a NEW service
a FREE service
A Central Asian country of incredible natural beauty and proud nomadic traditions, Kyrgyzstan was annexed by Russia in 1864; it achieved independence from the Soviet Union in 1991. Current concerns include: privatization of state-owned enterprises, expansion of democracy and political freedoms, inter-ethnic relations, and terrorism.
Update No: 265 - (28/01/03)
The Kyrgyz republic is very remote from things right in the heart of Central Asia. That is its main reason for being cut off from world developments.
Post - 9:11 end to isolation
The republic had long been targeted by Islamic militants for all that, notably by the stalwarts of the Islamic Movement of Uzbekistan (IMU), some 3,000 strong at their zenith a few years ago, who are loosely allied to al - Qaeda. They operate in the Fergana Valley, which stretches across Tajikistan, Uzbekistan and Kyrgyzstan. Several hundred of IMU militants penetrated the Osh Province in the south on occasion in the early 2000s, but were repulsed by Kyrgyz security forces.
Then came 9:11. The Kyrgyz government seized the moment to put itself on the map. They agreed to allow the US to use an airfield, Manas, as a forward base for operations in Afghanistan. It is being built up into the US's main surveillance and intelligence centre in Central Asia, only 150km from China. It will have 3,000 personnel in due course, a major military complex. Kyrgyzstan is no longer a former Soviet republic of no importance, but a formidable outpost of US power in its region.
There is one commodity that Kyrgyzstan has in abundance - gold. Its gold reserves are not quite in the class of South Africa's, Australia's or Russia's, but are third in the CIS after Russia's and Uzbekistan's. It is remarkable how little gold there is in the world and how much of it is in Central Asia.
Russian, Chinese, British and Australian investors have been attracted there; but the lion's share of Kyrgyz gold is at the Kumtor deposit in Issyk-Kul oblast, in the Tien-Shan mountains and at the Makmal deposit in Naryn oblast. The Kyrgyz government signed an agreement with the Canadian firm, Cameco, in 1994, giving the states two-thirds and the company one-third stakes.
Production is about 20 tonnes per annum, although a landslide in July caused output to drop to around 17 tonnes in 2002.
Kyrgyzaltyn, the state owned gold company, is going to increase the gold production on its gold mines by up to 1.85 tonnes. Kumtor operating company is planning to mine 20.9 tonnes, and will reach full production capacity after recovery from the accident by the second half of 2003.
Kyrgyzstan has sold all its gold beforehand to Europe and the United Arab Emirates; but now this situation is poised to change. Kyrgyzaltyn will soon start selling gold bullion and silver weighting from 50 grams to 1 kilogram, through refining plans with international certification to individuals and entities in the domestic market, as a complex of measures to liberalise and develop the country's precious metals market.
However, the republic's economy is far too dependent upon one sector, the mining sector, and one industry within it, the gold-mining industry, for comfort. When they do badly, and other sectors begin to malfunction, everyone does badly, as the economy turns sharply down. The authorities admit that GDP, which contracted by 1.9%in 2001, fell by more in 2002, decreasing by 2.6% year-on-year in the first nine months, the last months for which figures exist.
The Kumtor mine has produced more than three million ounces of gold since extraction started in 1997. The mine accounts for approximately 38 per cent of Kyrgyzstan's industrial output (which contributes some 20 per cent to GDP) and 33 per cent of exports. Its problems have therefore no small consequences for Kyrgyzstan's economy.
This shows Kyrgyzstan's failure to diversity its economy. It is too dependent on volatile world gold prices - and on output levels at Kumtor. Yet the declining gold content of Kumtor makes it clear that the mine's productive life span may be falling fast, and that Kyrgyzstan has to make haste diversifying and reforming its economy. If it fails to do so, observers believe prospects for long-term economic growth remain bleak and the risk of destabilisation high.
EBRD to the rescue
The EBRD is strongly urging the same. It is closely involved with all aspects of modernisation of the economy. The EBRD strategy for the next two years is to encourage small and medium-sized enterprises (SMEs), the development of the financial sector and the attraction of investments to key natural resource projects.
In the context of high public indebtedness of the country, the EBRD will respect the government's commitment to budget restraint by focusing on the private sector where there is no need for sovereign financing or guarantees.
Adding to the private-sector projects that the EBRD has co-financed - Kumtor gold mine, Hyatt-Regency Hotel, Demir Kyrgyz International Bank, and the Kyrgyz Investment and Credit Bank (KICB) - the bank recently launched the Micro and Small Enterprise Finance Facility Programme, for Kyrgyz commercial banks, as well as five investments in local SMEs via its Direct Equity Fund (DIF)
Kyrgyzstan hits foreign investment target in 2002
Direct foreign investments in Kyrgyzstan's economy totalled US$100m in 2002, of which Russia invested US$20m, Deputy prime Minister, Dzhoomart Otorbayev, was quoted as saying by Interfax News Agency.
"There are several reasons behind Russia's desire to invest in Kyrgyz companies, including the predictable investment climate, security and a friendly attitude towards Russia," Otorbayev noted. Bilateral projects involve hydropower facilities, gold mining, machine building, the defence complex, food processing and tourism, he said. "I am very optimistic about 2003 because a foundation for economic growth was laid last year. Numerous talks and meetings were held and the government is expecting serious dynamics in investment and trade," Otorbayev noted. Another priority is maintaining political stability and peace in Kyrgyzstan, he said.
Russian keen on investing in Bishkek
Direct foreign investments in Kyrgyzstan's economy totalled US$100m in 2002, of which Russia invested US$20m, Deputy Prime Minister, Dzhoomart Otorbayev, was quoted as saying by Interfax News Agency.
"There are several reasons behind Russia's desire to invest in Kyrgyz companies, including the predictable investment climate, security and a friendly attitude towards Russia," Otorbayev noted.
Japanese Embassy to be opened in Bishkek
The Japan Embassy to Kyrgyzstan will be officially opened in Bishkek on January 27th, 2003.
According to the Kyrgyz Foreign Ministry, the Japan Embassy has been operating in Kazakstan since 1996 and in Russia before.
Kyrgyzstan and Japan established diplomatic relations on January 26th, 1992. The Japanese Government gave to Kyrgyzstan US$300m as humanitarian aid and loans. In 2002 the overall exports from Kyrgyzstan to Japan were about US$700,000, imports - US$990,000.
INVESTMENT BACKGROUND REPORTS
Our analysts and editorial staff have many years experience in analysing and reporting events in these nations. This knowledge is available in the form of geopolitical and/or economic country reports on any individual or grouping of countries. Such reports may be bespoke to the specification of clients or by access to one of our existing specialised reports.
For further information email:
Considering an investment or a trip to any newnation? First order our Investment Pack which will give you by e-mail the last three monthly newnation reports and the complete worldaudit democracy check for the low price of
US$12. The print-out would be a good companion to take with you. Having read it, you might even decide not to go!
To order please click here: