another challenge is the improvement of the situation of minorities. Reports suggest that minorities, including religious minorities as well as members of the LGBTQI community, over-proportionally face discrimination, harassment, and mistreatment by law enforcement.

2. LABOUR RIGHTS

The Kyrgyz Republic has ratified all ILO labour rights conventions covered under the GSP+ regulation. In addition, the country has ratified three of the four ILO priority conventions, namely the Labour Inspection Convention, the Tripartite Consultation Convention, and the Employment Policy Convention. Over the reporting period 2018-2019 most of the concerns related to the effective implementation of the conventions, adequate and timely reporting, and Kyrgyzstan's weak legal framework. A new Labour Code is still under development which currently leads to restrictions to labour inspections. Progress has been made in addressing child labour, however, strong regulations could further improve the effective sanctioning of violations. Similarly, existing laws on women's economic participation are ineffective in addressing sexual harassment and workplace discrimination. Another area of concern is the draft Trade Union law, which poses a serious threat to the independence of trade unions and would contradict the provisions of the ILO conventions on freedom of association and collective bargaining.

3. ENVIRONMENTAL PROTECTION

Environmental protection is of importance to the Kyrgyz' government given the country's vulnerability to the impact of climate change. Overall, there has been positive progress on the Kyrgyz' commitment to international conventions. The government currently revises the national legislation to tackle illegal wildlife trade more effectively, put forward national plans for the conservation of biological diversity, as well as a national strategy for sustainable development. Furthermore, a law on biosafety has been drafted. Difficulties persist for the disposal of persistent organic pollutants and medical waste, which will need to be addressed in future regulations.

4. GOOD GOVERNANCE

Addressing corruption remains a central challenge for the Kyrgyz Republic which has been acknowledged by the government. A number of new legal initiatives better protect whistleblowers, provide clearer guidelines on conflict of interest and increase the transparency of the criminal justice system. Further steps, like an institution that coordinates all anti-corruption measures, still need to be taken. Kyrgyzstan remains a transit country for international drug traffickers, particularly from Afghanistan. The overall number of drug offenses decreased over the reporting period and law enforcement was able to increase their confiscations which reflects the overall effectivity of the measures.

EU-Kyrgyz Republic Bilateral Development Assistance

€174 million

The EU assisted the Kyrgyz Republic with €174 million over the period 2014-2020. The priority areas of the engagement were closely aligned with the government's national priorities on the rule of law, education, rural development, and investments.

Opportunities in Kyrgyzstan

  • Favourable geographic location with good proximity to important regional markets and the Eurasian Economic Union
  • Young population and cost-effective labour supply
  • The government aims at expanding the agri-food sector through improving competitiveness and focussing more strongly on organic production
  • Considerable mineral deposits such as gold and rare earths
  • Large untapped potential in hydropower generation, currently only 10% of the potential has been exploited
  • Part of China's Belt & Road initiative

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