Kyrgyzstan faces a decline in garment industry production. Prior to the Soviet collapse in 1991, the local textile industry relied primarily on cotton grown in Central Asia, especially Uzbekistan. But now operations depend mostly on synthetic Chinese fabrics.
Businesses have no reliable demand forecasts and poor management skills. Labor supply is a major problem. Kyrgyzstan’s complicated tax regime acts as a barrier to the formalization of the garment industry. Though existing taxs favor small companies, as soon as companies grow above 30 employees, they face higher payments and a more cumbersome payment procedure. That discourages growth.
Ever since Russia joined the World Trade Organization (WTO), it has hurt the competitive edge of Kyrgyzstan, also a member. The concern is that Russia, under its WTO commitments, will reduce tariff barriers against other exporters of garments – namely China – and thus Kyrgyz producers would lose some of the preferential margin they are currently enjoying in the Russian market. Nearly 1,62,000 workers are employed in the textile sector. Several small-scale entrepreneurs say they are against joining the Customs Union.
Compared to 2012, there was a decrease in Krygyz apparel production in 2013 because of imports of Made in Kyrgyzstan products from China and also because of the government’s decision to increase the rate of customs duties on raw materials like fabrics, accessories and other support materials for the production of apparel.