Kumtor Trade Union Letter to Government of the Kyrgyzstan

published: 29 April 2013

TO: A. Sh. Atambaev
KR President

TO J. J. Satybaldiev
KR Prime Minister

Dear Mr. Atambaev,

We, KOC employees, approach you with regard to the stringent situation around The Kumtor gold deposit. Based on the findings of the state and parliamentary commissions on the Kumtor Project, various political figures, leaders of public and environmental organizations launch legislative initiatives to denounce the Agreement on New Terms for the Kumtor Project dated 2009 and nationalize the Company as well as call for public active participation in this process under the mask of patriotic slogans abusing trust of ordinary people.

Pursuing their own political goals, they do not think that the Agreement denunciation can result in entire Mine shutdown. Such shutdown can last for years during multiple international arbitration proceedings. Thus, 4,000 employees including their family members will be left with no jobs and means of subsistence.

Currently, Kumtor is the only significant investment project being implemented in the country. The Company has operated since mid 90-s providing 10% of the country’s GDP, 40% of the industrial output, more than 50% of export and more 20% of all tax contributions of the state. According to the data provided by KR Ministry of Economy and Antimonopoly Policy, GDP has grown by 0.5% without Kumtor and by 8% with Kumtor.

Annual taxes, customs fees and other mandatory payments of the Company to the National Budget made up KgS 7 billion in 2011 and more than KgS 5 billion in 2012.

The amount of annual employer (17.25%) and employee (10%) social fund contributions were KgS 1.2 billion in 2011 and approximately KgS 1 billion in 2012.

These funds are further allocated to pay salaries of budget organization employees, pay various social allowances for vulnerable and socially unprotected population and pay retirement allowances.

Currently, Kumtor Operating Company has more than 2,500 KR national employees. Also, the Project uses contractors having about 1,500 employees. The above employees work in extreme, high-altitude, remote and hard-to-access conditions, receive decent salaries thus supporting their families and assisting their close relatives. On average, USD 10 million is paid by the employees to the state budget as the income tax.

Each year, more than 2,500 employees working at the Kumtor Mine site are sent for treatment and recreation to sanatoriums and spas during off-season. Thus, successful operations of these organizations and employment of hundreds of employees in these sanatoriums also depend on the Kumtor operations.

Dozens of small and medium-scale Kumtor suppliers of goods and services ensure Kumtor continuous operations.

Moreover, the Company renders significant financial assistance to the Issyk-Kul Region through establishment of the regional development fund and transfer of funds designated for construction and repairs of schools and medical institutions, as well as for promotion of small and medium-scale businesses.

Kumtor shutdown will lead to the KR budget deficit, inability to make public payments. This, in its turn, will result in economic instability and social unrest. Nobody can give guarantees that after losing their jobs and sources of income the Company employees and their family members will not go to massive demonstrations and meetings to defend their constitutional right to work. This is fraught with irretrievable consequences.

KOC employees support the effort of KR President, KR Parliament members, KR Government to gain more benefits from the Kumtor Project, however, believe that all disputes with the investor shall be resolved by negotiations and request that you prevent adopting the law on denunciation of the Kumtor Agreement and stopping Mine operations.

Sincerely,

On behalf of KOC employees
A. Jakypov
Chair, Trade Union Committee