Kyrgyz Republic - Garment ManufacturingKyrgyz Republic - Garment

Overview

The Kyrgyz Republic has been home to a notable garment manufacturing industry since Soviet times.  Since independence, the sector experienced rapid development, fueled by comparative advantages such as low labor costs, favorable customs agreements, and historical ties to large, post-Soviet consumer markets.  Since 2014, the sector has grown by approximately 190%[1].

The vast majority of Kyrgyz companies in the industry operate as “cut-make-trim” garment manufacturers, with domestic textile production having virtually ceased.  The sector remains fragmented, comprised predominantly of numerous small- and medium-sized enterprises (SMEs), with many manufacturers operating informally.  Due to this aspect, estimates of both the market size and the number of workers employed in the sector vary widely.  The latest statistics, in the first 8 months of 2018, estimated exports from the garment industry totaled $115.5 million, indicating 20% growth compared to the same period of 2017[2][3] - nearly 6.5%[4] of the country’s total ($1.76 billion in 2018) – as exports. Up to 90% of the textile products are exported to Russia, and the rest to Kazakhstan. An estimated 200,000 people work in the garment manufacturing sector in the Kyrgyz Republic[5], or between 8-8,5% of the total labor force.  

After years of producing for the bazaar trade, without firm orders, Kyrgyz garment manufacturers are now beginning to fulfill “cut-make-trim” contracts with fabric and fixtures provided by clients, with a few advanced firms involved in design, branding and production. As global competition in the sector has accelerated in recent years, Kyrgyz garment manufacturers have been forced to adapt to shifts in supply chains and are now positioning themselves to meet this international demand.

USAID partnered with SMEs in the garment and apparel industry to increase their export potential.  Through this cooperation, Kyrgyz apparel manufacturers underwent Business Social Compliance Initiative (BSCI) social and labor audits and certification, enhanced their quality control systems and expanded their base of suppliers.  As a result, they attracted new buyers to include international retailers from Europe in addition to their traditional Russian and Kazakh clients.
However, several other short- and medium-term challenges persist, including a lack of access to finance and modern inputs, and an underdeveloped capacity to market to demanding, yet lucrative European buyers.  The Kyrgyz Republic’s accession to the Eurasian Economic Union in August 2015 raised tariffs on several inputs into the garment manufacturing process, and the country continues to harmonize its laws and regulations to conform to the standards of the EAEU.

Opportunities

The garment and apparel manufacturing industry presents opportunities for U.S. retailers to diversify their supply chain away from countries with troubling labor standards, and particularly those seeking to export to the larger, nearby markets of Russia and Kazakhstan.  U.S. retailers committed to low carbon footprints will also be encouraged by the fact that nearly 90% of electricity is generated from renewable hydro-power assets.  Opportunities also exist for professional service providers that specialize in certification and standardization and assist garment manufacturers in navigating the export process.  On balance, the sector requires significant capital expenditures to upgrade machinery in order to remain competitive, which offers prospects for U.S. producers of advanced and specialized sewing, processing and cutting equipment.