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OO RUEHAG RUEHAST RUEHBI RUEHCI RUEHDA RUEHDBU RUEHDF RUEHFL RUEHIK
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DE RUEHTA #0490 0770945
ZNR UUUUU ZZH
O 180945Z MAR 09
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4957
INFO RUCNCIS/CIS COLLECTIVE 1387
RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 0764
RUEHKO/AMEMBASSY TOKYO 1467
RUEHUL/AMEMBASSY SEOUL 0451
RUCNDT/USMISSION USUN NEW YORK 2226
RUEHNO/USMISSION USNATO 2556
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEAIIA/CIA WASHDC
RHEFAAA/DIA WASHDC
RHEHNSC/NSC WASHDC 0947
RUEKJCS/SECDEF WASHDC 0860
RUEKJCS/JOINT STAFF WASHDC
RHMFIUU/CDR USCENTCOM MACDILL AFB FL
RUEHAST/USOFFICE ALMATY 1330

UNCLAS ASTANA 000490 
 
SIPDIS 
 
STATE FOR SCA/CEN, EUR/ACE, F 
STATE PLEASE PASS TO USAID 
 
E.O. 12958: N/A 
TAGS: PGOV PREL ECON EAID SOCI KZ
SUBJECT:  KAZAKHSTAN:  PUBLIC-PRIVATE ALLIANCES EXPAND BUSINESS 
SERVICES, PROMOTING ECONOMIC DIVERSIFICATION 
¶1.  SUMMARY:  On February 25, USAID established separate 
public-private alliances with Baker Hughes ($1,250,000 over five 
years), an American drilling company active in Kazakhstan, and with 
 
Chevron ($250,000).  The partnerships between these two companies 
and USAID will improve the supply of skilled labor in the country by 
establishing a "Know About Business" (KAB) entrepreneurship course 
in select vocational schools in Aktau, Atyrau, Astana, and Almaty. 
These recent agreements are but two of a number of public-private 
efforts that USAID is promoting to help diversify the Kazakhstani 
economy through improved productivity of small- and medium-sized 
enterprises (SME).  END SUMMARY. 
BACKGROUND 
¶2.  SMEs are important throughout the world as leaders in job 
creation and innovation, and motors for broad-based economic growth 
and development.  In Kazakhstan, SMEs are especially important for 
their potential to diversify the country's largely natural 
resource-based economy.  Unfortunately, global surveys, such as the 
World Economic Forum Global Competitiveness Index and the Global 
Entrepreneurship Monitoring (GEM) Report (which is sponsored by 
USAID in Kazakhstan) reveal that entrepreneurs and SMEs in 
Kazakhstan suffer from relatively weak knowledge and poor skills. 
¶3.  USAID designed the Kazakhstan Small Business Development (KSBD) 
project to establish sustainable business development services (BDS) 
-- which are non-financial services such as training, consulting, 
and information -- for SMEs.  Building a market for BDS means that 
both the supply and demand for BDS are fostered and expanded. 
Markets also need simple but effective regulation -- preferably 
self-regulation -- which promotes quality control, ethics, and 
continuing education. 
¶4.  KSBD facilitated important gains through introducing the best 
training and consulting tools to SME business service providers 
(BSP), and the best international SME development practices to the 
Government of Kazakhstan.  The project designed a set of 
standardized Business Essentials (BE) and Consulting Essentials (CE) 
training courses, which are complemented by a set of practical SME 
management tools and specialized training courses for consultants 
and trainers.  These training and consulting courses and tools have 
been well received, with 150 trainers/consultants and over 2900 
entrepreneurs trained.  KSBD also added the International Labor 
Organization (ILO) designed vocational curricula to complement KAB. 
¶5.  Despite these gains, development of the BDS market will only be 
successful if it is supported by the private sector and government, 
as well as by non-governmental players.  USAID has an important role 
to play in establishing alliances which share costs and risks, and 
which build upon the relative strengths of the three sectors. 
STRATEGIC ALLIANCE WITH DAMU ENTERPRISE DEVELOPMENT FUND 
¶6.  The Damu Enterprise Development Fund is a state-owned 
corporation tasked with implementing programs to improve SME access 
to credit, as well as financing other support for SMEs, such as 
training and consulting services.  Since late 2006, USAID support to 
Damu has included a comprehensive review of the challenges and 
opportunities to applying international best practices to assist 
SMEs.  Study tours, technical assistance, and training programs have 
emphasized the importance of outsourcing SME programs to private 
sector partner financial institutions and BSPs.  This outsourcing 
approach benefits from private sector efficiency and expertise and 
promotes commercial sustainability, while minimizing distortions to 
the emerging market economy.  The following are but some of the 
results of this partnership: 
-- Damu previously lent directly to SMEs, an approach that proved to 
be an inefficient method for the disbursement of credit.  Damu has 
now revised its credit program to work through commercial banks.  As 
a result of this new and more efficient approach, this year the 
Kazakhstani government provided Damu with an additional $1 billion 
for its lending program. 
-- Based partially upon two study tours to the U.S. Small Business 
Administration and other additional technical assistance, Damu 
advocated to its state holding company, Samruk-Kazyna, for the 
development of a network of Enterprise Development Centers (EDCs). 
These EDCs are designed to provide training and consulting services 
to SMEs through outsourcing to the private sector.  The first of 
four pilot EDCs will be established by the end of March in Almaty. 
These EDCs will outsource and carefully subsidize training and 
consulting to entrepreneurs and SMEs across the country and provide 
other services, such as government procurement assistance to 
complement Damu's access to credit programs. 
-- With USAID support, Damu is now in the final stages of completing 
a comprehensive SME Handbook of international best practices for 
promoting SME development.  This Handbook will be used to guide the 
government's strategy and program development at both the national 
and regional levels.  In addition, KSBD is working with the 
government to develop an Annual Entrepreneurship Report to provide 
an annual comprehensive overview of the status of SMEs in the 
country and priorities that will promote continued development. 
-- Responding to a request from Damu, in March, USAID will provide a 
workshop on its Development Credit Authority, a financing authority 
which partially guarantees loans from qualified financial 
institutions.  The workshop and follow-up technical assistance will 
enable Damu to revise its concept of a guarantee product and role 
out the product later this year. 
ALLIANCES WITH THE PRIVATE SECTOR BUILD CAPACITY 
¶7.  The USAID-Baker Hughes alliance will use the KAB course to 
improve employment opportunities for youth through developing 
entrepreneurship skills and knowledge, a key to creating a 
competitive, diversified, flexible, innovative, and growing market 
economy.  The emphasis on entrepreneurial skills will support, in 
particular, the development of a stronger SME sector.  Moreover, the 
introduction of interactive pedagogical methodologies and improved 
capacity for evaluation and monitoring will help start the process 
of modernizing vocational education in Kazakhstan.  The Ministry for 
Education and Science approved of the implementation of KAB in all 
vocational schools in Kazakhstan, which includes a total enrollment 
of over 610,000 students.  The alliance will establish KAB in up to 
10 pilot vocational schools in Atyrau and Aktau, the centers for 
Kazakhstan's oil production.  The program includes training programs 
for teachers, the provision of materials and equipment, and 
assistance in tracking the outcomes of the vocational training 
courses. 
¶8.  USAID has also completed negotiations with Chevron for a 
$250,000 contribution towards introducing a similar program in up to 
10 vocational schools, primarily in Almaty and Astana. 
¶9.  On November 1, 2008, in Aksai, West Kazakhstan Oblast, USAID and 
the Karachaganak Petroleum Operating Joint Venture (KPO), a natural 
gas consortium of four international companies, completed a 
training-of-trainers course entitled "Start Your Business."  The 
target group for the training program was rural entrepreneurs.  KPO 
requested and received a proposal from KSBD to expand this program 
under its Corporate Social Responsibility program.  In addition, one 
of KSBD's partners in the region submitted a proposal to KPO to 
provide KSBD courses and consulting to KPO's suppliers.  KPO has 
also worked with prior USAID projects in the areas of quality 
management and in accounting training programs. 
¶10.  USAID has a long-standing partnership with the ExxonMobil 
Foundation which helped establish the Astana Enterprise Development 
Center.  For the first two years of the Center's operation, USAID 
provided $300,000 and the ExxonMobil Foundation provided $921,000. 
The Center provided about 4,500 entrepreneurs (over 75% of whom were 
women) with training in strategic and business planning, financial 
management, marketing, human resources management, taxes, and law, 
all through outsourcing to local BSPs.  Over 130 SMEs (including 51 
women-owned or women-managed companies) received business consulting 
services.  ExxonMobil recently approached USAID regarding 
establishing a second EDC in Atyrau, while continuing to fund the 
Center in Astana.  Both centers will continue to focus support on 
women in business. 
LOCAL GOVERNMENT AND NGO PARTNERS ALSO INVOLVED 
¶11.  In South Kazakhstan, the city of Shymkent recently established 
a total of seven EDCs (these EDCs are distinct from Damu's planned 
network of EDCs).  These EDCs are to provide SMEs with information 
and consulting services, as well as refer clients to USAID's local 
BSP partner for more advanced training and consulting.  This 
USAID-supported BSP assists the EDCs to identify services in demand. 
 USAID has also financed the Start Your Business entrepreneurship 
training course to the staff of these EDCs. 
¶12.  As part of its program to build BSP capacity, USAID is 
supporting the establishment and development of the Kazakhstan 
Management Consultant Association (KAMC).  The KAMC can play a 
crucial role of identifying competent and credible management 
consultants, which will assist in the development of the consulting 
profession in Kazakhstan.  In addition to promoting the 
international Certified Management Consultant program, KAMC agreed 
to adopt a Certified Associate Member designation based on KSBD's 
BE/CE program, as well as other professional requirements such as 
experience, ethics, continuing professional development, and 
association membership.  USAID is working with the European Bank for 
Reconstruction and Development's Business Advisory Services program 
to assist the institutional development of KAMC. 
 
HOAGLAND