VZCZCXRO4282
OO RUEHIK
DE RUEHTA #1891/01 2930518
ZNR UUUUU ZZH
O 200518Z OCT 09
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 6658
INFO RUCNCIS/CIS COLLECTIVE 2048
RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUCNIRA/IRAN COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 1419
RUEHKO/AMEMBASSY TOKYO 2119
RUEHUL/AMEMBASSY SEOUL 1062
RHMFISS/DEPT OF ENERGY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEAIIA/CIA WASHDC
RUEKJCS/DIA WASH DC
RHEHNSC/NSC WASHDC 1608
RUEKJCS/SECDEF WASHINGTON DC
RUEKJCS/JOINT STAFF WASHINGTON DC
RHMFIUU/CDR USCENTCOM MACDILL AFB FL
RUEHAST/USOFFICE ALMATY 1947

UNCLAS SECTION 01 OF 03 ASTANA 001891 
 
SENSITIVE 
SIPDIS 
 
STATE FOR SCA/CEN, EEB/ESC 
STATE PLEASE PASS TO USAID 
 
E.O. 12958: N/A 
TAGS: PGOV PREL ECON ENRG EAGR ECIN EINV KZ
SUBJECT:  KAZAKHSTAN:  WORLD BANK OFFICIAL DISCUSSES REGIONAL 
ECONOMIC STABILITY 
 
REF:  ASTANA 1365 
 
ASTANA 00001891  001.3 OF 003 
 
 
¶1.  (U) Sensitive but unclassified.  Not for public Internet. 
 
¶2.  (SBU) SUMMARY:  On October 7, the DCM met Motoo Konishi, the 
World Bank's Regional Representative for Central Asia, who described 
his surprisingly positive views on each Central Asian country's 
economic situation, the potential impact of global climate change, 
and the prospects for a regional energy market.  END SUMMARY. 
 
TAJIKISTAN'S STABILITY IS MAIN CONCERN 
 
¶3.  (SBU) Konishi said his main concern in the region is 
Tajikistan's economic and political stability.  He said 45% of 
Tajikistan's GDP comes from remittances abroad, including oil 
workers in Russia, many of whom have returned home as Russia's 
economy has gone into recession.  He told the DCM that Tajikistan is 
dependent on international donor assistance, and the $116 million 
loan from the International Monetary Fund (IMF) ensured the 
country's survival last winter.  Konishi questioned the government's 
decision to spend $100 million on the Rogun hydroelectric power 
plant and suggested the money would be better spent heating schools 
and diversifying the economy.  Konishi said the Chinese have made 
significant investments, especially in infrastructure projects such 
as road construction in eastern Tajikistan.  To improve stability, 
Konishi said Tajikistan would have to increase food security, ensure 
reliable energy supplies, and strengthen border controls.  Regarding 
the latter, Konishi said he was concerned that the conflict in 
Afghanistan would drive Taliban forces northward, towards 
Tajikistan.  "If Tajikistan goes extreme," he said, "there's nothing 
left for them.  Kyrgyzstan will cut off the border, and suddenly, 
we've got a big problem on our hands." 
 
KAZAKHSTAN REQUESTS WORLD BANK LOAN 
 
¶4.  (SBU) Konishi praised the government of Kazakhstan for its 
"smart, savvy" management of the financial and economic crisis. 
"The government," he said, "has been able to shift gears on the run, 
and learn and adapt very quickly."  Konishi said that Kazakhstan 
must still diversify its economy away from a reliance on the 
extractive industries, but he complimented the government's fiscal 
discipline and cooperation with international financial institutions 
(IFI).  Konishi said Prime Minister Masimov is concerned that the 
price of oil will fall in the near future, and the economy will 
experience a "W"-shaped recovery, with the second dip yet to come. 
According to Konishi, the government and World Bank are negotiating 
the terms of the government's recently requested $1-2 billion loan. 
When asked why the government did not draw upon its $25 billion 
National Oil Fund, Konishi suggested that a World Bank loan would be 
politically more palatable.  "Once you begin to erode the Oil Fund," 
he said, "you create a crisis of confidence." 
 
MASIMOV'S STRATEGIC PLAN 
 
¶5.  (SBU) Konishi said Masimov convenes regular brainstorming 
sessions with deputy prime ministers and World Bank vice presidents. 
 He said the debate during these half-day sessions is "lively and 
very sophisticated."  According to Konishi, Masimov typically 
watches, listens, and learns from the debates, and "then he 
implements."  Masimov, according to Konishi, asked the next World 
Bank brainstorming session to discuss Kazakhstan's "territorial 
development" and "economic geography," in order to ensure even, 
sustainable growth throughout the country.  Konishi said the 
majority of jobs and wealth are concentrated in Astana, Almaty, and 
Atyrau, while southern cities such as Shymkent are of particular 
interest for further development.  (NOTE:  Masimov also raised this 
issue with CODEL Boehner on August 8, reftel.  END NOTE). 
 
THE MALAYSIAN MODEL 
 
 
ASTANA 00001891  002.3 OF 003 
 
 
¶6.  (SBU) Commenting on the government's negotiations to restructure 
BTA Bank debt, Konishi said, "I think they've done well to protect 
their interests, and are unlikely to bend" to accommodate export 
credit agencies and other creditors.  Konishi also suggested that 
Kazakhstan is moving toward a "Malaysian model," which involves 
"picking winners and backing national champions." 
 
UZBEKISTAN'S ECONOMIC STABILITY 
 
¶7.  (SBU) Konishi said that Uzbekistan has the most stable economy 
in the region, "much more stable than Kazakhstan, because the 
economy is so closed."  He said that none of the country's banks 
suffered during the global financial crisis, because they were not 
tied to the international financial system.  In public, Uzbek 
officials have boasted about the country's isolation from the 
international economic crisis.  In private conversations with the 
bank, however, Konishi said that Uzbek officials have sought the 
bank's advice, concerned that Uzbekistan must diversify its economy 
to reduce its dependence on commodities such as cotton, gold, and 
gas.  He added that the food processing industry has potential, as 
long as the agricultural sector remains stable. 
 
HYDROPOWER POLITICS 
 
¶8.  (SBU) According to Konishi, Uzbekistan's President Islam Karimov 
recently sent a letter to World Bank President Robert Zoellick, 
offering to participate in an international consortium to build a 
hydropower plant, if the World Bank could guarantee the security and 
quality of water supply and the seismic stability of the plant. 
Konishi considered this project feasible, given Russian, Chinese, 
Iranian, and even Pakistani interest in Central Asia's downstream 
energy supplies. 
 
TURKMENISTAN MAY BE OPENING UP 
 
¶9.  (SBU) Konishi said Turkmenistan is similar to Uzbekistan, in 
that both have stable but closed economies and must diversify away 
from a dependence on commodities.  According to Konishi, 
Turkmenistan's President Gurbanguly Berdimuhamedov is interested in 
engaging with the outside world, and has made some progress in doing 
business with international companies.  However, he remains somewhat 
leery of large, private companies from big countries. 
 
THE IMPACT OF CLIMATE CHANGE 
 
¶10.  (SBU) Konishi, who worked from 1997-2009 as the World Bank's 
Sector Manager for Water Supply and Sanitation, said that global 
climate change will eventually have a mixed, but decisive, impact on 
Central Asia, particularly affecting water resources.  He speculated 
that northern areas in Central Asia will ultimately become warmer 
and wetter, improving their chances for agricultural growth. 
However, southern areas, which now rely on agriculture, could become 
too hot and dry for some crops. 
 
A REGIONAL ENERGY MARKET 
 
¶11.  (SBU) Konishi sees huge potential for a common Central Asian 
energy market.  He noted that the region contains abundant supplies 
of oil, gas, and coal in addition to untapped energy from hydro, 
geothermal, solar, and wind power.  He mused that a Central Asian 
common energy market would offer the world's cheapest energy prices 
and would include one of the most diverse baskets of energy 
products.  However, he emphasized a lack of technology and tense 
relations among the Central Asian countries as two major factors 
that affect the development of a regional energy market.  Regarding 
technology, Konishi noted China's experimentation with solar and 
wind power, which it could potentially develop in Central Asia.  As 
for relations among the Central Asian countries, Konishi admitted 
that an expansive, common energy market in Central Asia is "all pie 
in the sky if they won't trust each other." 
 
ASTANA 00001891  003.3 OF 003 
 
 
 
¶12.  (SBU) COMMENT:  Konishi brings over 15 years of regional 
experience to his unique perspectives on the region.  His tour 
d'horizon shows that the economic success of each country will 
depend on the talents and decisions of individual decision-makers. 
But regional cooperation can produce tremendous gains, especially in 
the development of new forms of energy, if Central Asian states can 
slowly build trust through reliance on neutral actors, such as the 
World Bank.  END COMMENT. 
 
¶13.  (U) Embassies Ashgabat, Bishkek, Dushanbe, and Tashkent have 
cleared this cable. 
 
HOAGLAND