STUDY Agreement Under Pressure Gold Mining and Protests in the Kyrgyz Republic DAVID GULLETTE| ASEL KALYBEKOVA September 2014 n Kyrgyzstan’s economy depends heavily on gold mining, mainly from output at the Kumtor mine run by the Canadian company Centerra. Yet, the mine is contentious due to social and environmental concerns. As a small, developing country, Kyr­gyzstan is challenged to balance standards, oversight and securing revenues, while attracting needed foreign investment to the sector. Growing protests against mining are leading investors to suspend or shut down operations. n Against the background of rising resource nationalism, the Government of Kyr­gyzstan is negotiating a new agreement with Centerra. Parliament approved a draft which would swap the country’s shares in the company for control of half of the mine. This signals a shift from a longer-term financial perspective in the mining com­pany to shorter-term economic gain. There is no clear indication of how MPs will fi­nally vote on the proposed agreement; several prominent politicians have advocated nationalizing the mine. n Irrespective of the outcome of the negotiations, the Government must seek to use funds in a transparent and effective manner and should establish a specific fund for gold sector revenues. The fund should be managed by the Ministry of Finance and utilize stringent oversight mechanisms. n The debate on Kumtor, however, hides more significant economic challenges. Non­gold sectors of the economy must be strengthened to mitigate the effects of the potential accession to the Eurasian Economic Union, and to support longer-term economic development. n People living in areas affected by mining have legitimate concerns about social re­sponsibility and corruption in the sector. The Government must seek to mediate between stakeholders and find better ways to share benefits.