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UNCLAS SECTION 01 OF 02 ASTANA 000362 
 
SENSITIVE 
SIPDIS 
 
STATE FOR SCA/CEN, EUR/RUS 
STATE PLEASE PASS TO USTDA FOR DAN STEIN 
 
E.O. 12958: N/A 
TAGS: BEXP BTIO PGOV PREL ECON EIND ETRD RS KZ
SUBJECT:  KAZAKHSTAN:  GENERAL ELECTRIC'S TWO TESTS 
 
REF:  08 ASTANA 2391 
 
ASTANA 00000362  001.2 OF 002 
 
 
¶1.  (U) Sensitive but unclassified.  Not for public Internet. 
 
¶2.  (SBU) SUMMARY:  On February 25, General Electric (GE) executives 
briefed the Ambassador on the company's current projects and future 
prospects in Kazakhstan.  Ron Pollett, President and CEO of GE 
Russia/CIS, said he has "two tests" for the government of Kazakhstan 
in 2009.  The first will be whether it fulfils commitments made in a 
December 2008 MOU to sign contracts with GE worth up to $1 billion 
on locomotive procurement, servicing, and signaling (reftel).  The 
second will be the government's decision to award a contract for 
compressor stations for the Uzbekistan-Kazakhstan-China gas 
pipeline.  Pollett said GE has already won related contracts in 
Uzbekistan and China and hopes to win the final contract in 
Kazakhstan.  Pollett told the Ambassador that GE does not plan to 
reduce staff or curtail operations in Russia or the CIS, although 
the company may restructure its consumer lending business in Russia. 
 He also indicated interest in pursuing contracts in the health-care 
industry, but expressed concern about corruption.  In 2008, total 
revenue for GE Russia/CIS was $2.2 billion, including $260 million 
in Kazakhstan.  Pollett said he expects 2009 revenue in Kazakhstan 
to be approximately $350 million.  END SUMMARY. 
 
GE EXPECTS TO SIGN RAIL CONTRACTS THIS SPRING 
 
¶3.  (SBU) Pollett said GE expects to sign a series of rail contracts 
worth up to $1 billion as soon as April 15, although the date could 
slip to May, when GE's CEO Jeffrey Immelt is expected to visit 
Kazakhstan.  However, Pollett worried that the financial crisis 
could adversely impact the deal.  "We don't think they'll back out 
of the deal," said Pollett, "but we're concerned that KTZ (national 
railway operator Kazakhstan Temir Zholy) will not sign the contracts 
according to the timeline in the MOU, since they collect revenue in 
tenge and purchase equipment in dollars."  Pollett said GE will 
honor the commitments it made in the December MOU, including 
acquisition of a 15 percent stake in the locomotive manufacturing 
facility in Astana.  "We'll go forward if Kazakhstan goes forward," 
he said. 
 
SIEMENS CEO ANNOUNCES ITS OWN LOCOMOTIVE DEAL 
 
¶4.  (U) Pollett was in Astana for less than 24 hours to meet with 
senior government officials, particularly Samruk-Kazyna Chairman 
Kairat Kelimbetov, whom he called "our champion."  He returned to 
Moscow on February 26, the same day that Siemens CEO Peter Loscher 
arrived in Astana.  According to local press reports, in December 
2008, KTZ subsidiary JSC Locomotive signed a contract with China's 
Zhuzhou Electric Locomotive Company to supply 22 passenger 
locomotives equipped with Siemens traction equipment and controlling 
systems.  During Loscher's visit on February 26, KTZ president Askar 
Mamin said, "Although we received other offers, our experts found 
Siemens' offer the most suitable solution."  Loscher said there is 
growing demand for freight locomotives in Kazakhstan and announced 
that Siemens would start a project to design an advanced engine in 
accordance with Kazakhstan's technical specifications. 
 
ALLEGATIONS OF CORRUPTION IN THE HEALTH CARE SECTOR 
 
¶5.  (SBU) Pollett also told the Ambassador that GE would like to 
enter the health-care industry in Kazakhstan and is already speaking 
to local companies with x-ray and mammography technology about 
building a mobile mammography diagnostic machine that could serve 
the entire female population of Kazakhstan.  Unfortunately, 
according to Pollett, the health-care sector in Kazakhstan is 
"extremely corrupt and Siemens is a big part of the problem." 
Pollett said that "third-party, offshore trading companies have a 
stranglehold on the market."  According to Pollett, they monopolize 
supply and charge two to three times market rates to supply 
high-technology medical equipment.  The Ambassador relayed an 
invitation from Minister of Health Doskaliyev, who told the 
Ambassador on February 12 that he was eager to meet with GE's 
 
ASTANA 00000362  002.2 OF 002 
 
 
representatives to discuss future cooperation in Kazakhstan and in 
the region writ large. 
 
GE HOPES TO SUPPLY COMPRESSORS FOR GAS PIPELINE 
 
¶6.  (SBU) Pollett noted that the Kazakhstani government will be 
awarding a contract for compressor stations for the Kazakhstani 
portion of the Uzbekistan-Kazakhstan-China gas pipeline.  He claimed 
that GE submitted the best bid on both technical and cost aspects of 
the project:  "We should win that contract," he said, particularly 
since GE has already been awarded the contract to work on the 
pipeline segments in Uzbekistan and China.  In closing, Pollett 
noted that GE has five offices in Kazakhstan and plans to be in 
country for years to come.  "We're not here just to win one or two 
contracts and leave," he said.  "We look at each of our projects in 
the context of a long-term strategy." 
 
HOAGLAND