KAZAKHSTAN COMMITTED TO PUBLIC PRIVATE ECONOMIC

UNCLAS SECTION 01 OF 02 ASTANA 000594

SENSITIVE
SIPDIS

STATE FOR SCA/CEN, EUR/ACE, EEB, F
STATE PLEASE PASS TO USAID

E.O. 12958: N/A
TAGS: PGOV PREL EAID SOCI KZ
SUBJECT: KAZAKHSTAN COMMITTED TO PUBLIC PRIVATE ECONOMIC
PARTNERSHIP WITH THE UNITED STATES

ASTANA 00000594 001.2 OF 002



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


2. (SBU) SUMMARY: On April 1, the initial Coordinating Committee
meeting of the Public Private Economic Partnership Initiative
(PPEPI) was held in Astana. While the initiative has been slow
getting off the ground since it was launched in June 2008, all the
partners remain committed and eager to see real progress and results
that promote economic policy reform, and ultimately lead to
increased investment in Kazakhstan. Five working groups consistent
with PPEPI's pillars were established which will develop substantive
policy reform recommendations. The Ambassador and Deputy Prime
Minister Yerbol Orenbayev, representing their respective
governments, stressed the importance each government accords the
initiative and its high-level support. END SUMMARY.

PPEPI MEANS PARTNERSHIP FIRST


3. (U) First launched with the direct participation of Prime
Minster Karim Masimov in June 2008, PPEPI will harness the expertise
of the U.S. and Kazakhstani public and private partners to foster
dialogue and prepare policy recommendations designed to facilitate
business and improve the overall investment climate in Kazakhstan.
The initiative's partners include the Governments of the United
States and Kazakhstan, the American Chamber of Commerce in
Kazakhstan (AmCham),the U.S.-Kazakhstan Business Association, the
Forum of Entrepreneurs, and the Atameken Union. The latter two
organizations are both Kazakhstani business associations that
represent the private sector of the country.


4. (U) The PPEPI is administered by AmCham, which received funding
from USAID and from the Government of Kazakhstan (through the
Program for Economic Development, in which the costs for the USAID
Economic Growth program are shared by the two governments),and
through financial and in-kind contributions from AmCham and the
other partners to the initiative. The agreement calls for a
one-year pilot program, which will then be reviewed and considered
for extension and additional funding.

WORKING GROUPS TO PROVIDE EXPERTISE, POLICY RECOMMENDATIONS


5. (U) The Coordinating Committee meeting, which gathered the
partners of PPEPI, is the first of three such meetings planned over
the course of the first year. This managing body sets overall
policy and the strategic goals of PPEPI and, during this first
meeting, established the several working groups that will be
responsible for producing the economic policy recommendations, or
white papers. Five substantive working groups were formed:

--Anti-Corruption Measures and Rule of Law
--Transparency and Economic Efficiency
--Regional Economic Integration - Trade and Customs
--Cooperation in Science and Technology
--Economic Diversification/SME Development


6. (U) U.S. Government participants in the working groups are
expected to include representatives from USAID, the Political and
Public Affairs Sections of the Embassy, the Foreign Commercial
Service, and the U.S. Center for Disease Control and Prevention
(CDC).

HIGH-LEVEL SUPPORT FROM THE KAZAKHSTANI GOVERNMENT


7. (SBU) The Coordinating Committee meeting included the
participation of Deputy Prime Minister Yerbol Orenbayev, who was
assigned responsibility for the government's implementation of the
initiative by Prime Minister Masimov. Orenbayev is part of the
up-and-coming "new guard" in the government and his rise bodes well
for the future leadership on the country. Just 37 years-old,
Orenbayev is English-speaking, and a Muskie program alum who
received his master's degree from Duke University. Unassuming and

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soft-spoken, his leadership in PPEPI is indicative of the importance
the Kazakhstani government places on the success of this
partnership. It also indicates the political willingness of the
government to consider real economic policy reform, with the further
understanding that such reforms can be part of the answer to the
country's current economic woes.

AZAT PERUASHEV, A POTENTIAL POPULIST LEADER?


8. (SBU) Azat Peruashev is the 40-year old Chairman of the National
Economic Chamber of Kazakhstan "Atameken" and one of the founding
partners of PPEPI. Peruashev and Atameken have been dismissed by
some as the "tame" business group responsive to the government. Our
experience has indicated, however, that Peruashev can be quite blunt
in his criticism of government policies, particularly when they
interfere with the interests of his constituents, the private
entrepreneurs of small- and medium-size businesses. Peruashev likes
to depict himself as an outsider, "I am a simple village person."
When the various representatives made their comments at the PPEPI
press conference, only Peruashev spoke in Kazakh (to the obvious
discomfort of most of the journalists who could not understand his
untranslated remarks). Peruashev is not quite the country rube that
he pretends to be. When we first met him several years ago, he did
not speak any English. In the meantime he has become reasonably
fluent. His desire to improve his ability to communicate in English
is derived from his belief that the United States' experience is the
most relevant to Kazakhstan. He professes his admiration for
American entrepreneurship. "We must learn innovation from the
Americans. The Europeans have nothing to teach us."


9. (SBU) Peruashev is also more ambitious then he would let on. "I
would like to leave the leadership of Atameken, but no one else can
step forward to represent the small businessman." He is a
passionate advocate of the free market including denying the
government's right to regulate for social purposes though also
favoring a nationalistic style of protectionism. He strongly
criticized the government's decision to ban alcohol and tobacco
advertising on Kazakhstani television. "Businesses, even alcohol and
tobacco, should be able to act as they need. The result of this ban
is not a decrease in drinking and smoking but rather an increase in
the sales of Russian cigarettes and vodka since Kazakhstanis see
their advertisements on Russian television." Peruashev used to lead
the now defunct Civic political party. This party later merged with
the ruling Nur Otan. If he returned to a more active political
life, he could represent the interests of those raised at the end of
the Soviet era, the rural population and mid-level businessmen.


10. (SBU) COMMENT: PPEPI has been slow getting off the ground for
reasons other than the commitment of its partners. With
administrative obstacles overcome and the initiative now funded, it
will be incumbent on the several working groups to produce
substantive economic policy recommendations in the form of white
papers within the next six months to build on the momentum of the
Coordinating Committee meeting and maintain the confidence of its
partners. END COMMENT.

HOAGLAND