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Analyzing Investment Risk in Kyrgyzstan

By Resource Investing News on 09/14/2010 – 11:06 am PDTLeave a Comment

By Michael Montgomery—Exclusive to Rare Earth Investing News

Assessing risk on investments in developing nations such as Kyrgyzstan, officially the Kyrgyz Republic, is essential for interested investors. A region’s political stability is a major determining factor in the success of any company’s operations as it represents a significant risk to large scale projects and investments. Wars have been fought over the nationalization of property and business interests, and companies have lost millions due to increased mineral royalties and changes to tax code rules.

This instability is not just a factor in developing nations alone. The Rudd Government in Australia tried a dramatic overhaul to the mineral royalty system, which was met with stiff opposition from the business community. After losing the election, the new regime has stated a desire to change certain aspects of the tax system, but have jettisoned the ‘Super Profits Tax’ proposed by Rudd. These factors play a pivotal role in the overall success and the forecasting of profitability of a mining operation.

In the case of the Kyrgyz Republic, political instability is a reality. But its affect on business may not be as drastic as in certain Latin American nations, which are undergoing a National Socialist awakening. Looking at the vital social statistics of the republic helps investors understand the political realities on the ground.

Kyrgyz Republic: Gained Independence from the USSR in August of 1991

Population: 5.4 million

GDP: USD $12.11 Billion/$4.57 Billion (Official Exchange Rate)

GDP by Sector: Agriculture 26.9%, Industry 18.4%, Services 54.7%

Per Capita GDP: $2,200

Exports: Cotton, wool, meat, tobacco; gold, mercury, uranium, natural gas, hydropower

Export Partners: Switzerland 25.96%, Russia 25.88%, Uzbekistan 15.72%

Imports: Oil and gas, machinery and equipment, chemicals, foodstuffs

Import Partners: China 57%, Russia 19.3%, Kazakhstan 5.9%

(Data from CIA Factbook)

In April, 2010 bouts of ethnic clashes and rioting ousted President Kurmanbek Bakiyev and have left the country with an interim government headed by President Roza Otunbayeva until elections are held later this year

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Tags: cia factbook, , mineral royalties, mineral royalty, ,

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