KAZAKHSTAN: KORZHOVA DISMISSED AS FINANCE MINISTER

C O N F I D E N T I A L SECTION 01 OF 02 ASTANA 003152 SIPDIS SIPDIS E.O. 12958: DECL: 11/16/2017 TAGS: ECON EFIN EINV ETRD KZ PGOV PREL KCOR SUBJECT: KAZAKHSTAN: KORZHOVA DISMISSED AS FINANCE MINISTER REF: A. ASTANA 3025 ¶B. ASTANA 2823 ¶C. ASTANA 2716 Classified By: AMB. ORDWAY FOR REASONS 1.4 (B) AND (D) Summary -------------- ¶1. (C) Finance Minister Korzhova, whose departure had been rumored for several months, has been dismissed and replaced by Bolat Zhamishev. Korzhova's tenure was a problematic one, with the Finance Ministry showing itself ineffective at dealing with a number of issues, including the recent customs crisis. President Nazarbayev has placed the blame squarely on Korzhova for a wide range of Kazakhstan's recent economic challenges. Zhamishev has a wide range of experience for his new job, including two past stints as Vice Minister of Finance. His appointment may portend positive changes for the Finance Ministry. End summary. Finance Ministry under Korzhova -------------- ¶2. (C) Finance Minister Natalya Korzhova was relieved of her duties on November 14 and replaced by Eurasian Development Bank Deputy Chairman Bolat Zhamishev. Korzhova, who had been in charge of the Finance Ministry since January 2006, was recently viewed as increasingly vulnerable, and her departure had been rumored for several months. The head of the Customs Brokers Association, Gennadiy Shestakov, recently told Econoff that Korzhova had played a key role in pushing through a Customs Code amendment that led to the recent customs shutdown for imports from the United States (ref B and C). Korzhova, who repeatedly vowed to fight corruption when she became Minister, may have also been weakened by linking herself to this decidedly uphill battle. Corruption remains a critical problem and is particularly associated with the customs authorities, who operate under the Finance Ministry's umbrella. In dealing with Embassy Astana on the customs shutdown as well as on various taxation issues, the Finance Ministry under Korzhova often displayed institutional paralysis. The Ministry proved largely unable to negotiate or make decisions due to a fear that legal solutions proposed by Finance would leave its officials vulnerable to prosecution by the General Procurator's Office. Korzhova Takes the Blame -------------- ¶3. (SBU) According to a KTK TV channel broadcast, President Nazarbayev roundly criticized Korzhova and her Ministry's performance at a Security Council meeting on November 15. Using some harsh words (roughly translated as "outrage" and "blockheadedness"),Nazarbayev blamed the Finance Ministry for the current slowdown in the construction sector, rising gasoline prices, and beer shortages in various regions of the country. Nazarbayev also mentioned the "August crisis," an apparent reference to a brief dollar-buying panic which ensued as a result of the customs crisis (Refs A, B, C). Thus, Nazarbayev essentially blamed Korzhova for the wide range of economic challenges that Kazakhstan has faced as a result of the global financial turbulence (Ref A). Nazarbayev added that he is not expecting any additional Cabinet changes in the foreseeable future, and that it is up to the current ministers to solve the problems at hand. Zhamishev: Wealth of Experience -------------- ¶4. (SBU) Bolat Zhamishev brings to the Finance Ministry a wealth of relevant experience. The 50-year-old Zhamishev served two stints as a Vice-Minister of Finance between 1999 and 2002 and was chairman of the Financial Supervision Agency during 2004-06. Zhamishev held working-level positions at the National Bank of Kazakhstan during 1993-97. This period could be described as a formative one for the NBK, when it was led by such prominent individuals as Daulent Sembayev (a founding father of the Kazakhstani banking system) and his progressive proteges Oraz Zhandosov and Gregoriy Marchenko. It was then that the NBK started developing into a highly professional, effective and somewhat independent central bank it is today. Comment -------------- ¶5. (C) Nazarbayev's harsh criticism of Korzhova, along with his statement that no additional Cabinet reshuffling is to be expected, implies that she may be taking the fall for the current economic challenges, some of which (particularly the construction sector slowdown and rising gasoline problems) have primarily external causes. Her departure and ASTANA 00003152 002 OF 002 Zhamishev's arrival may portend positive changes in a rather sclerotic ministry that oversees several key functions, including taxation and customs. Zhamishev, whose resume appears to be that of a classic 'technocrat' (and who is not known to belong to a political party),may be just what the Ministry needs. His appointment may also be welcome news for the banking sector, which was recently subjected to some harsh remarks from Korzhova and to increasing inspections by her Ministry. It is unclear, however, to what extent Zhamishev will be able to overcome the political and institutional burdens that plagued his predecessor, including fears stemming from aggressive oversight by the General Procurator's Office. Ordway