China Offers Assets-for-Investment Deal

A deal in which Kyrgyzstan would offer China access to mineral resources in return for investment in a new railway could eventually cause friction between the two countries, as well as depriving the Kyrgyz of important assets, according to NBCentralAsia’s economic commentators.



On November 9, Prime Minister Felix Kulov ordered the creation of a working group to look into the merits of an assets-for-investment scheme which Chinese investors have put forward. The idea is that Chinese firms would pay for work on the Kyrgyz section of a planned intercontinental rail route running from Beijing to Paris, and in return they would be granted permission to develop Kyrgyz mineral deposits.



The Chinese are especially interested in gold, which once mined would be deposited in the Development Bank of China, to be returned to Kyrgyzstan once the railway investment starts producing returns.



The idea holds considerable attractions for Kyrgyzstan, a country that lacks the finances to spend on large investment projects.



Jyldyz Sarybaeva, an NBCentralAsia economic expert, says the deal offers the country a prime opportunity to access substantial funds for a transport project that promises huge revenues. “Building this railway would create a route for exporting goods, and Kyrgyzstan would also get earn revenues from transit traffic,” she said.



But Kyrgyzstan, which shares a common border with China, also needs to think about its neighbour’s wide-ranging geopolitical interests. In Sarybaeva’s view, China is beginning to pursue a policy of expansionism based on “strategic borders and living space” to match its growth as a power. In light of that concern, the analyst recommends that Kyrgyzstan identify other mechanisms for attracting Chinese investment.



Nariman Tuleev, the director-general of Kyrgyz railways, acknowledges that creating a direct route from Beijing to Paris would bring Kyrgyzstan economic benefits, but he too warns against giving away the nation’s resources to underwrite investments.



“Kyrgyzstan has to learn how to use its mineral and other resources, including gold deposits,” he said. “We could use a particular mineral deposit as security to underwrite share purchases, earn money on these and turn a profit; in other words, we could use them short-term rather than long-term and still earn money.”



Businessmen are similarly opposed to the idea of handing over resources as security for investments. “If we give away underground mineral-bearing resources as security, they may end up staying in the hands of the investor. So we shouldn’t be too hasty about offering them as security for Chinese loans,” said Omurbek Abdrahmanov, head of the Union of Entrepreneurs.



Abdrahmanov added that in any case, before any such move was undertaken, Kyrgyzstan needed to sort out its own corruption and bureaucracy and make government operate in a transparent manner.



NBCentralAsia’s interviewees also voiced concern at what would happen if Kyrgyzstan lost its natural resources and could not reclaim them. In such a clash, it would be at a distinct disadvantage compared with superpower China.



“It’s better not to put ourselves in a situation where China can apply sanctions or limit trade with our country. We’d end up in an even worse position,” said Abdrahmanov.



(News Briefing Central Asia draws comment and analysis from a broad range of political observers across the region.)