During the Soviet era, industry in Kyrgyzstan was totally dependent on the other republics for raw materials and other resources. Between 1985 and 1989, industrial output increased at a rate of over 5% annually. With the disruption of traditional supply and export arrangements within the former USSR, however, industrial output declined by 1% in 1990 and dropped by over 23% in 1992. Industrial production decreased by 24% in 1994 and by another 12.5% in 1995. By mid-1995, production began to recover and in 1997, Kyrgyzstan reported an industrial growth rate of 7%, one of 14% for 1998. The high growth rate in 1998 was associated with a steep rise in gold production. Nearly all of Kyrgyzstan's industrial output derives from the capital of Bishkek and surrounding areas. Mechanical and electrical engineering (vehicle assembly, washing machines, electrical appliances, electronics), light industry (mainly textiles and wool processing), and food processing make up close to 75% of the country's industrial production and 80% of its industrial exports. Other important industries include chemicals, leather goods such as shoes, and construction materials (primarily cement).
The government passed the "Privatization and Denationalization Act" in December 1991, authorizing the transfer of all small, medium, and large-scale industrial enterprises to the private sector. The Concept Law on Privatization passed in 1994 was designed to correct early problems with the transition. By 1995, about 600 enterprises had been sold, with 250 fully privatized. The transition is also expected to involve the conversion of defense industries to civilian use under private ownership. One important conversion thus far involves the participation of a South Korean firm in establishing electronics manufacture at a plant previously geared toward military-related production. The government is encouraging the purchase of substantial shares of individual enterprises by worker collectives, although more widespread and non-collective ownership is also being promoted. By 1999, much of the government's stock had been sold.