Renewed Calls to Re-Nationalise Gold Mine
Renewed Calls to Re-Nationalise Gold Mine
The debate over whether to nationalise Kumtor, the largest and most profitable gold mine in Kyrgyzstan, is gathering pace, but NBCentralAsia observers say the state is incapable of developing the mine alone.
From May 4 to May 12, villagers from the Jetioguz district in the northern Issykkul region blocked the highway leading to the Kumtor mine.
Production at Kumtor accounts for around seven per cent of Kyrgyzstan’s gross domestic product. The mine is run by the Kumtor Operating Company, KOC, a subsidiary of Canada’s Centerra Gold.
The residents are demanding that the Kyrgyz state acquire a larger share in the gold mine, and that they should get compensation for environmental damage they say was caused by a chemical leak at the mine in 1998.
In the latest protest, the road was reopened after lengthy negotiations, but locals warned they would block it again on May 20 if their demands were not met.
The Kyrgyz government owns 16 per cent of the stock in Centerra, but a debate is now under way as to whether the mine should be wholly re-nationalised.
In late March, parliament passed a bill in its first reading which, if it were to go through, would cancel the contract with Centerra and handing the mine back to the government.
The draft law would also require the government to levy unpaid taxes, fees and other charges from the different companies that have been involved in developing Kumtor since 1992.
In order for the bill to enter into law, it must be passed on its third reading in parliament and then signed off by the president. It is currently being reviewed by a special parliamentary commission.
Parliamentarian Karganbek Samakov, one of the architects of the law, says gold mines in Kyrgyzstan serve the interests of investors rather than acting as a source of revenue for the country as a whole.
“Mineral resources should be used to boost the economy and improve people’s welfare. We should [also] use mining revenue to service our foreign debt,” he said.
Foreign Minister Ednan Karabaev is in favour of revising the Kumtor agreement.
“Now this country is learning to solve its problems independently and from now on we won’t allow agreements to be signed that are to the detriment of Kyrgyzstan’s national interests,” he said.
But despite the recent debate in parliament, Karabaev told Canadian ambassador Margaret Skok on May 8 that the government is not considering nationalising Kumtor.
Meanwhile, in early May, Andrei Sazanov, the vice-president of KOC in charge of public and government relations, said that talk of nationalisation and protests by locals have dented Centerra Gold’s position on the stock market, and as a result the Kyrgyz government as a shareholder has lost around 60 million US dollars this spring.
Orozbek Duysheev, head of the Association of Miners and Geologists of Kyrgyzstan, argues that there is no need for a nationalisation law.
“If we pass such a law, we could be [embarrassed] in the international community. If they [foreign investors] launched an international court action, we might lose. And in order to nationalise the mines, we would have to pay out huge sums of money to build production plants and other facilities,” said Duysheev.
He added that President Kurmanbek Bakiev would not sign such a bill even if it won parliamentary backing.
Instead, Duysheev said, the government should review the 2003 decision that gave control of Kumtor to Centerra Gold. That would make it possible to revert to an earlier general agreement, which says all production should be transferred to the Kyrgyz state in 2007, giving it 70 per cent of the revenue.
Sapar Orozbakov, director of the Bishkek Institute for Economic Analysis, warned that the nationalisation bill would act as a deterrent to foreign investors – and in any case Kyrgyzstan lacks the capacity to develop mines on its own.
He said the government should halt block the progress of this draft law, and in future ensure that similar agreements take the interests of both Kyrgyzstan and the investors into account.
(News Briefing Central Asia draws comment and analysis from a broad range of political observers across the region.)
From May 4 to May 12, villagers from the Jetioguz district in the northern Issykkul region blocked the highway leading to the Kumtor mine.
Production at Kumtor accounts for around seven per cent of Kyrgyzstan’s gross domestic product. The mine is run by the Kumtor Operating Company, KOC, a subsidiary of Canada’s Centerra Gold.
The residents are demanding that the Kyrgyz state acquire a larger share in the gold mine, and that they should get compensation for environmental damage they say was caused by a chemical leak at the mine in 1998.
In the latest protest, the road was reopened after lengthy negotiations, but locals warned they would block it again on May 20 if their demands were not met.
The Kyrgyz government owns 16 per cent of the stock in Centerra, but a debate is now under way as to whether the mine should be wholly re-nationalised.
In late March, parliament passed a bill in its first reading which, if it were to go through, would cancel the contract with Centerra and handing the mine back to the government.
The draft law would also require the government to levy unpaid taxes, fees and other charges from the different companies that have been involved in developing Kumtor since 1992.
In order for the bill to enter into law, it must be passed on its third reading in parliament and then signed off by the president. It is currently being reviewed by a special parliamentary commission.
Parliamentarian Karganbek Samakov, one of the architects of the law, says gold mines in Kyrgyzstan serve the interests of investors rather than acting as a source of revenue for the country as a whole.
“Mineral resources should be used to boost the economy and improve people’s welfare. We should [also] use mining revenue to service our foreign debt,” he said.
Foreign Minister Ednan Karabaev is in favour of revising the Kumtor agreement.
“Now this country is learning to solve its problems independently and from now on we won’t allow agreements to be signed that are to the detriment of Kyrgyzstan’s national interests,” he said.
But despite the recent debate in parliament, Karabaev told Canadian ambassador Margaret Skok on May 8 that the government is not considering nationalising Kumtor.
Meanwhile, in early May, Andrei Sazanov, the vice-president of KOC in charge of public and government relations, said that talk of nationalisation and protests by locals have dented Centerra Gold’s position on the stock market, and as a result the Kyrgyz government as a shareholder has lost around 60 million US dollars this spring.
Orozbek Duysheev, head of the Association of Miners and Geologists of Kyrgyzstan, argues that there is no need for a nationalisation law.
“If we pass such a law, we could be [embarrassed] in the international community. If they [foreign investors] launched an international court action, we might lose. And in order to nationalise the mines, we would have to pay out huge sums of money to build production plants and other facilities,” said Duysheev.
He added that President Kurmanbek Bakiev would not sign such a bill even if it won parliamentary backing.
Instead, Duysheev said, the government should review the 2003 decision that gave control of Kumtor to Centerra Gold. That would make it possible to revert to an earlier general agreement, which says all production should be transferred to the Kyrgyz state in 2007, giving it 70 per cent of the revenue.
Sapar Orozbakov, director of the Bishkek Institute for Economic Analysis, warned that the nationalisation bill would act as a deterrent to foreign investors – and in any case Kyrgyzstan lacks the capacity to develop mines on its own.
He said the government should halt block the progress of this draft law, and in future ensure that similar agreements take the interests of both Kyrgyzstan and the investors into account.
(News Briefing Central Asia draws comment and analysis from a broad range of political observers across the region.)
