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kyrgyzstan

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KYRGYZSTAN

 

REPUBLICAN REFERENCE

Area (sq.km) 
198,500 

Population 
4,753,000

Principal 
ethnic groups
Kyrgyz 52.4%
Russians 21.5%
Uzbeks 12.9%

Capital
Bishkek 

Currency 
Kyrgyz Som 

President 
Askar Akayev

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Background:
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: 266 - (27/02/03)

Kyrgyzstan fades from the scene
Kyrgyzstan used to be regarded in the West as different from the other Central Asian states. It had a liberal reformist president and was so remote from anywhere that it was not likely to be overly influenced by Russia. Not exactly an obvious port of call for FDI; but in a sense for that very reason a rather intriguing venue for it.
Well, in 2002 FDI in Kyrgyzstan was exactly US$100m, of which one fifth was by Russia, the lowest figure of any state in the FSU. The one big investment in the past, we shall see, has turned sour on it. It is losing favour with the Western investors, despite a recent geopolitical rapprochement with the US.
Economically speaking it is looking to Russia again for sustenance. Russia - Kyrgyz trade was up 50% in 2002. There is great interest by Russian investors in cooperation in the military - industrial complex, which the Russians know how to operate, whereas Kyrgyzstan, if it ever had any lustre for the Americans after 9:11, soon lost it.
The US is keen to keep the enormous air base at Manas near Bishkek. It can serve as a forward base for surveillance of China and will have a full complement of 3,000 soon. But it can operate as a more or less autonomous enclave in the country without much in the way of spin-offs. It is well known in the former communist world because in Soviet times, Warsaw Pact and other satellites and armaments customers, sent their pilots there to train in Soviet-built military and civil aeroplanes.

Political storms
Bishkek is receiving US$24m in economic aid, which is not much for the use of the base in Kyrgyz eyes. There is no doubt that hopes are being raised of political changes as a result of the US presence which could lead to problems if they are not in fact forthcoming.
Indeed, these are already happening. In May of 2002, the leader of the opposition, Felix Kulov, was arrested for 'abuse of power.' In June came the arrest of opposition deputy, Azimbek Beknazarov, which sparked off demonstrations in protest in the town of Djelalabad. The police opened fire and killed at best five demonstrators. The civil war has begun.
Kyrgyzstan is just not of much interest to the US or UK investors, unlike Uzbekistan or Tajikistan, which both abut Afghanistan and played an active role in the war against al-Qaeda within that country. Attention has largely switched to Iraq and Central Asia has become a backwater again, at least for the moment, nowhere more so than Kyrgyzstan.

Golden prospects
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 state 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 weighing 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.

Economic malaise
However, the republic's economy is far too dependent upon 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 therefore have no small consequences for Kyrgyzstan's economy.
This shows Kyrgyzstan's failure to diversify 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.

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ENERGY

Kazakstan in hydroelectric projects in Kyrgyzstan

Kazakstan has reaffirmed its plans to build two Kambartinsk hydroelectric plants on the Naryn river in Kyrgyzstan. At a recent meeting in Astana, Kazak Prime Minister, Imangale Tasmagambetov, and Dennis de Tray, the World Bank's regional director for Central Asia, addressed establishing an international hydroelectric consortium. The parties stressed the need to begin preparatory work by defining a legal basis for "Kazakstan's participation in financing the designing, construction and future management of the facilities to be built in Kyrgyzstan," the Kazak government press service said, reports New Europe.

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FINANCIAL NEWS

US$33m to be paid in foreign debt

Kyrgyzstan will pay US$33m in foreign debt in 2003, Finance Minister, Bolot Abildayev, said at a briefing in Bishkek. Abildayev noted, "This figure could be as high as US$90m, if Kyrgyzstan and the Paris Club of creditor nations had not agreed to reschedule part (US$101m) of the country's debt in March 2002. This money was received under bilateral agreements with the club's members," he said, Interfax News Agency reported. 
"If over the next eighteen months, Kyrgyzstan meets all of the conditions listed in the three-year Poverty Reduction and Growth Facility programme, which it signed with the International Monetary Fund in 2002, it can hope for a US$449m write-off in 2005, which is equivalent to the country's two budgets," the finance minister said. Abildayev said, "In 2003, the government will not hold negotiations to reschedule foreign debt in 2005." Kyrgyzstan's foreign debt currently totals US$1.5bn and has remained nearly unchanged since 2001, when the country started to reduce government investments and stopped giving loans under government guarantees. In 2002, the country paid US$11.4m in foreign debt, while about US$100m was rescheduled.

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FOREIGN ECONOMIC RELATIONS

The EU urges Uzbekistan to hasten reforms

European Union officials are urging Uzbek President Islam Karimov's administration to hasten economic reforms and improve its human rights record in advance of the European Bank for Reconstruction and Development (EBRD) annual meeting, which is scheduled for May in Tashkent, EurasiaNet.com has reported. 
EU officials visited Uzbekistan for talks January 27th under the auspices of the Cooperation Council, a body formed in 1999 to guide implementation of a reform agreement between Brussels and Tashkent. The perfunctory language used in an EU statement of the meeting served as an indicator of Brussels' frustration with the slow pace of change in Uzbekistan. 
"It was agreed," the EU statement said, "that any possible development of closer relations between the EU and Uzbekistan would depend upon respect for shared values." It went on to note "the importance of full respect for human rights and the rule of law," while reiterating the EU's "readiness to give practical support for implementation of judicial and legal reforms in Uzbekistan."

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