RESTRICTED
WORLD TRADE WT/ACC/SPEC/KGZ/6
5January 1998
ORGANIZATION(98-0004)
Original: English Working Party onthe
Accession oftheKyrgyz Republic
ACCESSION OFTHE KYRGYZ REPUBLIC
Information ontheProcess andMethods ofPrivatization
intheKyrgyz Republic
Thefollowing information ontheprocess andmethods ofprivatization intheKyrgyz Republic,
hasbeenreceived fromtheGovernment oftheKyrgyz Republic, withtherequest thatitbecirculated
tomembers oftheWorking Party.
_______________
Theinformation concerning alltheinvestments intheeconomy isnotavailable fortheSPF
(State Property Fund) andisunder control oftheAgency onForeign Investments.
Oneofthemain directions ofthesignificant economic reforms intheKyrgyz Republic is
considered tobethecreation oftheopenmarket economy. Astheresult ofsuccessful implementation
ofprivatization ofState-owned enterprises, active promotion offoreign direct investment, development
ofsmall- andmedium-sized businesses andtheroleoftheprivate sector inGNP, thecountry haschanged
significantly. TheaimoftheGovernment 'sactivities istoform arealbasis thatwillprovide stable
development ofasocial-oriented market economy.
Attheverybeginning, theGovernment oftheKyrgyz Republic identified priorities, stages,
forms andmethods forprivatization. Forexample, during thefirststageoftheprivatization, theperiod
from 1992 to1993, itwasplanned toprivatize theentities ofretail trade andfoodindustry. Atthe
current moment, thelevel ofprivatization inthese sectors is96.4percent. Themain aimofthe
privatizationpolicyofthesecondperiod(1994-1995)wastoreorganizemedium-sizecompaniesoperating
inindustry,transportandconstructionsectorsoftheeconomy.Thisreorganizationincludedreorientation
oftheproduction fornewmarkets andtheneedofforming newbusiness relationships withsuppliers
ofrawmaterials. Forthesepurposes, theStateProperty FundoftheKyrgyz Republic usedthemethods
ofcompetitive selling ofState-owned shares ofthecompanies. Tomake itmore efficient the
above-mentioned selling wasbased onpreparation ofbusiness plans andcompetitive bidding. Atthe
current moment, thelevel ofprivatized companies isasfollows: industry -79.2percent;
construction -56.3percent; transport -47.1percent; andthetotal level ofprivatization is
60.7percent.
Nevertheless, theprocess ofprivatization ofState property intheKyrgyz Republic hasnot
achievedadequatecompetitiveconditionstoincreasetheefficiencyofthelocaleconomy.Forthepurpose
ofresolving such kindofstrategic problem theGovernment oftheKyrgyz Republic decided to
demonopolize thelargest companies insectors oftheeconomy suchastelecommunications, printing,
aviation, energy andrecreation through privatization. Themain ideaofthisdemonopolization is
segmentation ofthestrategically important national companies andattracting foreign direct investors
whowillbring tothese newsegmented companies thedefinite forms ofinternational management,
marketing, newtechnologies andfinancial expertise.WT/ACC/SPEC/KGZ/6
Page2
Thistypeofprivatization hasbecome themainreason forchanging thestrategy ofprivatization.
Themain principals ofthenewpolicy areidentified asfollows:
- decreasing thespeed oftheprivatization because ofthecomplexity ofthecompanies;
- using case-by-case method ofprivatization;
- attractingstrategicallyimportantforeignandlocalinvestors.Case-by-caseprivatizationincludes
financial diagnosis ofcompanies andcorporatization ofcompanies intoState-owned joint-stock
companiesand/orintroductionofcorporategovernance.Afterimplementingallofthenecessary
procedures thegovernment shares ofthese companies maybesoldthrough:
- commercial tender (level ofprice plays thekeyrole),
- investment tender (future investment conditions arethemain criteria),
- openauction.
InAugust of1996 theStateProperty Fund formed alistofcompanies thatwillbeprivatized
using case-by-case privatization methods andaredeemed tobeattractive forforeign investors. To
effectively coordinate allofthesteps intheprocess ofcase-by-case privatization, theState Property
Fundcreated theCase-by-case Privatization Department. Thefirsttender forthesecompanies isplanned
tobeconducted inOctober 1997. Inorder tomake theprocess ofprivatization ofthese more efficient,
theState Property Fund isgoing toattract international consulting companies thatwillprovide all
necessary assistance ininforming theworld about investment opportunities intheKyrgyz Republic.
Thetotalamount ofprivatized enterprises, fortheperiod fromJanuary 1991untilMay1997,
theprivatization process intheKyrgyz Republic envisaged 6,304 enterprises (thequantity ofenterprises
before thebeginning oftheprivatization -9,989 enterprises).
Sector Number ofState-owned
enterprises before privatization
(1/1/97)Number ofprivatized
enterprises (30/05/97)
Industry 602 491
Services 1,253 470
Domestic services 1,919 1,919
Trade andfoodindustry 1,949 1,895
Agriculture 855 353
Construction 730 416
Transport 295 152
Others 2,386 608WT/ACC/SPEC/KGZ/6
Page3AListofCompanies forCase-by-Case Privatization
Company Industry Charter
capital
(th.Soms)State share
(%)
1 Trade House Ay-Churek Retail Trade 219.7 28.17
2 Kara-Kol Dan-Azyk (Wheat storage andbread combinate) Food industries 6,845.0 71.21
3 Chuy Dan-Azyk (Wheat storage andbread combinate) Food industries 14,440.0 50.00
4 Joint-stock insurance company "Kyrgyzstan" Finance 2,221.3 70.75
5 Tunguch-Kant (Sugar andsoftdrink factory) Food industries 16,549.4 70.8
6 VLKSM Bishkek Garment Factory Light 6,366.7 80.00
7 Bugu-Ene (Sewing factory) Light 3,776.0 70.24
8 Ak-Bula (Wool scouring plant) Light 6,928.0 51.00
9 Kasjet (Wool yarnfactory) Light 2,500.0 60.00
10 OREMI (Heavy electrical machinery plant) Consumer andindustrial engineering 327.9 46.00
11 KEMZ Corporation (Electrical machinery plant) Consumer andindustrial engineering 875.4 34.3
12 TNC Dastan (Electric engineering defence factory) Consumer andindustrial engineering 1,459.0 58.00
13 Jetigen (Electrical plugs, machine blades, consumer goods) Consumer andindustrial engineering 441.8 38.05
14 OshPATC-1 (Passenger autotransport company) Transport 8,714.5 45.81
15 Kyrgyzkabel (Electrical cables) Consumer andindustrial engineering 679.6 35.00
16 Aynut (Electronic connectors andtransformers) Consumer andindustrial engineering 187.7 49.00
17 KyrgyzTash (Decorative stone processing plant) Construction materials 1,864.0 70.14
18 Tokmok APKSM (Ceramic brick factory) Construction materials 8,732.2 36.99
19 Mata (Textile plant) Light 17,180.0 71.07
20 Jibek-Jolu (Mineral water, kid'snutrition) Food industries 100.00
21 Semetey (Furfactory) Food industries 26,989.9 70.20
22 Dan-Azyk (Wheat storage andbread combinate) Light 2,326.2 71.23
23 Kara-Suu Dan-Azyk (Wheat storage andbread combinate) Food industries 12,346.6 41.95
24 Ak-Suu (Corn processing sugar/fructose combinate) Food industries 73,340.5 71.03
25 Kyrgyz Starch Treacle Plant Food industries 5,665.0 70.43WT/ACC/SPEC/KGZ/6
Page4Company Industry Charter
capital
(th.Soms)State share
(%)
26 Kyrgyz National Energy Company Utilities 7,470,107.7 94.50
27 Akyl (Printing) Printing 31,084.6 80.00
28 Kyrgyz Mining Combinate Mining 203,817.5 87.00
29 Kadamjay Antimony Combinate Mining 301,749.0 84.00
30 NarynHydroEnergoStroy (Hydro-station construction) Construction 418.6 42.02
31 Kyrgyz Too-Tash (Marble processing plant) Construction materials 7,283.7 70.23
32 Anar (Transformers, connectors andceramic insulator) Consumer andindustrial engineering 423.58 31.39
33 KanIndustrial Combinate Others 2,712.4 71.23
34 Dostuk (Electronic connectors, plastic consumer goods) Consumer andindustrial engineering
35 Kyrgyz Chemical-Metallurgical Plant (Silicon andrare
earth metals)Metallurgic
36 KantCement andTileCombinate Construction materials
37 Kurmenty Cement Plant Construction materials
38 KantCement Plant Construction materials
39 Linoleum Factory Construction materials
40 National Airlines Company "Kyrgyzstan Aba-Joldoru" Transport
41 Ainek (Sheet glass plant) Construction materials
42 Setun (Machine tools andconsumer goods plant) Consumer andindustrial engineering
43 Kyrgyzstroyfarfor (Porcelain products) Construction materials
44 Bishkek Auto-Repair Plant Services
45 Bishkek Machine-Building Plant Manufacturing
46 Janar (Electrical engineering factory) Consumer andindustrial engineering
47 Bishkek Leather-Commodities Plant Light
48 Bishkek Chemical Plant (Paints) Others
49 Kyzyl-Kya Sut-Azyk (Milk products) Food industries
50 Uzgen-Sut (Milk products) Food industriesWT/ACC/SPEC/KGZ/6
Page5Company Industry Charter
capital
(th.Soms)State share
(%)
51 Kyrgyzgasmunayzat (Gasoline andnatural gas) Trade
52 Kyrgyztelecom (Communications) Communications
53 Kyrgyzneft (Oilextraction andrefinery) Oilprocessing
54 Plant "Kyrgyz Hydro Steel Construction" Construction materials
55 Shop "Min-Turkun" (Hardware trading company) trade
Hotels
56 Issyk-Kul Hotel Tourism
57 Bishkek Hotel Tourism
58 OshHotel Tourism
Forinquiries please contact:
Deputy Chairman A.Chukin
State Property Fund
57Erkindik Avenue
Bishkek
720040 Kyrgyz Republic
Telephone: 73312 228346
Fax: 73312 620136
Email: ATC@SPF.BISHKEK.SU