This is written on the website of a mining company that operates in Central Asia:
"The Tien Shan Gold Belt is one of the most prolific gold belts in the World extending from Uzbekistan in the west into China and Mongolia to the east. The Tien Shan Gold belt is host to one of the world's largest concentrations of multi million ounce gold and silver deposits in the world."A lot of companies looking for possibilities to dig gold in Kyrgyzstan.
The current government is slowly nailing the lid of its own coffin. Not only privatization of energy companies is controversial, very few people think this the process will be transparent. Read on...
Kyrgyzstan Fast-Tracks Energy Sell-Off
Source: IWPR
Parliament gives away its right to block controversial privatisation deals in the electricity industry.
Legislative changes allowing the Kyrgyz government to privatise the potentially lucrative energy sector without consulting parliament have raised concerns that it wants to speed ahead with sales with little accountability or transparency.
On April 18, parliament passed three bills relating to energy privatisation in the course of a single day. The key law signs away parliament’s right to be consulted before privatisation programmes are approved.
In past years, it would have been difficult to get such bills passed so easily. In its previous incarnation, the legislature frequently raised objections to plans to sell power stations and other energy-sector assets because members felt the process was botched and was not in Kyrgyzstan’s best interests.
That changed after the December election, when the newly-created Ak Jol party swept the board and gave President Kurbanbek Bakiev and his allies the majority they needed to pass bills effectively unopposed.
The two other parties represented in parliament – the Social Democrats and the Communists, with 20 of the 90 seats between them – were unable to slow the rapid progress of the privatisation bills’ rapid progress, let along block them.
RUSH TO THE FINISH
In January, Bakiev told his government to make the rapid sell-off of power companies a priority. (For more on this, see Kyrgyz to Pay High Price for Power Privatisation, RCA No. 528, 25-Jan-08.)
Kyrgyzstan's mountainous terrain means it has the potential to produce enough hydroelectricity to meet its own needs and for export as well. For now, the cash-strapped authorities argue that privatisation is the only way of attracting investment to renovate infrastructure, build new plants and eventually become self-sufficient in electricity, and that the state does not have the funds to sustain current losses, let alone fund new projects.
Denationalisation of the power industry, launched in 1998, has been a protracted process, beginning with the breakup of the state-run Kyrgyzenergo into several constituent parts – one company to run the power stations, another in charge of the national grid, and others distributing electricity to consumers in various parts of the country.
The companies that have now been lined up for sale, or alternatively a management lease arrangement, under the current fast-track programme include the electricity distributors Severelektro in the north of Kyrgyzstan and Oshelektro and Jalalabadelektro in the south. Other assets on offer are Bishkekteploset, which pipes hot water to the capital, and the power station that supplies the heating for this system as well as the city’s electricity.
Apart from massive inefficiencies, theft and unpaid bills, Kyrgyzstan’s power industry is just recovering from an unusually harsh winter which placed a huge strain on existing generating capacity. Low water levels in the Toktogul reservoir, where one hydroelectric scheme accounts for 40 per cent of the power generated in the country, are continuing to create blackouts of up to 14 hours a day in many regions and even in Bishkek.
Pro-Bakiev members of parliament have defended the decision to cede control of the privatisation process.
Ak Jol deputy Osmonali Attokurov told IWPR that the decision placed responsibility for the process firmly on the government, where it belonged.
“I personally think the government was right to assume this responsibility,” he said. “Now it is entirely answerable for its own actions and will not shift responsibility onto parliament. Since it is proposing the energy-sector development programme, it should be responsible for the consequences.”
Tursun Turdumambetov, head of the government agency in charge of state property, was a strong advocate of the change and was pleased to see it sail through.
“Privatising any asset requires speed. The republic loses potential investors because of the long-drawn-out procedures for approving decisions,” he said. “That’s why we removed [parliament’s right of] approval, so that government can work with speed and agility.”
He added that ministers would remain accountable to parliament, whose members would be able to look into the privatisation process any time they wanted.
“We aren’t concealing anything from the public,” he said.
Opponents of the new arrangement disagree.
Tolekan Ismailova, the head of the Citizens Against Corruption group, told IWPR that the people have lost their right to scrutinise the privatisation process by means of an elected parliament.
“The decision to implement the programme without going through parliament is anti-constitutional and it will be easy to contest it in court,” said Ismailova. “Parliament is now closed, and no longer exists as a public institution.”
Ismailova and some other human rights activists were ejected from parliament on April 16 when the amendments were being discussed in committee.
According to Azimbek Beknazarov, a leading opposition figure from the Asaba party, recalled how the previous parliament, of which he was a member, used to be the scene of robust debates on this issue.
By contrast, he said, “The current tame parliament does what it’s told. The authorities now do whatever they want, and it’s useless to resist them as they do not listen to anyone else’s opinion. All the key decisions are made in private.”
Isa Omurkulov, a member of parliament for the Social Democratic Party, told reporters on April 23 that the only option now might be to seek a national referendum on the issue of privatisation.
“Today we, the parliament, have absolutely no influence over these processes. Thanks to a certain group of deputies – we know who they are – we’re unable to monitor the implementation of this programme,” said Omurkulov.
The government is currently developing two energy-related documents – a programme lasting until 2010 and a strategy for 2025, both of which are currently before parliament.
Public hearings were held on the two papers on April 23, during which industry and energy minister Saparbek Balkibekov said the energy sector needed at least five billion US dollars in investment, and this kind of money could only come from commercial investors.
FEARS THAT NEW PRIVATE FIRMS WILL HIKE PRICES
For critics of Bakiev’s policies, the underlying concern is that once private companies come in – most likely from more powerful countries like Russia and Kazakstan – they will simply replace the state monopoly with one of their own, and proceed to bump up utility prices as a way of recouping their investment.
These fears will be heightened if the bidding process is less than transparent. At the moment there are believed to be four prospective investors waiting in the wings for privatisation to move forward, but the government has not revealed their identity.
Officials insist that electricity prices will be held down once the private sector takes over, but local human rights groups doubt it will have the legal mechanisms at its disposal to ensure this happens.
“The is a strong possibility that an investor will increase prices and start cutting off the power to hospitals and other public-service institutions,” said Aziza Abdirasulova, head of the Kalym Shamy human rights centre.
One of the other laws passed last week designates electricity as a “commodity” rather than a service. This might seem an academic distinction, but it has become yet another bone of contention between the government and its critics
Those in favour of the re-designation say it is consistent with other pieces of legislation, while minister Balkibekov argues that it will make it easier to prosecute those who steal or waste electricity. or default on unpaid bills
Yury Danilov, an Ak Jol member who chairs the parliamentary committee on energy affairs, told IWPR that the law was in the best interests of the public.
“Until now, electricity has been regarded as a service, so [offences were] only punishable by administrative [civil] law. Now that it is designated a commodity, the criminal code is applicable and it can be dealt with as theft of property,” he explained. “This law is in the interests of honest electricity consumers who don’t steal it, but pay for it,”
Activist Anara Dautalieva said the change deprived people of one of their basic rights.
“Electricity and water are not goods, they are services of social importance to the population; this is about access to a local resource that we produce ourselves,” she said.
“Why have a state at all, if the president says the state cannot be an efficient manager and everything should be handed over to private ownership?”
My blogging hiatus of 2 weeks is explained by traveling in Kyrgyzstan (1305 kms in 4 days) and amount of work that had gathered while I was traveling. It is interrupted by some worrying tendencies in the country.
Because of an unusually harsh winter this year, Kyrgyzstan had used up a lot of water in our dams to produce enough electricity that the government decided to introduce measures to accumulate water in dams by regularly switching off of electricity around the country.
Bishkek, which by is producing almost 40% of country's GDP, is fortunately not being much affected by this. Power is cut off from midnight to 5 am daily and some neighborhoods have power cut off during the day for couple of hours. The government decided not to publish the schedule of when and which areas of Bishkek will not have electricity because it is afraid that powerlines might be stolen and stores and offices might be robbed when there is not electricity.
However, everywhere else the electricity is turned on only in the morning and in the evening for people to make breakfast and dinner and watch some TV. I was meeting with a radio station in Karakol, Issykkul, and they complained they could not air their programs during the day because they don't have power generators to feed the radio station and the transmitters. And they are losing income from advertising. I am sure it is of bigger concern for companies using bigger machinery who have to cope with this.
In addition, the government this week decided to increase the price of electricity by at least 11.3% (from 0.62 to 0.69 KGS for a kilowatt-hour) for ordinary citizens, while companies might be charged 28% more. It also decided to increase fees for heat and hot water, but has not published the details of the increase, although some are saying it will be a 150% increase. The Bishkek City Council also decided today to increase fees for public transportation by 60% for daytime and 100% for nighttime (from 5.00 to 8.00 and 10.00 respectively). All these increases will come into force starting from July 1, 2008.
All in all, the Kyrgyz economy is not in the best shape. The government, at least Economic Development Minister Japarov, seems to understand it and is predicting an inflation of 19-25% in 2008.
Not in Kyrgyzstan! Another bad news for us. We lag behind not only in education (see previous post), but also in attracting tourists. According to the World Economic Forum's Travel and Tourism Competitiveness Report 2008, Kyrgyzstan is on the 113th place. Only Tajikistan from CIS at 114th is behind us, while the rest are ahead: Kazakhstan 91st, Uzbekistan 90th, Armenia 89th, Azerbaijan 79th, Ukraine 77th, Georgia 72nd, and Russia 64th. This ranking is based on three categories: regulations, infrastructure, and human, cultural, and natural resources. Kyrgyzstan is 90th on regulations (KZ 61st, UZB 64th, TJ 102nd), 128th on infrastructure (KZ 96th, UZB 98th, TJ 126th) and 102nd on cultural, human, and natural resources (UZB 101st, TJ 111th, KZ 112th).
So, another disappointment for Kyrgyz government. Fortunately for them though, the Kyrgyz press has not picked up on the education and tourism rankings. But, I am sure coming, after everyone gets overs from the March 8th celebrations, the Kyrgyz media will throw these rankings at the government's face.
2008 will be the year of grand privatization projects. The president spoke several times in favor of privatizing big state-owned companies (electricity, heating, gas, power plants, telecommunications, etc.). The parliament under tight grip of his party will approve all the necessary laws.
I am for privatization. But, I have several problems with it. Its proponents are arguing that private owners will modernize these companies, make them profitable, and basically run them better than the government is now doing. However, private ownerships is not a panacea. State-owned companies can easily be ran like modern companies if you good management is recruited.
Nonetheless, I am more worried about the privatization process. Under these conditions, these companies might be sold to companies, who give the biggest kickback to government officials in charge of the privatization process.
Here and there people are talking about possible Presidential elections. But, before the elections are held, it is expected that the Parliament, controlled by President's Ak Jol Party, will make changes to the Constitution (4th in 2 years!) and extend president's term in office from 5 to 7 years. Then elections can be held, possibly in summer.
The thinking is that why wait till 2010, when you can "win" today and remain president till 2015. And, it will be the first term. New constitution, new term! Then, the government can go ahead with privatization of big state companies: electricity, gas, heating, and telecommunications.
According to the official Chinese statistics, the trade turnover between Kyrgyzstan and China is around $1 billion, while our government puts it at $289 million. The Kyrgyz government met with their counterparts from Xinjiang (China's western province) to discuss the trade issues.
Where is $711 million? Corruption resulting from poor accountability and lack of transparency is the cause. This striking difference ends up in the pockets of traders, who lower the actual amount of goods being imported from China in order to avoid paying the tariffs, and of customs officials, who agree to register for a kickback. As a result, it is rumored that positions of customs officials on a border post cost from $5000 to $20000.
You can read more about trade between China and Kyrgyzstan here.
Despite the peak of pre-election campaigning and the voting day in 5 days, Kyrgyzstan is closely watching the breaking news from Russia. Putin's backing of Dmitri Medvedev as his heir put an end to various speculations. Today's news also ends the debate on how Putin stays in power after March 2008. Medvedev, as a return of favor, also asked Putin to be the Prime Minister, with extended powers to control the entire security forces.
As for Medvedev's background, I amazed to learned that he is a big fan of Black Sabbath (remember Ozzy Osborn?). He is seen as a liberal politician without confrontational intentions towards the West, although he already made a Putinesque statement regarding the rise of Russia. Putin's protégé was involved in several big economic deals. After all he is not as white and fuzzy as we have known him so far.
This news is important to Kyrgyzstan because mainly Putin is very popular in Kyrgyzstan and many wish that we had a president like Putin, as a result President Bakiev tends to imitate his Russian counterpart. For example, since coming to power in March 2005 Bakiev has been cultivating the image of a boxer similar to Putin's image of a judo master, although Putin can parade sports credientials of owning a black belt.
Russia is also important because of Kyrgyz immigrant workers numbering from 300 000 on a conservative count to 1 millions on a liberal count. These are mainly voting age people. They left their children with relatives, mainly grandparents, in Kyrgyzstan. Despite this, the Central Elections Commission is sending only 29,000 ballot papers to Russia. Moreover, the CEC is installing voting booths in bazaars as if they expect difficulties of using all the ballot papers.
The World Bank also issued a report claiming that immigrants in 2007 send approximately $1billiob, which is around 27.4% of our GDP. By contract, the 2004 figure was around 8% of GDP.
All the basic food items have gone up so much, that I am already losing track of how much things cost last week.
Flour costs 50soms/kg in stores, or 1700soms/50kg in bazaars. It was 25soms a few months ago. There is a scarcity of wheat in the market.
Cooking oil costs 100soms/lt. It was 50soms a few months ago.
And to add insult to injury, currency exchanges lowered USD from 37 to 33soms and Euro from 52 to 46. I took this picture on the intersection of Manas and Moskovskiy.
