WELCOME TO IWPR'S REPORTING CENTRAL ASIA, No. 509, September 18, 2007
KYRGYZSTAN TAKES STOCK IN REVISED GOLD DEAL Jury still out on whether the
latest arrangements for the giant Kumtor gold mine will prove more lucrative
than before. By Aziza Turdueva in Bishkek
ISLAM EXERTS GROWING INFLUENCE ON KYRGYZ POLITICS Some analysts fear that
populist measures to promote Islamic values could run out of control in the
long run. By Tolkun Namatbaeva in Bishkek
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KYRGYZSTAN TAKES STOCK IN REVISED GOLD DEAL
Jury still out on whether the latest arrangements for the giant Kumtor gold
mine will prove more lucrative than before.
By Aziza Turdueva in Bishkek
While the Kyrgyz government has acquired a bigger stake in the company working
a major gold mine at Kumtor, it may not receive the increase in revenue that it
anticipates, experts warn.
The deal will see the governments share in Centerra Gold, a joint venture
between Kyrgyzstan and Canadian mining company Cameco, double to nearly 30 per
Commentators interviewed by IWPR want the deal to mark a new era in the way the
government handles foreign investment deals, which under the previous president
Askar Akaev were sometimes less than transparent.
Kumtor, is located in the Issykkul region in the northeast of the country 70
kilometres from the Chinese border, is one of the ten largest gold mines in the
world. Over 180 tonnes of gold has been mined since commercial extraction
began, and the field accounted for one-third of the countrys industrial
production in the first six months of 2007.
Centerra Gold was set up by the government and Cameco in 2004, and the Kumtor
Operating Company, KOC, which runs the actual operation, was transformed into a
wholly-owned Centerra subsidiary. This restructuring followed the expiry of an
earlier arrangement with Cameco dating from 1994 which exempted the Canadian
company from paying profit tax for a decade.
The government initially held around 30 per cent of the shares in Centerra, but
subsequently sold about half, leaving it with 16 per cent.
Since then, there has been a change of government President Akaev was ousted
in March 2005 following massive demonstrations. Under the new dispensation,
questions began to be asked about the previous administrations handling of the
contract and the transparency of its finances.
Negotiations to review the arrangements for Kumtor started at the end of 2006,
when the Kyrgyz authorities indicated that they would like to up their share in
Centerra from 16 to 61 per cent so as to generate more profits and tax revenue.
The latest agreement, reached after a second round of talks was held in July,
does not go nearly as far as that. The deal announced on August 30 involves a
complex set of transactions in which Kyrgyzstan receives 22 million shares from
Cameco, and Centerra issues ten million new shares which also go to the
government. The Centerra share issue will be absorbed by Camecos shareholders
as a one-off loss.
Some of the shares are to be transferred immediately, but others will be
released within four years, depending on a number of conditions.
By the end of the process, Kyrgyzstan will own about 29 per cent of Centerra,
with Cameco holding 41 per cent and public shareholders the rest.
The deal also grants Centerra concessionary rights to explore and mine a wider
area at Kumtor and sets out a simplified new taxation rate for the project.
Addressing parliament following the announcement of the deal, Prime Minister
Almazbek Atambekov said, We have come to an agreement which is beneficial not
only for us but also for Kumtor, which will continue to operate.
The agreement has to go before parliament for approval this month.
Orozbek Duysheev, a member of the Kyrgyz delegation which negotiated the deal,
welcomed an arrangement which he said would leave the country with more shares
in Centerra, greater profits, and higher tax revenues. In addition, he said,
the government would be able to use its Centerra stock as collateral when
seeking foreign loans.
The government is counting on earning increased profits from the rising price
of gold. According to Finance Minister Akylbek Japarov, The Kyrgyz government
is convinced that the price of gold will continue to grow from year to year.
He noted that when the deal was clinched, shares in Centerra went up and he
predicted a rising trend through 2010.
But some analysts said the governments increased stake in the company would
not necessarily lead to greater profits.
Sapar Orozbakov, the director of the Bishkek-based Centre for Economic
Analysis, said that the conditions attached to the share transfer were
difficult to fulfil, and the total value of the completed transaction might not
be as high as the government expects.
Member of parliament Kanybek Imanaliev said it was unwise to be projecting high
returns on the basis of a forecast rise in gold process.
The share of the profits [for Kyrgyzstan] will depend on the world price of
gold and on the value of Centerra shares. So it is too early to be talking
about a positive outcome, he said.
Other experts noted that future revenues would depend on the amount of gold
produced at Kumtor.
According to Nasirdin Shamshiev, head of the department for macroeconomic and
microeconomic analysis at the Ministry for Economic Development and Trade, the
rate of production has slipped of late.
Judging from recent months, we cannot talk of an increase in gold mining. In
2006, around nine tons of gold was mined at Kumtor. In the first half of this
year, it was around four tons in other words, less than for the first half of
In July, Cameco revised its 2007 forecast for Kumtor production from nearly 13
tons down to 8.5 tons.
Much of the pressure for economic reform since 2005 has been based on a
perception that Kyrgyzstans former rulers failed to secure the best possible
terms when they signed foreign investment deals, and that as a result the
country has lost hundreds of millions of dollars in potential revenues.
Analysts interviewed by IWPR said the share deal provided an opportunity for a
fresh start, with more transparent accounting by government to avoid the
allegations of corruption that persisted through the Akaev years.
Jumakadyr Akeneev, formerly head of the national statistics committee, said
that in the old days, neither the statistical office nor the tax agency had
access to information about Kumtor.
It was an area that was closed to everyone, to the entire country. The
information was kept a complete secret. Only former president Akaev and his
immediate entourage had information about Kumtor, said Akeneev.
Economics professor Ayilchy Sarybaev said that in future, the government must
be conducted with transparency, openness, and the publication of financial
reports. Otherwise, he said, things will change little from what went on
Duisheev hopes the deal will set a precedent for how contracts with foreign
companies are drawn up.
In future, the talks with Cameco will serve as a model for other foreign
companies that wish to work Kyrgyzstans mineral deposits, he said. The talks
showed that when a deposit is to be opened up, the interests of the local
population and indeed the entire nation must be taken into account.
Aziza Turdueva is an IWPR contributor in Bishkek
ISLAM EXERTS GROWING INFLUENCE ON KYRGYZ POLITICS
Some analysts fear that populist measures to promote Islamic values could run
out of control in the long run.
By Tolkun Namatbaeva in Bishkek
In an attempt to win public support, Kyrgyz officials are launching increasing
numbers of initiatives that reflect Islamic influences a trend which analysts
warn could eventually lead to the erosion of the secular state.
However, a leading public figure human rights ombudsman Tursunbay Bakir-Uulu,
who is a devout Muslim argues that restoring religious values to public life
only makes for a healthier, more ethical society, and rejects claims that this
undermines the secular state.
As political agendas are increasingly coloured by religious values, some see
the growing endorsement of Islam in official life as a contradiction of the
principles underlying this post-Soviet republic, whose constitution stipulates
that Kyrgyzstan is a secular state.
Last month, for example, the head of the State Agency for Religious Affairs,
Toygonbek Kalmatov, announced a special scheme where up to 70 officials will be
able to travel to Saudi Arabia to perform the pilgrimage in Mecca under a
A number of officials have been making recommendations influenced by Islamic
precepts for some time now. One such is Bakir-Uulu, who has drafted a bill that
would outlaw abortion. The draft is due to be considered by parliament.
Another proposal, to decriminalise polygamy, has already gone before parliament
The politicians pushing this agenda appear to be acting out of a mixture of
personal conviction and an awareness that there is popular support for a
restoration of traditional values.
According to Erkin Alymbekov, deputy speaker of parliament, The trend towards
excessive Islamisation is taking place at both the state level and at the
Ombudsman Bakir-Uulu rejects this suggestion. As for talk that religion is
infiltrating state institutions, I am not aware of any examples of this, he
In our society, the state is separate from religion
. When people seek
spirituality, search for God, and are interested in religious history, this
should be welcomed. If society lacks moral values, it will be governed by
corruption, crime and the mafia.
Much of the pressure to shift towards a more overtly religious society comes
from southern Kyrgyzstan, where the Islamic tradition has always been stronger
than in the north, which was historically more subject to Russian influence and
to Soviet secularism and anti-clericalism.
Last month, Mutakalim, a group based in the south which supports the rights of
Muslim women, won a campaign for women to be allowed to have their passport
photographs taken wearing headscarves. Parents in the south have also formed a
pressure-group to win permission for their daughters to wear hijabs or Islamic
clothing to school.
Although the state should technically avoid involving itself in religious
affairs, the local government in the southern city of Osh has thrown its weight
behind a major new mosque that will form part of a wider project including an
Islamic centre and a religious school.
The rising influence of Islam in public life dates from the period after March
2005, when Askar Akaev a northerner - was ousted as president in a popular
revolt. He was subsequently replaced as head of state by Kurmanbek Bakiev, a
native of Jalalabad in the south.
In a country where most of the population belongs to the Muslim tradition,
official attitudes to religious practice have varied over the years and remain
complex. While it is increasingly modish to appeal to conservative Muslim
sentiment in order to win votes, there is strong opposition to anything that
resembles extremism because of the recent history of instability in southern
Kyrgyzstan and adjoining parts of the Fergana Valley.
Between 1999 to 2000, the Islamic Movement of Uzbekistan, IMU, an armed
guerrilla group with links to the Taleban, launched a serious of armed
incursions into the Batken region of southern Kyrgyzstan. The IMU has not been
sighted in force Kyrgyzstan since its Taleban allies were routed in Afghanistan
at the end of 2001.
However, militant groups remain a concern for the Kyrgyz authorities. A string
of armed attacks last year were blamed on another radical group,
Hizb-ut-Tahrir, which like the IMU originated in Uzbekistan but took hold in
southern Kyrgyzstan in the late Nineties, initially among the large ethnic
Uzbek community there.
While the security services keep a close eye on covert groups of this kind,
Islamic principles appear to becoming an increasingly acceptable part of
mainstream politics. That worries observers like Gulnara Ibraeva, an
independent sociologist, who fear that Kyrgyzstan risks diluting or even
abandoning its secular identity.
The process of bringing religion into the political system is happening
gradually, and the principle of the separation of religion and state laid
down in the constitution - is constantly being violated, said Ibraeva.
Aman Saliev, an analyst with the Institute for Strategic Analysis and
Forecasting, says Islam is seeing a revival as people seek answers in a
confusing and difficult process of social transition.
Society today, with its principles of untrammelled capitalism, in many ways
does not provide solutions to moral and social problems, he said. People are
starting to turn to what they have traditionally seen as the tried and true
ways. It even offers a kind of protection against all thats going on in
However, Alymbekov insists that while there is nothing wrong with applying
religious principles in ones personal life, we need to make sure that
religion is kept separate from the state.
Bakir-Uulu said it was only natural that Kyrgyz Muslims should seek an
alternative to Soviet atheism.
In this era of independence, it is not surprising that there has been a return
to spiritual roots not only in Kyrgyzstan, but also in other post-communist
republics. It would be immoral to develop a market-based society without an
ethical dimension, he said.
Some analysts fear that the secular nature of the constitutional system could
be at risk.
When the constitution was revised in November last year, the drafting
commission deleted all reference to a secular state altogether. According to
Ibraeva, the secular principle was re-inserted in a later draft.
Bishkek-based political analyst Natalya Shadrova said state officials must
remember that Kyrgyzstan is a secular state, and should not dabble in religion
or woo faith organisations for populist reasons.
If religion really begins to permeate all areas of life, I fear it will
greatly undermine the foundations of the secular state, and ultimately damage
them, she said.
According to Shadrova, those officials who are keen to incorporate Islamic
ideas into public life do not fully realise what they are doing and do not see
the consequences, but only look at the advantages for themselves.
Saliev does not agree that all politicians are driven purely by an ambition to
win votes. There is in addition a kind of personal motivation which one might
call a spiritual quest, he said.
Since it became independent in 1991, Kyrgyzstan has seen an explosion in the
number of mosques from just 39 to about 2,500. Shadrova is insistent that
politicians should not use their public positions to build mosques. Doing this
is, she said, tantamount to buying votes.
It is a gross violation. They can make a personal donation as private
citizens, without advertising it, but they must not do so officially, she said.
Ibraeva agreed. Some politicians are indeed adepts of Islam, and as citizens
they have the right to be so, but the fact that they
articulate this without
separating it from their position of authority is, I believe, a violation of
the basic principles of a secular state, she said. It is an abuse of the
mandate which Kyrgyzstan citizens have given deputies and other politicians.
She warned of dire consequences if the process was allowed to continue
unchecked, There are numerous examples of what the politicisation of Islam can
lead to from the establishment of an Islamic state to attempted coups and
creeping revolution. Unfortunately, the politicisation of any religion leads to
quite radical consequences, and losing the benefits of a secular state would be
obvious and significant.
Alymbekov does not agree that the country faces the threat of a religious
revolution, he warns that continuing to integrate religious ideas into the
institutions of state could lead to Islamicisation over ten or 20 years.
Theres nothing wrong with it if thats what every individual wants, but if
its imposed, there will be conflicts, he said.
Bakir-Uluu dismissed such concerns as scaremongering, saying, When certain
experts express fears that Kyrgyzstan is losing its secular nature, I would say
they shouldnt exaggerate. It is not as bad as they paint it. There is no need
to fear religion or religious people. You should fear those who do not believe,
who fear neither God nor the Devil.
Tolkun Namatbaeva is an independent journalist in Bishkek.
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