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bne IntelliNews – Kyrgyzstan’s big-ticket deal with new Chinese firm raises questions

A newly created government body tasked with reviving Kyrgyzstan’s industrial sector boasted last week that it had signed a preliminary agreement with a Chinese company to set up a $200 million joint development fund.

Ambitions are high for this investment project called Kyrgyz-Chinese Fund.

A plan outlined in the Memorandum of Understanding (MoU) is to build a factory producing 10,000 electric cars a year. The MoU also envisions collaboration on renewable energy, e-commerce, artificial intelligence and drones for military use. The fund will eventually reach $1 billion, Kyrgyz industry regeneration agency Kyrgyzindustriya said in a statement posted on Facebook on May 17.

And none of those involved seem overly concerned that neither of the joint venture parties – both newly created entities – seem particularly experienced in these or other areas of the industry.

Jierong Zhang, general manager of Guangdong Xinjin Energy Development, the company on the Chinese side of this deal, received the red carpet treatment during his trip to Bishkek this month. He met with Economy Minister Daniyar Amangeldiyev and discussed even more ideas than those shared by Kyrgyzindustriya. These included building eco-farms and hydroelectric plants, and making something called “smart buses.”

One would expect a company with such grandiose visions to be endowed with considerable capital and a portfolio of successful projects to its name.

Guangdong Xinjin Energy Development, however, was only incorporated in March in the city of Zhuhai, which borders Macau, and has a relatively modest 100 million yuan ($15 million) under its belt. He doesn’t have a public online profile to speak to, which is hardly surprising given how recently the company was established. An online database of Chinese companies describes Guangdong Xinjin Energy Development as having licenses to explore and exploit metallic and non-metallic mineral resources, but provides no other useful details.

Kyrgyz Ministry of Economy’s own pot description for Guangdong Xinjin Energy Development makes claims not even the company makes about itself, such as that its business interests extend to nuclear power generation and wind turbine.

Neither the Kyrgyz government nor the Chinese Embassy responded to Eurasianet’s questions about how this deal was struck and why Guangdong Xinjin Energy Development in particular was chosen as a partner by Kyrgyzindustriya.

“Just search for the company on the Internet,” a Kyrgyzindustriya spokesperson told Eurasianet. “It’s your job after all.”

It would certainly help Kyrgyzindustriya if Guangdong Xinjin’s energy development were the real deal. The body, which operates under the auspices of the Ministry of Economy, was established in January with start-up capital of 1 billion soms ($118 million). It is presented as a joint-stock company, although the government is the sole shareholder.

“Having a single shareholder in the person of the state offers citizens and investors the guarantee of successful development and reduces risk,” the government said in January when presenting Kyrgyzindustriya.

The idea behind Kyrgyzindustriya, head of government Akylbek Japarov said in September, was to revive old and dormant businesses and launch new ones as well. The dream is that the businesses incubated by Kyrgyzindustriya will one day create hundreds, if not thousands, of skilled jobs.

So far Kyrgyzindustriya Chairman Zharasul Abduraimov has been busy meeting with various businessmen from countries like Pakistan, South Korea and China. Some of those encounters felt less than overwhelming, though it’s too early to make summary judgments.

A report on Kyrgyzindustriya airing this week on state television explained how it was providing cash injections to theoretically promising but indebted local businesses. The report does not dwell on how these companies are selected. And a throwaway and oxymoronic sentence spouted by the journalist is far from encouraging.

“Among the companies [receiving funds] are those that bring benefits to the state budget, but do not generate revenue for the public treasury,” she says.

Another potentially confusing detail is that Kyrgyzindustriya is responsible for managing investments with money from the State Property Management Fund. This body is headed by Mirlan Bakirov, a politician best known in the militant community for his unreserved support for Rayimbek Matraimov, who was convicted last year of corruption. Matraimov’s critics allege that he defrauded the state of hundreds of millions of dollars while serving as deputy head of the customs service.

Because Kyrgyzindustriya’s financial transactions are protected by commercial secrecy – an advantage of being a joint-stock company rather than a government-owned entity – there is every chance that opaque operation will be its default modus operandi. (The State Assets Management Fund is also granted commercial confidentiality for its operations under amendments approved in 2021.)

Kyrgyzindustriya already has its detractors. MP Kamila Taliyeva complained in parliament this week that she and another newly created agency for tourism development were evidence of confused policy on the part of the executive.

“It’s a kind of incomprehensible economic policy you have here. There is no beginning or end to things. Every other day you open a new business and the money flies away like sand,” she said.

This article was originally published on Eurasianet here.