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Goods that keep economy of Kyrgyzstan afloat

The pace of economic development of the republic, according to the forecasts of the government and international financial institutions, will make up at least three percent by the end of the year.

According to the most conservative estimates, the country’s GDP will increase by at least 15 billion soms. Could it be even more?

Losses of Kyrgyzstan from «blockade» on border

Indeed. So, the IMF forcedly lowered the forecast due to the situation in the autumn on the border with Kazakhstan. According to experts of the International Monetary Fund, the controversy with Akorda will cost Bishkek 0.3 percent of GDP.

At first glance, this seems a minor figure. However, in monetary terms, the losses will be about one and a half billion soms, or over twenty million dollars. A more accurate figure should be determined by a commission headed by the Deputy Prime Minister of Kyrgyzstan Tolkunbek Abdygulov.

There are calculations that the losses can be higher than predicted by the IMF. In part, even the Eurasian Development Bank agreed with it, which, being more cautious in assessing, nevertheless admitted: «The slowdown in the annual dynamics of GDP growth will be more significant than it was previously expected.»

There are many mines, but only one hoists

In the conditions of «blockade», which, fortunately, was removed, the main attention again riveted to the mining industry and gold deposits. Metals, as it is known, do not require veterinary or phytosanitary control. Gold remains one of the main items of Kyrgyz exports and goes mainly to the western market, safely bypassing the Kazakhstan’s border.

According to various sources, gold production in Kyrgyzstan may reach 17-18 tons by the end of the year.

The production of precious metals has a powerful impact on the economy and is estimated at least at several percent of GDP, and taking into account related industries and the multiplier effect, it exceeds a tenth of the country’s annual gross domestic product.

However, a few weeks ago there was a possibility of a significant drop in production in this area. The reason for this was a loud debate, involving even high-ranking officials, including Almazbek Atambayev, who was in office of the president.

Such an amazing dependence of the economy on public debate can be explained simply: large volumes of gold are given to Kyrgyzstan by one field.

Yes, the authorities in recent years have made significant progress in attracting foreign investment in the mining industry. Several new mining enterprises operate. Together with the Chinese investor, development of the gold-copper deposit Taldy-Bulak Levoberezhny was started, where the first ingots of the metal were produced; several foreign companies are working in Chatkal area, where alluvial gold deposits are located. However, these projects do not produce even a ton of the precious metal.

The main contribution to the economy of the republic is made by Kumtor mine, where, according to forecasts, the volume of gold production at the end of the year will be 16.3-17.2 tons.

«Development of Kumtor mine in the USSR was considered to be economically impractical due to high financial costs,» Ulanbek Ryskulov, Chairman of the State Committee for Industry, Energy and Subsoil Use, said in a recent interview. «But the project has proven its value. Kumtor is still the flagship of the mining industry.»

How Kumtor replenishes the treasury

Why did it happen? It is mostly because the deposit is being developed by a Canadian company. And in this country, nature protection and new production technologies are treated with great scrupulousness. Nevertheless, Kumtor for a long time was actually a hostage of politics in Kyrgyzstan.

Almost every six- seven years, the authorities tried to revise the agreements with the investor. But each time — only for a period determined by the term in office of a particular president.

Last time, Kumtor was laid claims mostly of an environmental nature. A group of civil activists, who received unexpectedly wide support in the Parliament, demanded to stop development of the mine, arguing that the mine allegedly caused irreparable damage to the nearest glaciers.

Scientists and specialists claimed the opposite. But if the government and legislators did not listen to them, the Kyrgyz economy would enter a period of prolonged crisis.

According to forecasts, by the end of the year the budget will receive at least 9 billion soms in taxes and mandatory payments from Kumtor.

For the entire period of the company’s operation in the country, the volume of its payments exceeded $ 3.5 billion!

Dividends from new agreement

The government eventually acted as it deemed more appropriate and logical. In mid-September, a new cooperation agreement was concluded with the Canadian investor, which guarantees significant benefits for both sides.

The Kyrgyz one, first of all, received more significant levers of management in the project.

Three of five top executives of the company are citizens of the republic now. Centerra has undertaken new obligations to finance environmental protection activities, primarily in the water area of Issyk-Kul Lake. The Natural Resources Development Fund will get $ 50 million, and the annual environmental payment was increased from $ 310,000 to $ 3 million.

The conclusion of the new agreements has become such a significant event that was included in the government’s one-hundred-days report by Sapar Isakov. And, undoubtedly, this Cabinet of ministers can go down in the history of Kyrgyzstan with a team that has decided the so-called Kumtor issue. If, of course, the authorities succeed in preserving continuity of decisions in the future that has been the main problem in the state’s investment policy so far.

Cabinet and Kumtor- in one fairway so far

Nevertheless, despite the fact that the conclusion of the new agreement can be attributed, rather, to the merits of the former Cabinet of Ministers, headed by Sooronbai Jeenbekov, investors do not seem to have anything to worry about. The government of Sapar Isakov not only promises not to change the rules of the game — at least in the near future, but indeed considers the agreements with Centerra very beneficial for the Kyrgyz side.

There are reasons for it. Moreover, the government is more satisfied with the fact that the Kumtor project is almost entirely in line with the goals and tasks that the authorities are setting themselves, including Taza Koom project and the strategy of «40 steps», which are now actively promoted by Sapar Isakov and his supporters.

Kumtor project is one of the rare enterprises that can boast of transparency in many ways.

Those who are really interested in the work of enterprise can easily become acquainted with its activities, revenues, and the amount of deductions to the budget. By the way, there is a version that this once served as the true reason for criticism of the project by political groups. After all, the gold mine was perceived by the circle of the first two presidents as a potential source of personal incomes, and for understandable reasons the regime of openness was extremely unfavorable for them. However, times change.

According to the Prime Minister Sapar Isakov, the Kyrgyz side, as the largest shareholder of Centerra, is interested in the stable operation of the company and its development.

«The government is committed to effective joint work and creation of favorable conditions for the operation of Kumtor mine, as well as citizens of the republic — employees of the company,» he says.