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Kyrgyzstan Review, 10 years ago

[16.05.2OO2] "The poverty of Mineral richness and secto". By I. Saakyan

Recently funding of geological survey through foreign capital has decreased several times: from $5 million to $500,000: many companies feeling interest towards our deposits have settled in the adjacent countries and now invest good money in geological survey and mining.
Meanwhile during the first years of independence our republic was ahead of the neighbors in elaborating legal and standard documents to encourage foreign investment. The country had friendly environment for capital investment. Dozens of major foreign mining companies negotiated to create joint ventures for deposit survey, exploration and development. However activity of foreign investors began to decrease since 1997.
The only thing that would let Kyrgyzstan be competitive in attracting investment is a favorable legal environment, more preferential than that in the neighboring countries.
Today mining industry provides 40% of FX budget revenue. However this figure can sufficiently increase if capital investment increases.
Leading experts in Kyrgyzstans mining sector have scrutinized the sector situation. The assessment has shown: despite the plummeting prices for mineral raw materials and the financial crisis many CIS countries (Uzbekistan, Kazakhstan, and Russia) have improved their laws to attract foreign capitals, reduced tax rates, and introduced some other preferentials. Preferences to joint mining projects are decided at governmental level. Stability of treaty terms and conditions and investment-bound preference growth are guaranteed.
Meanwhile Kyrgyzstans legal base is worse in several aspects.
Our tax law stipulates tax and duty rates close to those of the developed rather than developing nations. Japanese experts have assessed the countrys current profit tax, dividend tax and depreciation charges. It appears that should Makmal and Solton-Say concerns operate in the mode similar to those in Argentina or the Philippines they would yield sufficient dividends. Meanwhile today these companies are low-profit.
In addition businessmen have to pay great taxes in purchasing equipment and materials from the money intended for building, albeit there is no product yet.
Nevertheless the mining sectors contribution in the republics total industrial output reached 20,950,000,000 soms in 2001. (This indicator was 728 million soms in 1995.) Hence mining sector is responsible for about 60% of the republics total industrial output.
Calculations show that our national mineral and raw material capacity is high. However many deposits Jerooy, left-bank Taldy-Bulak, Solton-Sary, Kooroo-Tegerek, Bozymchak, Terrekan, Trudovoye and others cannot be developed without serious investment. Operated, these and other deposits would allow companies to pay tens of millions of dollars as taxes and payments to the budget and create thousands of jobs.
Vecherny Bishkek, May 16, 2002

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