The travails of Centerra, the operator of Kyrgyzstan’s Kumtor gold mine, are well-documented. But it is worth noting that it’s not just Western-run mining operations that are experiencing troubles in Kyrgyzstan: Chinese ventures also are dealing with their fair share of hassles.
There are more than 200 mining sites in Kyrgyzstan. Around 50 of them are operated by Chinese companies, and the executives who run these Chinese operations tend to be less likely than their Western counterparts to go public with problems. But the keep-it-quiet approach doesn’t seem to make life any easier for Chinese mining projects.
The hostility exhibited by local populations toward outside mining interests appears to be universal. The latest bout of public discontent toward a Chinese firm occurred in mid-May, when hundreds of protesters interrupted operations at a gold mine operated by Kaidi in southern Kyrgyzstan’s Chon-Alai District.
Unrest at Chinese mines in Kyrgyzstan has been documented for almost two years. In August 2011, roughly 300 protesters beat up Chinese workers at the Salton-Sary gold mine not far from the Kumtor site. One month later, protesters demanded the closure of the Chinese-owned Kemin gold mine, and in October 2012, around 250 Chinese workers had to be evacuated from an exploration site of the Chinese Zijin Mining Group.
Although Kyrgyz officials like to blame foreign companies’ insensitivity to local environmental and social concerns as the main source of trouble, the real root of the problem is weak governance and a lack of transparency. Since gaining independence in 1991, Kyrgyzstan has been plagued by corruption, specifically the widespread misappropriation of taxpayer funds and international assistance. In 2012, the country ranked 154th out of 178 in Transparency International’s Corruption Perceptions Index (CPI).
Kyrgyzstan sits on roughly 140 million ounces of gold. Taking into account the price of gold, which currently hovers in the area of USD $1,300 per ounce, there would seem to be more than enough of the precious metal for everyone involved — i.e. the Kyrgyz government, foreign mining companies and local populations – to benefit. But for that to happen, all the sides need to embrace a long-term outlook and take steps to build mutual confidence. It would also help if Western and Chinese mining executives could try to harmonize their positions and policies toward both the government and local populations.
Mining companies have tried to muddle through under the current set of conditions. But they haven’t been able to find a sure-fire formula to avert trouble. For instance back in 2011, Talas Copper Gold, another gold mining company in Kyrgyzstan (co-owned by South African Gold Fields Ltd.), addressed local discontent by trying close engagement with the local community. Still, its extraction sites were attacked and burned.
The mining companies themselves bear a large share of responsibility for their predicaments. After all, it was the companies that cut the original deals with Kyrgyzstan’s kleptocrats, deals that enabled corrupt officials to line their pockets while shortchanging the public at large.
The kind of violence that occurred at the end of May 2013 at the Kumtor mine has become an increasingly accepted method for trying to settle mining-related disputes in Kyrgyzstan. It is staged at times by politicians to further their short-term gains.
Kumtor illustrates how the “triangle of reciprocity” involving the central government, the local population and mining entities is dysfunctional. The only way to fix the system, and perhaps rescue the country’s experiment in parliamentary democracy from an ignominious fate, is for Kyrgyzstan’s legislative leaders to set personal interests aside and take corrective steps with the public’s best interests in mind. Mining executives then might be more comfortable in embracing new steps to share the wealth generated by extractive industries.