The Kyrgyz Republic
The Kyrgyz Republic, also known as Kyrgyzstan, is a landlocked, mountainous country in Central Asia covering some 191,300 square kilometers (five times that of Switzerland). Like Switzerland it is mountainous - its population is about 5 million. The country shares a long border with China, its main trading partner, and with Kazakhstan, Uzbekistan and Tajikistan. Bishkek, the capital, is situated in the northern part of the country with Osh, the second largest city, located in the south.
Political background
The Republic became independent in August 1991 and adopted a constitution in 1993.
Whilst the country has been holding elections considered “fair” since 2003, the President in office until 2010 was perceived as corrupt and nepotism was widespread. Civil unrest resulted in the former President leaving the country, allegedly resigning prior to his departure. Rosa Otunbayeva, a former foreign minister, became acting President on 7 April 2010, and was appointed president, her term of office lasting through to 31 December 2011.
A vote in a nationwide referendum to ratify a new constitution, restoring powers to Parliament, was held on 27 June 2010. Almost 70% of eligible citizens voted, roughly 90% in favour of the proposed changes. Parliamentary elections followed suit and the country became the first former Soviet Union Republic to have a coalition government.
Since the election the interim president has terminated her term and a new President was elected in October 2011 and took office towards the end of that year.
This made the Kyrgyz Republic the first FSU republic to complete the transformation from a one party Soviet system to a multi-party parliamentarian democracy.
Support is being provided from around the world to this young country in its transformation to a fully functioning democracy with independent judiciary, predictable and modern tax collection and other functions which enable a sovereign state to deliver wealth to its people.
Doing business in the Kyrgyz Republic
The World Bank has underlined the significant progress made by the country – its current Annual Report on "Doing business" features Kyrgyzstan well ahead of many traditional mining countries such as Turkey, Namibia, Zambia, Argentina, Brazil, Indonesia, Mongolia and Papua New Guinea. Italy and Greece were also ranked lower than the Kyrgyz Republic.
A strategic location
The Kyrgyz republic resembles Switzerland in one more aspect – it is locked between three very large powers: the Russians, the Chinese and the West (led by the US) who are all trying to gain a footing in central Asia in a modern version of the "great game". The governments of the Republic have managed, masterfully, to balance the wills of these three powers to maximise the return from its unique position and secure significant support for the country.
Kyrgyzstan provides the only base in central Asia which allows the US and NATO convenient access to Afghanistan and all troops and sensitive equipment transit through Manas airport in Bishkek. The Russians also maintain a large air force base and the Chinese are developing a stronghold by investing large sums in development projects such as roads, power lines and railways.
Infrastructure and energy
The country is well connected to its neighbours by a good network of rails and road. Rail links to Kazakhstan (branching to China and Russia) and Uzbekistan will soon be complemented by a new rail line directly to west China. Roads to China, Kazakhstan and Uzbekistan make Kyrgyzstan a natural transit location for Chinese goods on route to Russia and the former Soviet Union - the highways are always packed with Chinese mega-trucks.
Being a mountainous country, the Kyrgyz Republic has ample hydro power and is a significant net power exporter to its neighbours. Power is low cost and plentiful, which is an important advantage for mining companies trying to operate in country.
The internal road and power grid suffered from years of neglect following the collapse of the Soviet Union. However, institutions such as the World Bank, the Asian Development Bank and the European Bank for Reconstruction and Development (EBRD) as well as some sovereign governments (for example China and Switzerland) have made investments aimed at rebuilding and upgrading infrastructure and institutions.
Mining in Kyrgyzstan
Kyrgyzstan`s natural resources include significant deposits of gold, rare earth metals, and other minerals. Also present are deposits of coal, uranium, mercury, antimony, bismuth, lead, and zinc. Exploitable but small reserves of oil and natural gas also exist.
The Republic had a long tradition of mining preceding the Soviet era and, at present, mining is one of the mainstays of the economy. It is the third largest gold producer in the Commonwealth of Independent States. The Tien Shan range, which stretches through Central Asia contains numerous large gold deposits including Kumtor, the Kyrgyz Republic’s largest gold mine and Muruntau in Uzbekistan, probably the largest gold deposit in the world.
The mining infrastructure in the Kyrgyz Republic is well established, with a readily available, skilled, mining labour force. Although gold mining is acknowledged to be crucial to the country’s development, the gold mining industry is currently relatively under-developed.
The government recognises that reform in the regime of licence granting and processing is required and has been working on this in consultation with the industry. The political events of 2010 have delayed some of this reform but in general the direction is deemed positive and supportive.
The taxation regime in the Kyrgyz Republic is very favorable. The total revenue paid to the Government - known as Total Government Take (TGT) - by way of royalties, taxes and other measures is about 17%, compared to 20%-40% in many other jurisdictions. In addition none of that "take" is achieved by the government taking any carried interest or other form of ownership in the company. This means there is no interference by the government in management issues (unless it is the owner of a developed deposit which is injected as a contribution in kind).
The total government revenue comprises:
- 7% royalty (from revenues)
- Income tax worth some 5% in TGT terms (payment starts effectively after most of the investment has been repaid)
- Dividend withholding tax worth some 5% - payments will only begin when all loans and shareholder's loans have been repaid.
Transportation:
Railways: 420 km.
Highways: total: 18,500 km; paved: 16,854 km (including 140 km of expressways); unpaved: 1,646 km.
Terrain & climate
In Kyrgyzstan 93% of the land areas is mountainous. The vast peaks of the Tien-Shan Mountain Range stretch away across the border into the heart of China. The scenery varies between lush, fertile, cultivated valley bottoms to some of the world`s highest peaks - of the 7 peaks in the world over 7.000 m, 3 are in Kyrgyzstan. Peak Jengish Chokusu, at 7,439 m (24,400 feet), is the highest point and is considered by geologists (though not mountaineers) to be the northernmost peak over 7,000 m (23,000 feet) in the world. Glaciers and permanent snowfields cover more than 3 percent of Kyrgyzstan`s total land area. There are fast-flowing mountain rivers full of snow-melt from the high glaciers cutting their way through steep-sided valleys, often tumbling over waterfalls and through beautiful Alpine meadows awash with multi-colored carpets of blooms in spring time. In the South it is still possible to see forests of indigenous walnuts. Over 90 per cent of the country is at an elevation of 1,500 metres or higher giving an average elevation of 2,750 metres above sea level. Lake Issyk-Kul in the north-western Tien Shan is the largest lake in Kyrgyzstan and the second largest mountain lake in the world after Titicaca. The runoff from the mountains is also used for hydro-electricity.
The country`s climate varies by region. The climate is subtropical in the Fergana Valley and temperate in the northern foothill zone with large contrasts of seasonal and round-the-clock temperatures and very mixed precipitations. The lower mountain slopes have a dry continental climate, as they receive hot desert winds from Kazakhstan and Uzbekistan, whereas the highest mountain elevations have a polar climate. In the valleys, the average daily temperature in July is 28° C (82° F). In January daily averages are as low as -14° C (7° F). Conditions are much colder at high elevations, where in July the average daily temperature is 5° C (41° F) and in January, -28° C (-18° F). Precipitation is between 100 and 500 mm (4 and 20 in) in the valleys and from 180 to 1,000 mm (7 to 40 in) in the mountains.