KAZAKHSTAN'S CHIEF WTO ACCESSION NEGOTIATOR SPEAKS ON

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SIPDIS

SENSITIVE

SIPDIS , SCA/CEN - MUDGE

E.O. 12958: N/A
TAGS: ECON ETRD KZ
SUBJECT: KAZAKHSTAN'S CHIEF WTO ACCESSION NEGOTIATOR SPEAKS ON
ACCESSION, ECONOMIC POLICIES


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1. (U) Summary: In a February 2 meeting, Deputy Trade Minister
and Kazakhstan's chief WTO accession negotiator Zhanar
Aitzhanova briefed Ambassador Ordway on the status of economic
reforms tied to accession and the Ministry's current views on
economic policy. End summary.



WTO Accession

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2. (SBU) Kazakhstan has submitted its goods and services offer,
said Aitzhanova. "We did our best to take your comments into
consideration," she noted, adding that "some issues still
remain." On telecommunications, Aitzhanova remarked, "we are
still somewhat inflexible, since this is a domestic industry in
need of protection." She expressed optimism that "not too many
problems" in regard to accession remain in the financial sector.
With respect to the issue of foreign banks' ability to open
branches in Kazakhstan, she commented, "We want to support our
banks. But we have three dominant banks; interest rates are
still quite high. So, this sector needs to open up."




3. (SBU) Aitzhanova added that Kazakhstanis have started work on
technical issues, such as sanitary and phytosanitary measures
(SPS),with help from the EU, and on customs issues under the
umbrella of the Central Asia Trade and Investment Framework
Agreement (TIFA). WTO requirements dictate that any laws
affecting trade must be available in English. "We lack the
capacity," Aitzhanova said, "to translate our laws from Russian
or to perform economic analysis of our WTO commitments."




4. (SBU) On labor issues, Aitzhanova said, "we are still very
sensitive." Kazakhstan is "unprotected," she noted, due to its
geography - particularly its proximity to China - and the lack
of sophisticated immigration or border controls. She said that
the idea of maintaining a quota system for unskilled labor only
is under consideration. However, the notion of establishing
regulations, such as requiring companies to advertise in
Kazakhstani newspapers before hiring foreign workers, is not
being accepted.



Economic Policy

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5. (SBU) Before WTO accession, Aitzhanova said, the key is
developing policies; after accession, the focus will be on
enforcement. Aitzhanova characterized her new boss, the
recently appointed Minister of Industry and Trade Vladimir
Shkolnik, as an energetic, quick learner with a sense of humor,
and remarked that he is not interfering with her work. She
noted that Shkolnik strongly supports the Industrial Innovative
Development Strategy and sees Kazakhstan as an energy-producing
state that should not be ashamed that energy represents 80% of
its exports. "The key," Aitzhanova commented, "is to use the
[energy] revenues well to develop other sectors without
overstretching our resources, financial and human."




6. (SBU) Turning to agricultural subsidies, Aitzhanova said, "we
should not reduce them but make them better." She agreed with
the Ambassador that developing the textile industry is a
problematic idea. Textiles, she noted, are a water-depleting
sector with the resulting potential for sparking regional
conflict.




7. (SBU) Kazakhstan's trade surplus, Aitzhanova said,
constitutes a quarter of its GDP. "But," she stated, "until the
end of 2004, we did not have a regulatory framework on trade.
Focusing on trade is, for us, a necessity as well as a
commitment to WTO accession." On e-commerce, Aitzhanova added,
Kazakhstan still lacks a regulatory framework.



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Clubs: TIFA and Eurasian European Community

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8. (SBU) Aitzhanova responded positively to the Ambassador's
suggestion that Kazakhstan take a leadership role in TIFA.
Kazakhstan, she said, can share its experience in sector reform,
such as banking, and in clearing a path toward joining the WTO.
"It is one thing when the U.S. comes to teach," Aitzhanova
observed, "and another when Kazakhstan is succeeding in action."
Kazakhstan is considering focusing on financial system issues -
not only banking and insurance but also exchange rate and
currency management. Aitzhanova added that Kazakhstanis are
considering holding a regional conference on these topics in
Almaty. "This," she said, "is crucial for facilitating
cross-border trade and investment." The Eurasian Economic
Community is also important to Kazakhstan, she concluded,
because of Kazakhstan's "strategic" dependence on Russia in
shipping its goods to other countries, particularly the EU.



Comment

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9. (SBU) Comment: Aitzhanova remains optimistic that Kazakhstan
will be able to complete all WTO requirements in 2006. However,
the GOK's inflexibility on the telecommunications sector, among
others, could make this deadline difficult to meet. End comment.
TRACY