Kyrgyzstan and Centerra Gold came to a new agreement on Kumtor project after long negotiations. It has entered into force. It has been repeatedly written about additional payments that the republic would get under the new agreement. But it is important not only because of them. Aza Migranyan, Doctor of Economics, Professor, Head of the Economics Department at the Institute of CIS countries told about other advantages for Kyrgyzstan.
— What solution of controversial issues on Kumtor can give?
— Signing gives, first of all, serious image bonuses to Kyrgyzstan in terms of increasing investment attractiveness and creating a stable business environment.
This is much more valuable than any other financial income, because the presence of a contentious issue with the large foreign investor dictates additional requirements for any potential investor in terms of risk insurance. Accordingly, this affects the cost of external loans or the ability to attract direct investment in general.
The first advantage is the overcoming of negative image issues and the possibility of transition to normal conditions for creating an investment climate, terms of trust in the country.
Aza Migranyan
The second advantage is the completed or rather suspended dispute, because judging by how the discussion unfolds, it is impossible to talk about a final solution of the issue. This can give greater stability to the socio-economic situation in Issyk-Kul region as a whole. Indeed, it is Kumtor that remains one of the major players in the region, providing the population with benefits and allowances, contributing to the solution of social problems and helping to develop the region’s infrastructure and partially employ the population. This is a very serious factor.
The third advantage is the possibility of a stable forecast for the future in terms of fulfilling conditions of the signed agreement.
Aza Migranyan
It means that the capitalization of Kumtor’s assets in global stock markets is becoming more stable: there is a possibility that their cost will increase due to rising gold prices. And then we can say that the level of capitalization will depend not on political risks and instability factors, but on the global conjuncture of gold prices. It is very important. This makes it possible to rely on revenues from Kumtor in the future.
Another advantage is that a stable operation of Centerra Gold makes it possible to forecast stable revenues to the budget of Kyrgyzstan, which is important given the share that Kumtor contributes.
— Do information campaigns criticizing investor affect the stock prices of the company’s shares?
— Sure. But if there is a signed agreement approved by all parties and having a legal status, these discussions are no longer crucial. They may form an external informational background, but the effect on stock price fluctuations will be insignificant.
If we talk about their influence in the absence of such an agreement, then they have a decisive role. We have managed to move away from this destabilizing non-economic factor that has become a serious acquisition.
