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Kazakhstan: Turning Gold Into Wealth Is Not So Easy

Almaty, 9 January 1997 (RFE/RL) -- Kazakhstan is a classic example of a resource-rich country which is having trouble turning its assets in the ground into wealth in society.

Take gold for example. Kazakhstan, already an established producer of the precious metal, has excellent potential to further develop production. At just one of the country's mines, Aqbaqay in southern Kazakhstan, the ore load is estimated to be three kilometers long. Only 700 meters of the deposit is being worked at present.

An RFE/RL correspondent reports that following the dissolution of the Soviet Union, hopes were high that Kazakhs would take control of their own economic destiny in the gold industry as in other fields. State mines and production facilities were sold off to local businessmen, including those at Beskempir, Aqsaqal, Altay-Altyn and Qazaq-Altyn.

But the local enterprises faced many problems of transition, and management's were not used to operating in the new environment. Most of the privatized companies ran into trouble, and many of the mines stopped working altogether.

Dwindling production rates mirror the declining fortunes of the gold industry: in 1994 a useful 14,500 kilograms of gold was produced; this fell to 11,800 kilos in 1995, and dropped further to 10,000 kilos last year.

The Kazakh government has not had the resources to invest in upgrading the industry, and it says it can't apply foreign credits to this sector because of the absence of laws allowing gold to be offered as a guarantee for such credits.

Parliamentary deputies have questioned the validity of the government's approach, among them the former Almaty mayor, Zamanbek Nurkadilov, who has been campaigning against opaqueness and corruption in government dealings.

As to attracting direct foreign investment in the gold industry, Kazakhstan has had more success. Last month it announced that the Bakirchik gold producing complex in the northeastern Semipalatinsk Oblast had been sold to a British company called Central Asian Mining Limited (CAM).

The Bakirchik complex is valued at some $270 million, but the actual sale price was not announced.

Commercial considerations aside, the deal signed between CAM and the State Privatization Committee contains some $2 million annually for the regional budget to help improve the social standards of the local population. Sixty per cent of profits from the venture will remain with the Kazakh government, and 40 per cent with the British company.

Central Asian Mining's purchase of the promising Bakirchik development marks a new stage in British involvement. Earlier in the year two other mines, at Suaq and Kenjesh, were also sold to British Interests.

Not all enterprises in Kazakhstan are in tune with the sell-off process however. Privatization has to some degree become associated with plants which are bankrupt or in a parlous state, and some enterprises would prefer to stay with the state while improving their economic performance.

One such enterprise is the Aqbaqay Non Ferrous Metals Ore Development Plant in the southern Jambyl Oblast. An official tender for the sale of the plant was announced on December 31.

Representatives of Aqbaqay's administration told RFE/RL's correspondent there is no reason to sell off the plant. They said that during 10 months of 1996 the plants output had increased by 147 per cent, and that in the last 9 months of 1996 the net profit of the plant was 132 million Tenge (about $1.83 million).

The officials also said the plant has the capacity to push its already-high production level to over 2 tones of pure gold annually, as well as to develop silver production.