ISSN 2330-717X

Kyrgyzstan: Same Old ‘Bubble’, Different Players – Analysis

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By Ryskeldi Satke

The Central Asian nation of Kyrgyzstan is on the verge of taking another potential blow with the offer of an investment package service from the virtually unknown consulting firm East Star Capital, headed by Mr. Paul Devine who claims to have a plan on how to attract nearly $100 million to the Kyrgyz economy from 2012 to 2013. The Bishkek-based news agency 24.kg reported [1] that East Star Capital is already supported by the government of Kyrgyzstan.

According to 24.kg, the firm is currently working on ten perspective projects, some of which are related to the mining and energy industries of the country with portfolio investments of over $3 billion. Kyrgyz Deputy Prime Minister Otorbaev, who was present at the public introduction of East Star Capital in Bishkek, proclaimed the importance of the step taken by the agreed parties to develop investment banking in the Kyrgyz Republic. What is more interesting about the founder of the consulting agency Mr. Paul Devine is that has been in Kyrgyzstan for a little over one year according to the statement issued by Strzelecki Metals Ltd., [2] which also said that during a short period of time he gained “vast knowledge of the country and its people,” not to mention his “holding key relationships in the republic.”

Kyrgyzstan
Kyrgyzstan

Paul Devine is also the Executive Director at Illuminate Capital based in Perth, Australia [3], an international investment consulting agency specializing in financial services, market penetration and capital restructuring. Within a few days after the announcement in Bishkek, India-based web source Steel Guru published a press release [4] from Australian company View Resources Limited [5] operating in the mining industry. According to View Resources data, two projects located in southern Kyrgyzstan have the potential to be sources of good-value coal with further exports to the Chinese cities of Kashgar and Urumchi in the Xinjiang province.

China’s Shandong Iron & Steel Group is on its way to complete a steel mill [6] with a production capacity of 3.6 million tons of iron and steel. Earlier in the beginning of 2012, the Kyrgyz government had been widely campaigning to push for public support of the Trans-Asia railway that is planned to connect China with the markets in the north through Kyrgyzstan and Uzbekistan. But the real challenge for the government of Kyrgyzstan came from quickly-spread rumors around the country as a result of the lack of transparency in the decision-making process. The allegations of corrupt schemes with mining concessions in exchange for foreign investments had been brewing even before the recent drop in the public mood over ownership of the projects.

On August, 26 2011, the 24.kg news outlet reported [7] a local protest in western Kyrgyzstan demanding a halt to the state process of issuing licenses to foreign mining companies and against the involvement of Chinese firms in the mining project. A scandal stressing the subject of mining concessions broke out once again in February 2012 when Kyrgyz MP Tologonov claimed the Chinese government is looking at the prospects of the Trans-Asia railway despite Kyrgyzstan’s public opinion regarding the China Road and Bridge Corporation [8]. The MP also pointed out at corruption schemes in the construction of the railway between China and Kyrgyzstan.

The government of the Kyrgyz Republic rushed to dismiss the allegations. Notably, Kyrgyz President Atambayev stated that the “China-Kyrgyzstan railway will not be built at the expense of the mineral resources of the country,” according to the Trend news agency [9]. The controversy around the railway project continues to be the headline of regional media outlets including Russia’s news sources. Russian online news website Regnum highlighted the Kyrgyz government’s role in particular in fueling the confusion over the financial disclosure of the project on the side of the Kyrgyzstan [10].

The source in the government of the Kyrgyz Republic says that the current leadership of the country has not changed the “rules of the game” despite the double-played regime ouster. That being said, Kyrgyzstan’s political elite is still being divided along regional lines with the mix of commercial opportunities that are at the center of the recent scandals.

According to the source, Deputy Prime Minister Otorbaev had been seen as an economic adviser to the previous administrations of Kyrgyzstan that still remain the targets of high-profile criminal investigations in the country. The name of the Kyrgyz Prime Minister Babanov has been frequently brought up for numerous investigations related to his jet fuel deals with the NATO/U.S. air base Manas, a highly-disputed case of communication carrier Megakom and the outrage in the Kyrgyz Parliament over his role in the scam with the Kyrgyzneftegaz oil company [11].

Ryskeldi Satke is a freelance contributor to research institutions and news organizations in Central Asia, the Caucasus, Turkey and the U.S. His contact e-mail is: [email protected]

References:

1. Пол Дивайн: В ближайший год
мы инвестируем в экономику Кыргызстана
$100 миллионов
http://www.24kg.org/biznes-
info/123964-pol-divajn-v-blizhajshij-god-my-
investiruem-v.html

2. Strzelecki Metals Ltd. (STZ) ASX Release http://www.asx.com.au/asxpdf/20110928
/pdf/
421cl7kvq949th.pdf

3.Illuminate Capital http://www
.illuminatecapital.com.au/About_Us.html

4. View Resources finalizes acquisition of
Kyrgyzstan coal projects http://www.steelguru.
com/raw_material
_news/View_Resources_finalizes_acquisition_of_
Kyrgyzstan_coal_projects/255252.html

5.View Resources Limited http
://viewresources.com.au/

6. Shandong Iron & Steel Group
Invested RMB 12 Billion in Steel Project to
Build a Steel Town in South Xinjiang
http://www.ciipp.com/en/index/view-365089.html

7. We oppose to transfer Zhetim
-Too and Sandyk minefields to
the Chinese side on account of the railway
construction – Zhenish Moldok
matov
http://eng.24.kg/business/2011/08/26/19947.html

8. Китайская сторона рассматр
ивает месторождения Сандык и Иштамберд
ы взамен инвестиц
ий в строительство железной дороги Китай
—Кыргызстан—Узбекистан, –
депутат http://thenews.kz/2012/02/28/103
8823.html

9. President Atambayev: China
-Kyrgyzstan railway to be built at expense
of credits
http://en.trend.az/capital/business/2004830.html

10. Железнодорожный аншлюс
Киргизии Китаем: подробности
http://www.regnum.ru/news/fd-
abroad/1507916.html

11.Омурбек Бабанов временно
сложил с себя полномочия вице-
премьера
http://kloop.kg/blog/2011/04/13/o
murbek-babanov-vremenno-slozhil
-s-sebya-polnomochiya-vice-premera/

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JTW

JTW - the Journal of Turkish Weekly - is a respected Turkish news source in English language on international politics. Established in 2004, JTW is published by Ankara-based Turkish think tank International Strategic Research Organization (USAK).

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