New Kyrgyz rulers welcome Russian business groups

by Simon Pirani

Inward investment by Russia’s powerful business groups is welcome in the new Kyrgyzstan, deputy prime minister Daniyar Usenov told Emerging Markets in an interview yesterday.

Usenov, outlining the new Kyrgyzstan’s economic perspectives for the first time in the international press, said government will act as a strategic “organiser and adjudicator”. Corruption is being combated “from the top”.

The new authorities were swept to power on the basis of popular protest in March. “This was a revolution – not a coup, and it came as a reaction to corruption and to the gulf between rich and poor,” Usenov emphasised.

Meeting Russian business leaders was an early priority for acting president Kurmanbek Bakiev. He travelled to Moscow this month and met with Oleg Deripaska, the main owner of Rusal, the world’s second largest aluminium producer, and Petr Aven, chairman of Alfa Bank.

Bakiev and Deripaska discussed developing Kyrgyzstan’s huge natural potential in Kyrgyzstan for developing hydro-electric power production.

Usenov said: “We are in discussion with Mr Deripaska about completing two unfinished power stations at Kambar-Atina, building new high-voltage power lines to export electricity to Tadjikistan and constructing a aluminium smelter in Kyrgyzstan.”

A supply of cheap Kyrgyz electricity would boost Rusal’s plans in Tadjikistan, where it has signed an agreement with the government for $1 billion of investment in energy and aluminium production. Rusal is front-runner to take control of the Tursunzade aluminium smelter, Tadjikistan’s largest industrial asset, in a privatisation sale this year.

Usenov also said Kyrgyzstan welcomes inward investment in telecoms by billionaire former deputy prime minister Petr Aven’s Alfa group, which owns Alfa Bank, Russia’s largest private bank, and has merged its oil company, TNK, with BP’s Russian assets.

Alfa Telecom, an Alfa group company, has bought BiTel, Kyrgyzstan’s only GSM operator. It is defending an action in the international arbitration court in London by a Kazakh group, Alians Kapital, over ownership of BiTel.

“The Alfa group is ready to invest substantial sums in Kyrgyzstan. But the government will not take any part in the legal process. We are interested in BiTel’s future: we want it to work, to pay taxes and to develop. The telecoms sector must be opened up to competition and a second GSM operator established.”

Usenov believes that the political changes in Kyrgyzstan have brought “vastly improved conditions” for inward investment from the whole international community. The priorities in the country’s relationship with the EBRD are infrastructure and banking sector reform, and in developing such financial products as mortgages and leasing.

The government’s economic strategy must reverse years of neglect, Usenov said. “We will lead, not interfere. First, it will act as an organiser and adjudicator, and ensure that there is a level playing field. Second, it will work to bring into existence a middle class that will act as a guarantee for stability and against future political upsets. Third, it will give direction to strategic industries including electrical energy and gold production.”

The battle against corruption “is starting from the top”, Usenov pledged. In Akaev’s Kyrgyzstan, corruption was “systemic and all-embracing throughout the state”; business was effectively taxed twice, and all government positions had to be purchased – “up to the prime minister’s, for $350,000, and the head of the tax service, for $250,000”.

He and other ministers have appeared at dozens of mass meetings, attended by up to 30,000 people, to speak … and listen. People want to avoid conflict in the run-up to July’s elections, and, above all, “to have hope for the future”.