A case study of foreign direct investment in Kyrgyzstan

For developing or poor countries that do not have substantial natural resources that can be used in their economic development, foreign direct investment (FDI) may play an important role considering the inability of such countries to modernize their industries and produce industrialized products. One the benefits of FDI is the opportunity for local firms to learn from experiences and capabilities of foreign firms. Kyrgyzstan is a poor and newly independent country of the former Soviet Union (FSU). This region is one of the last areas to which foreign investments have been flowing. Garibaldi et al. state that 'foreign investment flows toward the region are in the form [of] FDI mostly and portfolio investments are scarce'.(1) Since the early 1990s, FDI has been active in the region with different motives and multitudes.(2) Kyrgyzstan has a relatively small market compared to others in the region and, unlike Azerbaijan, Turkmenistan, Kazakhstan and Uzbekistan, it does not have any large natural resources such as oil, natural gas and rich minerals.



The aim of this study is to analyse FDI characteristics in Kyrgyzstan in a case study context and to provide suggestions for FDI issues. As we explain in a detailed manner in the research methodology section, many difficulties prevented us from implementing a wide ranging survey through mail questionnaires. The study specifically examines first, the importance of company and host countryspecific factors in FDI decisions; second, it deals with the drawbacks of operating in the region by studying corruption, the effect of which on company performance is the third major concern of the study.