Industry

Industry

Industrial production in Kyrgyzstan declined significantly in 1992 and 1993, especially in comparison to the average annual growth rate from 1985 to 1990, which was 3.3 percent. Important factors in this decline were the energy crisis caused by the loss of Soviet-era fuel supply agreements and the outflow of skilled Russian industrial and management personnel. By 1994, when output had fallen by another 25 percent, Kyrgyzstan's production was only 42 percent of its 1990 level. Only four of the country's 200 most important industrial products--oil, electrical power, household electric appliances, and alcoholic beverages--showed an increased output in 1994. By the first quarter of 1995, some 120 enterprises, more than one-third of the national total, were idle. The decline was caused by problems in obtaining raw materials, components, and other inputs; a drop in effective demand; the economic weakness of trading partners; and problems in arranging for payments. An important additional problem, however, is the nature of Kyrgyzstan's Soviet-era industrial structure, which was specialized for defense-related manufacturing. Many defense-related industries closed in the early 1990s because they could not find alternative types of production once Soviet defense contracts ended. The government's initial policy was to avoid supporting unprofitable state enterprises, but intense political pressure has kept many such firms open.

Including mining, the electric power industries, and construction, industry contributed about 45 percent of GDP in 1991, but that percentage dropped significantly in the following years, even with a parallel agricultural decline. For example, between 1991 and 1993 production of crude steel decreased 45 percent, cement production decreased by 49 percent, and production of metal cutting machines dropped by 77 percent. Gross capital formation decreased an estimated 55 percent in 1994, and investment for that year was below 25 percent of the rate at the end of the Soviet period. Private investment, however, rose slightly to nearly half of total investment for 1994.

None of the major industrial projects planned for 1993-94 was completed on time. Included in major construction postponements was a cigarette factory in Osh, which could have taken advantage of southern Kyrgyzstan's favorable tobacco-growing conditions. Many other projects were completed on a much smaller scale than originally planned. As conversion to useful new lines of manufacture was delayed, the national economy shrank. In addition, unemployment grew rapidly as state-owned enterprises were phased out but not replaced.

In the mid-1990s, the most valuable industrial components of Kyrgyzstan's economy were machine building, textiles, and food processing, which are centered in Bishkek, Osh, and Jalal-Abad (see fig. 5; table 14, Appendix). Some electronics and instruments are produced in former defense plants, and a limited metallurgical industry also exists. The most productive"industry" is electric power, which is produced in the country's numerous hydroelectric plants.

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