Kyrgyz Republic

The government engages in EITI at a high level. Senior officials are represented and engaged. However, government funding and outreach to other donors was unsuccessful in 2017-2019. Despite future funding prospects, shortfalls in 2017-2019 caused challenges for reporting, outreach and dissemination. Therefore, while many aspects have been addressed, the overall objective of effective government engagement has not yet been fully achieved.

Although there is significant scepticism and to some extent active lobbying against the EITI within parts of the company constituency, some companies have been actively engaged through participation in MSG meetings. Many companies, including all large tax payers, participate in EITI reporting. The renewed industry engagement is welcome.

There is an enabling environment for civil society to operate in the Kyrgyz Republic, and no concerns about civil society’s ability to participate in the EITI process.

The constituency guidelines for nomination were developed prior to the commencement of Validation, and participation in the nomination process was open and transparent. Although the processes were concluded after commencement of the Validation, the EITI Board considered that the corrective action was fully addressed. Civil society and companies have appointed their representatives without interference. No stakeholders highlighted any significant deviations from the Memorandum of Understanding in practice.

The MSG has agreed an up to date work plan for 2016, with objectives for EITI implementation that are linked to national priorities for the extractive sector, as well as costed and time bound work plan activities and actions. Future work plans need to be clearer about the link between the work plan activities and the work plan objectives, and include more specific deadlines for each activity. It is also recommended that the Supervisory Board urgently agrees a fund raising strategy including plans for partial government funding in the future.

The 2013-14 EITI Report contains a comprehensive description of the legal framework including a detailed overview of the fiscal regime, changes to the legal framework, and reforms underway. Responsibilities of government entities involved in the management of the extractive sector are described. The fiscal system is centralised, with local governments only collecting property tax and land tax.

The Kyrgyz Republic comprehensively describes how licenses are awarded and transferred. Kyrgyz Republic has begun disclosing license information regularly. However, some gaps remain for 2015-2017 awards and transfers; no list of allocations through direct negotiations was available. The government confirmed there were no deviations from the licensing procedures, however the basis for the conclusion was unclear.

Kyrgyz Republic discloses information on license holders online, including coordinates, relevant dates, and commodity being produced. The register also links to the general business register and to the Open Budget Portal of the Treasury. Dates of application for licenses allocated before 29 March 2018 are not available. These dates cannot be compared with the license register due to poor technical usability.

The report explains the government policy on contract transparency and comments on the actual practice of contract disclosure. The report also discloses the only publicly available contract with the Kumtor Gold Company.

The Kyrgyz Republic took part in the beneficial ownership pilot, but only four companies disclosed their ultimate beneficial owners. The 2013-2014 EITI Report confirms that as of 2014, companies must disclose their beneficial owners when applying for a license and notify the government in case of changes in beneficial ownership. Failure to do so constitute grounds for revoking the license in accordance with the Subsurface Law.

Kyrgyz Republic improves on most aspects of the corrective action. Ten state-owned enterprises (SOEs) are active in the extractive sector. Two companies were considered material, Kyrgyzaltyn OJSC and Kyrgyzneftegaz OJSC. Some disclosures governing the financial relationship between the government and SOEs exist. However, disclosures do not extend towards subsidiaries and joint ventures of SOEs. Lack of coverage of these entities made it impossible to conclude that extractive SOEs’ data is comprehensive. Information is not available on actual practices of these rules. Loan and loan guarantees was partially addressed, though debt agreements between SOEs and the Ministry of Finance were not accessible at the commencement of Validation.

The EITI Report provides a comprehensive overview of mineral resources and deposits, including “attractive” extractive projects, most of which are significant exploration projects.

Kyrgyz Republic makes great efforts in pursuing comprehensive disclosure of production data. However public disclosures of the EITI Report continue to fall short of providing clear and comprehensive estimates of production volumes and values for all commodities. Production data does not seem to include silver, mercury, copper, iron and antimony. Kyrgyz EITI has begun to overcome the obstacle of state secrecy laws, though this barrier still exists. Kyrgyz Republic also published data after the commencement of Validation, though they did not cover all gaps in disclosures.

Kyrgyz Republic discloses export volumes and values for most commodities. Some gaps remain and were hampered by state secrecy laws; in particular for gold export volumes and data on metal commodities. However, the EITI Board considered publications made after commencement of Validation, and consider that Kyrgyz Republic provided fully disaggregated export data, using international data standards for commodities, covering in excess of 99% of all extractive exports. The remaining ~1% relates to exports of metal commodities, under the Harmonised System code for metal ores.

The report does provide an assessment of comprehensiveness of the reconciled financial data. However, some material payments and companies were excluded from reconciliation without sufficient evidence. There are barriers to ensure full government disclosure of extractive sector revenues. However, these are not clarified nor are plans to overcome these barriers.

The 2013-14 EITI Report does not provide information on whether the government collects revenues in-kind. Government officials confirmed that in-kind revenues are not practiced.

The International Secretariat’s assessment is that the corrective action on infrastructure and barter arrangements has been addressed and that Requirement 4.3 was not applicable to the Kyrgyz Republic in the period under review.

The International Secretariat’s assessment is that the corrective action on transportation revenues has been addressed and that Requirement 4.4 was not applicable to the Kyrgyz Republic in the period under review.

The report discloses some SOE transactions. Material dividend incomes and management fees are not reconciled. Additionally, dividend incomes collected by Kyrgyzneftegaz OJSC were not considered.

All revenue streams are recorded in the State’s single treasury account, even subnational revenues. Kyrgyz Republic clearly distinguishes mandatory social expenditures versus regular fiscal instruments. Full disclosures are not made for ‘Opportunity cost of provided land plots ’ as is required, even if included in the reconciliation exercise.

Data is disaggregated by individual payment, individual company and individual government entity. The data is not presented by project.

The draft 2013-2014 EITI Report was published online on 31 December 2015. The final 2013-2014 EITI Report was published and distributed among stakeholders on 16 February 2016.

Kyrgyz Republic have embedded several aspects into corporate filings to the regulator, with data reported to the regulator annually. The full plan for addressing the corrective action has not yet been completed, but significant progress has been made. There were minor issues related to adherence to standard reconciliation procedures, however the IA was able to provide an assessment on the comprehensiveness and reliability of reconciled financial data.

The 2013-14 EITI Report provides a list of revenues recorded in the national and local budgets. Stakeholders confirmed that all revenues are allocated in the budget.

Kyrgyz Republic addresses material transfers from Treasury’s special account to to regions. How revenues should be distributed is provided but it remains unclear how the government calculates the transfers. Actual amounts are disclosed and disaggregated by project and beneficiary. However, the transfer amount calculated in accordance with the relevant revenue-sharing formula is not provided.

The 2013-14 EITI Report provides a description of the budget process, and auditing practices for state finances. The 2013-14 EITI Report also provides an overview on establishment of regional development funds - oblast and district levels that were introduced in November 2014 and that will receive a share of extractive related non-tax payments.

Social payments are mandatory, social package payments from companies are available. Additionally, social payments to the Issyk-Kul development fund, funded by the Kumtor Gold Company, are disclosed.

Kyrgyz Republic discloses all quasi-fiscal expenditures for two material SOEs; Kyrgyzaltyn OJSC and Kyrgyzneftegaz OJSC. There was consensus among stakeholders consulted that these disclosures were comprehensive.

Kyrgyz Republic discloses information about contribution of the extractive industries to the economy, with a commentary from the IA that there is 6% discrepancy in comparison to the data by the National Statistics Committee. The report provides information on the extractives industries’ contribution to government revenues, exports and employment, although the IA does not comment on the methodology used to calculate these values.

Kyrgyz EITI reporting is comprehensible and accessible to the general public. Several outreach and dissemination events have been organised in key mining regions. Restricted funding have limited efforts somewhat, however civil society and the regulator, SCIESU, have supported in its place.

Kyrgyz Republic’s EITI does not yet provide EITI data in easily accessible format. The MSG held a discussion to address this encouraged requirement, no actions were taken.

The Supervisory Board ensured that there has been adequate follow up of the recommendations from EITI Reporting, including identifying, investigating and addressing the causes of discrepancies.

The Kyrgyz Republic reviews outcomes and impact on a regular basis. They monitor progress in meeting each EITI Requirement, including steps undertaken to exceed them.