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UNCLAS SECTION 01 OF 03 ASTANA 000253 
 
SIPDIS 
 
STATE FOR SCA/CEN, SCA/PPD, OES, OES/S 
 
E.O. 12958: N/A 
TAGS: ECON PGOV SENV SOCI TSPL KPAO KZ
SUBJECT:  KAZAKHSTAN SEEKS TO BE COMPETITIVE IN SCIENCE AND 
TECHNOLOGY 
 
ASTANA 00000253  001.3 OF 003 
 
 
¶1.  SUMMARY:  During the annual Public Roundtable on Collaboration 
in Science and Technology, participants heard that the development 
of science is one of Kazakhstan's most important priorities, and the 
government plans to increase the government budget allocated to 
scientific research and development (R&D) by 30% over the current 
level.  Kazakhstan recognizes that it must have good scientific 
cooperation with other countries, such as the United States, Europe, 
and Japan, if it is to become an international leader in science and 
R&D.  The recently established Kazakhstan National Medical Holding 
company claims it can serve as a model for health service delivery 
and successful restructuring of the health care systems inherited 
from the former Soviet Union.  The New University of Astana will 
establish three new science research centers and constitute an 
entirely new educational system in Kazakhstan and Central Asia, 
based on the U.S. model, to prepare students for Kazakhstan's social 
and economic challenges.  Properly applied tax incentives can 
significantly affect R&D, but tax incentives alone will not be 
sufficient to promote R&D; a country must also have a well-developed 
scientific infrastructure and a good education system.  END 
SUMMARY. 
 
SCIENCE IS A PRIORITY FOR KAZAKHSTAN 
 
¶2.  The U.S.-Kazakhstan Public-Private Economic Partnership 
Initiative (PPEPI) hosted the annual Public Roundtable on 
Collaboration in Science and Technology in Astana on February 16, 
one of five roundtable events conducted to date under the PPEPI 
umbrella.  With USAID funding and American Chamber of Commerce 
administration, PPEPI's goal is to improve the business environment 
for foreign and domestic investment and trade through broad-scale 
economic policy reform.  PPEPI promotes policy reform in five 
priority areas, one of which is science and technology. 
 
¶3.  Deputy Minister of Education and Science Aidar Zhakupov opened 
the roundtable, calling the development of science one of 
Kazakhstan's most important priorities.  He said the government will 
raise the level of science education and investment so that 
scientific research can contribute to Kazakhstan's overall economic 
development.  The government plans to increase funding for 
scientific research and development (R&D) by 30% over the current 
level, to 18.5 billion tenge (approximately $123 million), or about 
1% of GDP.  (NOTE:  Kazakhstan's GDP based on purchasing power 
parity for 2008 was approximately $178 billion.  END NOTE.) 
 
¶4.  Zhakupov said Kazakhstan was committed to increasing R&D funding 
to international levels, ranging from 2-4% of GDP.  In addition, 
Kazakhstan intends to increase grant funding (including for the 
Bolashak Grant program) to further promote science education in 
Kazakhstan.  He said the government must make the current system of 
funding science more efficient and eliminate wasteful competition 
among science funds.  The government should also facilitate the 
commercialization of scientific research, according to Zhakupov, so 
that ideas can move from the laboratory directly to commercial 
production.   Zhakupov said this will require a sound legal 
framework, including the protection of intellectual property rights 
(e.g., patents, trademarks, formulas, etc.). 
 
SCIENCE POLICY IN THE UNITED STATES AND KAZAKHSTAN 
 
¶5.  U.S. Civilian Research and Development Foundation (CRDF) 
Director Kanat Shakenov said Kazakhstan recognizes that it must have 
strong scientific cooperation with other countries, such as the 
United States, Europe, and Japan, if it is to become an 
international leader in science and R&D.  In order to advance 
science, he said, it is "not only desirable, but necessary to seek 
funding, which includes international funding."  He said Kazakhstani 
scientists should publish their work in international journals in 
English and conduct scientific research in accordance with 
international standards so that science and R&D in Kazakhstan can 
reach an international level.  In addition, he said that Kazakhstan 
needs to develop a more effective distribution of scientific 
knowledge to scientific and business centers.  In particular, he 
suggested that the government provide assistance to scientific and 
 
ASTANA 00000253  002.3 OF 003 
 
 
business entities in order to stimulate the development and 
commercialization of science. 
 
NATIONAL MEDICAL HOLDING:  A MODEL FOR HEALTH SERVICE DELIVERY 
 
¶6.  Kazakhstan National Medical Holding (NMH) CEO Almaz Sharman said 
the Kazakhstan government established NMH in June 2008 to 
revolutionize the national health care system and make it a model in 
Central Asia for restructuring health care systems inherited from 
the former Soviet Union.  According to Sharman, NMH will introduce 
international standards of quality, safety, and financial 
sustainability that are absent in the current system.  He said NMH 
will introduce a market-driven health model that will provide a 
level of care such that Kazakhstanis will no longer have to go 
abroad for treatment.  NMH manages six health care centers, 
including the National Research Center for Maternal and Child Health 
in Kazakhstan.  Sharman said that internationally renowned experts 
will manage all six centers by 2015. 
 
¶7.  Sharman said a number of socio-economic factors affect health 
care in Kazakhstan, including the gradual ageing of the population, 
an increase in the cases of infectious diseases, and unequal access 
to medical services.  In addition, as medical costs increase, there 
is pressure to reduce the length of treatment while maintaining the 
same level of quality.  One concern of medical research, he said, is 
how to harmonize scientific research with actual practice that can 
lead to commercialization.  Sharman said that medical researchers 
should follow international standards to ensure that the resulting 
products are competitive. 
 
THE NEW UNIVERSITY OF ASTANA 
 
¶8.  New University of Astana President Aslan Sarinjipov said the New 
University of Astana expects to open July 1.  (NOTE:  The New 
University likely will be renamed Nursultan Nazarbayev University in 
July.  END NOTE.)  He said the New University's nine international 
university partners (including Duke University, Johns Hopkins, 
Harvard, etc.) will help design and implement a curriculum that will 
emphasize the scientific, technological, and economic development. 
According to Sarinjipov, the university will have medical, science, 
life science, business, and public policy schools, and will also 
host three science research centers:  a life sciences center, which 
will conduct research jointly with the leading world scientific 
centers in the sphere of organ transplantation, artificial heart and 
lungs, stem cells, and the medicine of longevity; an energy research 
center dealing with issues of renewable energy sources, physics, and 
high energy technologies; and an interdisciplinary engineering 
center that will include laboratory facilities and a design bureau. 
 
¶9.  Sarinjipov said the New University will not be just another new 
university, but it will constitute an entirely new educational 
system in Kazakhstan and Central Asia.  The first year will be 
devoted to intensive English training, and subsequent courses will 
be in English, providing the students with an education that meets 
international standards.  He said that 90% of the faculty will be 
foreign until the university can generate its own trained faculty, 
but even after that, Sarinjipov believes the university will still 
retain a high percentage of foreign professors.  The university will 
be based on the U.S. model, with a four-year bachelor's degree, a 
master's degree, and a Ph.D.  He said the curriculum will prepare 
students to meet Kazakhstan's social and economic challenges.  After 
5-10 years, he said he hopes the New University will qualify for the 
international ranking system.  Sarinjipov said the anticipated cost 
of this education will be equal to the cost of going abroad to study 
at a world class university.  (NOTE:  Local press reported that the 
New University will be the most expensive university in Kazakhstan 
and as expensive as elite universities in Russia, the United States, 
and the United Kingdom.  The annual tuition fee will be $19,000, 
which is twice as much as the Moscow Institute of International 
Relations.  END NOTE.) 
 
IMPACT OF TAX INCENTIVES ON SCIENTIFIC R&D 
 
 
ASTANA 00000253  003.3 OF 003 
 
 
¶10.  PriceWaterhouseCoopers Tax Services Director Richard Bergonje 
said governments have used direct funding as well as grants and 
subsidies in order to promote and stimulate R&D.  Tax incentives are 
also a key tool that allow direct or incremental deduction of R&D 
expenses, permit depreciation allowances on laboratories and 
equipment, and grant tax holidays.  According to the OSCE, R&D tax 
incentives are extremely popular, with 21 of the 31 member countries 
using them in 2008, up from only 12 in 1998.  Bergonje noted that 
emerging countries such as Brazil, India, Russia, and China are also 
using tax incentives to stimulate R&D. 
 
¶11.  Bergonje referred to the Alatau-IT City (Information Technology 
City) in Almaty, a Special Economic Zone (SEZ) with tax and customs 
incentives for information and telecommunication companies working 
in the park, as an example of the possible use of tax incentives to 
support R&D in Kazakhstan.  Companies registered in the SEZ do not 
have to pay corporate income tax, property tax, or customs duties. 
The government also allows companies in the SEZ to depreciate the 
cost of buildings and equipment.  Bergonje said studies demonstrate 
that properly applied tax incentives can significantly increase R&D 
investment.  However, while Kazakhstan has good tax incentive 
programs, he said the existing tax code can be improved. 
 
¶12.  COMMENT:  The PPEPI Science and Technology Working Group finds 
that its work dovetails closely with Kazakhstan's national priority 
to improve science research and education in order to stimulate 
further economic development.  Kazakhstan has ambitious goals and 
one might doubt the extent to which it will achieve them. 
Nevertheless, the will is there and the government is committed to 
achieving these goals, since the mandate for change is coming from 
President Nazarbayev himself.  END COMMENT. 
 
HOAGLAND