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Kazakhstan: Ethics Still In Question As 'Shadow Capital' Amnesty Ends

This Saturday (13 July) will mark the last day of an amnesty allowing Kazakh citizens with bank accounts abroad to return their money to Kazakhstan with no questions asked about how the money was earned. The so-called "shadow capital" amnesty -- which Kazakh officials hoped would lure much-needed capital back to the impoverished republic -- will be followed by a second dramatic measure. All of the country's tax records from 1995 to 2000 will be destroyed by the beginning of September. RFE/RL correspondent Bruce Pannier speaks with Berlin-based Transparency International about the ethical questions surrounding the Kazakh plan.

Prague, 10 July 2001 (RFE/RL) -- Kazakh citizens holding large foreign-currency accounts abroad have until 14 July to safely return their money to Kazakhstan under a special amnesty designed to bring cash back to the republic's depleted coffers.

The plan, which took effect 14 June, allows Kazakh citizens holding foreign bank accounts to re-deposit their so-called "shadow capital" in a Kazakh bank with no threat of fines, taxes, or inquiries. By 1 September -- when Kazakhstan is scheduled to destroy all tax records from 1995 to 2000 -- there will also be no official records proving how, and how much, money was ever earned.

Kazakh officials predicted the radical two-part program would absolve many top government officials of the financial sins of their past and bring back some $500 million in capital to the country's ailing economy. But when initial returns proved meager, officials extended the amnesty by another 10 days. As of last week, some $190 million had reportedly been returned to Kazakh banks.

Many outside observers have expressed doubts about the program, which is widely seen as a desperate move aimed at saving resource-rich Kazakhstan from financial and political chaos. Miklos Marshall is the executive director for the Berlin-based Transparency International corruption-monitoring group. He told RFE/RL that the amnesty was a sound move, given the circumstances:

"It's a real dilemma. From a moral point of view, every amnesty is a questionable process, but from an economic point of view -- and from the point of view of Kazakhstan's economy and its own interests -- I think it's a reasonable and viable way. What other means can you imagine to at least recover portions of that stolen money? Nothing else is available. So this is a kind of deal. Morally it is not up to the highest standards, but for practical reasons it is a proven way of asset recovery."

The amnesty, which was first announced earlier this year, was unabashedly aimed at Kazakhstan's wealthiest -- and most corrupt --citizens, most of whom had earned their money through dubious deals in the oil-rich country's fuel sector.

Zeinulla Kakimzhanov, the head of Kazakhstan's State Revenues Ministry, admitted on 6 July that he was taking advantage of the amnesty, saying it would be "silly" not to. The tax chief stressed, however, that the money he was returning to Kazakhstan was earned before he joined the government, by "generating multiple schemes to minimize tax payments."

Kakimzhanov is not the only person who stands to benefit from the amnesty. The Western press has reported on James Giffen, a U.S. businessman and a former adviser to Kazakh President Nursultan Nazarbaev. Revelations of Giffen's business dealings led to allegations that Nazarbaev was holding millions of dollars in a Swiss bank account. Both U.S. and Swiss officials are investigating the claims.

In less than two months, however, any financial paper trails will end at the Kazakh border. Government officials last week announced that all tax records for the past six years will be destroyed, hoping the added incentive would convince those foreign-account holders still reluctant to redeposit their money at home.

Marshall of Transparency International said the move was disturbing: "Any attempt to destroy documents and hide documents from the public is against our principles. So, while I can support amnesty as a way to clean up the market and start building up the rule of law in the economy, destroying any documents is against our principles. So I don't think this is the right step and I don't think this is acceptable."

Critics of the controversial two-part plan have stopped short of calling it a form of legalized corruption. But some Kazakh legislators have expressed fears that the controversial program will mean the repatriation of money that was earned through the drug trade or organized crime and was never "clean" to begin with.