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
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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
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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
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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
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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
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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

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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