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How coronavirus and closed Chinese border affect Kyrgyzstan

The state border of Kyrgyzstan with China is closed for almost a month. First, the checkpoints stopped working due to holidays in the PRC, and then — because of an outbreak of coronavirus. No one knows when the situation changes. Entrepreneurs, meanwhile, are preparing to calculate their losses.

Heavy trucks without work

The head of the Association of Freight Carriers Temirbek Shabdanaliev noted in an interview with 24.kg news agency that he had already felt the consequences of the closed borders. As of today, drivers who transported goods from China to Kyrgyzstan, Kazakhstan and Russia are out of work.

They say that Kazakhstan will open the border with China soon. People are already leaving there.

Temirbek Shabdanaliev

«We bring from China not only finished goods, but also accessories and fabrics. Therefore, it is now a big problem for garment workshops to find new suppliers. For example, they are now in search of garment accessories from Turkey or Iran,» the head of the Association told.

Entrepreneurs turned to the Ministry of Economy to help deal with the difficulties. The ministry held a special meeting at which the business could tell about the problems.

The Ministry of Economy said they were looking for alternative countries that could supply goods. But these are only words so far, it will take a lot of time.

Temirbek Shabdanaliev

«Our cargo carriers all stopped, they were left without work and income. They have nothing to feed their families. The next may be garment industry workers. As a result, all trade will suffer,» Temirbek Shabdanaliev believes.

Businesses understand that decisions on border depend only on the government. They are alarmed by the latest news from Russia, where the border with China has been completely closed. Entrepreneurs believe that this may indicate that the situation is worsening.

«We understand that the border will not be opened until the peak of coronavirus infection drops. It’s about the safety of citizens. We also cannot strongly insist on opening the border. We will look for alternative solutions to the problem,» Temirbek Shabdanaliev said.

Markets are looking for new directions

The Association of Markets is in no hurry to talk about problems. They note that consequences of the closed border are not felt yet. January and February are traditionally the «dead» season. Therefore, a decrease in trade volumes at this time is not yet an indicator of any problems.

I can say that accessories, some fabrics are running low now. But I can not say that this is a big problem. We have many warehouses full of goods. It’s enough as of today.

President of the Association of Markets Damira Dolotalieva

«Entrepreneurs are well aware of what is happening, what is coronavirus and closed borders. Therefore, many are looking for alternative markets, for example, Indonesia, Vietnam, Pakistan, India, Turkey, Uzbekistan. We consider all possible options. For example, we make excellent use of Indonesian fabrics. People have already started to leave there, sign contracts, deliver some part of the goods,» Damira Dolotalieva told.

In addition, the traders already had a similar experience. The same problems arose in 2003, when the SARS broke out. The markets coped with it. Many entrepreneurs understand that until a vaccine is developed, the disease is got over, the border will be closed.

As of today, there are enough goods. Raising of prices because of this is out off question.

Damira Dolotalieva

Entrepreneurs have already contacted colleagues from China and concluded that the problems would last for a long time. Therefore, they are more oriented towards Turkey, India and South Korea.

«We are exploring all possibilities, consider all markets. For example, we provide space for sales representatives of other countries on the territory of Dordoi market. The Ministry of Economy proposed this option: they are negotiating with sales representatives of other countries, and we provide large areas with tents so that they can make an exhibition of their consumer goods. We ask everyone to come, we are ready to consider all the proposals,» Damira Dolotalieva said.

How to sell an item without label

Gulnara Uskenbaeva, President of the Suppliers’ Association, notes that there are no problems so far. But the business still has concerns that due to the outbreak of coronavirus in China, there may be difficulties with the supply of goods. Moreover, the problem is not only that a large number of goods are brought from China.

«We ourselves produce and process products. Well, for example, we supply the same potatoes or carrots to the domestic market. But we buy packaging, labels. We cannot work without it. There are no such problems now. But then again, everyone has different problems, someone has more reserves, someone — less. But if we are talking about small and medium-sized businesses, they cannot make annual stocks of goods. Maximum reserves are enough for a month or two. And large business will not make such large stocks either,» the expert stressed.

If the issue is not resolved by mid-March, then, of course, there will be problems.

Gulnara Uskenbaeva

Switch of suppliers is now costly. After all, this will have to be done according to the rules of the EAEU. The process is long and complicated.

«There are well-established ways, and it is not clear now whether to wait until mid-March, or to go to Turkey and look for new customers. But who has the extra money? When we know for sure that it is be impossible to deliver goods from China, then we will solve the problem. As it was, for example, with Ukraine. How difficult it was when Russia closed the transit of goods, so it is the same,» Gulnara Uskenbaeva said.

Coronavirus will affect the economy

The coronavirus epidemic in China has increased uncertainty of the prospects for the development of global economy. Slowing GDP growth in China may be temporary. Experts note that, most likely, the PRC authorities will strengthen fiscal and monetary stimulus. This will lead to a gradual recovery in economic activity by the end of 2020. Current conditions may limit global economic growth.

Bloomberg Economics estimates showed that the consequences of the disease may cost about 0.4 percent of global growth in the first quarter of 2020. Oxfords Economics suspects a 0.2 percent loss.

Aigul Berdigulova, an Analyst at the Eurasian Development Bank, noted that the economies of the EDB member countries are likely to feel consequences of the situation in the Chinese economy. This is due to a decrease in tourist expenses of Chinese citizens, the volume of transit of goods from China and investments in joint ventures, a decrease in export volumes (primarily energy), and a drop in oil and metal prices.

A temporary slowdown of the Chinese economy by 0.2–0.5 percent for a year, accompanied by a fall in prices for primary and industrial goods, could cost about 0.1 percent of Kyrgyzstan’s GDP growth.

«Our calculations are based on the temporary nature of the shock and the absence of a significant impact on the supply side. Otherwise, the consequences for the economy of Kyrgyzstan may be longer and stronger,» Aigul Berdigulova said.