UNCLAS ALMATY 000956

SIPDIS


SENSITIVE

E.O. 12958: N/A
TAGS: ECON EAID PGOV PHUM KZ ECONOMIC
SUBJECT: AMBASSADOR'S MEETING WITH PRESIDENTIAL
ADMINISTRATION DEPUTY MASIMOV


1. (U) Summary. On March 3, Ambassador met with
Presidential Administration (PA) Deputy Karim Masimov.
Deputy Minister of Industry and Trade Zhanar Aitzhanova, PA
Chief of the Center for Foreign Policy Nurlan Yermekbayev,
Astana PO and Astana USAID officer were also present.
Issues discussed included Kazakhstan's emphasis on economic
reform, President Nazarbayev's proposal for a Central Asian
Union, USAID's Program for Economic Development, building a
civil society, the extremism law, reducing corruption, and
foreign policy priorities. Masimov and Aitzhanova's
comments on WTO accession and intellectual property rights
discussion reported septel. End Summary.

Economic Reform First
--------------


2. (SBU) Masimov pointed to President Nazarbayev's February
18 state of the nation speech and highlighted economic and
political themes from the address. Economic reform,
Masimov declared, is Astana's first priority as a market
economy. Nazarbayev's proposal for a Central Asian Union
drew upon the EU as a model, Masimov said. Kazakhstan
already has a "good basis" with Uzbekistan and Kyrgyzstan
for developing this concept further, including a common
history and customs. Free trade would be the initial
focus, but a regional union could also take up issues such
as a single currency, a central bank, counter-terrorism,
transnational crime, and a unified defense. Nazarbayev was
interested in the opinion of others on this question.


3. (SBU) Ambassador endorsed focusing first on trade
issues. The United States welcomed Kazakhstan leveraging
its economic and political leadership to strengthen the
region. He noted that most of the work to harmonize
regional trade would center on relations with Uzbekistan.
Ambassador offered to consult with Washington further for
opinions on the proposed union. As a market economy,
Ambassador also urged that Kazakhstan allow market forces
to determine the question of airline routes into the
country rather than artificially restricting airlines to
the Astana hub.


4. (SBU) Ambassador assured Masimov that the United States

remains committed to the Houston Initiative (HI). He
noted, however, that taxation of assistance had created
some difficulties for the program. USAID's new Program for
Economic Development (PED) will encompass most of HI's
activities but with the added element of cost-sharing by
the government of Kazakhstan. Moving ahead with PED, he
emphasized, will require Parliament's ratification of the
1992 Bilateral Assistance Agreement and implementation
memo.


5. (SBU) Kazakhstan, Masimov responded, wants to become an
attractive investment option beyond the energy sphere.
Astana sees HI as a vehicle to bring in U.S. investors to
small and medium enterprises (SME). USAID Astana officer
explained that the goal of the SME development plan is to
raise local standards to make these enterprises more
attractive to American investors. Ambassador suggested tax
holidays and a separate agency that could market Kazakhstan
to potential SME investors as possible steps.

Democracy with a Kazakhstani Flavor
--------------


6. (SBU) Elaborating on political themes from Nazarbayev's
address, Masimov said that Kazakhstan was building civil
society on a western model but was also drawing on the
experiences of South Korea, Malaysia, and its own
traditions of a multi-ethnic/religious society. The
National Democracy Commission is a platform for a
discussion of Kazakhstan's development.


7. (SBU) Masimov commented that he "agreed and disagreed"
with portions of State's recently released Human Rights
Report on freedom of speech in Kazakhstan. Human rights
are taken seriously, he continued, but people must be held
accountable for their words. With the threat of terrorism
edging closer to Kazakhstan, Nazarbayev felt compelled to
sign the law on extremism. Masimov asked for FBI and
Interpol assistance to combat terrorism.


8. (SBU) Ambassador cautioned that it would be important to
see the extremism law in practice and advised tailoring
implementation on a narrow basis. The United States, he
continued, was ready to help Kazakhstan in the fight
against terrorism.


9. (SBU) Masimov acknowledged that Kazakhstan must reduce
corruption. He described his support for e-government
measures as a means of reducing opportunities for public


officials to solicit bribes. He is also advocating "one-
stop shopping" in Astana and Almaty (to start) for drivers'
licenses, pensions, and other services. Increasing
government salaries and standardizing government services
are also on the table. Ambassador recommended drawing on
the experiences of neighbors. Masimov said that Kazakhstan
is looking at Estonia, Singapore, and Colorado for models.


10. (SBU) Electoral and judicial reform, Masimov observed,
are two other areas on Astana's agenda. The government is
considering expanding electoral commissions and is
interested in improving electoral administration.
Strategies for improving the "social status" of judges are
under review. Ambassador emphasized the importance of
transparency in future elections. He cited a website
associated with Kyrgyzstan's recent elections that allowed
public access within three days to the protocols as a
critical tool for building public confidence. Responding
to Masimov's expression of interest, the Ambassador
provided the website address.

The Foreign Policy Front
--------------


11. (SBU) Turning to foreign policy priorities, Masimov
described Russia, China, the United States, and the EU as
the "strategic relationships." Kazakhstan, he added, had
$7 billion in trade with the EU last year. Ambassador
noted that Kazakhstan's trade volume with Ukraine
outweighed trade with the rest of Central Asia combined.
Masimov interjected that President Yushchenko's new
government has pledged support for the stability of
Kazakhstan. (Note: President Yuschenko and President
Saakashvili are expected later this month. End note.)


12. (SBU) Delimitation of the border with Russia, Masimov
continued, and President Putin's acknowledgement of
Kazakhstan's existence based on that border was an
important milestone. Astana is now looking ahead to the
Shanghai Cooperation Organization summit scheduled for July
5, 2005. Masimov commented that the SCO hopes that
President Karzai will attend.


13. (SBU) U.S. support of Kazakhstan's bid for the OSCE
chairmanship is extremely important, Masimov observed. The
United States would be very pleased to see Kazakhstan as
the first former Soviet state to lead the OSCE, the
Ambassador responded, but the path ahead is complicated and
will require full commitment to all OSCE principles.

Ordway


NNNN