UNDP has initiated a research on the shadow economy (SE) in the Kyrgyz Republic in cooperation with the Ministry of Economy and Finance. There are two aims to the research: to evaluate the size and nature of the SE and to develop policy recommendations to assist the Government to utilize the power of this relatively untapped potential resource.

It should be noted that the SE, broadly defined as the unregulated, non-formal part of the economy that produces goods and services for sale or for other forms of remuneration, is an integral part of advanced economies, as well as transition and developing countries. In second half of 1990s, the SE in developed countries was estimated to be 12% of Gross Domestic Product (GDP) on average, 2 23% of GDP in transition countries and 39% of GDP in developing countries (Schneider, 2 2003). The Kyrgyz Republic is no exception. The estimates produced in this report indicate that the levels of the SE in the country are comparable to similar countries in the region.