USD 68.27
EUR 84.11
RUB 1.19

Presidential race. Investors switch to standby mode

Despite the support of the partners in the Eurasian Economic Union, Kyrgyzstan has not managed to rebuild the economy.

Modernization of economy on paper

The Development Fund opened by Russia to finance industrial projects, at the insistence of the authorities, switched to lending of small and medium-sized businesses, mainly based on trade and production of agricultural products. Kyrgyzstan is back to square one, where technological development, in fact, is assigned to the only industry — mining.

Kyrgyz subsoil is rich in minerals, and with due attention they could long ago become a guarantee of successful development and economic prosperity. But despite the potential, the mining industry in the republic is represented mainly by the company for the development of the Kumtor deposit, which accounts for more than two thirds of the country’s industrial output and about eight percent of GDP. The mine is a successful investment project that has been working steadily despite the political turmoil that is habitual for troubled Kyrgyzstan.

That is why local experts for a long time call Kumtor a flotation ring of the economy. The Parliament is more straightforward. According to one of the legislators, the gold mining company is a cash cow for Kyrgyzstan which has a heavy burden. Despite billions of deductions to state and local budgets, Kumtor has ever been the main topic for criticism of opposition groups.

The situation does not change even when politicians who have been in power change places with their opponents. But both of them are perfectly aware that the work of the mine should not be stopped.

There is gold, but it can not be mined

According to experts, this situation can remain in the republic for at least other 10 years — till Kumtor is operating. And, accordingly, gold mining will remain extremely important for the economy, mostly because the precious metal is one of the main items of the Kyrgyz economy.

Local production cannot offer the foreign consumer something else because of its technological backwardness. An exception is the production of agricultural complex and light industry. But the demand for it is preserved only in the Russian market. And there is also an unpleasant tendency for local manufacturers — growing competition, which sooner or later will cause a decrease in exports in Kyrgyzstan.

In such a background, gold mining remains not only important but also a priority for the republic. Moreover, deposits were discovered in Kyrgyzstan in Soviet times, total reserves of which are estimated in hundreds of tons of precious metal. The problem is that the country can not develop them at its own expense. Only preparation for the development of an average field requires, according to experts, about $ 20–25 million. Large one demands even more powerful infusions. Kyrgyzstan fails to attract investments to new projects for 15–20 years.

In many respects, sadly, it is connected with the same Kumtor, taking into account the situation around which large business judges the real investment climate of the country, the level of corruption, the rules of the game. It happened so that the administrative pressure on the largest gold mining company has not weakened for the last 10–15 years. Moreover, negotiations on the format of cooperation with the investor are still going on.

Politics hampers investment

Is there any light at the end of the tunnel? No one seems to know the answer. On the one hand, international experts call the mining industry of the republic one of the safest for investors. On the other hand, it is not quite a pristine reality, with which foreign business in Kyrgyzstan faces daily.

Local entrepreneurs try not to invest in the development of production in the country, but seek to withdraw capital to other countries. This is a very alarming indicator, and it is high time for the authorities to pay attention to it.

Experts believe that in the next six months or a year the country should not wait for large private investments in the economy.

The business is waiting for the end of presidential elecion in order to understand how the organization of power in the republic will develop and whether it makes sense to invest money in projects proposed by the Kyrgyz side.

In many respects, it depends on whether the future president will somehow restrain political groups from open interference in the economy and whether he will cope with the so-called party corruption, the signs of which are becoming more apparent under the parliamentary system.

However, if the period of «tranquility and predictability» comes, it is unlikely to last long. A little later, the republic will begin preparations for the next and no less important political campaign — parliamentary elections. And, it should be assumed, the business will again take wait-and-see attitude. Big money likes silence and stability, but both are a scarce commodity in Kyrgyzstan.

All this time, Kumtor will continue to play the role of the airbag for the budget, which has managed to get used to the peculiarities of the business climate of the republic, which can be called sharply continental.

However, «immunity» to political storms cost the company a lot. Threats from parliamentary factions and the actions of opposition groups have already led to a decline in the value of the company’s shares. The experience of the largest private investor clearly shows: the economy simply needs to be separated from politics. Otherwise, Kyrgyzstan will have nothing else but to attract investments on trust till the burden of financial obligations to foreign creditors will not put the country on the verge of a real political bankruptcy.