Investment in Tourism
Tourism is recognized as an important sector of the Kyrgyz economy. The government of the Kyrgyz Republic has declared it as a priority in their plans for the economic development of the country.
Indeed, much has happened over the last fifteen years in the tourism industry in Kyrgyzstan as the country has moved from a “central economy” to one which is governed by principles of a “free market economy”. A monolithic, state-run, service has seen much diversification, development and improvement in the range and level of services offered to potential tourists with the growth of private sector provision. The increased competition introduced by the increase in service providers has led to a need for an improvement in the level of their services, in order to attract and retain customers.
One particular example that illustrates this is the increase in the number of restaurants and cafes, especially in Bishkek, but also throughout the republic as a whole – not just in terms of their numbers, but also in terms of their range, the quality of dishes and the level of services offered. Today, we can rightly say that visitors to the capital have a glittering array of choice when considering places to eat.
This is not to say that the State has no role to play in tourism. There are many components which play a role and can help, or hinder, the development of tourism. The state is responsible for: the visa regime; permissions; border and customs controls; the role of the police; the provision of museums and similar services and the maintenance of an overall healthy environment in which the tourism industry can grow and prosper. The private sector, on the other hand, is rightly concerned in the delivery of services: accommodation; transport; guides; food and entertainment. For tourism to develop as a major part of the economy, it needs to be recognized that there is a symbiosis – both parties, the public and the private sector, need each other.
The government of the Kyrgyz Republic has made serious attempts to encourage the development of tourism. For example, the visa regime has been relaxed for citizens of many countries; the move towards deregulation; measures introduced to help protect and assist foreigners whilst they are here, and a Destination Marketing Organization (to act as Tourism Promotion Agency) which has been established in co-operation with the private sector.
There are several other tools which are available to the government, which could help and assist in the development of this sector of the economy.
The first of these is a favourable tax environment. For example, part of the improvement in the provision of restaurants has been achieved by the introduction of a patent system which has made it possible for small entrepreneurs to start their own businesses and flourish.
Another tool available would be to facilitate the availability of finance – or credit. Unfortunately, there are too few examples where credit has been made available for the development of suitable projects. In most cases it is simply too expensive for most businesses to contemplate – but the emergence of new banking and credit institutions (including micro-finance institutions) can only help to bring further projects to fruition. It would be good if these projects were such as to spread the facilities to communities beyond those traditionally thought of as “tourist destinations” – Bishkek and Issyk Kul – through priority consideration of business projects and preferential credits in the regions. For example, the development of the new facilities at Sary Chelek is to be welcomed
Unfortunately, the government structures that are responsible for tourism in the Republic do not always seem to recognize the move towards the “market” economy. There appears to be confusion between the concepts of “monitoring”, “supervising”, “support” on the one hand and “control”, “trusteeship”, “instructive management” and “administrative levers” on the other. For example, every year since 2001 – the Year of Tourism – has seen attempts to reintroduce measures of control especially in terms of licensing and certification. This thinking seems to equate the “market” with “chaos” – something out of control.
It seems to us that there are three tasks ahead of the government in the immediate future, to continue the trends towards:
- the improvement of the services for which they are responsible: the work of the relevant ministries, and services such as the Customs and the Police;
- the re-orientation of public policy towards the principles of the market economy – recognizing the legitimate role of both public and private sectors;
- co-operation with the private sector in terms of the creation and dissemination of information about tourism potential in the country, and creating a recognizable marketing brand.
The aim for both public and private sectors must be to increase their relevant income (by taxes and turnover) – whilst minimizing costs. This is not just in terms of cash … it also applies to social, personal, cultural, tradition and environmental factors. A healthy tourism sector is good for everyone – for the consumer, the service provider (be it an individual entrepreneur, or company), local communities, the government and the budget.
Co-authored with Emil Umetaliev – President of AKC Kyrgyz Concept.
Published in “Investment Now” – the journal of the International Business Council (IBC) – Bishkek.
Bishkek