Socio-Economic Baseline Survey for

Issyk Kul Region Presentation, Donor Forum

Bishkek, November 15, 2013Douglas Grier, Director Sustainable Development, Kumtor

1. Context

2. Purpose of the Baseline Survey, and expected benefits

3. Approach & short overview of issues covered

4. Outlook

CONTENT

1. Context

• Very significant social and economic importance of Kumtor operations, both on a national and Oblast level. History of Kumtor in corporate social involvement, e.g community investments

• Limited life time of the mine (2023, 2026). Socio-economic context will be addressed in mine closure plans

• High and some times conflicting expectations of stakeholders

• Ambition to create a positive impact on livelihoods, and leave a lasting legacy - for instance related to building up of local capacity, economic diversity and local ownership that will continue to generate social and economic benefits in the post mine closure area

• Ongoing challenge to assess the contribution of mining operations to sustainable development on the level of regions and communities - beyond the larger financial contributions at the national level (such as taxes and other mandatory payments)

• In order to inform the public debate in a constructive manner and improve coordination and impact of development activities, Kumtor has embarked on a journey for improved measurement, communication and management of its various contributions to sustainable development

2. Purpose

• In 2013 Kumtor commissioned a socioeconomic baseline study of Issyk-Kul Oblast

• Purpose is to provide a snapshot of socio-economic conditions of Issyk-Kul Oblast at the current time

• Used to inform:

• Mine closure planning

• Kumtor strategic community investment (SCI)

• Also beneficial for:

• Issyk-Kul Development Fund

• Donor organizations

2. Purpose of the Survey

• To take an initial step in presenting a more complete and comprehensive picture of current socio-economic trends and development challenges in Issyk Kul region, and identifying how they link in with the overall context at national level

• The socio-economic baseline study will thus provide the basis for future measurement of Kumtor’s overall contribution to local, regional and national development

• Over time, changes can be identified with reference to the socio-economic conditions identified and described in the survey, and better judgements about the impacts and results achieved from development interventions and mining activities should be made possible

2. PurposeProject Overview

•Creating the foundation for the socio-economic baseline survey

•Understanding the context: -National and regional development needs, opportunities, objectives, plans and priority areas

-Stakeholder views

1. Assessing needs & opportunities

•More complete picture of the current socio-economic status on national level and in particular of the Issyk Kul region

•Basis for future measurement of Kumtor’s overall contribution to sustainable development

•Better sharing of relevant information and engagement with key stakeholders

2. Socio-economic baseline survey

3. Evaluating the economic impact

4. Managing development activities

• Indicating whether change is occurring

•Measuring the impact of mining activities with regard to the development needs and opportunities identified and described in the baseline survey

•Explaining how results were achieved

•To identify areas for improvement

To improve Kumtor’s current SCI approach: Focus on real

needs and opportunities

Building trusted relationships

Increasing local participation and ownership

Further development of development partnerships

On-going measurement and monitoring of activities, and continuous improvement

2. PurposeOngoing process of improvement

• It is intended that every three years the situation would be revisited

• This includes a validation whether needs have changed and whether they should be reassessed. This will happen through involvement of and in consultation with selected stakeholders and more detailed regional review

• The baseline will be updated with new information and input as necessary, and the impact assessment will be adjusted accordingly

• All this information will also be used in a continuous cycle to adapt and improve the approach to development over time

Socio-economic baseline

Assessing the needs

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Impa

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Asses

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Managing develop-

ment activities

3. Approach and MethodologyIssues covered

In consultation with stakeholders and using desk top research (both public domain and statistical information provided by government agencies), the survey has identified and addressed several relevant areas for future measurement in the economic, social and environmental space

Examples of areas covered are (non exhaustive list):

• Economic

• National and local context (e.g. GDP, HDI, labour & employment, industrial output and structure) and economic history

• Agriculture (e.g. livestock, arable farming, crop yield, food security, irrigation)

• FDI and aid

• People and households (e.g. income, consumer prices, employment)

• Enterprises

• Social

• Health facilities, and access to; infant and maternal mortality

• Education, schooling

• Environmental

• Water (access to and cleanliness of water)

• Air (pollution)

• Land (pastures) degradation

3. Approach and MethodologyStructure of survey

• Structure:

• Discussion and analysis of data and conditions, including national overview and context, and more detailed analysis on Oblast level

• Findings related to challenges and opportunities identified and described

• Interpretation and where feasible first conclusions (high level)

3. Approach and Methodology

• The socio economic status and situation is described and assessed by selected indicators and information

• As far as possible, indicators have been chosen that are quantifiable, measureable and comparable (regionally, nationally, internationally)

• However, socio-economic conditions are often difficult to identify and assess, because they are influenced by perceptions and relate to different views and values from different stakeholders

• Therefor, the study has identified areas and activities of common interest in consultation with a number of organisations involved in development activities at national and regional level, taking into account numerous existing surveys, studies and statistics

• As far as possible indicators have been chosen that:

• focus on the needs and opportunities related to national and regional sustainable development,

• provide the basis for subsequent management, monitoring and measuring of activities,

• should help to improve coordination & participation of local people and partners,

• should be replicable by local partners,

• provide an adequate basis for subsequent judgements about the results achieved.

3. Approach and MethodologyLimitations

Limitations are for example (non-exhaustive list):

• Unrealistic expectations that Kumtor can address every issue

• Missing or poor quality data / information – lack of data depth in some areas. Sometimes data available on village level, sometimes not even on oblast level

• Areas covered by indicators require different analysis (e.g. a ‘problem’ versus a ‘root cause’, short term versus long term view, cause and effect)

• Definitions of indicators

• Update and measurement protocols

• Limited input from wider stakeholders, for example from communities (so far, this is indirectly covered through organizations working on the ground, and based on experience from own projects)

• Limited impact and capacity of one organization alone (including Kumtor) to have a major effect on the overall socioeconomic condition and underlying root causes in Issyk Kul or any other oblast in Kyrgyzstan. To this end, more cooperation will be required.

Disclaimer: Inclusion or exclusion of any particular information or indicator should not be taken as a commitment or target setting exercise by Kumtor Gold Company against one or more indicators. In this context please check individual project plans for specific indicators.

4. OutlookOngoing process

• Designed as an on-going process of continuous improvement with a long-term view to improving socio-economic conditions

• For achieving longer term positive and sustainable outcomes beyond the life of the mine, the importance of the following should be reminded:

• reducing the dependency on Kumtor as an employer and purchaser of goods and services,

• building capacity in the region and, and

• supporting innovation and developing alternative income opportunities (economic diversity)

• Stakeholders / donor organisations will be invited to comment on the socio-economic survey and contribute to further improvement and development

Contact

Doug GrierDirector,Sustainable DevelopmentKumtor Operating Company

Douglas_Grier@kumtor.com