It is important that activities in the mining industry are open and transparent. Investors should know the rules, and local residents should know who exactly owns the licenses for the development of deposits, as well as the size of taxes and their purposes.
As emphasized by Kurban Mambetov, the head of the national secretariat of the Extractive Industries Transparency Initiative (EITI), "transparency is one of the key aspects that must be ensured in the mining industry. Communities should know which companies operate in their region, what their tax obligations are, and what commitments they make to the population."
EITI: What It Is and Why It Matters
The Extractive Industries Transparency Initiative (EITI) is an international standard aimed at ensuring openness in the mining sector. In Kyrgyzstan, this standard has been implemented since 2004. The country's legislation, particularly the Law on Subsoil, confirms compliance with EITI international norms, requiring companies to provide reports on their activities to government bodies according to these requirements.Arkadiy Rogalskiy, an expert in subsoil use, points to the advantages that EITI brings to the state, companies, and society:
For the state:
- Strengthening the transparency of public administration.
- Combating corruption.
- Independent assessment of revenues from the mining sector and budget planning.
- Improving the state's image.
- Increasing public trust through openness.
- Unified rules for information disclosure for all participants.
- Stability in institutional decisions.
- Access to reliable information about minerals.
- Discussion of issues with the government and companies through the EITI supervisory board.
Who Owns the Licenses?
However, EITI includes not only tax reports from companies. An important aspect is the ownership structure of subsoil users, which is often complex. Open sources may only indicate the name of the company and the name of its leader, while information about the actual owners may be absent.EITI requires the disclosure of data on beneficial owners of companies, which allows understanding who actually profits from their activities. This information is more important than just tax data, as the beneficial owner is the one who benefits from the company but is not always mentioned in official documents.
Disclosure of information about ultimate owners will help the population understand who is behind the development of deposits and ensure confidence in the absence of corrupt schemes. Openness on this issue strengthens trust in mining projects.
For the state, such transparency helps avoid corrupt practices and approach the issuance of licenses more reasonably, as authorities will have more information about the candidate. This will help prevent potential problems and unfair competition.
The lack of information about ultimate owners can lead to concealing connections with politically significant individuals and tax evasion, as well as contribute to corruption and conflicts of interest.
The Situation with Openness in Kyrgyzstan
Despite existing problems, Kyrgyzstan is actively taking steps to increase the availability of information about the mining sector, including data on beneficiaries. In 2020, the government adopted a resolution to create an open register of licenses for subsoil use.This year, the register was updated and published on the website of the Ministry of Natural Resources, Ecology, and Technical Supervision. This is an important step towards ensuring transparency and allowing the population to know who manages the deposits. However, it is worth noting that the register is only available in a table format, which needs to be downloaded to a computer for viewing.
Nevertheless, the register contains useful information, including complete data on companies and their beneficiaries. It specifies the full names of ultimate owners and their shares in the business, allowing verification of their connections with other organizations or political activities.
Interestingly, most licenses are issued not for precious metals but for the development of non-metallic minerals.
EITI experts point to the need to improve the activities of regional development funds that support local community initiatives. These funds are formed from contributions from companies working with subsoil.
Currently, there should be 49 such funds, but information about their activities is only available for six of them, which publish reports on their work. Although they report to the Ministry of Economy and Commerce, it is important that this information is accessible to the general public, emphasizes Arkadiy Rogalskiy.
In the near future, a report on Kyrgyzstan's progress in complying with EITI standards for 2023-2024 is expected to be published, which will allow assessing the level of openness and transparency in the mining sector.
