KAZAKHSTAN: GUIDANCE SOUGHT ON ASSISTANCE TO U.S. TOBACCO

UNCLAS SECTION 01 OF 02 ASTANA 000584

SIPDIS

SENSITIVE
SIPDIS

DEPT FOR SCA/CEN (O'MARA); EB/TPP/ABT/ATP; OES/IHA
DEPARTMENT PASS TO USTR/ENV, COMMERCE, AGRICULTURE, AND TREASURY

E.O. 12958: N/A
TAGS: EAGR ETRD ECON KZ
SUBJECT: KAZAKHSTAN: GUIDANCE SOUGHT ON ASSISTANCE TO U.S. TOBACCO
FIRM

REF: STATE 6604


1. (SBU) Summary: Post seeks Department's guidance on a request
from Phillip Morris's Kazakhstan office for the Ambassador to sign a
letter of support for Phillip Morris's application to join
Kazakhstan's "Foreign Investors' Council" (FIC). The FIC, chaired
by President Nazarbayev, promotes dialogue between the Government of
Kazakhstan (GOK) and foreign investors, with the goal of improving
the investment climate. Representatives from current FIC member
companies have told Post that one of the key, if informal, benefits
of FIC membership is direct access of company CEOs to President
Nazarbayev during FIC plenary sessions held each year. As Phillip
Morris might logically use its FIC membership, and resulting access
to key GOK decision-makers, to lobby business interests that the USG
cannot legally support, Post would appreciate Department's guidance
on the advisability of writing a letter of support for membership.
End summary.

Formal Role of FIC
--------------


2. (SBU) Ali Takesh, Managing Director, Phillip Morris Kazakhstan
and Central Asia South, recently asked the Embassy for a letter in
support of his company's application for membership in the FIC. The
FIC is an advisory body, established in 1998 to promote dialogue
between the GOK and private investors "in order to efficiently
address key issues related to their investment activities in the
country, to improve the investment climate of Kazakhstan for the
benefit of foreign investors..." Members are formally charged with
developing recommendations for President Nazarbayev and the GOK on
"key investment and economic development issues," as well as
"analyzing and discussing other core investment policy issues upon
instruction of the President." The FIC's fundamental work is
undertaken by five working groups, which address areas of interest
(oil and gas, legal, taxation, investment image enhancement, and
operations). The FIC also holds twice-yearly "interim sessions"
chaired by the Deputy Prime Minister or Minister of Industry and
Trade, and one or two annual "plenary sessions," chaired by
President Nazarbayev and customarily attended by company CEOs.
Twenty-one companies currently belong to the FIC. (For more
information of the FIC, see www.fic.kz.)

Informal Role of FIC
--------------


3. (SBU) A few FIC member company representatives have told Post
that one of the key benefits of FIC membership is the opportunity it
confers on company CEOs to meet directly with President Nazarbayev
on the margins of the plenary sessions. These meetings naturally
offer an opportunity for CEOs to address issues affecting existing
operations in Kazakhstan, as well as to advocate for new business
opportunities. Thus, it is conceivable that Phillip Morris would
use its FIC membership to lobby, at the highest levels, for business
opportunities which the USG cannot legally support under reftel
guidance.

Phillip Morris's Application
--------------


4. (SBU) Phillip Morris appears to meet the formal requirements for
FIC membership, which include a minimum of $25 million of direct
investment for non-oil/gas companies, and several qualitative
criteria addressing issues of corporate responsibility, significance
for the Kazakhstani economy, and prospects for future growth.


5. (SBU) Furthermore, the company appears well-placed to contribute
to the FIC's high-level discussion of Kazakhstan's investment
climate. Phillip Morris was the first foreign investor recognized
by newly-independent Kazakhstan, and went on to be a founding member
of the American Chamber of Commerce. With over $330 million invested
in a manufacturing facility near Almaty, the company is both one of
the largest employers in the country and one of the biggest foreign
investors outside of the energy sector. These factors suggest that
the company would make a constructive contribution to the FIC's
work.


6. (SBU) The FIC considers seven criteria for admission, including
the "recommendations of industrial and business associations, and
foreign embassies" accredited in Kazakhstan. Thus, the absence of a
letter from the Embassy is likely to be noted, and have a
detrimental effect (however small) on Phillip Morris's candidacy.


7. (SBU) Post appreciates Department's guidance as soon as possible.



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