KAZAKHSTAN: KOREAN PRESIDENT LEE'S STATE VISIT PROMOTES

UNCLAS SECTION 01 OF 02 ASTANA 000852

SENSITIVE
SIPDIS

STATE FOR SCA/CEN, EAP/CM, EEB/ESC
STATE PLEASE PASS TO USTDA FOR DAN STEIN

E.O. 12958: N/A
TAGS: PGOV PREL ECON ENRG EPET EINV RS CH KS KZ
SUBJECT: KAZAKHSTAN: KOREAN PRESIDENT LEE'S STATE VISIT PROMOTES
TRADE AND INVESTMENT

REF: (A) SEOUL 0753 (B) ASTANA 0555 (C) ASTANA 0678

ASTANA 00000852 001.2 OF 002



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


2. (U) SUMMARY: On May 12, South Korean President Lee Myung-bak
arrived in Kazakhstan for a three-day state visit (reftel A). Lee
and Kazakhstan's President Nazarbayev signed a series of documents
during the visit, including a joint action plan to strengthen
bilateral relations. On May 13, Kazakhstan hosted a business forum
in Almaty for South Korean investors, who agreed in principle to
invest in projects totaling more than $5 billion over the next five
years. Trade between the two countries totaled $754 million in
2008, including $330 million in exports from Kazakhstan and $424
million in imports from South Korea. Overall, this represented a
decline of 10.5% compared to 2007. The majority of Kazakhstan's
exports to South Korea consist of raw materials such as uranium,
ferroalloys, rolled plain carbon steel and iron, gold and copper.
Imports from South Korea include mainly electronics, manufacturing
equipment, and engineering products. South Korean companies are
partners in more than 300 joint ventures in Kazakhstan. According
to the National Bank, from 1993-2008, South Korean companies
invested more than $3 billion in Kazakhstan, or 3.6% of total
foreign direct investment in Kazakhstan during that period. END
SUMMARY.

ANOTHER BILLION-DOLLAR INVESTMENT PACKAGE FOR KAZAKHSTAN


3. (U) On May 13, Kazakhstani and South Korean businesses signed a
number of agreements at a forum in Almaty that could bring more than
$5 billion of new investment to Kazakhstan. Kairat Kelimbetov,
President of the Samruk-Kazyna National Welfare Fund, confirmed the
figure of $5 billion, but he said it covered future investments in
Kazakhstan over the next two to five years. Kelimbetov announced
that Samruk-Kazyna had signed memoranda of understanding (MOUs) with
Korean companies Hyundai, KZPOS Company Ltd., Daewoo Engineering
Company, and Bokwang Gid Company. Bokwang Gid intends to invest in
the uranium mining, coal mining, power generation, oil and gas,
transportation, and engineering sectors. In addition, a number of
Kazakhstani and Korean companies signed statements of intent to
cooperate, including Kazakhmys and Samsung; KazMunaiGas and Hyundai;
Kazakhstani national railroad company Temir Zholy and the Korean
Railroad Corporation (KORAIL); and SaryArka CEC and Korea Resources
Corporation. National telecommunications company Kazakhtelecom
agreed to cooperate with the Korean scientific institution ETRI in
the development of broadband Internet, WiBro global 3G, and
e-learning services.

FURTHER DETAILS ON RAILWAY COOPERATION


4. (U) On May 14, KORAIL said it signed an agreement with Temir
Zholy on areas of broad cooperation that it expects will lead to
significant business opportunities in the future. The memorandum of
understanding signed in Astana by KORAIL President Huh Joon-young
and his Kazakhstani counterpart, Askar Mamin, calls for the joint
development of transcontinental railway lines and the modernization
of Kazakhstan's logistics infrastructure. It also includes
provisions for KORAIL to participate in railroad construction and
operations in Kazakhstan, as well as the joint development of
information technology systems to improve rail operations. Huh said
the deal is significant because "Kazakhstan is rich in natural
resources and located along the main railway line crossing the Asian
continent." He added that KORAIL plans to examine the feasibility
of other projects, including introducing its KTX-II bullet trains,
and will prepare a package deal with other South Korean companies to
bid for future business. According to KORAIL, Kazakhstan plans to
acquire 23,000 rail trucks and 500 locomotives, and refurbish 3,000
km of existing railways by 2013.

SOUTH KOREA'S RESOURCE DIPLOMACY


5. (U) On May 5, Kazakhstan's Ambassador to South Korea, Darkhan

ASTANA 00000852 002.2 OF 002


Berdaliyev, was interviewed by Liter newspaper about South Korea's
"resource diplomacy." He said that Kazakhstan has become a
strategic investment destination for Korean capital as global
competition intensifies for limited natural resources. In
particular, he cited the energy, agriculture, and mining sectors as
areas of interest to Korean businesses. Berdaliyev said he expects
future investment to follow the selection of Samsung C and T
Corporation to construct a $2.5 billion, 1,500 megawatt thermal
power plant in Balkhash (reftel B). He said the project is
strategically important to Kazakhstan because it will help ensure
the country's energy security and offered it as proof that
Kazakhstan continues to maintain an attractive investment climate
despite the global economic crisis.


6. (SBU) COMMENT: The announcement that South Korean companies are
prepared to invest as much as $5 billion in Kazakhstan over the next
five years comes close on the heels of China's $10 billion
loan-for-oil deal on April 16. Both announcements were tied to
state visits, involve investments from state-owned and
state-directed companies, and represent package deals in a wide
range of sectors, including -- but not limited to -- the energy
sector. These deals demonstrate that Kazakhstan continues to seek
investment from all directions -- consistent with the country's
multi-vector foreign policy -- and has no intention of putting all
its eggs in one basket. END COMMENT.

MILAS