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Problems with investors: How Kyrgyzstan’s authorities can change situation

Economic situation in Kyrgyzstan has long been sad. It has only worsened last year due to the coronavirus pandemic. At the same time, there are a number of investment projects that somehow keep the country afloat, but they are at risk now. Igor Pankratenko, Doctor of Historical Sciences, Russian expert on Central Asia told what needs to be done to preserve what is still there and attract new investments.

— The Constitution was changed in Kyrgyzstan. Its new version significantly expands the powers of the head of state. Will such an increase in power help to improve relations with foreign investors?

— Of course, but on one condition. Bishkek must convince investors that their investments will be safe in the remaining six months before the parliamentary elections, which will actually complete the process of consolidation of Sadyr Japarov’s power.

To change the difficult situation with foreign companies, the president will have to convince the business of several fundamental things. First, under his rule, Kyrgyzstan will create a legal regime that will protect the interests of investors. Second, investors will be relieved of the need to observe ritual dances around their property.

— Are there mechanisms to fulfill these conditions?

— The issue of creation of such working mechanisms is long ripe and even overripe. The problem is that every president of Kyrgyzstan promises to resolve the issue, but, so far, the matter does not go beyond words. I have lived for a long time and I remember similar promises from the first president of the country, Askar Akayev, which were then repeated with minor changes by all the other heads of state.

Frankly, I doubt that the investment protection situation in Kyrgyzstan will change. The point is that the presidents cannot make an appropriate political decision. The problem goes much deeper.

Before initiating the necessary changes, it is necessary to create conditions for their implementation, overcome the inertia of the ruling elites in Kyrgyzstan, and ensure that the current laws are observed by all without exception.

We can build any kind of scheme, but when it comes to measures to enforce compliance with the rules, from ordinary citizens to top officials of the country, the system fails.

Igor Pankratenko

The local population should stop breaking the rules just because «the historical tradition of grazing cows in this field cannot be revised under any circumstances.» The authorities in their turn should stop perceiving investors as «cash cows» and a source of wealth for the political elite.

Investors are a tool for development of the republic. As soon as this simple truth enters the minds of people, many issues will be resolved.

— Do the risks that you describe concern only large companies or all foreign investors?

— Culture of private property and investment has not been formed in Kyrgyzstan. It is unfortunately so. The sanctity of private property in a country is recognized only when it belongs to a person endowed with power and having the ability to defend his rights. Including through staging mass events — rallies and protests.

Foreign investors are deprived of such opportunities. In the absence of legal mechanisms for resolving controversial issues, the natural reaction of foreign business is to invest anywhere but in Kyrgyzstan.

Against the background of the chaos in the country, even opening a business in Africa looks no longer like an anecdote, but as a real solution.

Igor Pankratenko

My assessments of the situation in Kyrgyzstan caused a negative reaction from a part of the expert community in the country. My words that Russia chose the only possible path to ensure guarantees for its investments in Jerooy project seemed offensive to someone.

But in the end, it may turn out that Moscow by its actions plays to the benefit of Bishkek, providing an inflow of investments into the country.

There is no need to be indignant, it is necessary to eliminate the problems, if any. If there are not any, how they tried to prove to me, why does the country faces scandals around the next deputy commissions and inspections?

Igor Pankratenko

To understand how unfavorable the relations of Kyrgyzstan with foreign investors are, it is enough to look at the ways in which foreign companies try to guarantee safety of their property. The most obvious example is Russia and Russian private investment in Jerooy mine. They opened an enterprise at the highest level with involvement of the Presidents Vladimir Putin and Sadyr Japarov.

I will reiterate my recommendations for investors at the other large mine, Kumtor, and mines where Chinese investors are working. You should take the dialogue to another level. Otherwise, there will be no safety of property, investments and future projects.