ountries as a group have been disinvesting in Kyrgyzstan, while Central and Eastern European countries emerged as the largest investor. FDI flows to the tertiary sector have been declining noticeably since 1998. During the period 1995-2002, the number of employees employed by TNCs increased steadily because of the increase in the number of foreign enterprises in the country.
FDI flows, by type of investment, 1995-2002
YearInward investmentOutward investmentEquityReinvested earningsIntra company loansTotalEquityReinvested earningsIntra company loansTotal199516.479.796.1199649.00.5-2.347.2199753.10.830.083.8199886.97.614.7109.222.622.6199911.23.929.444.46.16.1200017.68.0-28.0-2.44.54.5200112.313.5-20.85.06.16.120025.09.0-9.24.85.6
Foreign TNCs in Kyrgyzstan import considerably more than their exports from the country. The largest industrial investors in Kyrgyzstan in 2003 were Kumtor Operating Company (Canada), Reemstsma Kyrgyzstan (Germany) and Kyrgyzpetroleum Compnay (Canada). The largest investors in finance activity were the Demir Kyrgyz International Bank from Turkey, Amanbank from the Russian Federation and the Kyrgyz Investment and Credit Bank from the European Union. FDI inflows as a percentage of gross fixed capital formation remained low (2.3 percent) in 2001 as compared to the peak of 52 percent in 1998. FDI stock as a percentage of gross domestic product declined marginally in 2002, down from 28 percent in 2001 to 27 percent in 2002.of the sources of domestic investments in Kyrgyzstan is business. But the business sector has not matured enough to meet the needs of a market economy. Big business is still at the embryonic stage, and small and medium businesses are only just beginning to stand on their own feet. Thus, it is premature to expect large-scale investments in industrial development and modernization at present. This situation can only be rectified if foreign investments are found to supplement domestic capital.republic is in even greater need of direct foreign investments due to the indebtedness of most of its enterprises. Overdue debts are growing and state investments in industry are dwindling. The deterioration of basic industrial stock is also becoming increasingly apparent. Kyrgyzstan s industry needs a new lease of life in terms of updated technology and know-how. Most enterprises should be closed down and new state-of-the-art plants organized in their place, which will also require significant investments. Thus, the import of foreign capital into Kyrgyzstan is one of the most lucrative and fastest ways to revive the Kyrgyz economy.foreign investments will make it possible to create new, high-tech industries, modernize basic stock, create additional jobs, make active use of highly-qualified personnel, introduce the latest management, marketing and know-how achievements, saturate the domestic market with high-quality goods, and increase export. In contrast to foreign credits, direct foreign investments do not increase the republic s indebtedness, and thus decrease the drain of hard currency out of the country. If used efficiently, direct foreign investments, which do not place a long-term burden on the republic s budget, will make it possible to procure significant financial resources for investment in the key branches of the Kyrgyz economy.order to achieve the best results, a favorable investment climate must be...
