Kyrgyzstan’s Colossal Dordoi Bazaar: A Time of Opportunity and Change
In August, Kyrgyzstan became the fifth member of the Eurasian Economic Union (EEU), joining Russia, Belarus, Kazakhstan and Armenia. In the months leading up to the event, traders at the Dordoi bazaar located just outside Bishkek, Kyrgyzstan, waited anxiously to see if changes to trade and tariff policies would jeopardize their businesses. Their testimonies exhibit a depth of ingenuity and a keen eye for opportunity that suggests Dordoi will be able to maintain its place as a hub of Eurasian trade.
In 1992, shortly after Kyrgyzstan gained independence, Askar Salymbekov, the former head of the Sports Committee of the Kyrgyz Communist Party, turned his hand to capitalism.
In the 23 years since he set up Bishkek’s Dordoi bazaar, Salymbekov’s creation has become the largest market in Central Asia and a hub of trade between China and Europe.
The figures read like the description of a small nation’s economy. The Dordoi bazaar is made up of a dense maze of 30,000 containers and employs, directly and indirectly, more than 150,000 people, according to World Bank figures from 2009. With an estimated annual turnover of around $3 billion, Dordoi is no mere market – it is a vital artery in Kyrgyzstan’s economy.
Those numbers put the bazaar at the heart of the debate about accession to the Eurasian Union. Before joining the bloc, Dordoi’s traders deftly exploited their pivotal position in Eurasian transcontinental trade by playing on the difference of customs tariffs between Kyrgyzstan, China and Kazakhstan. Joining Russia, Kazakhstan, Belarus and Armenia is making trade with China more expensive, but decreases the cost of trade with other member states.
Contrary to pessimistic predictions, Kyrgyzstan’s accession to the Eurasian Union may not sound the death knell for all those reliant on Dordoi. The stories of Dordoi’s traders speak for themselves.
Jyldyz: “We should not exaggerate, the EEU is a bad thing, but we are not in Greece”
Jyldyz, 39, owns a container-shop in Junghai – the so-called “Chinese” section of Dordoi bazaar.
One summer afternoon, as Eurasian Union membership is looming, the bazaar is growing quiet. Only one other shop in Jyldyz’s alleyway is still open.
Entering these narrow alleys can be an intimidating experience for the unseasoned. At peak hour, men and young boys pushing carts of goods barrel down toward shoppers, threatening to knock down anybody inattentive enough not to make way.
For now it’s quiet.
Between two customers asking for plastic inflatable swimming pools, Jyldyz contemplates her situation. The intense heat-waves of this summer were good for business. “It is only because the weather is very hot and people want pools that I keep my shop open so late,” she says.
But the long-term trend hasn’t been forgiving.
“Five years ago, we were working till 4 or 5 pm, but since 2011 [when Kazakhstan, Russia and Belarus created the Custom Union – the EEU’s predecessor] business has gotten slower.”
Jyldyz’s customers were once predominately Kazakhs and Russians buying cheap goods in bulk. As custom tariffs with Kazakhstan rose, following the country’s entry into the Customs Union in 2011, the customers melted away and turnover fell dramatically.
The Eurasian Union spelled trouble for Jyldyz. “The cost of exporting to Kazakhstan will definitely get cheaper, but importing from China will become more expensive. Without changing my business model, I’ll never reach my highest turnover.”
Jyldyz thinks like an entrepreneur, however, and looks to new opportunities. “We should not exaggerate, the EEU is a bad thing, but we are not in Greece. There is still a lot of money to make.”
Jyldyz sees adaptation and innovation as the key to her future. She has experience of both. Facing unemployment in the 1990s, Jyldyz ended her career in journalism and turned to trading. At that time, Dordoi was a rare cash-making outfit in Kyrgyzstan.
Jyldyz began making annual visits to Yiwu, a city in China’s Zhejiang province that is home to the world’s largest wholesale market. “I used to spend 10 days there each year, but the journey, the interpreter, the cost of living and transporting the goods were very expensive,” she says. The appearance of Chinese and Dungan import companies in Bishkek changed the situation. Jyldyz says it became “cheaper and easier.”
The Chinese importer that Jyldyz works with has reduced his business activities in Kyrgyzstan. He now owns only five containers, compared to 20 a few years ago. That has forced Jyldyz to diversify. “Given the competition and my networks, it will be costly and exhausting to change my supply chains,” she says.
So it is that Jydyz has started studying to become a notary with aim of eventually making it her primary income source.
Erlan and Ruslan, conquering the Eurasian fur-hat market
While the EEU has dampened the prospects for some traders, others are not ready to quit. Erlan and Ruslan, a pair of brothers in their thirties, see the bloc as an opportunity to erase memories of last few lean years.
“We usually sell between 30,000 and 40,000 hats a year,” says Erlan.
Their small shipping container-cum-show room opens onto two dusty alleys in the middle of the Dordoi labyrinth. The shop their parents opened 20 years ago is a typical example of a small business that Dordoi’s unique geographical position made possible.
Behind the cold metallic walls of their office-shop, the brothers run a business that trades with clients across Eurasia. Four-fifths of their turnover comes from exporting. “I think that we could find our hats anywhere from Vladivostok to Kiev,” Ruslan says with a grin.
The brothers agree the EEU is good news.
Increased tariffs in Kazakhstan, Russia and Belarus have thrown obstacles in their way to customers there. Russia’s suffering ruble has been a bad wind too.
“For every thousand dollars we were making a few years ago, we are now making five,” says Erlan.
The process of Kyrgyzstan’s integration into the EEU was long and protracted, so Erlan and Ruslan gave serious thought to other options.
“Kyrgyzstan has a lot of land, we could have become farmers,” Erlan says.
But Erlan shows little enthusiasm for a farming life. After 20 years in the hubbub of Dordoi, leaving the baazari lifestyle behind would be tough.
Ruslan and Erlan believe the key to adaptation lies in modifying the production chain. “We have no raw material in Kyrgyzstan as all factories closed after 1991,” says Ruslan.
Their hats are made in China, so the brothers travel to Beijing and Urumqi up to five times yearly to collect their goods and make their purchases. With the EEU now upon them, they are planning to process more hats in Kyrgyzstan.
“We already produce 50-100 hats a day in our small factory in Kyzyl Asker [a small city in central Kyrgyzstan] and we intend to increase production,” says Ruslan.
The brothers are looking forward to the opportunity to access a market of almost 185 million people, many of whom are reliable consumers of fur hats.
Halil, an outsider navigating the new Silk Road
When Halil visited Kyrgyzstan for the first time in 1994, Dordoi was still a very small market. Halil was drawn from his native Turkey to explore business opportunities in this newly independent state. “I made some friends who offered me a job helping in the construction of a mosque in Bishkek,” he says.
His job was to import the materials, and it is from there that his small business grew.
To begin with, Halil dealt in a little bit of everything. Kyrgyzstan was a promising new market, although problems were plentiful. “Roads were bad, customs officers picky and greedy, and my drivers were simply afraid of making the journey from Turkey to Kyrgyzstan,” he recalls.
In 2000, Halil married his Kyrgyz sweetheart and settled permanently in Bishkek. “In those days, I only traded carpets made in Gaziantep,” he says, referring to a town in central Turkey. Halil’s brother owns a carpet factory and is his main supplier.
Over the span of two decades in which Halil has been trading, he has acquired an impressive knowledge of the modern Silk Road. His trucks use three routes. One route winds through Iran, Turkmenistan and Uzbekistan; another goes through the Black Sea and Russia. A third passes through Azerbaijan and over the Caspian Sea, although this is rarely used.
“The road chosen depends on the unofficial custom ‘tariffs’ at the different borders,” Halil explains. “If the price increases at Iran’s border, my trucks go through Russia. If it falls, they go through Iran.”
Halil’s networks have made him one of the main importers of Turkish carpets in Kyrgyzstan. In Bishkek, he usually has four to six customers a day, with more on the weekend. On top of that, he supplies around 50 shops across the country.
When interviewed on the eve of Kyrgyzstan’s official accession to the Eurasian Union, Halil, like most Dordoi traders, had little clue what the new customs regulations and tariffs would be. He anticipated a 40 percent increase in the cost of each truckload, enough to bleed his financial margin, already considerably reduced by Kazakh and Russian tariffs.
“The cost of one truck could rise from $20,000-$35,000,” he estimated.
Over the last few years, he has already reduced the size of his annual imports from 10 trucks to five.
But Halil has a Plan B. “I give myself until 2016 to decide what to do,” he says. He is considering importing machines from Gaziantep to produce carpets directly in Kyrgyzstan.
As a naturalized Kyrgyz citizen, Halil is a step ahead of potential Turkish competitors. “When I was still working on a visa, I had problems all the time: I needed to give 500 som here, 1,000 som there ($7.30 and $14.60 at the current rate). If any Turkish seller comes now, he will have to deal with the bureaucracy and may also need some money to smooth the way.”
Askar Salymbekov, “I couldn’t have imagined Dordoi bazaar could become so big"
In his huge office at the top of Dordoi’s business tower in central Bishkek, Askar Salymbekov, the president of the Dordoi Association, can’t stifle the smile when asked if he anticipated the success of Dordoi bazaar.
“I thought it would become a medium-size market,” he says. “It was a complete surprise to see it assuming such proportions.”
Between two calls, the busy businessman and politician remembers the reasons that led him to create Dordoi bazaar.
“In the early 1990s, there were no places to find goods like clothes – Kyrgyzstan didn’t have anything,” he says.
Sensing an opening, many enterprising Kyrgyz people traveled to Russia, where they stuffed their suitcases with garments to sell back home. Exploiting his position as head of the Bishkek department of markets in 1991, Salymbekov cleared a space around Spartak stadium for the small-time shuttle-traders to sell the goods straight out of their luggage.
With the demand ever increasing, Salymbekov decided to buy a sheepskin-processing plant that had gone out of business and used the space to found the market that would grow to become the biggest in Central Asia.
In the early years, according to Salymbekov and his associates, the aim wasn’t really to build a market. The model was to charge customers a few som to enter the bazaar – an example copied from Odessa’s Pryvoz Market, which Salymbekov visited in the late 80s and early 90s while attending sporting competitions.
Within a few years, Dordoi could hold 2,000 stands for vendors. After 10 years, there were 15,000 lots. Salymbekov now runs a holding company that bundles together 50 commercial companies, including the bazaar, along with 10 non-commercial organizations, such as the Dordoi Bishkek football club.
Salymbekov says the durability of the bazaar, which lived through the tough and lean 1990s, was down to the “spirit of business.”
“There were bandits … but ‘business spirit’ has been the best protection against them,” he says. “It is all about negotiation.”
Salymbekov is one of those many Kyrgyz figures to be found at the knotty nexus between politics and business. He was close to the first post-independence president, Askar Akayev, and served as the governor of the Naryn region from 1999 until the period of the 2005 revolution, which culminated in the toppling of the ruling order. After that uprising, Salymbekov for a brief period became mayor of Bishkek, before being elected to parliament under the colours of the President Kurmanbek Bakiev’s Ak Zhol party.
He took another run at the political scene by running for parliament in the October 4 election at the joint helm of his own party, Butun Kyrgyzstan-Emgek.
The goal, Salymbekov said, was “to put the economy at the forefront of government’s agenda, and defend the interest of entrepreneurs.”
The party garnered only 6.1 percent of the vote, however, short of the 7 percent threshold needed to enter the legislature.
During the Bakiyev presidency – which lasted from 2005 until the next revolution, in 2010 – Dordoi bazaar was seen as a safe haven for entrepreneurs troubled by organized crime.
“There are a few independent economic sectors in Kyrgyzstan. Dordoi is one of them and an escape from any predators,” says Emil Nasritdinov, professor at the American University of Central Asia, in Bishkek. “The large number of bazaaris and the ownership structure made it somehow untouchable.”
Salymbekov business’s story has had its moments of gloom.
During the Bakiyev period, the Dordoi Association was elbowed into selling off its banking arm, Dos Credos, for a pittance. Many business owners were similarly expropriated by the Bakiyev family and the elites that surrounded it at the time.
Initially reluctant to support Kyrgyzstan’s membership in the Eurasian Union, Salymbekov has finally publicly backed it, despite the fear of trouble it could cause to small-scale bazaaris.
“If we are able to trade, we should also know how to produce something,” he says.
Salymbekov is philosophical.
“The bazaar has always existed in the East, we just need to adapt,” he says. “In businesses, there always are fluctuations. Profits are falling a bit nowadays, but we anticipate an increase of activity soon.”
Like so much else in business, the future of Dordoi many be online. The Dordoi Association has started work on an Internet supermarket that will give bazaaris a new way to reach buyers.
Shuttle-traders, the end of an era
Dordoi may have undergone significant changes since the start of the 1990s, but some figures at its heart are recognizably the same. The bazaar is nothing without its shuttle traders, who deftly squeeze margins out of carrying goods across borders.
Some of the first shuttle-traders that emerged in the early years are now the heads of flourishing businesses, involved not only in trading but also construction, textile and services industries.
Present-day shuttle-traders – the porters and drivers essential to enabling the cross-border exchanges – worry that their day may soon be up.
Maybe the most important among their ranks are the “pressers,” whose job consists of skilfully squeezing as many wares as possible into easily transportable packages.
Osman, 40, rushes around a hall of a hundred or so metallic presses, as he explains how his job works. “The amounts of tax people pay at the border depends on the size of the bags,” Osman explains.
And so dozens of press-hall workers spend their days compressing massive piles of garments and wrapping them in fabric bags bound with wire and adhesive tape. “We usually work all day for 200-300 som ($3.5-$5),” Osman says.
A few years ago he was earning enough money to feed his four children and even managed to buy his own press. But the decline of activity at Dordoi has ushered in hard times for Osman and his fellow press-hall workers. Open borders with Kazakhstan make the service even more redundant.
Porters at the border are in a similar predicament.
The Kordai border post, the busiest border crossing between Kyrgyzstan and Kazakhstan, is about 10 kilometers from Dordoi.
In pre-Eurasian Union days, it was common to see up to 50 porters waiting with their trolleys at the crossing to carry through goods stuffed into bags – many of them freshly compressed by Osman and his colleagues. A porter would cross the border 3-5 times daily for 150-200 som per bag ($2.5 to 3.5). The payment would go toward covering the cost of the entire process, which could involve slipping the odd judicious bribe to customs officers.
Mansur, a porter in his 30s, saw the writing on the wall: “When the border opens, we will lose our jobs.”
Some of the porters try to reassure themselves and their colleagues.
“The government is not ready, construction work has to be done at the border post, and people still need our services,” they say.
Nonetheless, most agreed that time was running out. Sooner or later, they would have to look for employment elsewhere, possibly in factories making hats or carpets.
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