KAZAKHSTAN: SCIENCE FUND STRUGGLING, BUT CONTINUING TO

UNCLAS SECTION 01 OF 02 ASTANA 000361 SIPDIS STATE FOR SCA/CEN STATE FOR OES, PHUDAK, NFITE E.O. 12958: N/A TAGS: PGOV SENV TSPL KZ SUBJECT: KAZAKHSTAN: SCIENCE FUND STRUGGLING, BUT CONTINUING TO FUND SCIENCE PROJECTS ASTANA 00000361 001.2 OF 002 ¶1. SUMMARY: Created by Presidential decree in March 2006, Kazakhstan's Science Fund provides loans and grants to worthy applied-science projects in the areas of nanotechnology, new materials, biotechnology, mining technology, nuclear research, and alternative energy. Since April 2008, the Fund's government financing has been significantly reduced, although it still supports key projects. The Fund's Director says Kazakhstani scientists must reach out and find Western partners and integrate themselves into the international scientific community. The Science Fund has worked with the U.S. Civilian Research and Development Foundation (CRDF), but in general, cooperation with the United States has been minimal. Ideally, the Director said she would like the Science Fund to operate like a venture fund. END SUMMARY. SUPPORT FOR APPLIED SCIENTIFIC RESEARCH ¶2. Regional Environmental Officer (REO) and Environmental Specialist met on February 26 with Science Fund Director Ardak Kusainova, who said the Science Fund was created by Presidential decree in March 2006 to provide funding (loans and grants) to applied-projects for the advancement of science in Kazakhstan. She explained that the Science Fund is a government entity that receives all of its funding from the government. The government has determined that all supported projects must fall within the following broad areas of research: nanotechnology, new materials, biotechnology, mining technology, nuclear research, and alternative energy. According to Kusainova, the Science Fund generally does not provide small loans of the $5,000-$10,000 range, and only supports applied-science research and projects. (NOTE: The Science Committee in the Ministry of Education supports pure science projects. END NOTE.) She said that after the Science Fund selects a project it deems worthy of financing, it then submits that project to the Fund's Investment Committee for final approval. This Committee consists of scientists, government representatives, lawyers, and financial experts. SCIENTIFIC RESEARCH HAS FALLEN ON HARD TIMES ¶3. Kusainova said the Fund worked well for its first two years of its operation, but since April 2008, the financial picture has changed drastically. Whereas initially the Fund had several million dollars available to support scientific research projects, now this amount has been reduced considerably. She said the Fund can still support projects, but it is now much more difficult to do so. Kusainova said the Science Fund is currently supporting just two projects: a microbiology project to develop a new strain of potatoes, and a ferrous alloy project to help an investor research, develop, and produce a ferrous alloy material that can be used in metallurgical industrial production. ¶4. Because of the financial crisis, the Science Fund's approach has also changed. The organization's structure is the same, but the Fund is now able to provide interest-free and, tax-free loans in cases where recipients lack the resources and/or credit worthiness to obtain commercial loans, pay them back with interest, and pay taxes on them. Also, the loan period is much longer than before, with some terms as long as 15 years. SCIENCE FUND MONITORS PROJECTS ¶5. Kusainova said the Science Fund also monitors the progress of projects to see if there are any financial problems or misallocations, and to determine if a project is staying on track toward its goals. Each project lead must prepare a complete financial disclosure statement and information on the structure of its internal organization. This can help the Science Fund better determine whether or not an organization is able to repay its loans. NEED FOR WESTERN SCIENTIFIC CONTACTS ¶6. Kusainova admitted that present scientific level and quality of science in Kazakhstan is not equal to that of Europe. She said this ASTANA 00000361 002.2 OF 002 is largely due to the effects of the aftermath of the collapse of the Soviet Union, which led to a loss of funding for scientific infrastructure, research, training, and jobs. In addition, she said there was a resultant brain drain that took most of the good scientists away from Kazakhstan. ¶7. Kusainova argued that Kazakhstani scientists should invest greater time and effort to find partners overseas and in Europe. "Our scientists need to know what is happening in the world," she said, "and they need to integrate themselves into the international scientific community because now they are too isolated, with very few contacts outside Kazakhstan." She did not regard contact with Russian scientists as very productive, because "they are all products of the Soviet system," and she insisted that the real need is for scientific contacts with the Western scientific community. WILLING TO WORK WITH WESTERN PARTNERS ¶8. Kusainova said the Science Fund is anxious to work with international organizations like the World Bank, the United Nations Development Program, and others, as well as with private organizations and funds. She said the Science Fund has cooperated with INTAS, and is looking for similar partners in Europe. (NOTE: INTAS is an international association for the promotion of co-operation with scientists from the former Soviet Union. It was established in 1993 by the European Community and like-minded countries. INTAS began to wind down its activities in 2007. END NOTE.) ¶9. Kusainova said the Science Fund has also worked with the U.S. Civilian Research and Development Foundation (CRDF) on projects), which is involved in cooperative threat reduction activities and provides assistance to unemployed scientists. (NOTE: CDRF promotes scientific and technical collaboration between the United States and the countries of the former Soviet Union. END NOTE.) In general, she said, the Science Fund's cooperation with the United States has been minimal and generally based on grants given out by U.S. partners. VENTURE FUND MODEL ¶10. Kusainova said that, even though the Science Fund is a state entity, ideally, she would like it to operate more like a venture capital fund and cooperate with private sector partners, but she was also keenly aware of the Fund's limitations and the country's current financial constraints. She quoted a Russian proverb to express her goals for the Fund: "May our hopes and our possibilities come together." HOAGLAND