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bne September 2022 Companies & Markets I 15
Kyrgyzstan’s mining sector wilts as authorities seek total control
Alisher Khamidov for Eurasianet
In the government of Kyrgyzstan’s relations with the mining industry, appetite comes with eating. In May 2021, the authorities moved to finally put an end to a decades- long saga of legal tussling with Canada-based investors
by simply seizing the Kumtor gold mine that they were developing.
Officials said at the time that the takeover would only be temporary; that Kumtor, which has at times in its history accounted for more than one-tenth of the country’s economy, was being placed under a temporary period of state stewardship. But the following April, the government announced it had reached a settlement to take permanent control over Kumtor Gold Company.
Industry observers worry that Kyrgyz authorities are itching to drive out yet more private mining companies so that they can place the bulk of the industry into the hands of a single state-run enterprise.
A lot is at stake.
As Askar Sydykov, the head of the International Business Council, or IBC, a Bishkek-based lobbying group, told Eurasianet, the mining sector accounts for 20% of government revenues and provides employment to more than 20,000 people.
People like Sydykov worry this could all be threatened by the government’s intrusive and regulatory approach, which reached its apogee last year.
In August, the government adopted a decree enabling state- controlled companies to obtain subsoil-use licences without needing to take part in public tenders. Legislation typically requires that any company aspiring to develop natural resources, such as a gold or silver mine, need to compete for the privilege.
New rulers, new rules: Bolturuk and Japarov at Kumtor. / president.kg.
One month later, private investors were dealt another blow when the government introduced more onerous mining licence renewal fees. State companies, meanwhile, would be exempt from such fees under the new rules.
And then, in October, the authorities mandated a tenfold increase in fees for the use of water drawn from rivers and lakes by mining companies. State companies, sure enough, are exempt from fees for doing the same thing.
In laying out the logic behind all this to the country’s secu- rity leadership in November, President Sadyr Japarov made it clear that the new rules were intended to expel what he considers to be shady operators from the industry.
“Industry observers worry that Kyrgyz authorities are itching
to drive out yet more private mining companies so that they can place the bulk of the industry into the hands of a single state-run enterprise”
"We conducted an audit of all previously issued licences. Strong elements of corruption were found. There are cases when the same people bought 20 or 30 licences within a
five- to 10-year period,” he said. “And what do they do with [those licences]? They sit on them while discreetly looking for potential buyers to whom they can resell those licences for one or five million som [$12,500-$63,000].”
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