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Credit boosts tourism at Kyrgyz lake resort

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Resorts boom at Lake Issyk-Kul.

More jobs for locals in Issyk-Kul.

In 1998, when Elmira Mukasheva visited Issyk-Kul in northern Kyrgyz Republic, site of one of the world's largest alpine lakes, she was saddened to find out that the clean lake and sandy beaches of her childhood were just memories. 

“I grew up in Cholpon Ata, Issyk-Kul,” says Ms Mukasheva. “As children, we used to clean the beaches every weekend. But during my last visit, I saw rubbish all over the beach and plastic bags dancing with the wind over trees.”

Ms Mukasheva was not to be easily discouraged. In 2001, she and Chynara Sheraliva, a young businesswoman, set up the first modern resort in Issyk-Kul: the Royal Beach. “There might be little representation of women in the Kyrgyz politics,” says Ms Mukasheva, “but in business, we have taken over.”

Regardless of their dynamism, the two businesswomen still faced the same problem that plagues much of the Kyrgyz private sector: there just isn’t enough credit available to really fuel company growth.

Unblocking credit

So they approached Kyrgyz Investment Credit Bank (KICB), which the EBRD and other shareholders established in 2000, with technical assistance from Japan.

KICB, as the largest bank in the Kyrgyz Republic, was able to finance projects such as Royal Beach that were too large for other local banks. Building credit availability is one of the goals of the EBRD’s multi-donor fund for the seven ‘Early Transition Countries’ (ETCs). 

A five-year loan covered 50 per cent of expenses to build eight cottages. The new, cleaned-up Royal Beach can now host up to 200 clients and employs 58 people from the area. 

“We started from scratch,” says Ms Mukasheva, “and had to repair the road, construct electricity and water systems, and train the staff. We created our image and there was no looking back. Everybody should be able to enjoy Issyk-Kul. It is our pride. EBRD and KICB understood this quickly and invested in it.”

Issyk-Kul, the country’s main tourist attraction, is to the Kyrgyz people what Buckingham Palace is to the British. Nearly 700,000 locals and tourists from Russia and Kazakhstan took holidays in the Kyrgyz Republic in 2004. Although tourism is an important means of providing income to many families in the northern part of the Kyrgyz Republic, the government allocated just $100,000 for tourism development in 2006. 

Don’t wait for the state

Realising that it was up to the private sector to boost tourism, in 2004, Dinara Isaeva, Victor Kryltsov and Daniyar Usenov sought $12 million loan to develop their 15-hectare Raduga resort on the northern shore of Lake Issyk-Kul. The loan was too big for Kyrgyz banks, so the three businessmen approached the EBRD whose interest in strengthening and diversifying the private sector matched their own. EBRD teamed up with Kazakh banks – the Bank’s $6 million was matched by a further $6 million from Temir Bank Kazakhstan.

Dan Berg, Head of EBRD’s office in the Kyrgyz Republic says: “There have been many attempts by the international community to help develop Kyrgyz tourism but none involved direct engagement with local business people risking their own money. We believe that such engagement – EBRD credit and donor support married to local ideas, expertise and capital – offers the most sustainable approach to building this important business sector.”

Before a loan could be granted to the Raduga project, a careful investigation was required of related legal, financial and environmental issues. This is routine elsewhere in the world, based on reliable information from the would-be borrowers who pay accountants and lawyers to provide it. Such ‘due diligence’ is new to central Asia’s business and banking sector and the lack of reliable information on company operations has acted as another bottleneck in providing credit in the ETCs. So Raduga’s due diligence was conducted by the EBRD with financial support from the Swiss government.

Creating local champions 

A three-year EBRD loan gave birth to Raduga resort’s 70 modern cottages. Nearly 1,000 local workers were hired to build them.

Nazira Minikeeva is Raduga’s administrator and is bullish on the lake’s tourism potential. “Travellers who have been all over the world now prefer untouched sites, like Lake Issuk-Kul. I wish that more resorts would be built because the Kyrgyz Republic will benefit from competition.”

With her words in mind, the EBRD recently signed its second direct investment in the Kyrgyz tourism sector. It will invest $1.4 million in debt and equity to develop cottages and apartments in Lake Issyk-Kul’s Karven village.

Now that the EBRD has helped create three local ‘champions’, it is trying to focus on weaker links in the tourism sector: financial management and worker training. In 2005, the Business Advisory Services programme supported these and other hotels to audit and upgrade their financial management systems. The TurnAround Management programme is now developing a vocational training programme for workers at local bed-and-breakfasts. 

With so much private sector enthusiasm and assistance for tourism development, it’s time for the government to act says Emil Umetaliev, President of the tourism company Kyrgyz Concept. “The state must rehabilitate infrastructure, regularise property rights and develop a tax regime that will support small business.”

Written by Marjola Xhunga, an EBRD Communications Adviser.

Photos: V.Pirogov

Contact:

EBRD Kyrgyz Office

11 May 2006