Risks and opportunities for foreign investment in the mineral sectors of the Central Asian Republics: Kazakstan,Kyrgyzstan, Tajikistan and Uzbekistan

With the dissolution of the former Soviet Union in 1991, the nations of Central Asia gained independence and began the transition to market driven economies. Both the political and economic transformations of the Central Asian Republics (CARs) (Kazakstan, Kyrgyzstan, Tajikistan and Uzbekistan) have been difficult primarily because of a holdover of various centrally planned `command and control' approaches to national development. The extensive mapping and exploration of the CARs during the Soviet era (approximately 1921–1991) led to the discovery of several hundreds of mineral deposits that were subsequently evaluated, and it is this `pool' of known, but undeveloped, deposits which is of major interest to foreign and domestic companies. However, foreign investment in the mineral sectors of the CARs is at best quite modest and there are very few positive signs that foreign investment will increase dramatically in the near term. The major risks that the mining industry faces as it works in the CARs arise primarily from the fact that the nations are transitional economies which lack both a comprehensive legal framework and experience in dealing with foreign mining corporations and their practices. The major risks are political, economic, financial, infrastructure, contractual, environmental, social and cultural and workforce related. If all individual risk factors are weighted equally, the relative ranking of the countries (from least risk to most risk for mineral development) would be Kyrgyzstan, Kazakstan, Uzbekistan and Tajikistan respectively. However, such a classification scheme does not effectively weight the importance of mineral potential. If the risk criteria are weighted with respect to geologic potential, the ranking of the countries would be (from least risk to most risk) Kazakstan, Uzbekistan, Kyrgyzstan and Tajikistan, respectively.