VZCZCXRO5646
PP RUEHDBU RUEHLN RUEHVK RUEHYG
DE RUEHTA #3274/01 2610713
ZNR UUUUU ZZH
P 180713Z SEP 06
FM AMEMBASSY ALMATY
TO RUEHC/SECSTATE WASHDC PRIORITY 6966
INFO RHEHNSC/NSC WASHDC
RUCNCIS/CIS COLLECTIVE
RUEHIL/AMEMBASSY ISLAMABAD 2080
RUEHBUL/AMEMBASSY KABUL 0262
RUEHNE/AMEMBASSY NEW DELHI 0387

UNCLAS SECTION 01 OF 03 ALMATY 003274 
 
SIPDIS 
 
SENSITIVE 
 
SIPDIS 
 
DEPARTMENT FOR SCA/CEN (M. O'MARA) 
 
PLEASE PASS USTR 
 
NSC FOR MILLARD, MERKEL 
 
E.O. 193056: N/A 
TAGS: PREL ETRD ECON EINV ENRG AF KZ
SUBJECT: KAZAKHSTAN: A/S BOUCHER AND DEPUTY PRIME MINISTER 
MASIMOV FOCUS ON THE ECONOMY, INVESTMENT, AND AFGHANISTAN 
 
¶1. (SBU) Summary: Deputy Prime Minister Masimov expressed 
concern regarding the pace of bilateral WTO negotiations 
with the U.S. during a September 8 meeting with Assistant 
Secretary Boucher and requested a sign of U.S. support for 
 
SIPDIS 
Kazakhstan's early accession during President Nazarbayev's 
upcoming visit to Washington.  The Deputy Prime Minister 
briefed A/S Boucher on Kazakhstan's efforts to diversify its 
economy and informed Boucher that he expected the 
Kazakhstani delegation visiting Afghanistan in September to 
identify one or two investment projects.  Masimov also 
responded positively to A/S Boucher's suggestion to expand 
dialogue on nuclear energy issues.  End summary. 
 
¶2. (U) Assistant Secretary of State for South and Central 
Asian Affairs Richard Boucher met on September 8 in Astana 
with Deputy Prime Minister Karim Masimov.  The Ambassador 
and Pol-Econ chief (notetaker) were also present.  From the 
Kazakhstani side, A. Kamaldinov and Zhanna Sartbayeva of the 
Prime Minister's staff, director of the MFA's European 
Cooperation Department Yerkin Akinzhanov, and deputy 
director of the MFA's Europe and Americas Department Dauren 
Toleukhanov also participated. 
 
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Concern Regarding WTO Negotiations 
---------------------------------- 
 
¶3. (SBU) A/S Boucher opened the meeting by noting that the 
U.S. looks forward to President Nazarbayev's upcoming visit 
to Washington, which will be an excellent opportunity to 
discuss Kazakhstan's many accomplishments.  Masimov agreed 
that the visit was likely to contain many positive elements, 
quickly adding that after receiving the U.S. Trade 
Representative's most recent response he was concerned 
regarding progress on bilateral World Trade Organization 
negotiations with the U.S.  Boucher reassured Masimov that 
the U.S. fully supports Kazakhstan's early accession, and 
promised to convey his concerns to the experts handling the 
negotiations.  Masimov asked for the State Department's 
active engagement in the negotiations and for a sign of U.S. 
support during the visit. 
 
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Singapore Meetings 
------------------ 
 
¶4. (SBU) Masimov noted that he was looking forward to seeing 
Under Secretary Josette Sheeran during the upcoming World 
Bank/International Monetary Fund meetings in Singapore, 
particularly at the September 18 Kazakhstani presentation on 
regional economic cooperation.  (Note: Post learned later 
that Assistant Secretary for Economic and Business Affairs 
Dan Sullivan is attending the Singapore meetings on Under 
Secretary Sheeran's behalf.  End note.)  A/S Boucher said 
 
SIPDIS 
that the U.S. had been in contact with all the Central Asian 
countries except Uzbekistan to encourage their participation 
in the event.  Masimov said that the Vice President of the 
World Bank had promised to send good representatives. 
 
------------------------ 
Economic Diversification 
------------------------ 
 
¶5. (SBU) In response to A/S Boucher's question, Masimov 
described progress on the diversification of Kazakhstan's 
economy.  100% of oil revenues began going directly to the 
National Fund as of July 1, he noted.  The fund was now over 
$10 billion and would reach $18 billion by the end of the 
year.  President Nazarbayev had announced a new stage of 
administrative reform in his September 1 address to 
Parliament, Masimov said, including civil service reform, 
reduced government intervention in the economy, and further 
economic liberalization.  Masimov cited New Zealand and 
Singapore as good models for civil service reform; 
Kazakhstan seeks a smaller, more professional, better paid 
corps of public servants.  Development of small and medium 
sized enterprises is a priority, according to Masimov, as is 
agricultural reform.  Forty-three percent of the Kazakhstani 
population lives in the countryside.  Secretary of 
Agriculture Johanns' July visit to Kazakhstan had been 
 
ALMATY 00003274  002 OF 003 
 
 
particularly important, Masimov said, in setting the stage 
for expanded cooperation with the U.S. on things such as 
genetically modified organisms.  Predicting that the world 
could face a severe food shortage within 20 years, Masimov 
predicted that Kazakhstan could play a major role in the 
global market if it reformed its agricultural sector. 
 
¶6. (SBU) Masimov explained that the second stage of economic 
modernization in Kazakhstan focused on increased 
competitiveness and transparency.  The Kazakhstani 
government sought to promote better corporate governance, 
accountability, and transparency -- all of which were 
required for Initial Public Offerings.  Masimov noted that 
they were in negotiations with a "prominent Westerner" to be 
on the boards of Samruk, Kazyna, and KazAgro (a new state 
holding firm in the works).  These measures were all 
intended to support Nazarbayev's strategy of joining the 50 
most competitive countries in the world, said Masimov.  He 
pointed out that Kazakhstan had moved from 82 to 63 in the 
World Bank's "Doing Business 2007" report. 
 
¶7. (SBU) Kazakhstan is also working to support high 
technology and the financial sector, Masimov said.  A 
delegation from Microsoft recently examined the prospect of 
using Kazakhstan as a regional hub.  The Almaty Information 
Technology Park will open in mid-September, Masimov added, 
and efforts to develop Almaty as a financial center 
continue.  The Kazakhstani financial system enjoys a strong 
competitive advantage in the region, and Kazakhstani banks 
have been quite successful in raising capital on world 
markets.  Kazakhstan is now the largest source of foreign 
direct investment in Georgia, Masimov noted. 
Masimov said that he would meet with World Bank president 
Wolfowitz in Singapore to finalize a cooperation agreement 
which would help Kazakhstan play a larger role in Central 
and South Asia, including Afghanistan. 
 
¶8. (SBU) A/S Boucher told Masimov that the issues he had 
highlighted were very important.  Problems such as 
corruption, abusive tax audits, and inconsistent government 
processes hindered foreign investment.  He noted that the 
world financial centers are always known for having the 
cleanest record on corruption and the strongest anti- 
corruption agencies.  Hong Kong was a particularly good 
example, having been quite corrupt until the establishment 
in 1975 of the Independent Corruption Commission. 
 
------------------------- 
Investment in Afghanistan 
------------------------- 
 
¶9. (SBU) Masimov told Boucher that a Kazakhstani delegation 
would visit Afghanistan before Nazarbayev's visit to 
Washington in order to examine, among other things, 
investment opportunities.  He directed his staff to ensure 
that the delegation included a representative of the state 
holding company Kazyna, which had created a special vehicle 
for investment abroad. 
 
¶10. (SBU) A/S Boucher noted that he had shared a list of 
investment ideas in Afghanistan with Ambassador Saudabayev, 
and had highlighted the projects which supported regional 
economic integration.  He urged that the Kazakhstani 
delegation examine the investment question closely.  Roads 
and electric networks are not just economic projects, 
Boucher noted; they are also crucial to security and 
stability because they allow the central government to 
extend its authority to the regions. 
 
¶11.  (SBU) Masimov told Boucher that Kazakhstan would 
"definitely find one or two projects" in Afghanistan.  A/S 
Boucher welcomed the news and promised to find a way to 
include at least symbolic U.S. participation in the 
projects. 
 
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Nuclear Power 
------------- 
 
¶12. (SBU) A/S Boucher asked Masimov whether nuclear power 
 
ALMATY 00003274  003 OF 003 
 
 
would be important in Kazakhstan in the long term.  Masimov 
noted that nuclear cooperation had been the main issue 
during Japanese Prime Minister Koizumi's recent visit. 
(Note: According to the Japanese, discussions on nuclear 
issues were limited to uranium mining and processing.) 
Koizumi's top energy advisor had told Masimov that by 2020, 
the developed world would rely primarily on nuclear energy. 
Nuclear power already supplies 60% of Japan's energy needs. 
Masimov said that these trends would benefit Kazakhstan, 
which possesses 25% of world uranium reserves.  Boucher 
highlighted the need to raise the level of cooperation with 
the U.S. on nuclear power generation, including safety and 
regulatory issues.  Masimov indicated that he looked forward 
to more dialogue on the issue. 
 
ORDWAY