Bringing Mining Profits into the Open in the Kyrgyz Republic

The Kyrgyz Republic is rich in gold and other minerals. And so the mining industry is one of the biggest parts of the country’s economy, responsible for about 10 percent of the total GDP and over 40 percent of its export earnings.

To ensure that the mining industry is accountable and transparent, the Kyrgyz Republic joined the Extractive Industries Transparency Initiative (EITI) in 2004, which encourages participation from public interest groups, also called civil society organizations (CSOs).

Under EITI, all tax revenues paid by mining companies have to be reported separately by the government and the companies to ensure that they are the same. These are monitored by a Committee that includes representatives of the government, civil society, and the mining companies.

In addition, starting in the next report, due later in 2014, all mining licenses must be made public as well as the production of each mine and any payments to local governments. The process of “watch-dogging” mining interests is gaining ground, as local groups, the government, and the mining industry embrace EITI. 

Participation and transparency are key, says Kalia Moldogazieva, Director of the “Tree of Life” CSO. “The idea of equal participation of CSOs is important. CSOs need to know what’s happening because the mineral resources belong to the people of the Kyrgyz Republic, and they need to know what’s going on.”

De-Mystifying and Calming Unrest

Mining interests in the Kyrgyz Republic have been through a tumultuous couple of years recently. In some instances, people who were angry about perceived environmental damage have blocked roads and stopped mine operations for a period of days. Ulanbek Ryskulov of the State Agency for Geology and Mineral Resources says EITI helps minimize unrest by de-mystifying mining companies’ operations. “It is good for us, EITI helps quiet the protests now that we can clearly show the people how much the companies make, how much they to pay to the local community and to the national budget.”

Abdylda Temirberdiev runs a CSO near the city of Osh. He says that EITI has made mining companies more responsive to the demands of local communities, which has improved relations and soothes tensions. “It’s very helpful in getting companies to be more responsible. A good example is someone trying to dump byproducts illegally. We complained and they had to go get what they’d dumped and do it properly.”

EITI also makes the country a more attractive place for foreign investment. The gold mining concern Kumtor, based in Canada, was responsible for 6 percent of the Kyrgyz Republic’s GDP last year. Kumtor is the country’s biggest mining concern – last year, it paid nearly US$80 million in taxes on US$775 million of gross proceeds. It wholly supports EITI, says the company’s Rysbek Toktogul. “Apart from the transparency, EITI addresses shareholders’ issues, so taxes and revenue, for example, are consistent with the government’s numbers, and those figures are out for the public to see.”

Guzel Valieva, head of the foreign economic relations department for the state-owned KyrgyzAltin (KyrgyzGold) mining company, agrees that EITI helps promote investment.  “We’ve always supported EITI,” she says, “though we are still working to make it less broad and more adaptive to local circumstances, specifically for the Kyrgyz Republic.”

A Tool for Fairness

EITI is supported by the World Bank, and is active in 44 countries. It is a tool for fairness, says Karibek Ibraev, who runs the EITI Secretariat in the Kyrgyz Republic; it is a way to make sure the companies don’t get rich while the people stay poor. “The Kyrgyz Republic, during the last ten years, has gone through two revolutions. In 2011, the country reached compliance with EITI, they have to provide reports and be transparent, state their output, profits, and all that information goes to the public.”

But, although it is important, some say it is only a first step. Clare Short, a former member of the British Cabinet, is now chair of EITI and spends her time working on transparency in the oil and gas industries in developing nations. “So far, so good,” she says, referring to the EITI implementation in the Kyrgyz Republic. “But the next stage is very important, using the transparency to improve government systems to get a real accountability as to transparency, so everyone in the country knows where the money is, and that it is properly spent.”

Officials highlight the fact that over 70 Kyrgyz companies are doing their accounting using EITI standards is a good sign, especially given the importance of the country’s gold, copper, and coal mines for its economy and its future growth and stability.