08ASTANA2321, KAZAKHSTAN PURSUES ECONOMIC DIVERSIFICATION IN

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Reference ID Created Released Classification Origin
08ASTANA2321 2008-11-24 11:36 2011-08-30 01:44 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Astana

VZCZCXRO7914
RR RUEHAG RUEHAST RUEHBI RUEHCI RUEHDA RUEHDF RUEHFL RUEHIK RUEHKW
RUEHLA RUEHLH RUEHLN RUEHLZ RUEHNEH RUEHNP RUEHPOD RUEHPW RUEHROV
RUEHSR RUEHVK RUEHYG
DE RUEHTA #2321/01 3291136
ZNR UUUUU ZZH
R 241136Z NOV 08
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC 3931
INFO RUCNCIS/CIS COLLECTIVE 0848
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUCNCLS/SOUTH AND CENTRAL ASIA COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 0247
RUEHKO/AMEMBASSY TOKYO 0957
RHMFIUU/CDR USCENTCOM MACDILL AFB FL
RUEKJCS/JOINT STAFF WASHDC
RUEKJCS/SECDEF WASHDC 0330
RHEHNSC/NSC WASHDC 0415
RHEFAAA/DIA WASHDC
RUEAIIA/CIA WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RHEBAAA/DEPT OF ENERGY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS SECTION 01 OF 02 ASTANA 002321 
 
SENSITIVE 
SIPDIS 
 
STATE FOR SCA/CEN AND EEB 
 
E.O. 12958: N/A 
TAGS: PGOV PREL ECON EINV KZ
SUBJECT: KAZAKHSTAN PURSUES ECONOMIC DIVERSIFICATION IN 
MANGYSTAU 
 
1.  (U) Sensitive but unclassified.  Not for public Internet. 
 
2.  (SBU) SUMMARY:  On November 6, DCM and poloff met with a 
newly created national corporation to discuss business 
promotion and public-private partnerships in Kazakhstan,s 
Mangystau oblast.  The Chairman of the Mangystau and Atyrau 
branch, SEC Caspiy, described current projects and 
opportunities for U.S. investment.  Regional officials 
acknowledged that problems with poaching and over-fishing 
contributed to a decline in Caspian Sea sturgeon, and asked 
for U.S. investments in fisheries and oil services.  END 
SUMMARY. 
 
A LOCOMOTIVE FOR BUSINESS? 
 
2.  (SBU) Last year, under direct guidance from President 
Nazarbayev, the government of Kazakhstan created a national 
company with seven branch companies distributed throughout 
Kazakhstan,s 14 oblasts and two administrative districts. 
This &social entrepreneurial corporation (SEC)8 was tasked 
to promote business by setting up joint ventures and 
reinvesting 50 percent of the profits for social purposes. 
SEC Caspiy, which promotes business in Atyrau and Mangystau, 
is chaired by the highly influential former Akim (governor) 
of Mangystau, Bolat Palymbetov. 
 
3.  (SBU) Palymbetov outlined the 10 projects SEC Caspiy is 
currently implementing.  The company,s offices, located one 
block from the Nur Otan and Mangystau Akimat buildings, were 
ultra-modern and the staff efficient.  According to 
Palymbetov, SEC Caspiy should become a &locomotive for 
business,8 creating public-private partnerships and saving 
entrepreneurs the time and hassle of navigating local 
bureaucracy to acquire land and permits.  Palymbetov pointed 
out that none of the seven SEC branches fall under the 
authority of any one regional governor to assure their 
independence from pressure by local governments. 
 
SUPPORTING ALL BUSINESSES GREAT AND SMALL 
 
4.  (SBU) Palymbetov acknowledged that the SEC branch 
companies tend to reflect the economic characteristics of 
their regions, but stressed SEC Caspiy supports Prime 
Minister Masimov,s policy of economic diversification. 
Palymbetov told DCM and poloff that current projects in 
Atyrau include a $60 million German gypsum mining project, a 
national sulfur storage facility, a sturgeon farm, a salt 
plant, and a cement plant.  In Mangystau, Palymbetov 
described projects including the establishment of a technical 
support base for a dredging fleet, a flour-milling plant, a 
factory for biological products, and an institute of 
oil-field chemistry. 
 
FORMER AKIM OFFERS TAX BREAKS FOR U.S. INVESTORS 
 
5.  (SBU) Palymbetov emphasized SEC Caspiy could offer 
tax-exemptions and other advantages to &get a company on its 
feet quickly.8  Palymbetov requested U.S. assistance in 
encouraging submission of any proposals, highlighting 
opportunities for investment in oil services, construction, 
and sturgeon farming. 
 
WHERE HAVE ALL THE STURGEON GONE? 
 
6. (SBU) Mangystau,s most famous local product is sturgeon 
and black caviar.  However, interlocutors from Caspiy 
Meruerty and MAEC-Kazatomprom described problems with 
overfishing, and statistics show a 40% decline in the 
sturgeon population in the Caspian Sea over the last 15 
years.  More than 300 cases of poaching occurred in 2007, and 
over 10 tons of illegally caught sturgeon were confiscated. 
National quotas have been imposed on sturgeon fishing and 
black caviar exports.  A local Kazakhstani official told 
poloff that the state had instituted a system of regulating 
 
ASTANA 00002321  002 OF 002 
 
 
stores selling &government-approved8 sturgeon.  Visitors to 
Aktau who attempt to bring back packages of sturgeon or 
caviar without proof of purchase from government-approved 
stores risk confiscation of the product at the airport,s 
internal customs check-points. 
 
7.  (SBU) Poloff did not see any evidence of advertisements 
for recreational sturgeon fishing in Aktau, and most local 
shops and restaurants were not advertising sturgeon, although 
the Marriott Renaissance hotel was serving sturgeon kebabs 
for $20.  As Palymbetov stated, the price of Caspian Sea 
sturgeon caviar remains high; in Astana, 116 grams sells for 
$167.  If a sturgeon farming enterprise were successful, it 
could be highly profitable.  In the meantime, poaching and 
overfishing of wild sturgeon in the Caspian are taking
their 
toll on fish stocks.  One beluga sturgeon in a Caspian Sea 
museum weighed 1.8 tons, but today most sturgeon weigh only 
150 kilograms. 
 
SEC TO ADMINISTER TAX-FREE ZONES 
 
8.  (SBU) Palymbetov also told the DCM and poloff that he 
convinced President Nazarbayev to create a special economic 
zone (SEZ) for Aktau port.  Palymbetov noted that subsequent 
expansions of the SEZ proved the idea had merit, but 
criticized the slow pace of SEZ development under the current 
Akimat.  (COMMENT:  The SEZ already hosts seven enterprises, 
with four more under consideration, but Palymbetov pointed 
out that in one year, he had set up 10 enterprises.  END 
COMMENT.)  He stated that a pending amendment would charge 
the seven SEC companies to administer all tax-free zones. 
 
PALYMBETOV HAS CLOSE TIES TO THE UNITED STATES 
 
9.  (SBU) COMMENT:  The influential Palymbetov, Mangystau 
Akim from 2002-2006, emphasized his close relations with the 
United States, mentioning that in 1994 he had visited the 
United States on a very productive USAID sponsored-trip.  He 
also thanked former Ambassador Ordway for his last visit, and 
noted they had a very long and productive discussion. 
Palymbetov also stated he had spent the last year studying at 
Boulder University in Denver, and that his son, a graduate of 
Holden University, will pursue a Master,s degree at 
Columbia.  Based on his comments about &persuading8 
Nazarbayev to accept free-trade zones and his critiques of 
the current Akim, Palymbetov clearly sees himself as 
influential, and intends to remain a powerful figure in 
Mangystau business and politics, but also appears to have a 
very positive attitude towards the United States.  END 
COMMENT. 
HOAGLAND

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