Identifier
Created
Classification
Origin
07BISHKEK37
2007-01-22 02:38:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Bishkek
Cable title:  

NEW LAW BANS FOREIGN TRADERS IN KYRGYZ MARKETS

Tags:  PGOV PREL PHUM SOCI KG 
pdf how-to read a cable
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UNCLAS SECTION 01 OF 02 BISHKEK 000037 

SIPDIS

SENSITIVE
SIPDIS

DEPT FOR SCA/CEN

E.O. 12958: N/A
TAGS: PGOV PREL PHUM SOCI KG
SUBJECT: NEW LAW BANS FOREIGN TRADERS IN KYRGYZ MARKETS

BISHKEK 00000037 001.2 OF 002


Sensitive but Unclassified. Not for Internet distribution.

UNCLAS SECTION 01 OF 02 BISHKEK 000037

SIPDIS

SENSITIVE
SIPDIS

DEPT FOR SCA/CEN

E.O. 12958: N/A
TAGS: PGOV PREL PHUM SOCI KG
SUBJECT: NEW LAW BANS FOREIGN TRADERS IN KYRGYZ MARKETS

BISHKEK 00000037 001.2 OF 002


Sensitive but Unclassified. Not for Internet distribution.


1. (SBU) Summary: A new Kyrgyz labor law bans foreign
nationals from selling goods in the open-air markets. Coming
on the heels of a similar restriction in Russia, the measure
is scheduled to take effect on April 1. The State Committee
on Migration and Employment claims the measure is an attempt
to create more jobs for Kyrgyz citizens. The main target of
the law appears to be Chinese traders and retailers, mostly
in Osh and Jalalabad, but there are also Uzbek, Turkish, and
other foreign nationals who could be affected by this
measure. Some estimates put the number of foreign traders in
Kyrgyzstan as high as 10,000. Some Kyrgyz sellers told us
they welcome the new legislation, with the hopes of better
economic opportunities or simply less competition. But,
similar to a measure adopted in 2006 restricting the period
that expatriates can work in Kyrgyzstan, this latest
restriction raises questions about Kyrgyzstan's openness to
trade and investment. End summary.

ON THE HEELS OF MOTHER RUSSIA?
--------------


2. (SBU) A Kyrgyz government decree, signed on January 12 and
scheduled to take affect on April 1, bans foreign traders
from working in any wholesale market. The law also limits to
ten per cent the number of non-Kyrgyz citizens who can
operate as retailers in shopping centers and supermarkets,
and foreign retailers who fall within this quota will be
required to pay approximately $500 for re-registration. This
new law appears to be modeled after recent Russian law
limiting foreign traders, and some commentators have said
that the intent is to eliminate all foreigners from the
markets by the end of the year. According to several
traders, the Russian law has already sparked an exodus of
Kyrgyz traders back to Kyrgyzstan from Russia.

CHINESE MOST AFFECTED AND MOST WORRIED
--------------


3. (SBU) The number of Chinese traders operating in
Kyrgyzstan, mainly in the southern cities of Osh and
Jalalabad but also in Bishkek, has grown dramatically in
recent years. Although most were aware of the new law, few
Chinese traders we spoke to were knowledgeable about the
details. Many were worried the new law would ruin their
hopes of staying in Kyrgyzstan and developing their
businesses. Fearing substantial losses, one seller told
poloff that she has reduced the prices on much of her
merchandise. With several hundred thousand dollars in
Chinese products warehoused in Bishkek, she admitted it is an
amount one "cannot just sell off overnight." Others are
taking a wait and see approach, hoping that the Chinese
government can influence the Kyrgyz government to modify the
restrictions or threaten similar actions against Kyrgyz
citizens operating in Chinese markets unless the law is
revoked. Whether hopeful of compromise, fearful of economic
ruin, or in an attempt to make a quick sale, all claimed to
be reducing their stockpiles at deeply discounted prices.


APPARENT SUPPORT FOR THE LAW AMONG THE KYRGYZ
--------------


4. (SBU) Most Kyrgyz sellers seemed pleased that the law has
the potential to create more jobs for fellow citizens.
Grumbling that "it was about time our government was doing
something about those (expletive) Chinese", some traders
clearly expressed their animosity toward foreign traders
operating in the local bazaars. Many Kyrgyz retail clerks
viewed the new law with optimism, hoping to be offered more
responsibility, and correspondingly, a higher salary as a
result of the new limitations. Others speculated that in
order to continue working in their retail establishment,
foreigners will have to increase their staff to reach the

BISHKEK 00000037 002.2 OF 002


nine to one ratio. Although some believed that distribution
lines may somehow be affected or disrupted, everyone
questioned felt that less competition is always welcome in
the trade industry.

COMMENT
--------------


5. (SBU) While optimistic Kyrgyz traders see this new law as
a step in the right direction to create more job
opportunities, others view it as just another hurdle that
foreigners will have to overcome with increased payments or
bribes. If fully implemented, the measure could disrupt the
supply lines into Kyrgyzstan for the inexpensive Chinese
goods that fill the large open-air bazaars. And similar to a
measure adopted in 2006 restricting the period that
expatriates can work in Kyrgyzstan, this latest restriction
raises questions about Kyrgyzstan's openness to trade and
investment.
YOVANOVITCH