WELCOME TO IWPR'S REPORTING CENTRAL ASIA, No. 496, June 9, 2007 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
EXPERTS WARN OF REAL-ESTATE BUBBLE IN KAZAKSTAN 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 **** NEW AT IWPR ****************************************************************** KURK SCHORK AWARDS DEADLINE FOR ENTRIES APPROACHING (June 15) The deadline for entries to the Kurt Schork Awards in International Journalism is just two weeks away. Two annual prizes of $5,000 each are awarded - one to an international freelance print/internet-based reporter; and the second to a local journalist in the developing world. The deadline for receipt of emailed or posted entries is June 15th. The awards are being administered by IWPR, on behalf of the Kurt Schork Memorial Fund, with the two winners celebrated at an event to be held in London in November. A video of last years event hosted by Christiane Amanpour of CNN can be seen on IWPRs website www.iwpr.net For details on how to apply electronically or by post, contact Alan Davis ([EMAIL PROTECTED]) or click here http://www.iwpr.net/index.php?p=-&apc_state=henitri&s=o&o=top_ksa_07.html COALITION FOR INTERNATIONAL JUSTICE (CIJ) TRIAL REPORTS ARCHIVE: When CIJ closed in 2006, it donated its searchable Trial Reports Archive to IWPR in recognition of our own reporting work and to ensure these courtroom reports would remain available to the public. Milosevic and other ICTY Trial Reports as well as Sierra Leone Reports are now available at <http://iwpr.net/?apc_state=hen&s=c> MIANEH is a new, independent web-based initiative run as a project by the Institute for War & Peace Reporting. Mianeh aims to be an open space for ideas, news and debate where writers in Iran can reach out to each other as well as to those outside the country who are interested in learning more about the vibrant and dynamic society that is Iran today. Go to <http://www.mianeh.net/> to find out more. NEW PODCAST: THIS WEEK ON IWPR A regular audio programme produced by IWPR US, highlighting IWPR news and analysis on issues of conflict, human rights and international justice, written by our contributors around the world. To listen to the programme or for details on how to subscribe see http://iwpr.net/?apc_state=hen&s=u&p IRAQ PHOTO DIARIES, NIGHT RAIDS: Peter van Agtmael documents the late-night raids carried out by American and Iraqi troops against the homes of suspected insurgents. This series of photographs was awarded a 2nd place in the General News Stories category at the World Press Photo Awards in 2007. http://iwpr.net/?apc_state=henh&s=o&o=top_galleries_index.html NEWS BRIEFING CENTRAL ASIA is a new concept in regional reporting, comprising analysis and news behind the news in Kazakstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan. Available at: www.NBCentralAsia.net **** www.iwpr.net ******************************************************************** REPORTING CENTRAL ASIA RSS: http://www.iwpr.net/en/rca/rss.xml TURKMEN RADIO: INSIDE VIEW is an IWPR radio training and broadcast project for Turkmenistan. View at: http://www.iwpr.net/?p=trk&s=p&o=-&apc_state=henh RECEIVE FROM IWPR: Readers are urged to subscribe to IWPR's full range of free electronic publications at: http://www.iwpr.net/index.php?apc_state=henh&s=s&m=p GIVE TO IWPR: IWPR is wholly dependent upon grants and donations. For more information about how you can support IWPR go to: http://www.iwpr.net/donate.html **** www.iwpr.net ******************************************************************** 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 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 Kyrgyzstans 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 May. 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 Atambaevs 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 incident. 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 investment. 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 Kyrgyzstans 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 Kyrgyzstans 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 governments 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 Golds 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 mines assets and the right to dig gold, respectively. On April 26, KazakhGold, a major mining firm in Kyrgyzstans 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 Company. 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 governments 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. Jerooyaltyns 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. Kyrgyzstans 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 Kyrgyzstans 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. Its 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. EXPERTS WARN OF REAL-ESTATE BUBBLE IN KAZAKSTAN 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, Kazakstans 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 moment. 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 wont 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 said. 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 said. 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. **** www.iwpr.net ******************************************************************** REPORTING CENTRAL ASIA provides the international community with a unique insiders' perspective on the region. Using our network of local journalists, the service publishes news and analysis from across Central Asia on a weekly basis. The service forms part of IWPR's Central Asia Project based in Almaty, Bishkek, Tashkent and London, which supports media development and encourages better local and international understanding of the region. IWPR's Reporting Central Asia is supported by the UK Community Fund. The service is published online in English and Russian. The opinions expressed in Reporting Central Asia are those of the authors and do not necessarily represent those of the publication or of IWPR. 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