KYRGYZSTAN TODAY Policy briefs on - Department of Geography

200. This means that about USD 20 million are being earned per month, revenue that
is not considered by taxation or social insurance. The profit margin of the workshop
owners are estimated at 25 to 150 percent.
The implementation of many policies now in place remains questionable due to the
fundamental misconception of migrant entrepreneurs and small business. For instance,
at the national level, in Spring 2009 the Presidential Decree on Moratorium (freezing)
of any inspections by “law and order” institutions until 31 December 2008 was an
example of political will by the national leader to improve trust in the government by
entrepreneurs. However, as of early September 2008 this Moratorium already seemed
to be “hanging by a thread” facing a high likelihood of cancellation. At the local level,
an attempt was made by the Municipality of Bishkek City to initiate a Unified Window
for business registration similar to Moscow City Government of Russian Federation.
A good practice by definition, it was designed to make business registration much
easier. However, this service will now be monopolised by the Ministry of Justice and
the City Justice Department. This may mean that private law firms that, in the past,
dealt with the registration of businesses will no longer be allowed to provide these
services. Again, the intended consequences of this policy are in doubt from the start.
The proposed shift in perspective: Bishkek’s New Middle Classes
Three principles to frame policies for formalising the informal
A majority of entrepreneurs in self-help housing districts have admitted that they
do not know how to conduct official business or declare their self-employment (Dialect-
ICON research April-June 2008). A deep and widely-shared mistrust exists between
the residents of the self-help housing districts and the government agencies. For many
internal migrants, entrepreneurship is a way to survive and feed their families, and they
feel that they do not need to ask the state for permission to do so. Yet they are afraid of
potential intrusion in their activities by “authorised” individuals or institutions (such
as tax inspectors, or electricity inspectors, sanitary and epidemiology inspectors), and
having to pay bribes. When bribes and unofficial fees have become normalized and
grow, it becomes too expensive to do unofficial business. Therefore, they feel that one
day they would have to start declaring their business and revenue, yet they do not
know where to start and how to gradually prepare for it.
To overcome existing mistrust between the government and small entrepreneurs, the
self-help housing districts’ residents need to receive more support from the government
and the municipal authorities. Yet the state has to shift its perspective and stop viewing
rural migrants as “dependent masses” but instead encompass and support the identity of
internal migrants as an emerging middle class that is engaged in markets of production
and consumption. This is how the state can compete with the expansion of the informal
sector and perhaps even compete against the interests of organised crime that makes
use of the shadow sector as well.
Several policies have been formulated jointly by the business community and the
government, and attempts have been made to implement them during 2008. However,
there has not been much success in facilitating the process of formalising small businesses
and making their activities more transparent and accountable. This is perhaps due to the
nature of these policies. They do not allow for, or adjust to, the case of internal migrants
becoming entrepreneurs and turning around at least USD 200 million annually in Bishkek’s
undeclared workshops. Today it is clear that, to motivate and to legalize small business,
the following principles should be used to frame discussion and policy making:
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