VZCZCXRO5002
RR RUEHAST RUEHDBU
DE RUEHTA #2332/01 1801559
ZNR UUUUU ZZH
R 291559Z JUN 06
FM AMEMBASSY ALMATY
TO RUEHC/SECSTATE WASHDC 5988
INFO RUEHEK/AMEMBASSY BISHKEK 7638
RUEHNT/AMEMBASSY TASHKENT 7605
RUEHAH/AMEMBASSY ASHGABAT 7012
RUEHDBU/AMEMBASSY DUSHANBE 1798
RUEHMO/AMEMBASSY MOSCOW 1275
RUEHAST/USOFFICE ASTANA

UNCLAS SECTION 01 OF 03 ALMATY 002332 
 
SIPDIS 
 
DEPT FOR SCA/CEN (MUDGE), OES/PCI (SALZBERG), OES/PCI 
(SPERLING) 
 
DEPT PLS PASS EPA (B. FREEMAN) 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: SENV PGOV KZ
SUBJECT: KAZAKHSTAN: SAFE DRINKING WATER FOR RURAL 
SETTLEMENTS 
 
¶1. Summary:  On June 5, the U.S. Environmental Protection 
Agency (EPA) convened a high-level meeting in Astana to 
discuss the issue of safe drinking water for rural 
settlements in Kazakhstan.  EPA, together with the Akimat 
of Almaty Oblast, has been carrying out a village drinking 
water project in Almaty Oblast since 2003.  The purpose of 
the meeting was to present the results of the project so 
far and to make recommendations to Kazakhstan's national 
and regional water authorities as to the most effective 
approaches to ensuring the financial and technical 
sustainability of rural drinking water systems. 
 
¶2. This cable summarizes the meeting and events that have 
taken place since the meeting, with a view toward gauging 
the prospects for the EPA project.  The meeting itself 
went very well, with excellent participation and favorable 
responses from the Kazakhstani side. 
Initial indications are that the Government of Kazakhstan 
(GOK), including the Water Resources Committee (WRC) and 
the Prime Minister's office, are taking the EPA 
recommendations seriously, to the extent of making public 
announcements and taking concrete steps to make changes in 
its national drinking water program.  It is equally clear 
that more work must go into this initiative and that any 
one of several factors can intervene to stall the project. 
Given the importance of drinking water in Kazakhstan, Post 
will monitor this project closely.  End summary. 
 
¶3. There are some 7,000 villages in Kazakhstan, which 
constitute almost a half of Kazakhstan's population.  The 
majority of these villages do not have safe, reliable 
supply of drinking water, with adverse consequences for 
public health and rural economic development.  The GOK has 
created a 2002-2012 National Drinking Water Program to 
address this problem, with total funding of 115 billion 
tenge ($958 million), possibly to be raised to 300-310 
billion tenge ($2.5 - $2.6 billion).  The GOK has also 
taken a $34.6 million loan from the Asian Development Bank 
(ADB) for rural water supply in three oblasts in 
Kazakhstan. 
 
¶4. Ambassador John Ordway chaired the meeting, with 
assistance from Almaz Sharman, USAID.  Participants were 
from key institutions active on the issue of rural 
drinking water in Kazakhstan.  They included Anatoliy 
Ryabtsev, Chairman, Water Resources Committee (WRC), 
Ministry of Agriculture; Anar Shaikenov and Aliya 
Ibaldina, ADB; Alzhan Brailov, Deputy Minister of 
Environmental Protection;and Askar Tutubayev, Deputy Head, 
Construction Department, Almaty Oblast government.  The 
EPA project was represented by Bill Freeman, EPA; Michael 
Curley and Diyas Jubandykov, both of the International 
Center for Environmental Finance/Global Environment and 
Technology Foundation; Bulat Yessekin, Executive Director, 
Central Asian Regional Environment Center (CAREC); and 
Aidos Smailov, Eurasia Foundation.  The government of 
Norway, which is contributing $287,000 to the project, was 
unable to send a representative to the meeting. 
 
¶5. Noting that Kazakhstan's intention to join the list of 
the world's 50 leading countries was unthinkable without 
the provision of clean water to its citizens, Ambassador 
Ordway turned the discussion to the results of the project 
so far, as follows: 
 
-the project is providing safe drinking water to 8,900 
residents of six villages in Almaty Oblast.  The capital 
costs of rehabilitating village water systems have been 
reasonable, on the order of $50,000 per village. 
Village residents have paid a share of costs on time and 
in full, including 10% of the capital costs up front and 
100-150 tenge ($.83 - $1.25) per household per month for 
operations and maintenance.  The elected, self-governing 
village water committees set up by the project have 
managed these systems fairly and responsibly, with no 
major breakdowns or problems so far.  Six more villages 
are planned for 2006-07, including Bayandai, a Uighur 
village where construction begins in July. 
 
-the project emphasizes long-term financial and technical 
sustainability.  Financial sustainability is secured by a 
 
ALMATY 00002332  002 OF 003 
 
 
financial association, formed by representatives of each 
village who manage a reserve fund for spare parts and 
major repairs.  Technical sustainability is secured by a 
"circuit rider," who deals with problems beyond the 
technical capabilities of the villagers themselves.  This 
approach is designed to avoid the problem, often 
encountered in rural water projects of this kind, that 
when water systems break down, as they inevitably do, 
there is no money to fix them and no person with the 
knowledge to fix them. 
 
-the project has been able to overcome almost all 
obstacles so far.  The GOK natural monopolies agency has 
ruled that the village water committees can set tariffs 
themselves.  The oblast tax committee has held that the 
water drawn for drinking water purposes is exempt from the 
natural resources tax and has advised that the proper 
legal form for financial operations is that of a non- 
governmental organization, not a financial cooperative as 
initially thought.  Most important, the project has 
managed to overcome social inertia in the villages. 
Initially, it met with extreme skepticism and 
apprehension, due to money the villagers had lost to phony 
schemes that promised phones, electricity, and the like 
but never delivered.  Now, the initial skepticism has been 
allayed, and there is a queue of villages wanting to sign 
up for the project. 
 
¶6. Reactions among Kazakhstani participants at the 
meeting, notably the WRC and ADB, were uniformly positive. 
Ryabtsev said the WRC would consider incorporating the 
project into the national drinking water program, with 
modifications suited to local conditions.  All present 
agreed that the approach was best suited to small 
villages, with populations less than 1,500-2,000.  Some 
expressed surprise at the low per capita cost, and 
suggested that other villages in less favorable 
circumstances might cost more.  Tutubayev noted that the 
Almaty Oblast government had begun on its own to form self- 
governing water committees, or community-based "panels," 
in the oblast drinking water program.  Most importantly, 
all recognized the importance of residents' direct 
participation in and support for the program for ensuring 
the success of the project.  (One participant quipped that 
President Nazarbayev and chairs of the village water 
committees are the only directly elected executive-branch 
officials in Kazakhstan.) 
 
¶7. On the evening of June 5, in an interview on national 
television, Ryabtsev announced his intention to introduce 
the EPA project nationwide.  Asked whether Kazakhstan 
really did not itself have the money to supply clean 
drinking water, Ryabtsev replied that the point is not the 
money, but the methodology.  The EPA project has shown, he 
said, that public involvement - up-front financial 
contributions, creation of a reserve fund, and 
participation in financial associations - is essential to 
the sustainability of rural water systems. "This is a very 
important argument," he said, "now we want to make it 
standard for the entire drinking water program" in 
Kazakhstan.  This public announcement was a significant 
step over forward. 
 
¶8. On June 6, Ryabtsev met with several meeting 
participants in his office at the WRC.  Confirming his 
statements made the previous day, Ryabtsev requested a 
step-by-step "manual" for villages to follow in 
implementing the new approach - from the first village 
general assembly through the election of water committee, 
to tariff collection.  Second, he suggested a meeting, to 
be held in Almaty Oblast in mid-September, for all the 
deputy oblast akims to look first hand at the project's 
results and to discuss the incorporation of the project's 
methodology into national water policy.  Third, he 
proposed a revision of the current draft of the national 
drinking water program, with corresponding changes in the 
GOK budget for the program.  If accomplished, this 
revision would amount to official confirmation of the 
change in national drinking water policy. 
 
¶9. On June 20, Mukhambetkasim Shakenov, the chief state 
 
ALMATY 00002332  003 OF 003 
 
 
inspector in the Prime Minister's office in Astana, paid a 
visit to the project villages of Oktiabr and Algabas. 
Apparently, Shakenov had seen the Ryabtsev TV interview, 
called Ryabtsev, and informed him that he wished to 
include the EPA project in his inspection tour of Almaty 
Oblast.  During his visit to the two villages, he spoke 
with residents, checked the water supply system, studied 
the accounts, records, and other documentation - and, we 
are told, came away satisfied.  As of June 26, as 
developed in further conversations between Shakenov and 
Ryabtsev, the plan is for the Prime Minister's office to 
send a letter instructing Ryabtsev to officially examine 
the EPA project and then, if the conclusion is positive, 
to begin incorporation of the project's methodology into 
the national drinking water program.  Shakenov's visit 
seemingly gained for the project another powerful ally 
within the government. 
 
¶10.  Initial activities subsequent to these discussions 
are under way.  The first is the "how to" manual, to be 
completed by the end of June.  The second is presentation 
of the manual to GOK and regional officials (despite some 
difference on how to proceed:  Ryabtsev wants a conference 
for deputy oblast akims in Taldy-Korgan in September, 
whereas Shakenov prefers to get an advisory resolution 
from the Prime Minister's office before convoking of the 
deputy akims).  The third is the initiation of training 
for the next 70 villages to receive ADB loans, which would 
probably require a "train-the-trainer" program under 
CAREC.  All these steps are expected to go forward largely 
on the initiative of the Kazakhstani side. 
 
¶11. Several key roles remain to be played by EPA, however. 
On the finance side, it will be necessary for EPA to 
provide financial analysis and support for the formation 
of rural financial associations, with regard to such 
considerations as capital-to-needs ratios, funds 
management, and utility operations.  The U.S. has a wealth 
of experience with rural financial cooperatives to draw 
from.  On the technical side, it will be necessary to help 
start the circuit rider program.  Here again, the U.S. 
experience will be useful, especially that of the National 
Rural Water Users Association, funded jointly by EPA and 
USDA.  In the long run, the evolution will be the 
formation of rural financial associations, amalgamation 
into oblast-level associations, and the establishment of 
rural revolving funds, or water banks, across the country 
as a whole. 
 
¶12. Comment: It was clearly recognized at the meeting that 
constructing or rehabilitating village water systems is 
not technically complex and that the real problem arises 
over time as systems break down and repairs and spare 
parts are needed.  If sustainability issues are not 
addressed now, participants at the meeting noted, another 
such meeting would have to be held ten years from now.  It 
was also recognized that self-governance and social 
mobilization are the crucial parts of the EPA project, 
which distinguish it from current Kazakhstani and ADB 
water policy.  The project design puts real economic 
assets and decision-making authority in the hands of the 
elected village water committees, which creates a sense of 
ownership and responsibility.  Management of the reserve 
fund and other funds in an open and transparent manner 
builds experience with modern financial systems and 
operations.  The village water committees create a 
platform for further social action for education, health, 
and other local social and economic matters.  That is, the 
EPA project is not just about public health; it can have 
broad political, economic, and social ramifications. 
 
¶13.  Comment, continued:  Of special note is the high 
benefit-cost ratio for the EPA project.  If the project 
succeeds, a relatively small investment of USG assistance 
money will have leveraged as much as several hundred 
million dollars in environmentally friendly spending over 
the next five to ten years. We believe this project will 
show one of the highest returns on investment in the USG 
assistance portfolio.  End comment. 
 
ORDWAY