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Kyrgyzstan: Political Games Kill Businesses and Investment Climate

For the last several days, one of the largest cellular operators and taxpayers of Kyrgyzstan – MegaCom (Alfa Telecom) – has changed its CEO three times.  The company has fallen victim of the nationalization process that was launched immediately after the April revolution.  However, nationalization without clear national government led to the situation when all interested parties are trying to get a piece of the pie.  

After the April revolution 49% of the company stocks were taken over by the government, which appointed an external manager to the company from the Ministry of State Assets. Later on February 22, its active CEO Andrey Silich was removed of its post accused of money laundering for the Maxim Bakiyev, who took over the company in a similar way several years before. A couple of weeks later, after visit of a delegation of Russian MPs, Silich came back and unsuccessfully tried to restore his position and literally occupied his seat in the office.

Information war between government appointed Azamat Murzaliev and Silich turned into a mess. Meanwhile, Parliament commission investigating the case could not get any credible documents that gave grounds to Financial Police for removal of Silich. On the other hand, a representative of the General Prosecutor’s office openly stated removal of the company management was a political decision and there were no legal grounds. Moreover, GP’s office instigated criminal charges against Azamat Murzaliev.

As the story unfolds, disputed 51% of the shares that most likely belong to Russian based Eventis Telecom are claimed by other companies from Ukraine and Tbilisi.

All in all, the situation is a huge mess that looks ugly for potential foreign investors in the first place. Kyrgyzstan already has a very poor investment climate, which has been worsening steadily for the last several years as the numbers of cases like MegaCom are making up a very long list.

AsiaUniversalBank – bank with the largest authorized capital in Kyrgyzstan ($4.3 million) and widest network throughout the country was reorganized and driven into bankruptcy within weeks after the revolution due to its affiliation with Bakiyev’s regime. There were four more banks that were enforced to “external management” literally the next day after April 7th, 2010 for the same reason.

One of the more or less active gold mining companies – Jerooy was stripped off its license for mining on December 1, 2010. Kyrgyz Republic Ministry of Natural Resources and later a special Parliamentary commission decided that the company did not fulfill the agreement and confirmed the Ministry’s decision. The company which used to employ around 400 people is still unsuccessfully struggling to get the license back.

The situation is probably closely watched by another gold mining company – Centerra, owner of the Kumtor Operating Company – largest active gold producer in Kyrgyzstan. Kumtor made up 10.5% of the Kyrgyz GDP and paid around $100 million in taxes in 2010 – this certainly caught the sight of our government. Recently, Zamirbek Esenamanov, Minister of Natural Resources expressed the idea that Kyrgyzstan needs to increase its share in Centerra. Although, this idea has not been elaborated yet, there is no smoke without fire.

These are large scale cases that served as newsmakers for several weeks and months. Surfing through local news websites and forums one can find many more cases that add up to the general rather poor picture of the investment climate in Kyrgyzstan. All of them are similar in nature: one starts business with the current government, the next government comes and changes the rules of the game.

Saddest part of the story is not the investment climate, though. It is the people – thousands and thousands of people who face the uncertainty, disappointment, instability every day. Be it workers employed at goldmines or bank clerks – they are real people that have children, fathers, mothers. They are citizens of Kyrgyzstan. Games of our elected officials have real impact on what these people eat, drink and wear every day. If that does not make our politicians think and act responsibly, nothing will.

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