Italy discovers business opportunities in Kyrgyzstan

Kyrgyz Italian companies meeting e1649940300628
The meeting between business and government representatives of Italy and Kyrgyzstan (Credits: Ministerstvo Innostrannix Del Kyrgyzskoj Respubliki)

Author: Silvia Boltuc

Kyrgyzstan and Italy recently celebrated the 30th anniversary of establishing diplomatic relations. Recent official meetings between Italian and Kyrgyz political and business representatives underlined Italy’s interest in deepening cooperation with central Asian markets.

On April 12th, 2022, the Ministry of Foreign Affairs of the Republic of Kyrgyzstan and the Italian Trade Agency (ITA) organised a country presentation for more than 120 Italian companies on the investment and export potential of the country. It is the first time in Kyrgyz-Italian relations that such a meeting took place. The representatives of state bodies of Kyrgyzstan spoke about the current opportunities for export and investment in the country. The Kyrgyz part offered the Italian companies to create joint ventures in Kyrgyzstan with the brand “Made with Italy”. The Italian side, in turn, noted the high investment attractiveness of the country and expressed its readiness to assist representatives of the Italian business community in expanding trade and economic cooperation with the Kyrgyz side (Italy and Kyrgyzstan strengthened their relations).

As the Kyrgyz ambassador in Italy, Taalay Bazarbaev, recently stated, in November 2021 Minister of Foreign Affairs of Kyrgyzstan, Ruslan Kazakbaev, paid the first official visit to Italy and met his counterpart Luigi Di Maio, the President of the Senate, Maria Elisabetta Alberti-Casellati and the head of ITA, Roberto Luongo. In the same month, Italian companies specialised in consulting, engineering, renewable energy, agriculture, textile industry, and metallurgy visited Bishkek. Following the visit, in December 2021, Di Maio attended the format “Central Asia + Italy” meeting in Tashkent.

In his last interview, Bazarbaev furthermore expressed Kyrgyzstan’s stance on the current Ukrainian-Russian conflict, underlining the country’s commitment to the Minsk agreements, which have received the support of the United Nations Security Council.

Geopolitical scenario

One of the priority sectors of the Kyrgyz economy is hydroelectricity. Kyrgyzstan has about 250 large rivers. Therefore, the country has a vast production potential estimated at 140-160 billion kWh of electricity, of which it currently uses only the 10%. According to Bazarbaev, Italian investments in this sector could be decisive.

The United Kingdom, China and the Russian Federation are currently the country’s leading partners. As for the Chinese, Kyrgyzstan is part of the Belt and Road Initiative (BRI). China aims to become the leading actor in the central Asian dynamics by promoting the BRI and investing in regional infrastructural projects. Beijing created an economic dependence and, therefore, a strong connection between China and Central Asian republics through massive investments (Central Asian republics’ economic dependence on China). Among Central Asian republics, Tajikistan and Kyrgyzstan financially rely more on Chinese investments allowing Beijing to exploit this economic dependence to affirm its presence and influence. Indeed, since the U.S. troops’ withdrawal from Afghanistan, the Chinese authorities have promoted security cooperation with Dushanbe and Bishkek. In this framework, China has reached a security cooperation agreement with Kyrgyzstan (China and Kyrgyzstan strengthened security cooperation).

On the other hand, the country is part of several militaries, political and economic entities along with the Russian Federation, such as the Commonwealth of Independent States (CIS), the Eurasian Economic Union (EAEU), the Collective Security Treaty Organization (CSTO) and the Shanghai Cooperation Organisation (SCO).

Given that Italy is one of the world’s largest producers of textiles, clothing and footwear, and considering that the Kyrgyz textile and clothing industry are companies with high export potential, in the recent meeting, the Italian-Kyrgyz representatives declared the willingness to develop bilateral cooperation in this fields. Kyrgyz clothing products with the “Made in Kyrgyzstan” brand are in great demand in the markets of Russia and Kazakhstan. In the aftermath of the Ukrainian crisis, Russia proposed to Iran to replace the textile exports previously coming from Europe. In this context, if Italy starts to produce in Kyrgyzstan, the Russian and Kazakh appetite for this market might grow.

Tourism is another vital area of the Kyrgyz economy. The major countries that generate tourist flows to Kyrgyzstan are Russia, Kazakhstan and Uzbekistan. Increasing cooperation in this field might push Italians to explore the countries’ holiday opportunities.

Finally, low-cost energy resources and the availability of qualified personnel are aspects that are attracting Italian brands. The Kyrgyz Republic is part of the Generalised Scheme of Preferences Plus (GSP+) and will be exempt from customs tariffs for seven years, so products marked can be exported to Italy duty-free.

Risk Assessment

The recent Russian-Ukrainian crisis has underlined the importance for Italy to diversify its trading partners. The Central Asian republics, known for their strategic position in the Eurasian chessboard and vast energy resources, also offer advantages in the industrial and tourism sectors. From a geopolitical point of view, competition in central Asia among global power such as Russia, China, the United States and regional actors such as Turkey, Iran, Pakistan, India and Gulf monarchies might destabilise the area. On the other hand, the importance of transport corridor projects crossing the region might push the actors involved in maintaining a balance. Another concerning point for investors might be the security and stability issue since the region has experienced jihadist propaganda, the establishment of terrorist organisations and an increase in organised crime and illicit traffic.

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