Mining industry in Kyrgyzstan: better to do well than to say well

The Cabinet promises to make mining legislation in Kyrgyzstan industry the best in the world. They have introduced a first pack of mining bills to the public and parliament members.

Bring I don’t know what

To attract investors to the country the legislation must be changed and this is coincident point of business and authorities. The Law on Mineral Wealth of 1983 is staled. Our opaque license issuing procedure is unclear for foreign investors. It is too bureaucratic. Emotional decisions on support of local communities instead of practical assessment of risks and advantages of a project give rise to unfavourable criticism.

Comparing with other countries, which have developed mining sector, Kyrgyzstan has too complicated procedure on issuing acknowledgement letters. For instance, it is enough in Mongolia to get an environment certificate and permission of local public administration while in Chile foreign investors are need only permission of the Foreign Investment Committee which is possible to obtain within 25 days. In Kyrgyzstan, numerous departments controlling mining sector make unclear and sometimes impracticable requests. The Kyrgyz Government doesn’t help investors to solve their problems.

We hurried but tried

Representatives of business-communities proposed a dozen of ideas how to reform mining legislation at the session of the Development and Investment Council in September 2011. Well, the Cabinet decided to create attractive investment environment for 100 days within 100 Day Programme.

“The Government has to create accredited mining legislation in a relatively short time,” said vice Prime Minister Dzhoomart Otorbaev. He promised to harmonize laws and to simplify obtainment plots procedure, to introduce new licensing rules and tendering process, to work out new laws on mining license to operate.

However, the new bill is in conflict with statements of governmental officials and doesn’t meet expectations of the mining sector.

Thus, licensing procedure has become more complicated, it doesn’t contain clear period of subsoil use. Thus, period of geologic exploration is set up to 10 years while period of exploitation is up to 20 years. So, officials can set terms at their own convenience that give incogitable space for corruption.

Besides, exploration will take three stages in place of two ones. If earlier licenses were issued for geologic exploration and exploitation then now mining licensing system includes search, exploration and exploitation.

Headless

Miners wonder about subsoil article. The bill obliges everybody who has information about mineral wealth, despite whether they are subsoil users or not, to give it to the state at the first request of an authorized agency. This strange article doesn’t specify how this information should be given and leaves space for imagination. Tens geologists keep in mind various information about mineral wealth. So, should they give their heads to an authorized agency? Besides, it is unclear on what grounds? But if they refuse they will bear responsibility in accordance with the legislation of the republic. However, it is unclear who will control and prove these refusals and bring to book.

Besides, the new bill lays grounds for conflict of interests among subsoil users as it allows issuing licenses for different kinds of mineral resources at the same territory. So, how they can dispart in case of finding the complex minefield?

The article on obligations of subsoil users disappeared in the bill and they may face a threat to lose the business in case of expiration of tax payment. Nobody has abolished the Tax Code but the new mining bill imposes new rules for some reasons. The Kyrgyz Mining Association notes that such administrative tool is very convenient for raiding seizure.

Law-making mist

Slamming the bill the Kyrgyz Mining Association admits it has participated in working out of the bill but nobody has listen to their opinion. Thus, miners offered to abolish compatibility of licenses, to remain two-level license and define clearly its duration.

Miners say the law making process was vague. Suggested proposals were not considered. The procedure of public hearings was not exposed as members of the Association failed to get clear explanations why their proposals were ignored.

They believe the bill can hardly give strong impetus to development of mining sector. Big investments are needed to develop a minefield consequently investors want state guarantees, clear legislation and support of the government in case of groundless conflicts with local population.

In opinion of experts, the good thing is implementation of tendering process and auction procedure which are detailed in provisions to the current Law on Mineral Wealth.

They in the Kyrgyz Mining Association think that hopes for breakthrough in mining sector development are fruitless as long as they don’t stop discretionary decisions of functionaries and impose market regulators.

In pursuit of

“The new legislation contains mechanism which don’t allow local population to hamper work of investors,” Uchkunbek Tashbaev, the director of the State Agency for Geology and Ore Reserves, stated at the round table conference today.

According him, representatives of local authorities will be members of an auction commission which is approved by Prime Minister. “It has to comprise representatives of local government and landholders,” he explained. “This will prevent situations when licenses are issued by central authorities while access to plots is hampered at local level.”

The provision excludes middlemen during auctions, simplifies application procedures and imposes mechanism preventing participant from refusal to buy plots. “We considered the experience of the Ministry of State Property when prices are forced up at an auction and then a winner refuses to pay and buy therefore we have introduced a notion of security deposit of tenfold from a starting price of an asset,” said Uchkunbek Tashbaev.

Well, if Dzheruy minefield, for example, is estimated at $400-500 millions then who will agree to margin?