Identifier
Created
Classification
Origin
07ASTANA1122
2007-04-27 08:55:00
CONFIDENTIAL
Embassy Astana
Cable title:  

KAZAKHSTANIS TELL HOLBROOKE OF PLANS TO IMPROVE

Tags:  ECON PREL EINV IQ KZ 
pdf how-to read a cable
VZCZCXRO9223
PP RUEHDBU
DE RUEHTA #1122/01 1170855
ZNY CCCCC ZZH
P 270855Z APR 07
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC PRIORITY 9273
INFO RUCNCIS/CIS COLLECTIVE PRIORITY 0146
RUEHBJ/AMEMBASSY BEIJING PRIORITY 0001
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RUEBAAA/DEPT OF ENERGY WASHDC PRIORITY
C O N F I D E N T I A L SECTION 01 OF 02 ASTANA 001122 

SIPDIS

SIPDIS

DEPT FOR SCA/CEN (M. O'MARA)

E.O. 12958: DECL: 04/27/2017
TAGS: ECON PREL EINV IQ KZ
SUBJECT: KAZAKHSTANIS TELL HOLBROOKE OF PLANS TO IMPROVE
COMPETITIVENESS

REF: A. 06 ALMATY 1153


B. 06 ALMATY 256

C. 06 ASTANA 573

Classified By: Amb. John Ordway, reasons 1.4 (B) and (D).

C O N F I D E N T I A L SECTION 01 OF 02 ASTANA 001122

SIPDIS

SIPDIS

DEPT FOR SCA/CEN (M. O'MARA)

E.O. 12958: DECL: 04/27/2017
TAGS: ECON PREL EINV IQ KZ
SUBJECT: KAZAKHSTANIS TELL HOLBROOKE OF PLANS TO IMPROVE
COMPETITIVENESS

REF: A. 06 ALMATY 1153


B. 06 ALMATY 256

C. 06 ASTANA 573

Classified By: Amb. John Ordway, reasons 1.4 (B) and (D).


1. (C) Summary: In a wide ranging conversation with the
Ambassador and Richard Holbrooke, young Kazakhstani leaders
discussed President Nazarbayev's efforts to empower
Kazakhstani business to address the problems facing the
country, including corruption. One part of the plan is a new
state holding company designed in part to break the
telecommunications monopoly that is strangling the country's
competitiveness. Holbrooke also relayed to the Ambassador a
warning from President Nazarbayev that the U.S. must not
withdraw from Iraq before the situation is stabilized. End
summary.


2. (SBU) The Ambassador hosted a lunch in honor of Amb.
Richard Holbrooke on April 21 in Astana. Attendees included
Nurlan Kapparov of KazInvest Bank and the Lancaster Group,
Azamat Abdymomunov of the newly-created Samgau Holding
Company, and Pol-Econ Chief (notetaker).

--------------
Nazarbayev Tasks Kazakhstani Business
--------------


3. (SBU) Kapparov reported that President Nazarbayev held a
"groundbreaking discussion" on April 20 in Almaty with
leading Kazakhstani businesses. According to Kapparov,
during the two and a half hour meeting Nazarbayev told the
Kazakhstani business elite that it was time for them to help
"build the nation that had brought them up." Nazarbayev also
said that it was time to address the problem of corruption
that is hindering Kazakhstan's development. Prime Minister
Masimov is to implement the new program of public-private
partnership, which will involve identifying 30 national
champions and helping them succeed. Kapparov described the
initiative as an entirely new, "collaborative" approach on
the part of the GOK, which used to simply lecture to business.


4. (C) "Masimov will be the best Prime Minister in
Kazakhstan's history," Kapparov predicted, due to his
impressive management skills and proactive approach.

Holbrooke observed that while Masimov is clearly talented and
dynamic, the incompetence of the Kazakhstani bureaucracy
forces him to "micromanage" issues that would be handled well
below his level in a more mature government. Kapparov
concurred but predicted that the administrative reform
project that Masimov has launched will improve the situation,
and also give him grounds to change the current team of
ministers. Abdymomunov commented that the current cabinet is
the "weakest" in recent memory.


5. (SBU) Kapparov said that he is working on a project to
clean up the Khorgos customs post on the border with China,
infamous for its corruption (Ref A). Kazakhstan had never
done anything to construct the planned free trade area, he
noted, while China had built an impressive complex of
warehouses on its side. Kapparov said that he was in
discussions with major international logistics firms to get
them to take over freight handling at the border. Major
multinational manufacturers such as Proctor and Gamble had
expressed interest in sending goods from China to Moscow via
Kazakhstan if rapid delivery times could be guaranteed.

-------------- --------------
New Holding Company to Improve Telecommunications
-------------- --------------


6. (C) Abdymomunov, who had been Deputy Minister of Education
and Science until the previous week, explained that the
Kazakhstani government had established the Samgau ("To Soar")
Holding Company to manage and modernize the
telecommunications sector. The organization is so new that
it does not yet have a charter or operating capital. The
original intent was for Samgau to take KazTelecom from Samruk
Holding, but Samruk was strenuously resisting the change
because KazTelecom is its most profitable firm by far. "It
brings in more profit than KazMunayGas," according to
Abdymomunov, due to its monopolistic status and the fact that
many of KMG's oil fields are decades old and suffer from
falling production.


7. (C) Abdymomunov said that if Samgau cannot wrest control
of KazTelecom from Samruk, it will create a second national

ASTANA 00001122 002 OF 002


telecommunications firm to break the monopoly and spur
competition. Samgau will also control the GOK's shares in
KazTransCom, KaTelCo, KazTeleRadio, and KazPost. The GOK
created the new holding company in order to address the
telecommunications issues that are hindering Kazakhstan's
competitiveness and diversification, Abdymomunov said.
Deputy Head of the Presidential Administration Serik
Burkitbayev will be chairman of the Samgau board of
directors, an arrangement that Abdymomunov described as
"possibly not quite legal" since the chair should be a member
of government. (Comment: Bending the rules is nothing new
for Burkitbayev, perhaps best known to the USG for his
involvement in the Byelkamit scandal, Ref B. According to
subsequent press reports Burkitbayev is also angling to have
KazAeroNavigatsiya folded into Samgau. End comment.)

-------------- --------------
Nazarbayev to Holbrooke: "U.S. Must Stay in Iraq"
-------------- --------------


8. (C) In a one-on-one conversation following the lunch,
Holbrooke told the Ambassador that during their meeting in
Almaty President Nazarbayev had stressed the importance of
the U.S. remaining in Iraq. Nazarbayev is convinced that a
premature U.S. withdrawal would lead to widespread civil war
in Iraq and chaos throughout the region, according to
Holbrooke. (Note: Nazarbayev made the same point to the
Ambassador in November; Ref C.)
ORDWAY