This online event was held to discuss possible action and role of employers in reducing the level of informal economy in Kyrgyzstan in light of international experience. Moreover, the event featured the presentation of survey findings, as well as JIA Association policy document developed based on it.

The first part of the meeting was focused on discussing the employers and business community view of the informal economy and formalization.

The international expert Prof. Gustavo Rinaldi presented the findings of a study held among businesses in Kyrgyzstan. According to him, more than 40 percent of respondents did not see any advantage in formal registration, especially for small businesses. Mr. Rinaldi pointed out that corruption, taxation system, red tape and unfair competition were among the main problems of the business environment in Kyrgyzstan.

The national expert Bakyt Karabaev believes that contributions to the public pension system are too burdensome for businesses. “As a result, employers will either underreport the real wages or abstain from formally contracting individual workers,” Mr. Karabaev said. He further pointed out to loopholes in the patent system and complications in filling out the universal tax declaration.

The centrepiece of the event was a presentation of the JIA associations policy views on the subject, which was presented by Kalygul Saliev, legal advisor in the association. In their presentation JIA pointed out that employers often blame public services for low quality and corruption. This has an impact on the transition to formality as negative perception of public agencies and their practices does not encourage compliance when people do not expect quality services from the government in exchange for payment of taxes and social contributions.

JIA Association believes that another reason why enterprise shy away from formality is non-transparency of public spending. Taxpayers will want to know what their contributions are spent on, they said, and called for the greater transparency in public spending as one of the instruments to decrease the inclination towards informality.

Samuel Asfaha, Senior Specialist ILO/ACTEMP, underlined that the government needs information and feedback from enterprises to identify the goals and priorities of reforming the business environment. Events similar to today’s round table provide a unique opportunity for the government to establish communication with businesses, he said.

In the second part of the meeting, experts discussed the impact of COVID-19 on informal economy.

Judith Van Doorn, Specialist, Enterprise Formalization, ILO Enterprises Department, told the meeting participants about the ILO Recommendation on transition from the informal to formal economy. She specifically pointed out to a need in integrated approach or, in other words, joint efforts by different agencies and departments to provide enterprises with more opportunities and to improve the business environment.

Mirza Muleskovic, ILO Technical Officer on Enterprise Development, told about the ILO report to assess the impact of COVID-19 on enterprises in Kyrgyzstan. The report included findings of a survey of 623 businesses which shared the information on COVID-19 impact on the country’s private sector. As Mr. Muleskovic said, 50 percent of respondents did not stop their operations during the pandemic while the tourism sector was severely impacted. Also, 80 percent of respondents said informal employment was on the rise during the pandemic.

The report shed a light on what enterprises expected from the government and how their perceived the pros and cons of the transition to formality. Moreover, the report provided the main recommendations of the ILO regarding formalization of the informal economy.