Green Economy: Barriers and Incentives for Business in Kyrgyzstan

April 18, 2025 – 10:05 Kyrgyzstan has committed to transitioning to a green economy. To support this, special measures are being introduced to assist small and medium-sized enterprises. These primarily include tax incentives and improved access to energy-efficient technologies. Many of these tools have indeed been implemented and have gained popularity in the country. However, experts point out that most people use these incentives simply because it’s financially beneficial — not necessarily because they care about environmental issues. Few reflect on the fact that the true goal of these measures is environmental protection. This is one area where the government should increase awareness. Additionally, many citizens are unaware of the full range of incentives available. They might have used them — if someone had told them what benefits were on offer. Unison Group conducted a special study on the barriers and incentives for adopting green solutions in Kyrgyzstan. The company’s Business Development Manager, Iskender Sharsheev, presented the findings and offered recommendations on how to make support more impactful and efficient. "Many existing incentives for the development of the green economy in Kyrgyzstan are working quite well. Some, however, require the development of by-laws, which would allow them to be fully implemented," said Iskender Sharsheev. Fiscal Incentives Legislative support aimed at accelerating Kyrgyzstan’s green transition can be grouped into three types of incentives: fiscal, customs, and green financing. The Tax Code provides for the following: Expenses on innovation (including the introduction of environmentally friendly technologies and improved environmental sustainability in production) are tax-deductible, creating financial incentives. New producers of electric and thermal energy, as well as renewable fuels from RES, are exempt from taxation for up to five years after commissioning, encouraging entrepreneurs to pursue clean energy projects. Technologies and goods meeting energy/resource efficiency standards, such as equipment for wind, solar, and small hydropower plants, are exempt from VAT when imported to Kyrgyzstan. The list of eligible goods is determined by the Cabinet of Ministers. Electric vehicles are exempt from property tax. Buildings and facilities that meet energy/resource efficiency criteria are eligible for a 50% reduction in property tax, reducing the tax burden and stimulating investment in green infrastructure. A new version of the Law on Production and Consumption Waste introduces a utilization fee to encourage recycling and regulates payments for waste disposal, promoting waste management initiatives. The fee is also levied on certain product categories. The Law on Environmental Protection introduces additional incentives for eco-friendly entrepreneurship, particularly for SMEs. It also defines a list of green equipment exempt from VAT upon import (though not exempt from VAT when sold domestically). "If we look at fiscal incentives, there are plenty, and they are showing results. For instance, about 20 small hydropower plants have already been launched in the country. Another 20 are planned this year," noted Sharsheev. However, some provisions exist only on paper. One such provision relates to building insulation — stating that if a building achieves energy efficiency class B, the owner is eligible for a 50% tax reduction. "This is especially valuable for owners of large properties, where property taxes are significant. But this regulation has been hanging in the Tax Code for 1.5 years without implementation due to the lack of a by-law. It needs to be developed urgently to incentivize energy-efficient buildings," Sharsheev emphasized. Customs Incentives If you ask ordinary Kyrgyz citizens about green energy incentives, one will certainly come up — zero import duties on electric vehicles. This benefit is widely used, though many don’t know the environmental rationale behind it. Normally, the EEU customs duty is 15%, but Kyrgyzstan has zeroed this rate until the end of the year. Electric vehicles are also exempt from all local taxes in Kyrgyzstan. A discussion is expected within the Eurasian Economic Union to extend this benefit. But this is not the only customs incentive helping green sectors in Kyrgyzstan. Within the EEU framework, duties have also been eliminated on: Irrigation devices (drip irrigation); Photovoltaic cells; Heat exchangers; Water filtration and purification equipment. Kyrgyz legislation also provides tariff preferences for electricity purchased by energy companies from renewable energy sources. Green Financing Beyond tax and customs benefits, financial incentives are also gaining momentum. A growing number of both local and international banks offer low-interest loans specifically for green projects. Currently, nine banks in Kyrgyzstan provide loans for such initiatives — some offer proprietary green loan products, others operate under the KyrSEF program. "Of course, there are still regulatory barriers. These need to be removed because they now act as negative incentives hindering the green transition," said Sharsheev. What Needs to Be Done Sharsheev also mentioned administrative barriers. For example, building a power plant requires large land areas, and the bureaucratic process for land acquisition is complex and time-consuming. "These procedures need simplification. A big request to the government, private sector, and all stakeholders: simplify all processes related to the production and transport of green energy," urged Sharsheev. Experts also believe that more financial incentives are needed. The current ones are insufficient. For developing countries like Kyrgyzstan, the green transition is impossible without adequate funding. They also propose additional tax incentives — for instance, temporarily removing the 10% corporate tax for green companies. Once the number of such companies grows and ESG exports and audits appear, the tax can be reinstated. Experts also propose introducing tax credits for green companies. What Are Tax Credits? If an entrepreneur starts a green business, they don’t have to pay taxes for the first five years — not as an exemption, but as a deferred obligation. The tax is recorded, but only paid once the company becomes profitable. "This is a unique mechanism. We believe it could work in our country," said Sharsheev. Other Recommendations for Advancing the Green Economy in Kyrgyzstan: Provide subsidies for R&D; Increase funding for green infrastructure projects and improve access to concessional loans; Multiply educational and awareness campaigns; Strengthen international partnerships and access to donor programs (green ventures, crowdfunding, etc.). url: https://kaktus.media/521963 #GreenEconomy, #Kyrgyzstan, #SustainableDevelopment, #GreenBusiness, #EcoIncentives, #TaxIncentives, #GreenFinance, #RenewableEnergy, #EnergyEfficiency, #EnvironmentalProtection, #UnisonGroup, #IskenderSharsheev, #CustomsIncentives, #GreenTransition, #CleanEnergy, #ClimateAction, #SustainableInvestments, #GreenInnovation, #EcoFriendlyBusiness, #GreenLoans, #Hydropower, #SolarEnergy, #ElectricVehicles, #RecyclingPolicy, #WasteManagement, #ESG, #KyrSEF, #GreenInfrastructure, #ZeroEmissions, #CircularEconomy