2018 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Jobs in the Kyrgyz Republic MOHAMED IHSAN AJWAD SARAH BERGER GONZALEZ Public Disclosure Authorized © 2018 International Bank for Reconstruction and Development / The World Bank. 1818 H Street NW, Washington, DC 20433, USA. Telephone: 202-473-1000; Internet: www.worldbank.org. Some rights reserved This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. 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Further permission required for reuse. ii ABBREVIATION AND ACRONYMS BEEPS Business Environment and Enterprise Performance Survey CBT Cross-Border Trading CIS Commonwealth of Independent States ECA Europe and Central Asia EEU Eurasian Economic Union FDI Foreign Direct Investment GCI Global Competitiveness Index GCR Global Competiveness Report GDP Gross Domestic Product GERD Gross Expenditure and Research Development GIZ Deutsche Gesellschaft fur Internationale Zusammenarbeit (German Development Cooperation) ICT Information and Communications Technology IMF International Monetary Fund KER Kyrgyz Establishment Reports MFI Microfinance Institutions NEET Not in Education, Employment or Training NSDS National Sustainable Development Strategy OECD Organization for Economic Co-operation and Development PRC Peoples Republic of China R&D Research and Development SME Small and Medium Enterprises TVET Technical and Vocational Education and Training US United States UNESCO United Nations Educational, Scientific and Cultural Organization WDI World Development Indicators WGI Worldwide Governance Indicators iii ACKNOWLEDGEMENTS This report has been prepared by a core team led by Mohamed Ihsan Ajwad (Task Team Leader) and Sarah Berger Gonzalez (Senior Social Protection Consultant) and comprised of Ilhom Abdulloev (Consultant), and Alena Sakhonchik (Analyst). The team is grateful to the following colleagues for their excellent contributions: Arvo Kuddo (Senior Labor Economist); Oleksiy A. Sluchynskyy (Senior Economist), Bakyt Dubashov (Senior Economist), Aurelien Kruse (Senior Economist), Christopher David Miller (Senior Private Sector Specialist), Saida Ismailakhunova (Economist), Sherzod Akbarov (former Social Protection Specialist), Giorgia Demarchi (Social Scientist), Violane Konar-Leacy (Senior Private Sector Specialist), Zhanybek Ybraiym Uulu (Public Sector Specialist), Nataliya Biletska (Senior Public Sector Specialist), Rajul Awasthi (Senior Public Sector Specialist), and Susanna Hayrapetyan (Program Leader). The report was written under the overall guidance of Cem Mete (Practice Manager) and Andrew D. Mason (former Practice Manager, Social Protection and Labor). This note would not have been possible without the timely support and inputs from the Ministry of Economy and Ministry of Labour and Social Development of the Government of the Kyrgyz Republic. The report also benefited from discussions with Government officials and private sector representatives, including those in the Bishkek Free Economic Zone. The report benefited from peer reviewers’ comments from: Thomas Farole (Lead Economist), Johannes Koettl-Brodmann (Senior Economist), Josefina Posadas (Senior Economist). Isadora Nouel (Team Assistant, Washington, DC) and Meerim Sagynbaeva (Program Assistant, Bishkek) provided excellent logistical assistance during the preparation of this report. iv TABLE OF CONTENTS Overview .............................................................................................................................................................................. 1 Workers and potential workers in Kyrgyz Republic face challenging jobs outcomes ........................................ 2 Job creation is limited to a few sectors, and is often not in the highest productivity sectors ............................ 4 Labor demand, supply and matching constraints limit job creation, productivity, job quality and inclusiveness .................................................................................................................................................................... 5 Unleashing the Jobs Potential in Kyrgyz Republic ................................................................................................... 7 Increase labor demand through job growth .......................................................................................................... 8 Prepare and develop a skilled and capable workforce ......................................................................................... 8 Implement labor equilibrating policies ................................................................................................................... 8 Introduction ......................................................................................................................................................................... 9 Chapter I. Workers and Potential Workers .................................................................................................................. 14 Labor force growth is outpacing job growth ........................................................................................................... 14 Labor productivity is low ............................................................................................................................................ 16 Job quality is a concern ................................................................................................................................................ 18 Jobs are not inclusive – especially for youth, women, and residents of the South ............................................ 23 Women and young men have weaker job outcomes ......................................................................................... 23 Women are engaged in the workforce, but have limited opportunities in the private sector ..................... 26 The most desirable jobs are in Bishkek, Jalal-Abad and Naryn ....................................................................... 28 There is a notable correlation between household wealth and employment outcomes ............................... 28 Micro-determinants for Job Outcomes .................................................................................................................... 29 Summary ........................................................................................................................................................................ 31 Chapter II. The Job Creators .......................................................................................................................................... 33 Despite its small size, the formal sector is important to certain regions and sectors ........................................ 34 Economic growth and formal sector employment don’t always go together ...................................................