GOLD-DIGGING IN KYRGYZSTAN  Villagers protest against a gold mining development 
by throwing stones at the prime minister, but the real battle to control the 
industry is taking place elsewhere.  By Taalaibek Amanov in Bishkek

expensive mortgages could drive home-buyers out of the market, causing a major 
slowdown if not collapse of the real-estate sector.  By Ivan Voitsekhovskiy in 


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Villagers protest against a gold mining development by throwing stones at the 
prime minister, but the real battle to control the industry is taking place 

By Taalaibek Amanov in Bishkek

Recent protests over a gold mine in northwestern Kyrgyzstan involve local 
villagers who are fearful of possible chemical spills on their land and angry 
at being left out from the consultation process. But some commentators note 
that the dispute is taking place as commercial rights to the Jeruy mine change 
hands yet again, and they see a connection between grassroots protests and the 
high-level struggle for control of Kyrgyzstan’s gold mines.

Kyrgyz prime minister Almazbek Atambaev had been in the job for less than two 
months when he was dragged into the dispute at the Jeruy mine at the end of 

Jeruy is the second largest gold deposit in Kyrgyzstan, and its long-delayed 
development is seen as vital to economic growth. 

For the previous six months, locals had carried on protests by attrition, 
sporadically blocking the road to the mine to stop trucks bringing workers and 
equipment to the mine, located in the Talas region. 

On May 26, Atambaev went to Jeruy to urge local people to open the road and 
allow development work to resume. He tried to reassure a sceptical audience 
that once the mine was finally up and running, it would net 500 million US 
dollars a year in added revenue for central government, while another 150 
million dollars would go straight to Talas region. 

When Atambaev’s motorcade was setting off to return to Bishkek, a crowd of 300 
to 400 villagers blocked the road and pelted the official cars with stones. 
Several police officers were injured and government cars were damaged. 

Police made a number of arrests and launched a criminal investigation into the 

At one level, the dispute is about a rural population worried about 
environmental safety in their area once commercial mining starts, and also 
unhappy that so far, they have seen none of the economic benefits of 

The primary ecological worry is a possible leak of cyanide, used in processing 
pure gold from ore. 

In 1998, a truck carrying cyanide to the Kumtor gold mine – Kyrgyzstan’s 
largest – overturned and spilled some of its cargo into the Barskoon river, 
which feeds into Lake Issyk-Kul. 

The scale of the resulting contamination is still hotly disputed. Activists say 
a number of people died soon afterwards and many more illnesses and fatalities 
were caused by poisoning of subsoil waters and crops. But the authorities have 
said the impact has been much less than claimed. A joint commission of Russian 
and Canadian scientists found in late 1998 that irrigation water reaching local 
villages did not contain enough toxic traces to cause health concerns.

There is a direct parallel between Kumtor and the situation now at Jeruy, as in 
both places, grassroots concerns about environmental worries and demands for 
compensation are going on against a background of high-level discussions on 
contractual arrangements, and even questions about whether foreign investors 
should be allowed in the gold industry at all. 

“The people are not being kept informed about whether Kyrgyzstan’s interests 
are being protected, whether licenses to develop fields are issued to companies 
correctly, and whether our legislative requirements are observed,” said 
opposition member of parliament Temir Sariev.

At the Kumtor mine, high in the mountains of Jeti-Oguz region at the 
southeastern end of Lake Issyk-Kul, there were similar scenes in the first two 
weeks of May as protesters blocked the main road up to the mine.

They were demanding further compensation payments for the 1998 spill, and also 
a review of the government’s agreement with Canadian investors Centerra Gold, 
who run the mine through the subsidiary Kumtor Operating Company, KOC. 

The protests followed a parliamentary debate in late March over a bill which 
would if successful cancel the contract with Centerra and hand the mine back to 
the government.

Even though the Kyrgyz government already holds 16 per cent of the stock in 
Centerra, and it is unlikely it could run a high-tech mining operation on its 
own, the debate is a live and highly politicised one in Kyrgyzstan. 

Re-nationalisation is probably not imminent, since the bill would need a 
parliamentary majority and a final signature from President Kurmanbek Bakiev. 

Yet many politicians are worried about the many contracts signed with a variety 
of gold industry over the years since independence in 1991, allegations of 
corruption and certainly a lack of transparency in many of these deals, and 
suggestions that the Kyrgyz state has lost out financially as a result. 

These concerns, tinged too with some nationalist sentiment, dovetail neatly 
with the worries expressed by local groups about health and livelihood. 

KOC vice president Andrei Sazanov said in early May that all the talk of 
re-nationalisation and protests by locals had dented Centerra Gold’s position 
on international stock markets, and the Kyrgyz government as a shareholder had 
consequently lost some 60 million dollars this spring.

A special government commission is currently holding talks with Centerra. 

The Jeruy protests similarly come at a time of transition at the top, with one 
foreign investers pushed out unceremoniously and two more acquiring the mine’s 
assets and the right to dig gold, respectively. 

On April 26, KazakhGold, a major mining firm in Kyrgyzstan’s bigger neighbour, 
announced that it had bought out Norox Mining, the company which owns the Jeruy 
gold processing plant via a two-thirds holding in the Talas Gold Mining 

The Kazak firm bought the Norox shares from a subsidiary of the UK-based mining 
firm Oxus Gold. 

What KazakhGold did not acquire was the right granted by the Kyrgyz authorities 
to actually mine the deposit, although an April 26 statement made it clear that 
it was interested in doing so.

Oxus Gold held the operating license until last year, when the Kyrgyz 
government took it away following allegations that the company had breached 
some terms of its agreement. Oxus has described some of the government’s 
actions as unlawful.

The license now rests with a firm called Jerooyaltyn, set up by the Kyrgyz 
government and an Austrian company called Global Gold. Jerooyaltyn’s plans for 
the mine are unclear. 

Some observers say the real issue being played out at Kumtor and Jeruy is 
attempts by politicians to exert control over the mines. The campaign to seek 
fair solutions for local communities is merely a sideshow that is being 
exploited for bigger ends, they say.

“Kyrgyzstan’s natural resources are being divided up. The fact that conflicts 
around the major gold deposits are heating up is intimately connected with 
corruption,” said Tolekan Ismailova, head of the Citizens against Corruption 
pressure group.

Political analyst Zainidin Kurmanov believes the political and business 
turbulence surrounding Kyrgyzstan’s gold mines is affecting – perhaps even 
driving – the local protest movements.

“There are various financial groups behind these [mining] projects, and they in 
turn are backed by certain politicians. Civil society gets drawn into the 
struggle for ownership, because that struggle needs to be framed within a 
clear, understandable and attractive agenda. And that is where the 
environmental issue comes in,” Kurmanov told IWPR.

Kurmanov said the grassroots protestors are probably completely unaware of the 
wider political and business context. But he argues that a pattern of selfless, 
public-spirited actions being manipulated by specific interest groups is bad 
for Kyrgyzstan.

“It’s catastrophic for our country, because such actions show that Kyrgyzstan 
is not open to attract cooperation and partnership,” he said.

Taalaibek Amanov is an IWPR contributor in Bishkek.


Overpriced housing and expensive mortgages could drive home-buyers out of the 
market, causing a major slowdown if not collapse of the real-estate sector.

By Ivan Voitsekhovskiy in Almaty

Over the last four years, Kazakstan’s economy has boomed as revenue from 
exports of oil, copper and grain have continued flooding in. 

Most people have benefited, with the average income per capita up by 22 per 
cent and salaries increased by more than a third in 2007, according to official 
figures. The growth in spending power, along the modernisation of the banking 
system and the introduction of mortgages, has resulted in massive growth in the 
real-estate market.

However, experts say the main players in the market – property developers, 
banks and the authorities – are fixing prices at an artificially high level. 
They warn that as the rise in house prices is accelerating at a much faster 
rate than wages, this growth is unsustainable and the bubble could burst at any 

They draw comparisons with the situation in Japan, where the economy soared in 
the late Eighties and peaked in the early Nineties, but then fell steadily in 
what become known as the “lost decade”. 

The growth in the Kazak real estate sector comes after years of stunted 
development during the economic crisis which followed the collapse of the 
Soviet Union. Nowhere can the construction boom be seen more clearly than in 
the former capital Almaty, which remains the economic and financial centre of 
the country, and to which migrant workers flock from across Kazakstan and 
abroad in search of higher salaries and better jobs.

When Astana became the capital in the second half of the Nineties, resources 
were redirected there, and development in Almaty and other major regional 
centres was neglected in spite of the rising need for new homes and offices.

After mortgages became available in 2004 for the first time, the construction 
industry began to grow by 30 per cent a year. In the last couple of years, 40 
per cent of all mortgages in Kazakstan were taken out by residents of Almaty.

Besides measures to regulate land ownership and ease permission procedures, the 
government is running a programme to build affordable housing for civil 
servants and young families, with prices set at 350-450 US dollars per square 
metre and a loan scheme on soft terms over 20 years.

But this investment in the lower end of the market has had little effect on 
overall prices, construction has now become the most profitable economic sector 
after oil and gas.

Official figures show that housing prices in April were 50 to 70 per cent 
higher than in the same month of 2006. In 1999, a two-room apartment in Almaty 
cost just a few thousand dollars, but today the same money would not buy one 
square metre of property.

At about 600 US dollars a month, wages in Almaty are significantly higher than 
in the rest of Kazakstan. But even a good salary of 1,000 dollars will not 
cover repayments on a 20-year mortgage on a two-room apartment costing 3,000 
dollars per square metre.

There is concern that most potential buyers have been priced out of the market 
by the discrepancy between wages and loan repayments.

Aidarkhan Kusainov, head of the Almagest consultancy company, says the 
real-estate market began to overheat in the second half of 2006. Buyers are now 
forced to take out larger loans and repay the sum over a longer period.

“In mid-2006, housing became inaccessible for buyers who were not prepared to 
take on the risk of a ten-year mortage, and they left the apartment-buying 
market. And at the end of 2006, those people who were prepared to take out a 
mortgage for 20 years left the market. At present, the market consists of 
speculative trading,” he said. 

Meruert Mahmutova, director of the Public Issues Analysis Centre, warns that an 
unrestrained increase in mortgage lending will lead the country into crisis. 

She warns that if bubble bursts it will cause chaos throughout the whole 
financial sector, which is funding mortage lending by borrowing abroad. 

“Excessive debts in the private sector exacerbates the vulnerability of the 
tenge [Kazak currency]. The Asian crash [of the Nineties] showed that a boom in 
foreign lending to the private sector may end not only in a weakening of the 
currency, but also in a bank crisis,” she said.

Bulat Kusainov, a leading academic at the Institute of Economics, suggests that 
there will be problems whether prices continue to rise or if fall abruptly 
following a crash.

“If the bubble bursts, banks that have borrowed abroad won’t be able to repay 
the money, and may end up being taken over by foreign banks. A crisis in the 
banking system will consequently result in the crisis of the entire economy. 
But if the bubble continues to grow, the eventual fall will be even more 
painful,” he said.

There is also a worry that corruption is pushing prices up artificially. When 
Kazakstan broke away from the Soviet Union, a new class of well-connected 
businessmen snapped up prime pieces of land when prices were at their lowest.

Construction companies had to bribe officials to get land sales approved, and 
the market began to be saturated with luxury housing developments - the most 
profitable sector for builders, thus making it even more difficult for average 
customers to afford housing. 

Alexander Kalinin, deputy chairman of the Kazakstan Realtors’ Association, 
believes that price-fixing is prevalent throughout the property market. When 
major companies come out with forecasts that the market is about to experience 
more growth, the construction firms raise their prices.

Kusainov suggests the authorities should step in to curb such behaviour, 
although that is easier said than done. “The anti-monopoly committee must 
combat the artificial overstatement of prices on the real estate market. But 
since there are high levels of corruption, nobody will be able to do that,” he 

But the construction companies deny that the prices are set too high, arguing 
that the inflation is a result of increasing demand that is outstripping supply.
“In the last year alone, our corporation has finished 1,207 apartments,” said 
Oleg Nam, the president of KUAT, the largest construction company in Kazakstan. 

He says that in Almaty, home-buyers are rejecting Soviet-era housing and even 
housing stock from 10 to 15 years ago, and going after new properties.
“Despite what sceptics say, demand for housing is on the rise, especially among 
young families,” he said.
According to Nam, the main difficult facing his company is not selling houses, 
but finding the capital to invest in developments in the first place.

Many bankers agree that price rises are fuelled by genuine demand.

“This year, the average cost of real-estate in Kazakstan, including Almaty, 
will grow by 25 per cent,” predicted Aida Gapparova, the head of the mortgage 
department at the bank TuranAlem.

Gapparova insists this growth is healthy and fears of a crash in the property 
market are unfounded. “There are none of the economic preconditions for a fall 
in prices,” she said.

She says town planners have carefully projected a sustainable level of growth 
over the next few years, to replace demolished housing and keep up with demand 
from buyers. 

Kusainov is not predicting gloom, either. Instead, he says that the market will 
begin to cool off, wages will rise more slowly, and people will gradually be 
forced to reduce their spending.

“It will take time to get used to the fact that the economy is not going to 
keep growing at double-digit figures, and nor will salaries and bonuses,” he 

A slowing in the market will in turn lead to higher interest rates, so that 
people will struggle to make repayments, according to Kusainov. 

“There will be a deterioration in the quality of bank loans which were taken 
out in the hope of a general growth in incomes and a continuation of the 
consumer boom of previous years. People will simply get tired of handing over a 
third or more of their incomes to the banks,” he said.

Kusainov thinks property developers who took out loans to finance their schemes 
will also be affected by higher repayments. They will be in a greater hurry to 
sell properties and will not be able to hold out for higher prices from buyers, 
meaning prices will start to drop.

“The resulting stagnation on the real-estate market, even over a six-month 
period, would flood the market with apartments, because if prices stop rising, 
it will reduce the effectiveness of investments,” he said.

Ivan Voitsekhovskiy is an independent journalist in Almaty.

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