Analyzing the investment situation of Kyrgyzstan’s textile industry
As the only country in Central Asia to join the WTO, the advantage of “no quota restrictions” on textiles exported from Kyrgyzstan to the EU and North America is quite attractive. However, the country’s turbulent political situation has made some of our countries plan to invest in Kyrgyzstan. Companies are deterred from building factories.
In order to support the development of the local textile industry and attract the attention of Chinese investors, in April this year, Kyrgyzstan Deputy Prime Minister Babanov held a special investment promotion conference for the textile and apparel industry in Beijing in collaboration with the China Chamber of Commerce for Import and Export of Textiles. Faced with the olive branch offered by Kyrgyzstan, corporate decision-makers can’t help but think about whether investing in the textile industry in Kyrgyzstan will only provide 3 opportunities as previously said, while the remaining 7 are problems and challenges that companies have to deal with. ?
The investment situation is favorable
Although the unstable political situation and occasional unrest have caused Kyrgyzstan’s investment risk index to rise sharply, for textile companies interested in setting up factories in Central Asian countries, Kyrgyzstan still has investments that other countries do not have. Advantage.
Fujian Zhulong Garment Co., Ltd. is one of the few Chinese textile and apparel companies that has built a factory in Jilin. The company established its first overseas branch factory in Kyrgyzstan in July 2007 to produce knitted underwear products sold to other Central Asian countries. Cai Zhulong, chairman of the company, said that Kyrgyzstan was originally chosen to build the factory because the country is the most open and has the lowest entry threshold in Central Asia. “Central Asia has always been one of the main target markets for our mid- to low-end products. Kyrgyzstan has no trade barriers to China. At the same time, the five Central Asian countries (Kyrgyzstan, Kazakhstan, Uzbekistan, Turkmenistan, and Tajikistan) have implemented Zero-tariff trade policy. Building factories and producing locally not only has relatively low trade barriers, but also saves enterprises’ transportation costs. It can achieve the goal of using Kyrgyzstan as a radiation center to increase sales in Central Asian countries.”
In addition to zero barriers and low logistics costs, Cai Zhulong also values the advantage of low local labor costs. It is understood that the current monthly salary of skilled workers in my country’s textile industry is about 3,500 yuan, while in Kyrgyzstan, the monthly salary of each worker is about US$200 to US$300, and the salary level of some workers is only 1/2 of that in China.
As the only country in Central Asia that has joined the WTO, Kyrgyzstan’s “trade status” of no quota restrictions on textile exports to the EU and North America is also promising. Industry insiders pointed out that textile and garment processing companies that have long-term fixed customers in the EU and North America, and whose business development is greatly affected by quota restrictions, can make full use of this favorable condition to avoid quota issues.
However, such favorable investment conditions have not eliminated the grudges in the minds of investors. Worry about the political situation is the main reason why most companies dare not take a step forward. To this end, Kurubaev, Ambassador Extraordinary and Plenipotentiary of the Kyrgyz Republic to the People’s Republic of China, issued a special statement in an interview with the media at the beginning of this year, “The domestic political situation and situation in Kyrgyzstan are now very stable. The new parliament, the new government, and The new president is committed to stabilizing the domestic situation, developing the economy, and improving people’s living standards. In order to attract more foreign investors to invest in Kyrgyzstan, our government is also working hard to solve social and economic problems. On the other hand, the government will Efforts should be made to ensure the safety of foreign investors.”
Habitual bribery
In fact, in order to reshape Kyrgyzstan’s image in the minds of investors, the country’s government has taken frequent actions in recent years and has introduced various policies to attract investment. However, due to political instability and frequent regime changes, new regulations and policies often face difficulties in their implementation after they are introduced. On the other hand, the various social relations in Kyrgyzstan are complex, and the corruption problems that have arisen are more serious.
“In Kyrgyzstan, there is a group of intermediaries with ‘all-powerful’ skills. This group of people can find channels to settle various social relationships. When Chinese businessmen encounter troubles such as procedures and are criticized by the government, they often take the initiative He came to the door and introduced himself, saying that he knew a certain big shot and had a tough road. Do you want help? Some Chinese businessmen who are afraid of trouble simply put money into the relationship and go through the back door.” said a Chinese businessman who invests in Central Asia.
In fact, it is precisely because of the fear of trouble among Chinese businessmen that local so-called intermediaries take advantage of them. “When I first came to Kyrgyzstan to do business, I was not interested in relying on bribes to get things done. I would say that a large part of the reason for the current situation is that we Chinese are ‘used’ to it.” Mr. Yang, who has investment experience in Kyrgyzstan, said, “More than ten years ago, when the local police in Kyrgyzstan came to patrol stores, some Chinese businessmen who did not speak Russian well would stuff money into people’s pockets without knowing what they were doing, for fear of causing trouble. . In fact, the police are just doing routine work. Slowly, this kind of behavior and business habits have contributed to the local corruption.”
China Investment in Kyrgyzstan��I often complain that I encounter differential treatment that is different from that of businessmen in Western countries. The reason lies in the Chinese people’s own business culture and sense of rules. Although Kyrgyzstan is corrupt, its institutional structure does not completely lack the possibility of reasoning and appeals as some Chinese businessmen imagined. Due to the special status that Chinese investors have in Kyrgyzstan, if you have more patience and go through normal channels, you will always gain something.
Some Chinese businessmen believe that power background is not enough to rely on when investing in a country with high political risks like Kyrgyzstan. On the contrary, what is truly reliable is complete legal procedures. “Now, whether spending money to build relationships is reliable or not depends entirely on luck.” Mr. Yang explained, “The local ministers in Kyrgyzstan are just taking office, and the relationships at all levels are in the clouds. What’s more, scammers are taking advantage of them. When it’s a good time to make money, someone may cheat money under the banner of the new regime, and Chinese companies don’t know. If something goes wrong in any link, the money may be wasted.”
Intended companies are still waiting to see
Light industry is Kyrgyzstan’s pillar industry, accounting for more than 50% of both output value and employment. The textile industry once occupied an important position in the light industry, with a share of 25% during the former Soviet Union. However, due to obsolete and aging processing equipment, output has been greatly reduced, and the share is only 5%. In order to promote the development of the textile industry and attract Chinese investors, at the Kyrgyz textile industry investment promotion conference held in Beijing in April this year, Kyrgyz Deputy Prime Minister Babanov expressed his hope to introduce Chinese equipment, technology, capital and production experience to establish joint venture, with a strong desire to revive its textile industry. He also introduced to the participating companies the many advantages of business investment in the Kyrgyz Republic, such as lower labor and energy prices, lower taxes, and relaxed foreign exchange controls.
However, facing Kyrgyzstan, an investment hotspot with both opportunities and challenges, most companies are still on the sidelines. Liu Liansheng, general manager of Jingzhu Shengshi Group, said frankly, “There are many favorable conditions for investing in the textile industry in Kyrgyzstan, such as low labor costs, low utility bills, and factory construction costs of only 300 to 500 US dollars per square meter. However, for enterprises, In terms of operation, especially for such a big move as investing in and building a factory overseas, it is not just the cost factor that needs to be considered.” Liu Liansheng pointed out that in addition to the necessary actual exploration and understanding of the investment situation in the local market, it is also necessary to select and train people who are familiar with the local market. Management talents with a business atmosphere, “After all, compared with domestic people, the work efficiency of Central Asians is relatively low, so it is very important to find management methods and management talents that suit the local culture.” Liu Liansheng said that if you want to take action in Kyrgyzstan , the company prefers to test the waters first with re-export trade.
Yang Canlong, deputy general manager of the Textile Trading Division of Hengtian Group, also believes that investment and construction of factories abroad should be carefully chosen. “When entering a strange country, you not only need to formulate a business strategy that adapts to the local area, but also coordinate with the company’s own development strategy. Only by working in unison and interconnected can we contribute to the development of an enterprise.”
Every investor has a scale in his mind that measures opportunities and challenges. They may have different answers when it comes to evaluating the value of investing in Kyrgyzstan. The opportunities created by this market will also wait for those who dare to explore and work patiently. investors to incubate.
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