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Sensitive points of investment climate in Kyrgyzstan. What are we doing wrong?

«There are always «several truths» in the mining industry of Kyrgyzstan, one of the most promising and problematic. The task of the state is to find an optimal solution and maximally take into account the interests of all parties,» said Dmitry Alexandrov, an expert at the Russian Institute for Strategic Studies, in an interview with StanRadar.com.

— How do the people perceive disputes over projects of foreign investors in Kyrgyzstan?

— They look like this. If investors get a license they are entitled to do everything. But if you look closely, the situation is much more complicated. Therefore, conflicts in the mining industry of Kyrgyzstan should be considered individually and attention to details should to be paid. Because there are no unequivocally right and guilty in a situation where there is a misunderstanding. Everyone has their own truth.

Truth of a mining company is in getting a profit. It is interested in continuing work, if possible, conflict-free, long-term, but most importantly — as profitable as possible. For a mining company, caring for the environment, providing jobs to local residents are secondary concerns, so to say, the costs of operations.

Interest of a partner country is in receiving contributions to the budget, creation of jobs for its citizens and solving regional social problems.

Dmitry Alexandrov

A local resident, on whose land a mining company operates, is interested in gaining his or her own benefit. It can be expressed in different ways, for example, in the social support of the population, which is practiced by some large investors in Kyrgyzstan, or construction of necessary facilities in a village or region. This is a common occurrence in Kyrgyzstan. At least, a part of the large foreign companies more or less adheres to this scheme.

The truth of an ordinary Kyrgyz resident is that, in addition to benefits, he wants to preserve the environment, where he and his family will continue to live. As we know, approaches to this topic are very different for different investors in Kyrgyzstan.

— The listed objectives of a partner country and local residents coincide. Why, then, are there many disputes and discontent?

— They coincide only in part. A compromise between the interests of companies, the state and local residents is always needed. This is a multi-level and multi-faceted problem.

The task of the state is to control companies not only from the point of view of payment of taxes, but also from the point of view of their contribution to social infrastructure, compliance with environmental legislation and the rights of local people.

On the other hand, the state should ensure unhindered operation of a company if it complies with these requirements.

As for Kyrgyzstan, much depends on the peculiarities of internal relations between representatives of the authorities, the population and the leaders of specific companies, «personal factor» means a lot.

Dmitry Alexandrov

Many investors, primarily medium and small ones, practically do not allocate funds for social infrastructure. They often do not comply with environmental regulations. If a company can find an opportunity not to allocate these funds, it will not allocate them.

But even when investors allocate funds, for example, for construction of a school or a road, this money is not always used for its intended purpose, since the controlling structures often have their plans for these resources. The same applies to the distribution of jobs, social assistance and other bonuses from the work of foreign companies in Kyrgyzstan.

It turns out that villagers do not see a direct benefit from presence of investors in their land. If this situation lasts for a long time, discontent becomes an instrument that is easy to use.

It happens that other companies use the opinion of local residents. They can negotiate with local leaders to hinder competitors from working.

Dmitry Alexandrov

It is important that the issue of foreign companies and the locals dissatisfied with their presence became an instrument of political struggle. The work of Kumtor mine has made the gold mining industry one of the most significant sectors of the Kyrgyz economy. Naturally, it becomes a reason for speculation, criticism of opponents and political statements. This is already a familiar situation for the country.

I described only a small part of the problems that have accumulated in the mining industry of Kyrgyzstan. Negative around foreign companies will not decline without well-functioning mechanisms of interaction between the local communities, the leadership of government services and mining enterprises.

— What does the country has to do with existing projects in Kyrgyzstan?

— Jerooy and Kumtor are large, but not the only mines in Kyrgyzstan. There is a conglomerate of medium and small gold deposits. Licenses for some of them have been distributed, and work has not yet begun on some of them. I will not talk about Jerooy, because a full-fledged production has not been launched there so far. Therefore, I would not consider it as a working project.

As for Kumtor, disputes over which have been going on for many years, it seems to me, there is a solution that gradually comes to the interested parties. This is a compromise.

Dmitry Alexandrov

I believe that control over the activities of Kumtor, including in the environmental sphere, public and state, is at an acceptable level, unlike many smaller mining companies, to which such public interest is not attracted and which one has to pay closer attention to in terms of compliance with Kyrgyz legislation, especially environmental protection.

In the case of Kumtor, it probably makes sense not to change the existing agreement by 180 degrees, but to adhere to those agreements on the basic points that were reached earlier.

Partners need each other. Canadians need the mine, and Bishkek needs a profit from the investors. And if one cannot get away from each other, it is better to agree. This, however, does not mean that it is necessary to weaken control over the enterprise.

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