It is well known that private entrepreneurship has become the engine of economic progress in new industrial countries.
The right to private property and its inviolability, enshrined in the new Constitution of the Kyrgyz Republic, has undoubtedly played a revolutionary role in the development of private entrepreneurship in Kyrgyzstan.
The exit from the economic crisis, the rise in the living standards of the people, each family, and every citizen of Kyrgyzstan will largely depend on the activation of civilized, honest entrepreneurial activities of our business people.
In recent years, a certain layer of entrepreneurs has formed in Kyrgyzstan - a social layer of owners. They have created thousands of enterprises of various organizational and legal forms in almost all sectors of the national economy of the republic.
However, the new entrepreneurship, which we associated with hopes for overcoming the crisis, has received some development but still does not make a significant contribution to the recovery of the economy. It currently operates with the aim of quick enrichment, capital accumulation without a tangible productive effect. The main field of their activity remains trade mediation. The exception is rural entrepreneurs who have created peasant or farming households and their cooperatives.
What is the matter?
Partly, it is due to the fact that a number of problems have accumulated recently, hindering further growth of entrepreneurship, and there is a lack of effective interaction between state institutions and entrepreneurial structures.
It is necessary to take urgent measures to partially or completely eliminate various bureaucratic restrictions on the development of entrepreneurship, small and medium-sized businesses, such as licensing requirements, export and import restrictions, price and profit controls, limitations on access to credit resources, etc.
The greatest difficulty for small commodity-producing enterprises lies in obtaining bank loans to finance their production activities. Unfortunately, banks have primarily focused on financing commercial operations with quick returns.
To address all these issues, attention must be paid to the Law "On State Support and Protection of Private Entrepreneurship" to enshrine legislative measures for the support and protection of private entrepreneurs. Of course, the law should also define the responsibilities of entrepreneurs to the state and society.
However, no less important today is the sincere patriotic desire of entrepreneurs to help their people, their young country with its still fragile economy. A true entrepreneur will never lose sight of the interests of their state and their people.
Unfortunately, negative phenomena, such as criminal accumulation of money and property, are prevalent in the entrepreneurial environment, which law enforcement agencies must combat relentlessly and uncompromisingly.
In short, the state must create favorable conditions and provide support for a new qualitative leap in the development of entrepreneurship. By expanding civilized interaction between state and entrepreneurial structures, we can solve not only economic but also social problems.
In 2012, there were 11,900 small and medium enterprises operating in the territory of the Kyrgyz Republic. As of January 1, 2013, the number of individual entrepreneurs who registered their businesses was about 298,000 people. On average, from 2008 to 2012, the share of gross value added produced by small and medium enterprises accounted for more than 40 percent of GDP.
By the end of 2012, its volume amounted to 127,800.2 million soms, or 42 percent of GDP.
The number of people employed in the small and medium enterprise sector (excluding peasant and farming households) in 2012 increased by 9 percent compared to 2011, and by 28 percent compared to 2008, reaching 385,400 people, or 16.9 percent of the total number of employed in the economy. Over the past three years, there has been a decrease in the number of employees in small and medium enterprises. However, in 2012, compared to 2011, it increased by 1.9 percent, totaling 87,500 people. The majority of workers are employed in industrial enterprises - 34.7 percent, in organizations dealing with real estate operations, rental, and providing consumer services - 17.7 percent, and in construction - 14.5 percent.
The average monthly salary of employees in small and medium enterprises has been steadily increasing, and in 2012 it amounted to 7,065 soms, which is 10.5 percent higher than the previous year. However, despite this growth, the salary of employees here remains below the average level in the republic (10,726 soms). Moreover, the salary of employees in small and medium enterprises in all regions, except for Bishkek (8,289 soms), is lower than the average across the republic.
The volume of industrial production by small and medium enterprises (including unofficial activities in flour and bread production) in 2012 amounted to 36,813.1 million soms, which is 8.7 percent less than in 2011, but 1.6 times more than in 2008. The share of industrial products produced by small and medium enterprises in the total volume across the republic decreased over the previous three years; however, in 2012 it increased to 26.9 percent.
Over the past five years, the share of flour produced from grain crops by small and medium enterprises has significantly increased from 30 to 60 percent, mineral water from 7 to 31 percent, and ethyl alcohol from 2 to 37 percent.
Small and medium enterprises in the Naryn region produced over 60 percent of the total industrial output in the region, in the Talas and Osh regions, as well as in Bishkek and Osh - over half, in the Batken region - 24 percent, in Chui - 20 percent, in Jalal-Abad - 17 percent, and in Issyk-Kul - 6 percent of the total output.
In 2012, the volume of foreign direct investment (excluding outflows) directed towards the development of small and medium enterprises increased by 18.7 percent compared to 2011; however, compared to 2008, their inflow decreased by 26.2 percent. A significant increase in foreign investment was observed in medium enterprises - by 3.4 times, while in small enterprises, their volume decreased by 24.9 percent.
An increase in the volume of foreign direct investment attracted to medium enterprises was observed across all types of economic activities, except for transport and communications enterprises, which attracted 3.8 million USD in 2012, 6.4 times less than in 2011. The volume of foreign direct investment in small enterprises engaged in trade, car repair, household goods, and personal items (2.4 times), construction (1.6 times), and real estate operations, rental, and providing consumer services (1.4 times) decreased.
In general, foreign direct investments were attracted mainly to small enterprises in Bishkek and Batken region, as well as medium enterprises in Chui region and Bishkek. In 2012, small and medium enterprises invested 17,276.2 million soms in fixed capital, which is 2.2 times more than in 2011 and 2.8 times more than in 2008.
The most prioritized types of activities for investment by small and medium enterprises were in the manufacturing industry, transport and communications, trade, car repair, household goods, and personal items.
Compared to 2011, investments in fixed capital by small and medium enterprises increased in all regions, except for Osh and Talas, since 2008 - except for Jalal-Abad, Issyk-Kul, Talas regions, and Osh. In 2012, the volume of contracting work performed by small and medium enterprises amounted to 23,722.5 million soms, which is 12.7 percent more than in 2011 and 5.9 percent more than in 2008. At the same time, compared to 2011, the highest growth was observed among individual entrepreneurs - by 30.9 percent, as well as in small enterprises - by 7.6 percent. The volume of contracting work performed by medium enterprises, on the contrary, decreased compared to 2011 and amounted to 83.7 percent.
In all regions, except for the Jalal-Abad region and Bishkek, the entire volume of contracting work was performed by small and medium enterprises. The volume of trade, car repair, household goods, and personal items turnover by small and medium enterprises in 2012 amounted to 253,244.1 million soms, which is 11.8 percent more than in 2011. The share of small and medium enterprises in the total turnover of trade in the republic was 88.2 percent, of which the main share (43.1 percent) belonged to individual entrepreneurs. The share of small enterprises accounted for 31.3 percent of the total trade turnover in the republic, while medium enterprises accounted for 13.8 percent.
The volume of services provided by hotels and restaurants in 2012 amounted to 11,167.0 million soms, which is 12.7 percent more than in 2011. The share of services provided by individual entrepreneurs in the total volume was 50.3 percent, small enterprises - 39.4 percent, and medium enterprises - 2.2 percent.
In 2012, the volume of cargo transportation performed by small and medium enterprises reached 25.1 million tons, which is a 5.9 percent increase compared to the previous year and a 30.6 percent increase compared to 2008. A significant volume of cargo transportation (over 62 percent of the total volume in the republic) was carried out by individual entrepreneurs.
In 2012, small and medium enterprises transported 519.7 million passengers, which is 9.3 percent more than in 2011 and 11.9 percent more than in 2008. In the total volume of passenger transportation, individual entrepreneurs accounted for over 85 percent.
The volume of communication services provided by small and medium enterprises in 2012 amounted to 177,233.2 thousand soms, and their share in the total volume of communication services across the republic was 0.9 percent.
In 2012, small and medium enterprises engaged in agriculture (including peasant (farming) households) produced goods worth 102,888.7 million soms. Compared to 2011, the share of the products they produced increased by 1.0 percentage point, but compared to 2008, it decreased by 0.5 percentage points, and by the end of 2012, it was 61.5 percent.
In the structure of gross output of small and medium enterprises, about 98 percent is accounted for by products produced by peasant (farming) households.
Of the total volume of products produced by peasant (farming) households, including individual entrepreneurs in 2012, the share of crop production accounted for 61 percent, and livestock production - 39 percent.
Of the total gross harvest of grain crops of 1,272.1 thousand tons in 2012, peasant (farming) households produced 88 percent of the grain, as well as over 90 percent of cotton and tobacco, more than two-thirds of potatoes, and more than half of vegetables. In 2012, peasant (farming) households produced 179.0 thousand tons of livestock and poultry for slaughter (live weight), or about 50.8 percent of the total production in the republic, produced 672.0 thousand tons of milk (about 49 percent), sheared 6.3 thousand tons of wool (56 percent), and obtained 106.8 million eggs (26 percent).
In 2012, small and medium enterprises (excluding peasant (farming) households and individual entrepreneurs) received 80,034.6 million soms in revenue (gross income) from the sale of products (goods, works, services). Compared to 2011, the revenue volume increased by 34.1 percent, and compared to 2008, it increased by 1.6 times. About 40 percent of the total revenue came from industrial enterprises and 28.6 percent from construction. More than 68 percent of the revenue was generated by small and medium enterprises in Bishkek.
In 2012, based on the results of activities, small and medium enterprises reported a net financial result (net profit) of 2,205.5 million soms, which is 28.4 percent (876.6 million soms) less than in 2011. The main decrease occurred in organizations dealing with real estate operations, rental, and providing consumer services, which turned from profitable in 2011 (504.4 million soms profit) to loss-making in 2012 (1,953.2 million soms loss), and in financial organizations (in 2011 - profit of 88.9 million, and in 2012 - loss of 391.9 million soms).
At the same time, net profit increased in industrial enterprises (by 17.7 times), construction (by 1.5 times), and trade, car repair, household goods, and personal items (by 33.3 percent).
Based on the results of activities, net profit was reported by small and medium enterprises in Bishkek, Osh, Batken, Naryn, and Issyk-Kul regions, while net losses were reported in Chui, Talas, Osh, and Jalal-Abad regions. In 2012, the share of profitable small and medium enterprises in the total number was 44.3 percent, which is 5.3 percentage points higher than in 2011. An increase (by 6.2 percentage points) was also noted in the share of loss-making enterprises compared to 2011. Overall, the share of loss-making small and medium enterprises in their total number in 2012 was 33.3 percent.
The highest share of profitable enterprises was observed in agriculture, hunting, and forestry (47 percent), in organizations dealing with real estate operations, rental, and providing consumer services (46.1 percent), construction (45.4 percent), and trade, car repair, household goods, and personal items (45.1 percent).
The largest number of loss-making enterprises was predominant in financial organizations (42.2 percent of the total number of enterprises), in enterprises providing communal, social, and personal services (39 percent), and in hotels and restaurants (38.8 percent).
In 2012, the profitability level of small and medium enterprises was 3 percent, which is 2.6 percentage points lower than the level in 2011. The highest level was achieved by organizations in trade, car repair, household goods, and personal items, while the activities of financial organizations and those dealing with real estate operations, rental, and providing consumer services remained unprofitable. In 2012, the foreign trade turnover of small and medium enterprises amounted to 3,871.3 million USD (at current prices) and increased by 20.8 percent compared to 2011, and by 7.2 percent compared to 2008.
Export deliveries in 2012 amounted to 675.6 million USD, which is 7.9 percent more than in 2011 and 12.6 percent less than in 2008.
Import receipts in 2012 amounted to 3,195.7 million USD and increased by 23.9 percent compared to the previous year, and by 12.6 percent compared to 2008. The trade balance was negative, amounting to 2,520.1 million USD. In the total volume of foreign trade turnover, the share of export-import operations of small and medium enterprises in 2012 was 51.6 percent, including 35.0 percent in exports and 57.3 percent in imports.