Over the past 15 years, companies in Kyrgyzstan have grown in size by an average of 120%, yet their productivity has declined with age, according to a new World Bank report, Akchabar.kg reports.
This trend reflects weak market competition and a lack of support for the most efficient firms, the report concludes.
Despite some companies achieving higher productivity, measured by Total Factor Productivity (TFP), this has not translated into business expansion. These firms tend not to hire more employees or increase capital use. Instead, they charge higher prices and earn greater profits, ultimately undermining the efficient allocation of resources in the economy.
Foreign Companies Outperform Local Firms
The report also highlights the superior performance of foreign-owned companies operating in Kyrgyzstan. These firms demonstrate higher productivity levels and offer significantly better wages — with average salaries 91% higher than those at domestic firms. The advantage stems from advanced technologies and modern management practices.
However, Kyrgyzstan has struggled to fully leverage the potential of foreign direct investment (FDI). Since 2015, FDI has plummeted from 17% of GDP to about 3%. Still, it’s worth noting that nominal GDP has tripled, reaching $28 billion in 2025.
More than half of all FDI is concentrated in extractive industries, especially gold mining, while only 11% is directed toward knowledge-intensive and high-tech sectors.
Structural Reforms Urgently Needed
The World Bank stresses that for sustainable economic growth, Kyrgyzstan must create an environment where productive firms can thrive, reduce market barriers, and redirect investment flows toward more promising and efficient sectors.
CentralasianLIGHT.org
June 9, 2025