Arbitration as the Method of Settlement of Investment Disputes against the Kyrgyz Republic
AKIpress Analytics section, March 19, 2013

The Kyrgyz Republic has already participated in several arbitration proceedings. Therefore, it might be reasonable to analyze peculiarities of legal regulation of arbitration in the KR, the causes and consequences of arbitration disputes and make relevant conclusions…

What risks foreign investors should take into account while investing into the Kyrgyz mining sector,
The Times of Central Asia, March 1, 2012.

Overview of Anti-Corruption Laws in Kyrgyz Republic,
Comparative Summary of Anti-Corruption Laws in the CIS Economic Region, 2011,
The CIS Leading Council Network.

What a foreigner should know about tax regime in the Kyrgyz Republic?
The Times of Central Asia, publication expected.

Kyrgyzstan is not an offshore zone and does not provide tax exemptions, but the rates of many of them are not very high.

Attracting highly skilled specialists to Kyrgyzstan: Challenges and Solutions


Jyldyz Tagaeva, lawyer
Sultan Khalilov, junior lawyer

Attracting highly skilled specialists to Kyrgyzstan: Challenges and Solutions

INTERNATIONAL EXPERIENCE

In all developed countries, the war for talent is growing incredibly fast. Economic and political events in the early nineties had serious implications for emigration of highly skilled specialists (“HSS”). To date, there exist a global labor market and a growing number of jobs requiring special skills and expertise. Many countries compete to attract highly skilled scientific, technical and managerial personnel by undertaking regulatory measures to stimulate recruitment of such personnel.

Thus, for instance, in 2011, the government of Estonia adopted its Plan of Action for attracting and retaining foreign HSS. Unlike other European countries, Estonia does not require that before hiring a foreign specialist the employer should prove that there is no appropriate candidate in the local market for the job offered. What makes Estonia unique, however, is that it has the government sponsorship policy to support the hiring of foreign HSS by offering to pay 50 – 70% of their wage for 26 months.

The foreign talent policy in Singapore is the most effective among all of the four Asian tigers. Singapore creates favorable conditions to attract foreign specialists. In particular, it has the government housing policy to provide affordable accommodations to foreign personnel. It also offers preferential loans and tax incentives; for example, the costs of hiring and accommodating foreign talent are excluded from the tax base.

In the United Arab Emirates (“UAE”), the foreign talent policy is considered a top priority. Thus, the government offers a vast range of benefits and incentives to attract foreign HSS. Furthermore, the UAE has greatly simplified procedures for accreditation and recognition of foreign diplomas and degrees so that a foreign talent can be hired even without a diploma, provided that he is a master of his craft.

The war for talent has also begun in Russia which is encountering the problem of brain drain and shortage of skilled personnel, both local and foreign. Thus, in June 2010, Russia passed an act which greatly simplified the complex rules and regulations governing the hiring of foreign workers and eased the foreign HSS hiring requirements for employers. Foreign HSS in Russia refer to foreign nationals having certain experience, skills, or achievements in a specific area of practice and certain salary requirements. For all that, the rate of pay for foreign HSS is the main criterion. In March 2015, Russia further liberalized its foreign talent policy by lowering the minimum wage rate for foreign workers employed in different industries. For example, foreign workers employed by companies operating in technology innovation special economic zones must be paid at least 58,000 rubles per months, with other foreign workers being entitled to a maximum of 167,000 rubles per month. Although under Russian law, foreign HSS are not eligible for work permit exemptions, the procedure to obtain work permits is quite simple: the employer will need to submit its application and supporting documents to the migration authority and wait 14 days for response. Quota requirements for foreign workers do not apply to foreign HSS.

Kazakhstan has no explicit legal definitions of foreign HSS or special procedures for issuing work permits to them. However, some categories of foreign workers are exempt from work permits, for example, CEOs of branches and representative offices of foreign companies, performing artists, filmmakers, orchestra conductors, painters, sportsmen, trainers, educators, etc.

Thus, international experience demonstrates that efforts are being undertaken worldwide to create favorable conditions for inviting qualified personnel to share their experience, technology, and expertise for the economic development of the countries in general.

KYRGYZSTAN’S EXPERIENCE

Kyrgyzstan has general legal requirements for hiring foreign workers, i.e. there is no definition for ‘foreign highly skilled specialist’ in Kyrgyz law. The External Labor Migration Act of the Kyrgyz Republic (the “ELM Act”) regulating permits to hire and employ foreign workers and permits to work provides that the government offers incentives to stimulate arrival of people who will invest in the Kyrgyz economy or establish foreign owned enterprises or businesses with foreign participation in Kyrgyzstan. However, this provision does not work in practice: different types of foreign workers are subject to general work permit requirements and are not able to benefit from any preferences or simplified arrangements.

Trying to protect internal labor market, Kyrgyzstan fails to consider the needs of businesses and the importance of attracting highly skilled labor. Meanwhile, some investment climate surveys indicate the problem of HSS shortages as one of the main barriers to doing business in Kyrgyzstan. According to National Statistics Committee data, in 2014, only 445.3 thousand (19.3%) out of 2,302.7 thousand people employed in Kyrgyzstan had higher professional education. Some more detailed consideration should be given to the obstacles existing in the Kyrgyz legislation with respect to the attraction of foreign HSS and.

Below we discuss in more detail some of the Kyrgyz legal provisions that represent obstacles to attracting HSS to the country and consequently, to doing business and encouraging investment.

Required documents

When issuing permits, the Ministry of Labor, Migration and Youth (the “Ministry of Labor”), apart from the ELM Act, is governed by the Regulation on the employment of foreign nationals and stateless persons in Kyrgyzstan (the “Regulation”) .

Pursuant to the Regulation, a checklist of required documents for a permit to hire foreign workers is prepared by the Ministry of Labor, i.e. it is not final and subject to change from time to time. Moreover, there are a number of problems encountered by employers when collecting all required documents. For example, among other documents submitted in support of an application there must be a valid business or employment visa of a foreign worker, in other words, to order to apply for a work permit the foreign worker must be physically present in Kyrgyzstan. But the most controversial requirement refers to the need to submit the employment contract with the foreign worker although the law prohibits foreign nationals from working without a work permit. Thus, executing employment contract and starting work before obtaining work permit would constitute a violation.

Processing times

By law, the Ministry of Labor must process an application for work permit for employer within 30 days from the date of its submission or within 35 days where additional check is required. A written notification of the decision to grant or refuse an application must be provided to the applicant within 5 business days after its processing. Where an application is refused by the Ministry of Labor, the written notification must outline the reasons for the decision.

Upon receipt of the work permit for employer, the applicant must apply for a work permit for employee being a foreign national. Such applications must be processed by the Ministry of Labor within 15 days from the date of their submission. However, in reality, the processing time may be extended to 2 months. Thus, the applicants may have to wait minimum 45 days for the Ministry of Labor’s decision while there is no guarantee that a permit will be granted.

Refusal of applications

The Ministry of Labor may refuse to issue a work permit to a foreign worker on the grounds that similar specialists are available in the local labor market and can be selected from among Kyrgyz nationals. This is the main and most common reason why many foreign HSS are being refused Kyrgyz work permits with no reference to any reliable data. Included among these foreign specialists are top-level and middle level managers of local and foreign companies, educators, technical specialists, including IT, mining, oil and gas specialists, etc.

The current system of issuance of authorization documents for foreign labor force is opaque and ineffective, and does not stimulate the flow of HSS to the country. Business entities cannot obtain publicly available information on the number of permits issued; persons who have received a permit; the number of remaining available quota; the accuracy of information about citizens of Kyrgyzstan who have similar skills as the attracted foreign specialist.

The above mentioned bureaucratic procedures in the activities of the Ministry of Labor entail the time expenditures and labor costs for businesses. Instead of doing business, i.e. its primary activity, a business entity is forced to undergo unnecessary formal procedures and at the same time to be in a state of uncertainty, for example, about whether the potential director of the company will be issued a work permit. In the long run, when there are a huge number of such entities as a result of the complexity of formal procedures, there is a risk of a slowdown in economic growth in general, as well as the exit of foreign investors from the market of Kyrgyzstan.

In the last 5 years, Kyrgyzstan has been annually approving 10, 650 – 12, 990 quotas to hire foreign nationals and stateless persons, with approximately 80% of them being distributed in favor of unskilled labor. Such practice of quota allocation confirms the ineffectiveness of the foreign talent policy in Kyrgyzstan and the need for improvement in this field.

The improvement of the foreign talent policy in Kyrgyzstan has been addressed several times by the business community and discussed with the concerned public authorities. Currently, representatives of business associations and governmental agencies continue discussions in this direction.

CONCLUSIONS AND RECOMMENDATIONS

Attracting HSS by granting work permits

In our opinion, in order to compete to attract talents, create favorable conditions for attracting investments and benefit from HSS experience, knowledge and technology , Kyrgyzstan needs to take measures to stimulate attraction of foreign HSS.

After discussions with the business community, on October 22, 2015 the Ministry of Economy made available for public opinion the bills proposing amendments to legal acts aiming to simplify procedures for attracting HSS to Kyrgyzstan. The amendments propose to introduce a category of “highly skilled specialist” with reference to, inter alia, minimum wage rate based on Russia’s experience.

Representatives of business community and the Ministry of Economy continue to discuss the higher education requirement. The thing is that many qualified specialists may have no higher education. For example, this may apply to athletes, IT, oil and gas, or mining specialists, etc., who may have only specialized secondary or high school education, but be a “swell” in his field.

In general, it is proposed to establish a simplified procedure for attracting HSS, including a simplified list of documents necessary for obtaining work permits, non-application of annual Government-approved quotas to HSS and their families. The purpose of the proposed simplified procedure is not only to increase the investment attractiveness of the country and to benefit from new expertise and technologies, but also to encourage employers to get out of the black market, pay social insurance and payroll of their foreign HSS, which, respectively, will increase the budget revenues of the country.

Attracting HSS by exempting from work permits

In addition to the above-mentioned permit procedure, we think it is necessary to consider the possibility of attracting foreign HSS by exempting them from work permits, but giving a relevant notice on a paid basis. In this case, it is proposed to create a single register of HSS, which will be maintained by the concerned public authority for the purposes of their registration and accountability. Kyrgyzstan will not be a pioneer, by exempting foreign nationals from work permits. Kazakhstan over the years creates conditions for attracting certain categories of employees by removing administrative barriers.

Based on the foregoing, it can be concluded that along with the principle providing priority consideration to Kyrgyz citizens for appointment to vacant positions in the national labor market, it is also important to observe another principle of the country’ external migration policy : the principle of meeting the needs of the labor market for necessary workforce to enhance economic efficiency.

Problems of attracting and employing HSS are complex and require serious attention and integrated solutions. In our view, in this issue it is necessary to develop a long-term strategy at the state level. It is necessary to create favorable conditions for labor migration so that, firstly, people would be willing to come to Kyrgyzstan to work and, secondly, the rules would be clear and simple for their proper observance and avoidance of violations. As we are well aware, the availability of HSS is very important for the socio-economic development of the country. This can be learned from the experience of the developed foreign countries: Canada, Germany, Japan, South Korea, Singapore and others. Kyrgyzstan should also attract qualified personnel, since this category of workers can contribute to the economic development of the country and professional development of the local specialists. This, in turn, in the long run will lead to the improvement of the business environment and investment climate in the country and, consequently, the welfare of the people of Kyrgyzstan.

 

 

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