Nikita Mendkovich: "The Problem of Kyrgyzstan Lies in the Area of Large Investment Projects"

Not long ago, Kyrgyzstan denounced the agreement with Russia on the construction and operation of the Kambarata HPP-1. After the scandal with Canadian investors, the gold mining company "Centerra Gold," the work of the Chinese oil refinery "Junda" was suspended in the Kyrgyz city of Kara-Balta. Regarding why this is happening, as well as why the investment attractiveness of Kyrgyzstan is declining, the news agency spoke with economist and EAEU expert Nikita Mendkovich.

– The situation with foreign investments in Kyrgyzstan is not as bad as it seems at first glance, – the expert believes. – The volume of foreign investments in the Kyrgyz Republic in 2015 increased by almost 25%: in 2014 it was 42.3 billion soms, and in 2015 it reached 51.1 billion. The Statistical Committee has not yet published details by country, but according to incomplete data for the first 9 months of 2015, investments from EAEU countries, primarily Russia and Kazakhstan, are growing. Moreover, this statistic does not include funds from the Development Fund, which was created based on Russian funds entering the economy through national investment institutions. Against the backdrop of a decline in absolute investment volumes in 2014, the past year can even be considered successful, which is largely the result of the "EAEU factor," which also influenced the assignment of a sovereign investment rating to the republic by international agencies.

Nikita Mendkovich believes that the problem of Kyrgyzstan lies in the sphere of large investment projects, which require significant investments and have slow returns. The first main reason is the global crisis of overproduction, due to which many players, including Russia and China, have a shortage of free financial resources, slowing down the construction of previously planned assets that will take a long time to pay off. Therefore, investors are inclined to take a pause, as was the case with RusHydro. Mendkovich noted that the hasty revision of agreements by the Kyrgyz side will complicate the resumption of work in the future.

– Large projects in the Kyrgyz Republic traditionally face problems related to finding investors from abroad. The issue of revising property rights and investment agreements after 2010, conflicts around Kumtor and Jeruy, infrastructure deficits, and administrative issues, including corruption, all play a role. All of this deters investors. Joining the EAEU has somewhat improved the situation, as the Union opens access to the common market from Kyrgyzstan, which has also led to increased activity from Turkish investors.

The expert also added that, nevertheless, the construction of large production facilities with significant investments without quick returns remains a problem that will be resolved as Eurasian states overcome the current crisis.