National Programme on Transition from Informal to Formal Economy to Be Developed in Kyrgyzstan

On 11 November 2022, the Ministry of economy of the Kyrgyz Republic convened in Bishkek a meeting of the inter-agency working group established to develop a National Strategy on Transition from Informal to Formal Economy for the period of 2023-2025.

News | 12 November 2022
The group includes technical specialists in the following areas: economy, commerce, finances, transport, communication, labour, social security, migration, education and science, health sector, agriculture, social fund, tax service, statistics, workers’ and employers’ organizations. The ILO Project “Transition from Informal to Formal Economy” provided technical and experts assistance.

In his opening speech, Tchoro Seyitov, Deputy Minister of Economy and Commerce of the Kyrgyz Republic, highlighted that “the task of reducing the share of informal economy and informal employment has been included in the agenda of the Cabinet of Ministers of the Kyrgyz Republic as well as in different national documents like the National Development Strategy of the Kyrgyz Republic up to 2040, National development programme of the Kyrgyz Republic until 2026.”

Economic informality is an established reality observed in the last three decades of the Kyrgyz Republic’s history. The informal economy level has grown in recent years, reaching a peak of 24.5 % of gross domestic product (GDP) in 2016. In 2014-2018, it hovered between 23 and 25 %, up from 18 to 20 % in the years 2006-2013. The key sectors of the economy that are responsible for informal economic activity include trade and services, construction, transport and logistics, and the processing industry. As of 2020, 62.2 % of workers in the Kyrgyz Republic worked in the informal labour market.  In general, informal economy workers are more likely to be male than female (64 % versus 60 %), mirroring the overall higher share of men in the labour market. The informal share of employment in the high-risk sectors – notably agriculture, forestry and fishing, wholesale and retail trade, accommodation and food services, construction and transport and storage – is high.

Shea McClanahan, team leader, senior social policy specialist, international consulting firm ”Development Pathways Ltd.”,  presented preliminary results of the analysis on the informal economy/ employment situation and the coverage of informal workers by the social protection system in the Kyrgyz Republic. It was noted that formalization of the informal economy is not an objective in itself but rather a necessary condition to reach other very important objectives: decent work, productive and sustainable enterprises, enhanced government scope of action and fairer societies. The goal is to improve access to rights and protection of all women and men, including citizens belonging to the most vulnerable categories and enhance their capacity to contribute to and benefit from an inclusive, job-rich, resilient and green recovery.

Therefore, the Strategy should cover not only challenges of informal employment, but also of informal economy. Thus, the Strategy should aim to reduce the number of informally employed (both in informal and formal enterprises, as well as in the households); reduce the share of unregistered business entities including through increased productivity and better market access.

According to Gocha Aleksandria, Senior Specialist for Workers’ Activities, ILO Office for Eastern Europe and Central Asia, “the Strategy shall be developed using the participatory approach involving all stakeholders, including employers’ and workers’ organizations, as well as informal workers’ representatives. The increase of the proactive role of the social partners and the promotion of the social dialogue are vital prerequisites for the successful implementation of the process for formalization of the informal economy.”

It was agreed that in subsequent sessions, meetings of Inter-agency working group will a) identify extent, characteristics and nature of the informal economy; b) map ongoing interventions and actors; c) propose vision and goals of the strategy for transition from informal to formal economy, and d) propose measures for comprehensive and whole of government approach as well as baseline and key performance indicators; e) develop monitoring framework.