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Kyrgyzstan’s Apparel Industry Enjoys Breakneck Growth

Kyrgyzstan, the tiny Central Asian republic of fewer than six million inhabitants, recently reported that its production of apparel goods and fabrics has grown by an astonishing 50 percent over the last five years.

Kyrgyzstan has been experiencing impressive growth since 2006, according to data provided its National Statistics Committee to the World Trade Organization. Overall, its garment sector production, at $200 million, is modest by international standards but their accelerated growth is far better than average. The textile and clothing industries account for 6.9% of Kyrgyzstan’s total industrial output.

And it might be the case that the reality of Kyrgyzstan’s progress is even more stellar than the story the released statistics tell. In September 2011, a study issued by the US Agency for International Development argues that Kyrgyzstan’s government routinely underestimates the economic performance of its garment industry by as much as 50 percent.

Today roughly 80 percent of Kyrgyzstan’s apparel is exported, largely to Kazakhstan and Russia. It only trails China and Belarus as apparel suppliers to Russia. Before the dissolution of the Soviet Union in 1991, Kyrgyzstan relied heavily on cotton production in Central Asia,  especially Uzbekistan. Today, their dependence has shifted to synthetics from China.

Kyrgyzstan has fared so well recently due to variety of advantages: inexpensive labor, propitious geography and excellent positioning within a variety of free trade agreements. However, their expansion has been stymied by a torturously complex tax system that has proven particularly burdensome for small companies with just more than thirty employees.

The future of Kyrgyzstan’s apparel and textile industry seems to be intertwined with their ability to initiate meaningful tax reform, as well as the economic direction of Russia. There is some haunting concern that Russia’s membership in the WTO, and its creation of a regional Customs Union, will reduce trade barriers with other garment producers like China, vitiating Kyrgyzstan’s preferential status. If Kyrgyzstan can’t manage to win a spot on the Customs Union, populated by rivals Belarus and Kazakhstan, it will have to broaden its trade relationships to include a basket of new clients, minimizing its current dependence upon Russian business.