Kyrgyzstan is looking to reduce the number of methods for privatising state assets from eight to five

In Kyrgyzstan, there are plans to reduce the number of methods for privatising state property from eight to five. On 1 October, the Jogorku Kenesh adopted the relevant amendments at second reading.

It is proposed to remove three mechanisms from the current law: the sale of state property by tender, transfer to management with subsequent purchase, and transfer to lease with subsequent purchase.

Consequently, five main methods of privatisation will remain: sale by auction; contribution of state property to the authorised capital of commercial companies; the placement and sale of shares on the stock exchange; the sale of shares via global depositary receipts on foreign stock exchanges; and direct sale.

At the same time, the option of direct sale remains as an exceptional mechanism. Under current legislation, it may be applied, in particular, if an asset has failed to be sold on at least three occasions using other methods provided for by law.

The authors of the amendments explain the changes as necessary to simplify the procedures for the disposal of state property, make the privatisation process more transparent, and improve conditions for attracting investment.

During the debate on the bill, MPs raised the separate issue of protecting bona fide purchasers of already privatised property. Controversial cases of privatisation and legal proceedings concerning previously disposed-of assets were also discussed.

The amendments alter the very set of tools available to the state when selling assets. In particular, the removal of the tender process means abandoning a mechanism whereby the buyer could be selected not only on the basis of the price offered, but also on the basis of the commitments they undertook regarding the asset being privatised. The current law provides for commercial and investment tenders.

The issue takes on added significance given the scale of privatisation to date. According to the Ministry of Economy, 7,356 state-owned assets have been privatised in Kyrgyzstan since 1991.

Following the second reading, the relevant committee must finalise the draft bill, taking into account the amendments received, and submit it to the Jogorku Kenesh for consideration at the third reading.