Advancing Security and Transparency for the Governance of Critical Raw Materials in Central Asia

Executive summary

Central Asia’s critical mineral potential is significant but largely untapped

Kazakhstan, the Kyrgyz Republic and Uzbekistan hold considerable reserves of critical raw materials (CRMs), particularly hard minerals. As global demand for critical minerals is expected to rise significantly in the coming years, the mining industries inherited by the three countries from the Soviet era represent a major asset to be leveraged for sustainable and dynamic growth.

Central Asia holds 39% of global manganese ore reserves, 31% of chromium, 20% of lead, 13% of zinc, 9% of titanium, 6% of aluminium, 5% of copper, 5% of cobalt and 5% of molybdenum. Kazakhstan, already the world’s largest uranium producer, can export 21 of the 34 CRMs in the official EU list; the Kyrgyz Republic holds the world’s third-largest reserves of antimony, while Uzbekistan holds the world’s eleventh largest copper reserves and has started developing lithium and molybdenum production.

However, the region’s mining sector is far from realising its full potential, due to limited exploration, outdated geological data reporting and regulatory challenges. Potential investors lack reliable and up-to-date data on resource endowments, owing to a lack of geological exploration since independence and the use of legacy reserves reporting systems. The predominance of domestic state-owned enterprises (SOEs) in the sector and past disputes with foreign investors have also discouraged investment.

However, recent developments are encouraging. New data collection, the transition to global standards for reserves reporting and updates in legal frameworks signal a willingness to attract foreign investment to the sector. Central Asian governments see critical minerals as a new growth and diversification engine, not only in extraction but increasingly in processing and related value-chain activities. Amendments to labour laws, in particular in relation to female employment, offer new opportunities to increase inclusion.

Responsible Business Conduct standards and practices are being adopted more and more, but SOE footprint and due diligence remain points of attention

Awareness of Responsible Business Conduct (RBC) is growing in Central Asia’s mining sector, with Kazakhstan, the Kyrgyz Republic, and Uzbekistan adopting international standards to address corruption, strengthen due diligence and labour safety requirements, and enhance community involvement, albeit at varying speeds and in varying ways. However, implementation challenges remain, especially regarding government-SOE separation, labour rights, and local community participation.

In all three countries, the mining sector is dominated by a small number of SOEs. This raises several issues. First, some SOEs play quasi-regulatory roles when controlled by ministries that combine policy, regulatory and ownership functions, which can give rise to conflicts of interest, as ministry officials may hold positions in companies they regulate. The lack of transparency in public procurement and corruption also remain important issues and fuel distrust between stakeholders involved in mining projects.

Nevertheless, governments are working to address corruption and strengthen stakeholder dialogue in the mining sector, notably through the Extractive Industries Transparency Initiative (EITI) membership. Initial steps are underway to integrate Environmental, Social and Governance (ESG) principles into national legislation. Governments and SOEs are taking measures to better assess, prevent, mitigate and address adverse impacts and risks associated with mining activities.

Insufficient oversight of occupational health and safety continues to result in a high incidence of accidents on mining sites. Moreover, while local community engagement in mining projects may be legally required, in practice those provisions are not always effectively applied. Local populations often complain that they are excluded from consultations about the impacts and risks of mining operations, and there is an absence of clear guidelines on compensation and resettlement for affected communities.

Governments are enhancing environmental risk management in mining, but goals could be more sector-specific and integrate the whole mining lifecycle

The three countries have adopted economy-wide strategies to accelerate GHG emissions reduction and decarbonise their most carbon-intensive sectors, but these strategies are not sector-specific. Some provisions in the strategies target the mining sector or large mining companies, but there is a general lack of mining-specific targets in terms of GHG emissions and pollution. The same is true of provisions on water and waste management, which are mostly designed at the national level.

All three countries have developed legal frameworks for the environmental assessment and expertise of mining projects, as mining exacerbates environmental issues such as land degradation, greenhouse gas emissions, water pollution and stress, biodiversity loss, and hazardous waste. These frameworks often include provisions on Strategic Environmental Assessments (SEA) as well as Environmental Impact Assessments (EIA). Mining laws also require impact assessment and pollution prevention, but practical enforcement, wastewater monitoring and incentives for water-saving or circular systems remain limited.

Legacy mining waste and tailings also require specific attention, as the region hosts many legacy tailings storage facilities and dumps, some of which contain hazardous waste. As uranium producers, the three countries face risks of radioactive contamination for local communities and ecosystems. The management of legacy mining waste and tailings should remain a key part of future mining strategies as CRMs mining develops.

CRMs offer an opportunity to strengthen domestic revenue mobilisation but closer alignment with international tax policy and BEPS standards are needed

The CRMs sector builds on the extractive industries’ long-standing role in domestic revenue mobilisation in all three countries. Yet it remains exposed to tax practices by multinational entities that undermine public revenues. The sector is particularly vulnerable to Base Erosion and Profit Shifting (BEPS) practices, including the under-pricing of related-party mineral exports, uncommercial intra-group financing that shifts profits via interest deductions, and offshore indirect transfers (OITs) of mining licences, allowing capital gains to escape taxation.

Kazakhstan, the Kyrgyz Republic and Uzbekistan are gradually aligning aspects of their tax policy frameworks with international standards. However, existing legislative loopholes, ranging from permissive pricing rules and ineffective interest-limitation regimes to legislative inability to tax offshore licence transfers, continue to allow legal profit shifting and undermine domestic revenue mobilisation.

Governments are strengthening tax administration and international co‑operation to better detect and address tax risks in the CRMs sector. Training, technical assistance, and participation in international initiatives, such as the one led by the OECD and Tax Inspectors without Borders (TIWB), have helped develop risk‑assessment tools and audit capacity, especially in Kazakhstan and Uzbekistan. Further progress will depend on continuing to align their international tax frameworks with best practice and investing in specialised tax administration capacity to ensure effective rule enforcement.