KAZAKHSTAN'S PRESIDENT NAZARBAYEV FOCUSES SOLELY ON

UNCLAS SECTION 01 OF 02 ASTANA 000425

SENSITIVE
SIPDIS

STATE FOR SCA/CEN

E.O. 12958: N/A
TAGS: PGOV ECON EFIN SOCI KZ
SUBJECT: KAZAKHSTAN'S PRESIDENT NAZARBAYEV FOCUSES SOLELY ON
ECONOMY IN ANNUAL ADDRESS TO PARLIAMENT

REF: 08 ASTANA 280 (NOTAL)

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1. (U) Sensitive but unclassified. Not for public Internet.


2. (U) SUMMARY: President Nazarbayev delivered his annual address
to Parliament on March 6. The entire address was devoted to the
economy and overcoming the global economic crisis. He claimed that
many governments have come to understand the necessity of a "guiding
hand" for the economy, and that "regulation is becoming the most
important means for exiting the crisis." Nazarbayev justified the
February 4 devaluation of the Kazakhstani tenge as necessary to
maintain the competitiveness of domestic Kazakhstani producers. He
detailed the government's on-going program to overcome the economic
crisis and announced that an additional 600 billion tenge ($4
billion) will be allocated for modernizing the economy for the
post-crisis period. Nazarbayev said that high-ranking officials
will bear personal responsibility for implementing anti-crisis
measures. END SUMMARY.

ADDRESS DEVOTED ENTIRELY TO ECONOMIC ISSUES


3. (U) President Nazarbayev delivered his annual address to
Parliament on March 6. The entire address -- entitled "Through the
Crisis toward Renewal and Development" -- was devoted to the economy
and the government's program to mitigate the effects of the global
economic crisis. Unlike last year (see reftel),Nazarbayev made no
mention of foreign policy or domestic political reforms.


4. (U) Nazarbayev told Parliament that the economic crisis had
arrived in Kazakhstan from "the outside." He said that the world's
leading economies had already devoted ten trillion dollars to
overcome the crisis, and noted that many analysts say the global
economy has not yet hit bottom. Nazarbayev predicted that the
crisis would lead to changes in the world financial system -- and
possibly to changes in the political systems of various countries.
He claimed that many governments have come to understand the
necessity of a "guiding hand" for the economy, and that "regulation
is becoming the most important means for exiting the crisis."
According to Nazarbayev, "A profound and radical approach will help
the world community find those paths which will protect us during
future zigzags of the world market economy. For that reason, the
radical measures I have proposed" -- an apparent reference to his
recent suggestion to replace the dollar with a new global currency
-- "will be discussed by the world community."


5. (U) President Nazarbayev noted that in recent months, world
prices for Kazakhstan's principal exports -- crude oil and metals --
have fallen dramatically, and that Russia and Ukraine have devalued
their currencies by 40 to 45 percent. He justified the February 4
devaluation of the Kazakhstani tenge as aimed at protecting the
interests of the country's producers, explaining that a failure to
devalue would have damaged their competitiveness -- and would have
forced the country to continue burning through its gold and currency
reserves. Nazarbayev argued that Kazakhstan will emerge from the
crisis a stronger and more vibrant state -- and will preserve its
position in the global community.


6. (U) Nazarbayev described the decision to establish Kazakhstan's
National (Oil) Fund as a "well thought-out" policy that has allowed
the government to use money saved up in good times to support social
spending through the current crisis. He noted that Kazakhstan was
one of the world's first countries to react to the global economic
turbulence and implement measures to counteract it. Nazarbayev
described some of the details of the government's ongoing
anti-crisis plan, pointing out that over 2.7 trillion tenge
(approximately $18 billion) has been allocated for all its
components -- including support for the financial sector,
residential construction, small- and medium-sized enterprises, and
agriculture.


7. (U) Nazarbayev announced a new 2009-2010 program --involving an
additional 600 billion tenge (approximately $4 billion) taken from

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the National Fund -- for further economic modernization and an
employment strategy which will "ensure the country's post-crisis
development."


8. (U) At the end of his speech, Nazarbayev argued that sufficient
means have now been allotted from the government's reserves for
anti-crisis measures. He said the Cabinet and the Prime Minister,
as well as the heads of state bodies and akims (governors and
mayors) "will bear personal responsibility for implementation of the
measures for exiting the crisis." He said that those who had voted
for the ruling Nur Otan party "showed great confidence in us." "We
have to justify that (confidence) and lead a large-scale anti-crisis
movement in society." He appealed to state officials to better
explain the government's anti-crisis measures to the population, and
said law enforcement bodies must decisively fight crime, corruption,
and fraud. He also appealed to the media to be more active. "It's
not by coincidence that they call you the Fourth Estate," said
Nazarbayev. The media needs to be an "advisor" to the population on
how to overcome difficulties and how to survive these trying times,
he added.


9. (SBU) COMMENT: This was a sober and responsible speech. While
it lays the groundwork for greater government intervention in the
economy, it was not in any way out of the mainstream of the current
thinking of other world capitals. It also seems to imply confidence
in the current managers of the economic and financial leaders of the
government, despite press speculation that Nazarbayev is preparing a
broad reorganization of the government. We'll see. The bottom line
is that this speech and its policy implications are in line with
what we have been hearing and reporting from the international
financial institutions and from the private-sector international
financial interests based in Kazakhstan. END COMMENT.

HOAGLAND