KAZAKHSTAN: VIGNETTES OF PUBLIC OPINION: RBK

C O N F I D E N T I A L ASTANA 000068

SIPDIS

STATE FOR SCA/CEN, SCA/PPD, EUR/ACE, EEB, DRL

E.O. 12958: DECL: 01/25/2020
TAGS: PREL PHUM ECON ETRD EAID KPAO WTO RS KZ
SUBJECT: KAZAKHSTAN: VIGNETTES OF PUBLIC OPINION: RBK
CUSTOMS UNION, U.S. ASSISTANCE

Classified By: Ambassador Richard E. Hoagland: 1.4 (b),(d)


1. (SBU) INTRODUCTION: On January 23 in Almaty, the
Ambassador was the key-note speaker at the founding session
of Kazakhstan's chapter of the Young Presidents Organization
(YPO),an international group for CEOs of mid-level (or
larger) companies who must meet stringent international
standards of transparent business practices. Seventeen
self-made CEOs participated, at least half already well-known
to the Mission. YPO operates according Chatham House rules
and encourages frank and open discussion. During the
six-hour event, we heard several interesting points of view
about the Russia-Belarus-Kazakhstan Customs Union, and about
U.S. government assistance to Kazakhstan. END INTRODUCTION.

RUSSIA-BELARUS-KAZAKHSTAN CUSTOMS UNION (RBK-CU)


2. (C) One CEO of a major freight-transfer company reported
that in the final quarter of 2009, transportation and
customs-clearance companies recorded a surge in imports.
However, since January 1, this has not shown up "on the
shelves." In fact, in a number of sectors, shortages of
retail goods appear to be increasing. The CEO said this
suggests strongly that retailers are waiting to charge the
increased RBK-CU tariffs, which could lead to significant
inflation. For example, last year a Toyota Land Cruiser cost
about $75K retail in Kazakhstan, he said. This year, it will
cost about $125K "because we now have to charge the Russian
customs tariff." Further, in June, customs-clearance
companies will have to deposit one million euros cash with
the Customs Committee, rather than have standard business
insurance, as is now the case. The CEO said, "I'm big enough
that I don't care, except I'll lose the 7.5% interest I could
get on that million. But I can handle that." He added he
was worried this deposit requirement will force smaller
companies out of business. He claimed that the deposit is at
the demand of Russia, whose policies disadvantage small
businesses.


3. (C) Several of the CEOs agreed that Russia is more
corrupt and bureaucratic than Kazakhstan. They said, "Our
businesses are more nimble, but inevitably the Russian
culture will ooze in." They asked why foreign investors
would want to come to Kazakhstan rather than to Russia "when
our labor pool is a tenth of the size of Russia's and much
less well-educated -- and especially when the Customs Union
will require us to phase out our Free Trade Zones." Another
CEO commented, "We're trying to meet European standards. We
don't want to be dragged down to Russian standards. We can
complain all we want about tariffs, but the real danger is
that our business culture will suffer."

U.S. ASSISTANCE


4. (C) Reacting to rumors that Kazakhstan is considering
rejecting U.S. foreign assistance to Kazakhstan because it is
fed up with its "dignity being insulted" by the semi-annual
Congressionally-mandated human-rights certification process,
one CEO said, with others nodding agreement, "$20 million?
That's small change -- it has no meaning! Rejecting $20
million from the United States would be seen by the
Kazakhstani public as a glamorous and bold statement of
sovereignty. Russia and China pour in billions in investment
and never, ever criticize us. Why don't you do something to
win hearts and minds? Our education and health-care systems
are sub-standard. Why don't you give us $2 billion a year
for those sectors? Why don't you do something concrete
rather than preach and posture? Your ideology is very rigid.
We love America, but we don't understand your government.
You seem very Soviet to us; you demand we conform, when, in
fact, we think we're doing quite well."
HOAGLAND