US embassy cable - 05ALMATY1029

UNCLAS  ALMATY 001029 
 
SIPDIS 
 
 
DEPARTMENT FOR EUR/CACEN (J.MUDGE); EUR/ACE (M'ONEAL) 
DEPARTMENT PLS PASS TO USAID/E&E T.ALEXANDER 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: EAID, PREL, KZ, ECONOMIC 
SUBJECT:  Status Update on U.S.-Kazakhstan Cost Sharing 
Program 
 
1.  (SBU) Summary:  An official in Kazakhstan's Ministry of 
Economy and Budget Planning (MEBP), Maulen Utegulov, 
confirmed in a meeting with USAID the Government of 
Kazakhstan's commitment to finalizing a cost-sharing 
agreement with a budget allocation in 2006.  While signing 
of the agreement must await ratification of the U.S.- 
Kazakhstan bilateral agreement, the official stated that, if 
necessary, the budget allocation in 2006 can be done based 
on a draft agreement with supplementary budget 
justification.  USAID is collaborating with line ministries 
to ensure all relevant program justifications are provided 
to MEBP in time to be included in the 2006 budget.  End 
Summary. 
 
2.  (SBU) On March 14, the Director and two other members of 
USAID/CAR's Enterprise and Finance Office met with Maulen 
Utegulov, Director of State Borrowing and Lending Planning 
Department within the Ministry of Economy and Budget 
Planning (MEBP) of the Republic of Kazakhstan and the key 
counterpart responsible for realization of the Program for 
Economic Development (PED).  The PED refers to the set of 
programs aimed at helping Kazakhstan diversify its economy 
and broaden the benefits of economic growth through 
strengthening the competitiveness of small and medium 
enterprises and the environment in which they operate.  It 
encompasses activities under the so-called Houston 
Initiative, but entails cost-sharing on the part of the 
Government of Kazakhstan.  The purpose of the March 14 
meeting was to discuss the status of the agreement and next 
steps for moving it 
 
3.  (SBU) Utegulov described the process MEBP had taken to 
acquire input from Ministries on the PED.  They had 
solicited and reviewed budget and program justifications 
from all the Ministries.  Of the 13 received, only four were 
accepted as having relevance to the PED.  However, upon 
review of the rejection list, USAID noted that at least one 
was of relevance.  In addition, many program justifications 
that we would like to have funded were not included on the 
list.  Utegulov agreed to give USAID two more weeks to work 
with Ministries on the submission of their justifications so 
they could be included in the program.  He also agreed to 
fund existing programs (current contracts) rather than only 
new contracts as had been the GOK's position previously. 
 
4. (SBU) USAID EF director sought and received clarification 
on the relationship of the PED agreement (which is 
effectively a Memorandum of Understanding) to the budget 
allocation.  The PED agreement refers to the U.S.-Kazakhstan 
bilateral agreement for treatment of taxation, but the GOK 
does not agree to this language because the bilateral has 
not been ratified by Parliament.  The process is underway 
for ratification of the bilateral, but Post does not want 
this process to disrupt the PED budget allocation.  Utegulov 
said that ideally the bilateral would be ratified prior to 
submission of the 2006 budget to Parliament in September, 
but in the event that it was not, the budget could still go 
forward with inclusion of the PED budget.  A draft PED 
agreement could be attached to the budget along with 
corresponding justification.  Thus, any slowdown in the 
ratification process should not affect our obtaining a 2006 
budget allocation. 
 
5.  (SBU) It was agreed that the PED agreement would serve 
as a framework for the collaborative program.  Every year, 
the specific program elements would be agreed upon in a 
process similar to that currently underway wherein USAID 
works with the line ministries to obtain agreement and 
formulate program elements that are then submitted to MEPB 
for final review and acceptance.  USAID also agreed to 
review the proposed new programs that were not specifically 
envisioned, but which may fit within the context of PED and 
thus be worthy of funding and inclusion in new program 
designs. 
 
6.  (SBU) USAID EF director asked Utegulov whether it would 
be possible to include an allocation in the 2005 budget 
rectification.  He responded that it would depend on how 
closely activities aligned with the priorities outlined in 
the President's State of Union speech.  EF director noted 
that considerable attention was paid in the President's 
speech to SMEs and that strengthening SMEs was the essence 
of the PED.  Utegulov did not rule out the possibility of 
2005 funding. 
 
 
7.  (U) Minimize for Dushanbe considered. 
 
Ordway 
 
 
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