Clare Nuttall in Almaty -

Kyrgyzstan has managed to achieve compliance with the Extractive Industries Transparency Initiative (EITI) ahead of its more famous energy and mining neighbour Kazakhstan. And the Kyrgyz president has already signed a decree extending the initiative to include the energy sector as well as mining.

The EITI was launched in 2002 by former British prime minister Tony Blair, and is intended to encourage companies to publish what they pay and for governments to disclose what they receive. So far just 11 countries comply with the initiative, which sets standards for transparency and accountability in the extractive industries. Kyrgyzstan's compliance was announced on March 2.

For Kyrgyzstan, the endorsement by the international body was an important step in helping the country to demonstrate internationally that it is still an investor-friendly place despite the damage done to its reputation by the two recent revolutions, and subsequent expropriations of private assets. "Many investors are interested in the issue of country risk - they want to see companies operating a stable relationship with government and local communities," Sam Bartlett, regional director for Central Asia and the Caucasus at the EITI Secretariat, tells bne. "The EITI helps to build trust, so investors can be confident they will be able to focus on their business rather than thinking about compliance scandals and conflicts."

Revolving door

Under its first president Askar Akayev, Kyrgyzstan was one of the first countries to aim for EITI compliance. However, progress stalled after Akayev was deposed in 2005. "Kyrgyzstan had always provided very good government data, but the government stopped providing reports in 2007 or 2008. However, things started to change just before the April 2010 revolution," Bartlett says.

Since then, Kyrgyzstan's new government has pushed towards compliance. Current president, Roza Otunbayeva, has already signed a decree extending the initiative to the energy sector in addition to mining. This will have implications for both energy pricing and water resource management in the hydropower sector. "Hydropower projects have caused a lot of conflict in the community, so this will increase public confidence in government management of the sector," says Bartlett. "There are some technical challenges ahead, but there is a lot of political will to extend this initiative to other parts of the economy."

Meanwhile, Kazakhstan is still trying to get EITI accreditation. According to Bartlett, Kazakhstan has a very strong reporting process and is close to compliance, but there are some technical issues to clarify. In the Eurasia region, Azerbaijan and Mongolia are also among the countries to have achieved EITI compliant status.