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Risks For Foreign Investors Resurface In Kyrgyzstan 

Protest being held in Toguz-Toro against the building of a new factory for the Makmal mining company on February 7.

Kyrgyzstan has a long history of a troubled mining industry which is at the center of another debacle this week after violence erupted at the Chinese investor funded gold-plant facility in the Toguz-Toro district of southeastern Kyrgyzstan.

The G.L. Makmal Developing company met fierce resistance from the local population months ago when hundreds of residents demanded closure of the gold project in their area out of environmental concerns.

Whether these concerns were addressed by the Kyrgyz authorities or not is unclear.

Previously, the country's media reported that construction of the gold processing plant was launched in September 2017 and planned to be operational in the first quarter of 2018. The government seems to have responded to the local protests only after an initial outburst of public anger in February this year.

It appears the State Committee for Industry, Energy, and Subsoil Use recommended G.L. Makmal Developing Company conduct an environmental impact assessment of the project on construction of a gold recovery plant and hold public hearings," according to a state agency official last month.

However, the Chinese investor had also requested assistance from law enforcement agencies last month, including the country's State Committee for National Security (GKNB), to settle tensions with local villagers and create a safe environment for workers.

"Such actions are dangerous for the company’s employees. We ask you to initiate a criminal case, eliminate illegal actions, and take measures to avoid serious consequences," G.L. Makmal Developing said.

It didn't help.

On April 11, hundreds stormed into the gold plant and burned down the company facilities and equipment following a brief meeting with the interagency commission that ended with violent confrontation and three policemen wounded, one of whom was hospitalized.

The central government reacted by removing the head of the local district who was blamed for mismanagement of the crisis. Some in the Kyrgyz parliament called for swift punishment of the instigators who were orchestrating the protests against G.L. Makmal Developing.

Lawmaker Aitmamat Nazarov from the Kyrgyzstan faction in parliament criticized the central government's inaction regarding the "needs of the people" during the session on 12 April and proposed a review of the situation in the committee.

"Yesterday, we learned that this factory was built illegally, construction wasn't permitted by the authorities. Then why wasn't it suspended from the start?” Nazarov asked. “There was no public discussion whatsoever. No one talked to the people. More than two months have passed,” he said and added, “Not a single high-ranking official visited the district in the last two months.”

Nazarov continued, “People of the district are against this plant. Talking to people was the way, and it should have been resolved through communication. The governor of the province should have visited the district.”

Nazarov pointed out: “A district delegation came forward to speak with the government but no one met with them. As a result, we saw what happened."

Besides the escalation of the dispute in Toguz-Toro, there are two more mining conflicts in southern Kyrgyz provinces. Tiandi International Mining Co. Limited, a subsidiary of China’s state-owned Guizhou Geological and Mineral Resources Development Co. Ltd that operates the Shambesai gold deposit, is reportedly negotiating with the local population that has been staging protests against the mining plans since March 2017.

Another Chinese firm, Full Gold Mining, is locked in a protracted dispute with the local villagers at the Ishtamberdy mine where the company's operations were met with roadblocks, protests, and so-called ninja mining.

Nonetheless, this latest conflict between a foreign investor and local population in Kyrgyzstan could be another example of policymaking that has been criticized by some for corrupt practices, questionable transparency, and flawed record of accountability.

The Kyrgyz Republic is consistently plagued by widespread corruption. According to the UNDP, the estimated damage from corruption in the country reaches $700 million annually. Corruption continues to be listed as the second-worst obstacle for doing business out of 16 systemic issues in the country.

Furthermore, 20 percent of foreign investors in Kyrgyzstan admit to paying bribes, according to research by the International Finance Corporation (IFC).

An IFC representative indicated that the actual figure may be even higher, as investors are reluctant to confess to making unofficial payments.

Additionally, systemic risks in Kyrgyzstan include the mountainous nation's judiciary, which is deeply distrusted by the public and foreign investors alike.

I raised this structural issue in my opinion piece for The Diplomat Magazine in August 2017.

"The International Development Law Organization, an intergovernmental group in Rome, has stated that the Kyrgyz judiciary is not favorably viewed by the public and, at the same time, the public is not well-informed about the functions and duties of the courts.”

The World Bank’s survey results also highlighted a low level of trust in the justice system of Kyrgyzstan within the domestic business community; firms avoid settling commercial disputes via the country’s courts.

The Kyrgyz government's conduct to the recurring mining conflicts resembles its previous demeanor in the run up to the mass protests against the Kumtor gold mine in 2013.

Just as in Toguz-Toro, the Kyrgyz government ignored demands by the local population which led to controversy and reports of abuse by police.

It also demonstrates that the Kyrgyz government has done little since then to reform itself.

In the absence of meaningful steps to prevent conflicts and adopt the necessary policies, it is more than likely that such incidents will continue to take place in the future.

Ryskeldi Satke is a Bishkek-based freelance writer for news organizations and research institutions in Central Asia, Turkey, and the United States. For many years he has been living in, and traveling around, "Inner Asia," and that means some time in Mongolia as well as Central Asia. Satke has been a leader in reporting on environmental issues in this region. He can be followed on Twitter @RyskeldiSatke

The views expressed in this blog post are those of the author and do not necessarily express the opinions or views of RFE/RL.

About This Blog

Qishloq Ovozi is a blog by RFE/RL Central Asia specialist Bruce Pannier that aims to look at the events that are shaping Central Asia and its respective countries, connect the dots to shed light on why those processes are occurring, and identify the agents of change.​

The name means "Village Voice" in Uzbek. But don't be fooled, Qishloq Ovozi is about all of Central Asia.


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