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Supporting Firm Creation and Growth Through Business Development Services in Kyrgyzstan

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Supporting Firm Creation and Growth Through Business Development Services in Kyrgyzstan Policy Insights POLICY POLICY INSIGHTS . SUPPORTING FIRM CREATION AND GROWTH THROUGH BUSINESS DEVELOPMENT SERVICES IN KYRGYZSTAN IN SERVICES DEVELOPMENT BUSINESS THROUGH GROWTH AND CREATION FIRM SUPPORTING SUPPORTING FIRM CREATION AND GROWTH THROUGH Supporting Firm Creation BUSINESS DEVELOPMENT SERVICES IN KYRGYZSTAN and Growth through National governments working to support firms facing the COVID-19 crisis have strong incentives to support entrepreneurship and private-sector development. As they struggle to survive the crisis, entrepreneurs and SMEs need accessible and high-quality public services. In addition to improving Business Development delivery of public services to firms, governments can help stimulate the market for private business services, such as business advisory or training. Services in Kyrgyzstan This Policy Insight discusses the hurdles firms in Kyrgyzstan face in accessing public and private business development services (BDS). The report suggests three sets of actions to the government: (1) offering streamlined government to business services in physical and digital one-stop shops; (2) supporting greater uptake of private business services; and (3) working with other relevant actors, such as business associations and the development community to build a stronger BDS market, which can ultimately foster much needed business development. www.oecd.org/eurasia Co-funded by the European Union GLOBAL RELATIONS Eurasia Competitiveness Programme This work is published under the responsibility of the Secretary-General of the OECD. The opinions expressed and arguments employed herein do not necessarily reflect the official views of the member countries of the OECD. This document, as well as any data and map included herein, are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. Please cite this publication as: OECD(2020), Supporting Firm Creation and Growth through Business Development Services in Kyrgyzstan, OECD Publishing, Paris, www.oecd.org/eurasia/competitiveness-programme/central-asia/ Supporting-Firm-Creation-and-Growth-through-Business-Development-Services-in-Kyrgyzstan- ENG.pdf. © OECD 2020 You can copy, download or print OECD content for your own use, and you can include excerpts from OECD publications, databases and multimedia products in your own documents, presentations, blogs, websites and teaching materials, provided that suitable acknowledgement of OECD as source and copyright owner is given. All requests for public or commercial use and translation rights should be submitted to [email protected]. Requests for permission to photocopy portions of this material for public or commercial use shall be addressed directly to the Copyright Clearance Center (CCC) at [email protected] or the Centre français d’exploitation du droit de copie (CFC) at [email protected]. 3 Foreword Kyrgyzstan’s government is working to improve the country’s business environment so as to facilitate the growth of private sector firms – in particular its micro, small and medium- sized enterprises (MSMEs). The government has identified the lack of public and private business development services (BDS) as a critical barrier to growth. An OECD public-private Working Group (WG) was created in early 2019 to help design targeted policies to address this problem. The WG met three times in 2019 (Annex B). It was chaired by Mr Dastan Kadyrov, Deputy Minister of Economy, and prior to him Mr Eldar Abakirov, former Deputy Minister of Economy. The WG brought together stakeholders from different ministries, the presidential administration, the cabinet of ministers, business associations, companies, and NGOs active in the field, as well as representatives of the development community. This peer review note reflects the work of the WG as well as the contribution of international experts from the Ministry of Economic Development of Poland and the Ministry of Justice of Uzbekistan. The final recommendations presented in the note will be peer reviewed during the OECD Eurasia Competitiveness Roundtable on 23 June 2020 in a virtual manner as part of a series of OECD Eurasia webinars. This exercise will involve both international experts and representatives from OECD member countries and other Central Asian countries. SUPPORTING FIRM CREATION AND GROWTH THROUGH BUSINESS DEVELOPMENT SERVICES IN KYRGYZSTAN © OECD 2020 4 Table of contents Foreword ................................................................................................................................................ 3 Acknowledgements ................................................................................................................................ 6 Acronyms and Abbreviations ............................................................................................................... 8 Key Indicators for Kyrgyzstan ............................................................................................................. 9 Executive Summary ............................................................................................................................ 10 Introduction ......................................................................................................................................... 12 Kyrgyzstan’s economic growth has been primarily driven by remittances and minerals .................. 12 Firms operate in a challenging business environment with barriers to formalisation and growth ..... 16 Public and private business development services can support firm creation and growth ................ 20 The government has made BDS a policy priority, but results have so far been limited .................... 21 Recommendation 1: Improve the accessibility and efficiency of public services ........................... 23 Challenge 1: G2B services are scattered and involve multiple procedures ....................................... 23 Recommendation 1A: Establish whole-of-government one-stop shops for businesses, possibly leveraging existing business service centres ...................................................................................... 26 Recommendation 1B: Digitalise public services for businesses ........................................................ 32 Recommendation 2: Assess demand and act as a broker ................................................................ 37 Challenge 2: The government lacks information on business needs for BDS and firms receive little guidance on the availability and quality of services .................................................................. 37 Recommendation 2A: Conduct regular consultations and surveys of private-sector needs .............. 39 Recommendation 2B: Enhance the availability of information on existing services ........................ 42 Recommendation 3: Stimulate private supply .................................................................................. 45 Challenge 3: The market for private business development services is underdeveloped for small businesses........................................................................................................................................... 45 Recommendation 3A: Support and partner with business intermediary organisations in the delivery of services ............................................................................................................................ 49 Recommendation 3B: Make the best use of the development community ........................................ 51 Way forward ........................................................................................................................................ 56 Annex A: Defining firm sizes in Kyrgyzstan ..................................................................................... 57 Annex B: Methodology ....................................................................................................................... 58 Annex C: Survey results ..................................................................................................................... 59 References ............................................................................................................................................ 67 Tables Table 1. Selected business development services and their usual delivery channels ............................ 20 Table 2. Mobile broadband subscriptions and internet usage have been growing ................................ 34 SUPPORTING FIRM CREATION AND GROWTH THROUGH BUSINESS DEVELOPMENT SERVICES IN KYRGYZSTAN © OECD 2020 5 Figures Figure 1. Growth is highly correlated with exports and increasingly dependent on remittances and mineral rents .................................................................................................................................. 13 Figure 2. Perceived obstacles to doing business in Kyrgyzstan ............................................................ 17 Figure 3. Awareness of BDS ................................................................................................................. 37 Figure 4. Critical business needs by sector of activity (left) and firm size (right) ................................ 39 Figure 5. Firm awareness of sources of business support ..................................................................... 46 Figure 6. Use of BDS by sector ............................................................................................................
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