An open letter from the IBC
The International Business Council, (IBC), is a business association, which was established in December 2000, whose membership includes a wide range of local and international businesses that have created thousands of jobs and have a combined investment of over one billion USD in the Kyrgyz economy. The Celestial Mountains Tour Company was one of the original members, (in fact, the inaugural meeting was held in the Conference Room in our hotel in Bishkek, The Silk Road Lodge), and I have served several terms as a member of the Management Board of the IBC.
I should point out, however, that the following comments and observations, (barring the open letter itself), are my own.
As well as promoting the common interests of business investors and providing its members with relevant information and advice to support their business operations, IBC’s mission is to make the Kyrgyz Republic a more attractive investment location by promoting good business legislation and efficient business practices, working in partnership with the government of the Kyrgyz Republic and other local and foreign organizations. As such, it has established itself as one of the main voices of the business community in the Kyrgyz Republic – if not the main one.
To be fair, over the years it has sometimes been criticized as being the voice of foreign investors and of big business. There may be some element of truth in this, in that it was originally established by some of the large foreign investors and amongst its membership it has some, but not all, of the largest companies operating in the republic. However, it also includes, and actively recruits amongst, both smaller and local businesses.
IBC actively supports the process of economic reform in the country and tries to ensure that private sector investors are represented in Government policy activities. IBC representatives, for example, sit on many official bodies and working groups. The Association also has a strong recognition amongst the International Finance Institutions, (IFIs), embassies, and the international donor community as a key player in the process of reform.
IBC supports the ten principles of the UN Global Compact, setting core values in the areas of human rights, labour standards, environment and anti-corruption. As an Association, IBC encourages its members to embrace, support and enact these principles within their sphere of influence. It also works cooperatively with government and other local and international organizations to fight against corruption and to change laws and practice that impede social or economic justice.
Obviously, in order to achieve all of these aims, IBC has to maintain good relationships with the government – whatever government happens to be in place at any particular time, whilst maintaining its independence. This hasn’t always been easy and although it may sometimes appear as if the government and IBC are working “hand in glove” with one another, there have been other times when the relationship has been more strained.
Sometimes, the strain on the relationship has arisen out of the fact that we are a membership organization and part of our role is to present to the government the concerns of our members.
Recently there have been a number of issues that are affecting our members, (some more directly than others), and we were asked to address some of these issues and decided to publish an open letter to the government, addressed to the President, Prime Minister and the Speaker of the Jogorku Kenesh, (the Parliament).
To be fair, members of the government say many things which seem designed to convey positive messages and address many of the issues being raised by the business community. They are concerned about the development of the economy and stress the importance of business for the country. They want to bring about improved living conditions and raise the quality of life and standard of living for the population. Unfortunately, however, the way that events have unfolded has not always supported these positive statements and aspirations. Indeed, there is a concern that many of the events that are happening in the country, are likely to deter, if not drive away, potential investment – whether it be from local or foreign investors.
What matters most, however, is not what is said, but what happens in reality. It’s not a beauty contest and all the fine words need to be backed up by real measures, or else we do actually risk businesses deciding to shut up shop and leave, or simply not to decide not to come here. Celestial Mountains may be “in for the long haul”, (after all, our business is trying to persuade people to come and experience the landscape, history and culture of the country), but that isn’t necessarily true for everyone.
It is easy to think that IBC is just protecting the interests of its members: those who have been nationalized, or have had their licenses revoked, or those who have been faced with changes in legislation, court cases or corruption, but it is wider than that. We all need a thriving and growing economy in order to thrive and grow ourselves. To attract business, clients or investors, we need to be able to point to a safe and secure situation within the country. We need to show that we have the facilities and infrastructure of a modern state: banking and health services, transport services, communications and internet access, with a sound and predictable legal basis and system, an educated and willing workforce and a viable market for our products and services. We need a business environment that allows business to operate, prosper and grow; that will attract and encourage investment; that will, in the long run, benefit the whole community.
Here’s what the open letter said:
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The International Business Council (IBC) wishes to convey concerns from its members regarding the state of the business environment in Kyrgyzstan.
The IBC unites more than 100 businesses, both local and foreign, operating in Kyrgyzstan and representing more than US$1 billion worth of investments in the country. Over more than years, cooperation between the business community represented by IBC and the Government has become stable in reaching mutual understanding of common purposes and tasks. The business community has always been the basis for raising and strengthening the economic independence of the country, and it is the key to Kyrgyzstan’s future prosperity and stability.
However, there seems to be a growing tendency in the country to disregard the property rights which serve as the basis of businesses. It occurs mainly due to the opaque policy pursued by the Government in respect of nationalization of various business entities. The business community has been excluded from the process of determining the destiny of the nationalized facilities, in which it has its own property. Meanwhile, in accordance with the laws of the Kyrgyz Republic and international agreements to which Kyrgyzstan is a signatory, the business community has a voice and right to protection.
Insecurity of private property rights in Kyrgyzstan was confirmed by various studies of independent international organizations. Kyrgyzstan holds 97th place out of 125 countries on the IPRI index (International Property Rights Index) and got 25 points out of 100 points in the property rights protection according to the Heritage Foundation.
IBC believes that at present the country’s investment climate is becoming less conducive to attracting new investors. The investment climate has deteriorated sharply after the events of April 2010 and continues to deteriorate, primarily because of investors’ uncertainty that property rights are properly protected in Kyrgyzstan.
The massive investment outflow last year is not only the result of the April events, but also, to a far greater degree, the result of ill-conceived public policies in the area of investments and businesses. The lack of continuity of the government policies and lack of predictability and consistency of judicial decisions together with the “rich” legacy in the form of corruption cause investors’ uncertainty. All this undermines investors’ confidence and affects the investment climate in the country, the replenishment of the state budget and creation of new jobs.
Currently, the program of nationalization initiated by the Interim Government has been delayed. We understand that this is a necessary measure aimed at establishing justice. Therefore, to avoid perception of corruption, it is important that the nationalization should be carried out transparently with the participation of civil society and business communities. Most importantly, it is needed to keep the rule of law in each case and protect property rights of honest investors.
With a budget deficit and far-reaching goals of the Government, it is unclear how the state budget could be replenished while the Government’s policy leads to “pushing away” investors. If the Government does not urgently take measures to improve the business environment, there is a great risk that the country will lose confidence of both local and foreign investors.
IBC asks to draw your attention to the above mentioned issues and provide immediate assistance in resolving them. In turn, IBC is ready to offer its ideas on creating a favorable investment climate in the country and keeping existing investments and attracting new investments to build an economically strong country with a good international image.
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For those who know Russian, you can find the Russian version here.
Bishkek