Kyrgyzstan unrest may scare off future Chinese and other foreign investors, analysts say

Keegan Elmer
·4-min read

Unrest in Kyrgyzstan is likely to scare off Chinese and other foreign investors in the future, with increasing reports of attacks on foreign businesses amid the political upheaval, analysts say.

China, which neighbours the volatile Central Asian country and has in the past been its largest investor, will be hoping for a fast resolution to the turmoil. But analysts say it could be a long time before Chinese investors are confident about doing business in Kyrgyzstan, where political uncertainty has made it one of the least attractive partners in its Belt and Road Initiative.

A parliamentary election on October 4 triggered mass protests and the occupation of the parliament building in Bishkek amid allegations of vote rigging. The protests prompted the prime minister to resign on Tuesday, followed by the heads of many government bodies.

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Pro-Russian President Sooronbay Jeenbekov on Friday said he was prepared to resign as soon as a date for a new election had been set and a new parliament was confirmed. But the protests have now spread nationwide, with reports of attacks on Chinese and other foreign businesses amid the chaos.

President Sooronbay Jeenbekov says he is prepared to resign once a new election date has been set and a new parliament confirmed. Photo: dpa
President Sooronbay Jeenbekov says he is prepared to resign once a new election date has been set and a new parliament confirmed. Photo: dpa

Among the Chinese targets, Kyrgyz media reports said protesters tried to occupy a Chinese-owned oil refinery in the northern town of Kara-Balta. The refinery was the nation’s second largest taxpayer last year, according to Chinese media reports.

Meanwhile, Kazakhstan’s foreign ministry said several attacks and attempts to seize Kazakh-owned businesses in Kyrgyzstan had caused “serious concern”.

Niva Yau Tsz-yan, a researcher at the Organisation for Security and Cooperation in Europe Academy in Bishkek, described Kyrgyzstan as “chronically dysfunctional”.

“[It] is not a friendly investment environment – for China, or for any foreign investor,” Yau said.

The young Central Asian democracy has seen multiple waves of political upheaval since it gained independence in 1992 with the fall of the Soviet Union. A contested election in 2005 led to the ousting of then president Askar Akayev amid mass protests. Five years later, another president, Kurmanbek Bakiyev, was deposed and hundreds of thousands of Kyrgyz were displaced in ethnic violence that left hundreds dead and brought a series of political reforms.

According to Yau, the turmoil made the country a low investment priority for Beijing.

“China is concerned about the safety of its citizens and its fixed investments, but I don’t think China is worried at this point about losing opportunities in Kyrgyzstan in the future – it’s not on the top of Beijing’s agenda,” she said.

China’s foreign ministry last week said it was “highly concerned” about the situation in the country, and issued a warning to its citizens on Tuesday to avoid going outdoors.

But Yau did not believe there was anti-Chinese sentiment at play.

“These attacks on Chinese and other businesses are just locals taking advantage of the chaos to go after those who they think have money,” she said.

Chinese investment in Kyrgyzstan had been rising in recent years. A total of US$2.9 million was invested in 2016, and US$2.7 million in 2017, the most recent full-year data available, making China the top investor in the country at that time.

President Xi Jinping visited Bishkek last year and was awarded Kyrgyzstan’s highest national prize by counterpart Jeenbekov, for efforts to develop ties between the two countries.

But economic relations have cooled as debt owed to China has piled up, and as Chinese investment started to drop off. Kyrgyzstan’s government revealed in April that the country owed half of its US$4 billion in external debt to Beijing.

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Meanwhile, China accounted for just 5 per cent of foreign investment in the first quarter of this year, when it became the third largest investor behind Canada and Turkey.

In February, Kyrgyzstan also cancelled a US$275 million logistics hub planned for At-Bashy – a major belt and road project – days after mass protests against the development by local residents.

Supporters of politician Sadyr Japarov protest at the central Ala-Too Square in Bishkek on Friday. Photo: EPA-EFE
Supporters of politician Sadyr Japarov protest at the central Ala-Too Square in Bishkek on Friday. Photo: EPA-EFE

“Chinese and other foreign investors have long been losing confidence in the country, and this recent unrest is likely to scare off future investors,” said Raffaello Pantucci, a senior associate fellow at the Royal United Services Institute for Defence and Security Studies in Britain.

China’s economic interest in Kyrgyzstan had declined compared to other Central Asian states or other belt and road partners around the world, he said.

“Beijing is more likely concerned about the security implications of such uncertainty in a border country,” he said. “These upheavals have occurred periodically in Kyrgyzstan. It’s not the first time, and I’m afraid that it may not even be the last time.”

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