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New games around Kumtor. What they may lead to in Kyrgyzstan

The new composition of the government of Kyrgyzstan faced with the first problems. The economic difficulties in the next fall may turn into another government crisis, taking into account how fast the current composition of the Parliament punishes the guilty.

No economic growth

The first alarm bell has already sounded for the team of Mukhammedkaly Abylgaziev. The National Statistical Committee stated that the economy of the republic was slipping into recession. The pace of its development over the past six months amounted to only 0.1 percent. There were assumptions by some experts that the assessment of the National Statistical Committee was incorrect, and the calculation methods were out of date.

Some analysts think that real GDP growth is 4-8 percent.

The reaction of the National Bank helped to assess the state of things. It, being not politicized institution, lowered the annual forecast of economic development by 2.3 percent at once.

Amid such an unfavorable background, the government continues to seek funds for the development of the economy. The loans ceiling seems has already been reached, and the modernization of the country will require not less than $ 300 million annually in the next five years. Otherwise, as the authorities fear, the regions will remain subsidized, and the level of migration from them will increase.

It’s hard to believe that Kyrgyzstan is able to attract significant funds from investors to economic projects. Foreign large businessmen, despite the ostentatious hospitality of the officials, bypass the republic. Local business circles prefer to withdraw funds abroad — to more calm and predictable countries.

Official statistics indicates that the domestic sources are ready to invest mainly only in construction, because real estate seems to the population a more or less stable tool for savings.

Where the country can get money for the regions?

The geologists and mine owners tried to suggest the answer to the question to the Cabinet of Ministers. According to their calculations, if the regions start to develop prospective deposits, they will be able to earn about $ 83 billion or 5-6 trillion soms at the current rate. The main share of the minerals are located in Batken and Naryn regions, waiting for the taking.

These are, as the Association of Miners and Geologists explained, the reserves of gold, tungsten, molybdenum, copper, beryllium and other minerals.

But it is impossible to get these billions without investments as well as to attract these very investments. The reason is high risks, which nobody has managed to mitigate yet.

«The local population often opposes development of the deposits. Earlier, the President Sooronbai Jeenbekov said that the authorities needed to pay attention to the development of the regions. The mining industry will create new jobs, improve the infrastructure at the local level, and increase revenues to the budget. But people in the regions, till now, do not understand the significance of the minerals, while the working enterprises contribute to the development of the regions. Kumtor mine, for example, allocates money on an ongoing basis to the Issyk-Kul Development Fund. When the brown coal deposit Min-Kush was developed in Naryn region, Dzhumgal district turned into the richest and most developed in the region,» explained the head of the Association Orozbek Duisheev.

The government itself admits that the people, who are extremely negative about subsoil development, are often the source of risk. The Association, in its turn, says: an unsuccessful investment policy is a consequence of the unresolved issues of interaction between the authorities and the population.

«Subsoil use committee, for example, first issues a license, and then invites the investor to negotiate independently with the local residents,» said Duishenbek Kamchybekov, Deputy Chairman of the Board of the Association of the Miners and Geologists of Kyrgyzstan.

We say one thing but do another

However, not only the population, but also the government needs to realize the importance of investors for the economy and development of the country. If to believe the statement of the Parliament Speaker Dastanbek Dzhumabekov, the Cabinet again intends to revise the agreement with one of the largest investors and taxpayers in the country — Centerra Company, working at Kumtor mine.

The Prime Minister Mukhammedkaly Abylgaziev also said that there were moments in the current document that the Cabinet did not agree with. But the business community was convinced several months ago that the issue was finally closed. But ... Everything is back at square one, including the unfolding information campaign in the mass media.

There is the same mantra, got word-perfect. A bad investor and thievish officials deceive the gullible people, the budget receives a little from the project’s work, we can mine gold at Kumtor by ourselves.

But there is still no word about the catastrophic state of ecology and the glaciers that are disappearing because of the gold miners. Apparently, these «arguments» were left for later.

The campaign against the development of Kumtor unfolds with enviable constancy.

A few people already pay attention to it, understanding what for it is done. But there is one worrying detail. The so-called expert circles got involved in the discussion of the nationalization of Kumtor project. But in the past it was exaggerated, mainly among the marginal politicians and the parties created by them, interested in weakening the government and the president.

This may indicate that either the supporters of such approaches are trying to influence the authorities, or the officials want to put pressure on the investor, which will inevitably lead to image and financial losses for Kyrgyzstan.

It is doubtful that Kyrgyzstan is ready to nationalize the project. This issue has previously been studied repeatedly, and officials have long been convinced that such a process is doomed to failure in advance. In case of nationalization, the republic will have to pay a huge amount to the investor, which will ruin an already poor budget. Moreover, the Kyrgyz side does not have the necessary quantity of the means, forces or the engineering resources to maintain the work of Kumtor.

Games around Kumtor, in general, have always been extremely expensive for the country. The demands for nationalization have already led to a sharp decline in the value of the republic’s portfolio of shares in Centerra, with the help of which the government was going to attract additional resources to the economy.

But image losses are the worst of all. The fact is that the attitude of the authorities to Centerra, as the largest investor, shows the real state of the business climate in the country. And the situation is such that the company has received claims from various supervisory authorities of the republic for $ 465 million only for the last six years. The Kyrgyz side promised to withdraw the claims in exchange for concluding new agreements, to which the parties came last year. However, this has not yet been done.

All this has already led to the fact that large business from other countries simply stopped considering Kyrgyzstan as a place to work, despite the apparent benefits from participation in the Eurasian Economic Union and a relatively liberal tax regime.

A part of local analysts seriously suggests the government to consider labor migrants as investors. The logic is simple: since they can annually transfer home at least two billion dollars, why not to use these funds to develop the economy? It is, however, sincerely doubtful. Migrants go abroad not to earn money for business projects, but, trivially, to feed their families. Alas, Kyrgyzstan has not created such an opportunity for them yet.

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