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Analysis / Articles /
GIZ report on local content development in mining

January 24, 2018

This report was prepared at the request of German Development Cooperation (GIZ) as part of their Mineral Resources for Development program to support the development of local content in the Kyrgyz mining sector. Since 2015, GIZ has been implementing this program in Kyrgyzstan, Kazakhstan and Tajikistan with the aim of bringing economic benefits through sustainable mining of raw materials.

Mining as an industry has been described as one wing of the Kyrgyz economy. It accounts for 8% of GDP, 11% the State budget and provides almost half of the industrial output of Kyrgyzstan.

In spite of the already import contribution of mining to the Kyrgyz economy, an even larger benefit to more stakeholders could be realized through the increase in local procurement and local content.

When a mine is to open in a community a community immediately expects two benefits: employment opportunities at the mine, and to be able to sell goods and services to the mine. In general, local employment is more straightforward as there are strictly defined requirements for skills, education and experience that must be met for professional positions, and unskilled jobs that do not have such strict requirements can be filled by those with a minimal level of work ethic.

With no current legislative requirements in place, mining companies have taken a range of approaches to local procurement, from strategic to opportunistic, with varying degrees of success. Often times this can depend as much on the level of scrutiny attached to the mine and how local procurement is communicated as the overall impact or benefits. The type of mine is also impacting community expectations, those being higher for gold and other precious metals than for coal or construction materials such as lime.

In order to achieve the benefits that stakeholders, including government, communities and mining companies expect, a more strategic approach to local content and procurement is required. Although many challenges exist, such as the nature of the goods and services available or produced in Kyrgyzstan, the benefits that can be achieved are too great to be ignored, and can greatly enhance the economic impact from mining in Kyrgyzstan, and help to reduce conflict that currently exists.

This report, compiled through stakeholder interviews, literature review and personal experience in Kyrgyzstan, describes the activities that have been undertaken to date by mining companies, the challenges that are faced at the current moment, and lays out a number of steps that can be taken by stakeholders in order to increase local content in the mining sector in Kyrgyzstan.

The recommendations as they stand can be taken up by stakeholders individually, but in order to achieve full potential from local content development, a more cohesive and strategic approach is warranted. In this regard, it is proposed to hold a stakeholder forum on the basis of this report, whereby stakeholders can debate and discuss the issues, challenges and opportunities from their point of view, and hopefully come to a collective decision as to how best to proceed in a strategic and industry wide manner.

Download file «Local Content Development in Mining_Opportunities and Challenges in KR.PDF»

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