VZCZCXRO6777
OO RUEHAG RUEHAST RUEHBI RUEHCI RUEHDA RUEHDBU RUEHDF RUEHFL RUEHIK
RUEHKW RUEHLA RUEHLH RUEHLN RUEHLZ RUEHNEH RUEHNP RUEHPOD RUEHPW
RUEHROV RUEHSK RUEHSL RUEHSR RUEHVK RUEHYG
DE RUEHTA #1266 2080419
ZNR UUUUU ZZH
O 270419Z JUL 09
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 5889
INFO RUCNCIS/CIS COLLECTIVE 1800
RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 1167
RUEHKO/AMEMBASSY TOKYO 1869
RUEHUL/AMEMBASSY SEOUL 0828
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RHEBAAA/DEPT OF ENERGY WASHINGTON DC
RUEAIIA/CIA WASHDC
RHEFAAA/DIA WASHDC
RHEHNSC/NSC WASHDC 1353
RUEKJCS/SECDEF WASHDC 1265
RUEKJCS/JOINT STAFF WASHDC
RHMFIUU/CDR USCENTCOM MACDILL AFB FL
RUEHAST/USOFFICE ALMATY 1735

UNCLAS ASTANA 001266 
 
SIPDIS 
 
STATE FOR SCA/CEN, EUR/ACE, F 
STATE PLEASE PASS TO USAID 
 
E.O. 12958: N/A 
TAGS: PGOV PREL EAID EINV SOCI KZ
SUBJECT:   KAZAKHSTAN TAKES FURTHER STEPS TO PROTECT INVESTORS 
THROUGH NEW LEGISLATION 
 
¶1.  SUMMARY:  On July 14, President Nazarbayev signed legislation 
that will toughen and improve general reporting requirements for 
joint stock companies (JSCs) as well as certain business 
transactions of JSCs.  The new provisions will also require 
disclosure of potential conflicts of interest by managers, officers, 
and members of corporate boards of directors.  These legislative 
changes further incorporate international best practices related to 
corporate responsibility and governance, and should lead to a more 
attractive business environment for investors.  END SUMMARY. 
 
¶2.  On July 14, President Nazarbayev signed legislation, "On 
Payments and Remittances, Accounting Reports, and Financial 
Statements for Financial Institutions and the National Bank," which 
was developed through assistance provided by the USAID Business 
Environment Improvement Project to the Agency for the Regulation and 
Supervision of Financial Markets and Financial Organizations (FSA). 
This legislation amended the law "On Joint Stock Companies" and is 
designed to improve the protection of investors through increasing 
the disclosure requirements for businesses as well as their key 
executives.  Since JSCs were not previously required to make annual 
reports publicly available, it was difficult for shareholders, 
investors, and the public to obtain essential information on the 
health of businesses, or to ensure appropriate ethical behavior of 
corporate officers and adherence of officers to their fiduciary 
duties.  With the new legislation, members of corporate boards of 
directors must disclose annual reports of their companies to their 
shareholders as well as to the public, and include any transactions 
in which members of the board or key officers have a personal 
financial interest. 
 
¶3.  These new reporting requirements will increase transparency and 
should help attract foreign and domestic investment in Kazakhstan by 
providing additional information to potential shareholders.  This 
additional information will allow investors to better assess the 
risks of investment in a company.  The new legislation will also 
permit shareholders to take legal action if a transaction in which a 
member of a board of directors, an officer, or key manager has a 
personal financial interest results in harm to a company.  These 
legal improvements are also an important step toward protecting 
minority shareholders, who previously had few opportunities to 
obtain information about company operations. 
 
¶4.  Previous amendments to the law "On Accounting and Financial 
Reporting" required JSCs to prepare accounts and financial reports 
in accordance with International Financial Reporting Standards, of 
which Standard 24, "Related Party Disclosures," required companies 
to report on transactions in which directors or key managers have a 
personal financial interest.  With the July 14 amendments, these 
annual reports and disclosures will become publicly accessible 
information.  These requirements conform to international best 
practices for corporate governance and bring Kazakhstan's business 
environment into greater harmony with international standards 
investors have come to expect in attractive markets. 
 
¶5.  Moreover, the change in reporting requirements is expected to 
improve Kazakhstan's rating in the World Bank Doing Business 
Report's "Protecting Investors" indicator, by improving the 
underlying "disclosures in published periodic filings" measurement 
from its current rating of zero to as high as 2.  This could 
potentially improve Kazakhstan's overall "Protecting Investors" 
country rank from 53rd to 24th (assuming all other variables in next 
year's report stay the same).  While these reforms were adopted 
after the June 1, 2009, cut-off for the Doing Business 2010 report, 
they will be taken into account in Doing Business 2011. 
 
FAGIN