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Central Asia Report: December 20, 2001

20 December 2001, Volume 1, Number 22

NAZARBAEV PROMISES INVESTORS NO REVISION OF CONTRACTS... On 15 December a session of the Foreign Investors' Council was held in the Kazakh capital Astana, chaired jointly by Kazakh President Nursultan Nazarbaev and President of the European Bank for Reconstruction and Development (EBRD) Jean Lemierre, Reuters and Interfax-Kazakhstan reported. As Nazarbaev explained to a press conference after the meeting, he was working hard to reassure foreign businesses about a government-sponsored bill, presently under scrutiny in parliamentary committee, which aims to level the playing field between foreign and domestic investors by establishing equal business conditions for both groups.

Back in the early 1990s, in order to attract international investments particularly in the oil sector, Kazakhstan frequently offered companies contracts with ad hoc concessions and incentives tailored to their specific needs. Thus a revamped investment law that seeks to standardize business conditions in Kazakhstan has raised the specter (at least for foreign companies) of their beneficial deals being renegotiated or revised retroactively. It was those fears that Nazarbaev was addressing at the FIC meeting when he promised, "We have no intention of revising the contracts signed" and that they would be respected "strictly," Reuters said.

...BUT NOT ADVERSE TO VOLUNTARY DONATIONS. However, Nazarbaev continued: "The talk now is not about the revision of old contracts but about the balance of interests of the state and business. Let's sit down at the negotiating table and agree on how to respect this balance." A new balance was required since, as the president explained, new opportunities for profit (unforeseen when the contracts were signed) had arisen that turned the scales too much in foreign businesses' favor: oil prices had skyrocketed to $30 per barrel in 2000, for example, while the Kazakh government had recently reduced VAT from 20 percent to 16 percent. Therefore, in light of their "higher-than-expected profits," Nazarbaev said it was only fair that foreign investors should increase their payments of royalties and taxes to Astana. In fact, he said, 33 out of 47 companies approached with this request had already conceded its logic and voluntarily signed said accords with the government to increase payments. It had already been announced at the FIC meeting that an agreement had been reached about funneling some of those monies from the Eurasian Bank group to the Kazakh Ministry of State Revenues, Interfax-Kazakhstan said.

Nazarbaev announced that foreign direct investment in the country since 1993 had reached $14.7 billion, Reuters reported on 15 December. He further opined that Kazakhstan's calm political climate, and the stability of its laws, were as much of a draw for foreign businesses as its rich natural resources.

In Astana, EBRD chief Lemierre lauded Kazakhstan for having achieved "outstanding results" in large part thanks to Nazarbaev's leadership, called its economic performance "among the best in the CIS, if not the best," and characterized Kazakhstan as having created the most favorable investment climate and best banking sector in the ex-USSR, according to Reuters and ITAR-TASS (see "RFE/RL Newsline," 17 December 2001). Lemierre further identified Kazakh large and medium-sized enterprises, telecommunications, and infrastructure as areas targeted by the EBRD for future assistance. Gushing a little, he even pledged that his bank would remain "loyal" to Kazakhstan and to Nazarbaev personally, Interfax-Kazakhstan reported on 15 December.

On the previous day Lemierre told Reuters that the EBRD had invested 300 million euros ($269.5 million) in Central Asia this year -- equivalent to 8 percent of the bank's financial activity for 2001 -- and had invested some 1.6 billion euros in the region altogether since 1991.

KAZAKHSTAN CELEBRATES FIRST DECADE OF INDEPENDENCE, 'DIFFICULT BUT HAPPY YEARS.' Fireworks exploded over Astana and Kazakhstan's former capital Almaty on 16 December as the nation celebrated the 10th anniversary of its independence, the newspaper "Kazakhstanskaya pravda" reported. Earlier that day President Nazarbaev delivered a 50-minute speech, mainly in Russian with some Kazakh, that was broadcast on Khabar TV. He reviewed the past decade's achievements, touched on problems in the social sector and the rural economy, and summarized some points of his government's long-term development strategy. Calling the address "his most crucial" since his televised independence announcement 10 years ago, the president told his compatriots, "We had never lived, and will never live again, through such difficult but happy years."

He put the blame for the difficulty of those years squarely on the Soviet Union, from which Kazakhstan inherited a moribund economy and dilapidated transport and energy infrastructure, with the result that "we were forced to start everything practically from scratch."

Among the country's key achievements since then, Nazarbaev mentioned border delimitation agreements with four of its five neighbors (he omitted Russia), which he said had laid the basis for confidence and security in the region. He said the constitutional ban on censorship and right to free speech had created an open society, as proven by the "thousands of foreign correspondents" who had worked unhindered in Kazakhstan. He conspicuously failed to mention domestic journalists.

Positive about the economy, Nazarbaev said that Kazakh GDP had increased 26 percent during the last 5 years and was comparable to growth in Hungary or Poland. The president also highlighted Kazakhstan's contribution to global peace by voluntarily surrendering the nuclear weapons it had inherited from the USSR, and he claimed that in compensation the country had received "joint and comprehensive security guarantees" from "all the major, acknowledged nuclear powers." He did not explain what guarantees, or what powers, he had in mind.

(Meanwhile, Interfax reported that the president on 14 December signed the law ratifying the Comprehensive Nuclear Test Ban Treaty, passed by the Kazakh parliament earlier this year. The Semipalatinsk facility in northeastern Kazakhstan was the world's largest nuclear test site, where almost 500 tests were conducted until Nazarbaev, in one of his first decrees following independence, shut it down in 1991.)

Nazarbaev did acknowledge shortcomings in agriculture and technological development. But he said that the "Kazakh economic model" was predicated on bringing in the latest technologies, to spur both industrial growth and investments in the nation's priority sectors -- which he identified as hydrocarbons, ore-mining, and agriculture, while saying that the development of the food, metal-rolling, and petrochemical industries was necessary to diversify the economy. He implied that much of this development could be funded by oil revenues and he pledged not to squander the nation's hydrocarbon resources, but "to use them to improve education, construct new factories, and bring along new technologies."

Nazarbaev had introduced another strategic development plan for the next decade on 13 December, which envisaged doubling the GDP -- projected for next year at $23.3 billion, stimulating the agricultural sector, and increasing social benefits, all at the same time as keeping down inflation (see "RFE/RL Newsline," 14 December 2001).

But in his 16 December speech, the president said the focus of the next decade must be "eradicating poverty and ensuring the predominance of a middle class in our country." A middle class is one of the pillars of a democracy, he said, and thus its emergence was fundamental to his regime's democratization policies, in tandem with a functional civil society and the rule of law. He obliquely admitted serious problems in the latter two departments, however, with allusions to rampant corruption. He promised sternly to "draw up a new code of ethics for state servants." And he said the judiciary should remember it served the people, not vice versa, while promising unspecified "enforcement measures" if people in power "confuse the government's pockets with their own."

Nazarbaev referred to only two foreign policy priorities for the future. First, more active measures should be taken to integrate Russia economically into the Central Asian region as "our primary economic partner." To this end, he recommended harmonizing the political and legal regimes of the five members of the Eurasian Economic Community (Kazakhstan, Kyrgyzstan, Tajikistan, Belarus, and Russia.) Second, he referenced the continuing rows over the proper division of the Caspian Sea between the littoral states.

Also, 16 December happened to be the beginning of the three-day holiday of Eid Fetr, marking the end of Ramadan. Nazarbaev attended morning prayers at Astana's central mosque together with visiting Kyrgyz President Askar Akaev, and congratulated Muslims on the holiday, Khabar TV reported. Nazarbaev suggested in the televised report that the coincidence of Eid Fetr and the 10th independence anniversary was a sign of God's blessing on Kazakhstan.

On the occasion of the anniversary a small number of people were awarded the country's Dostyk (Friendship) state order, first class, "for important contributions to strengthening peace, friendship, and cooperation between states and peoples," Interfax-Kazakhstan reported on 15 December. Among them were President Akaev, ex-British Prime Minister Margaret Thatcher, ex-U.S. President George H. W. Bush, and Russian Orthodox Patriarch Aleksii II. However Nazarbaev himself was awarded title of Khalyq Qaharmany (People's Hero) and the Golden Star, the nation's top distinction, by a virtually unanimous vote of both chambers of the parliament for the president's outstanding contributions to the Kazakhstan's freedom and independence, the news agency said on 15 December. The day before, the Papal Nuncio in Astana presented Nazarbaev with the Vatican's Order of Pius (see "RFE/RL Newsline," 17 December 2001).

AKAEV STRONG-ARMS ANOTHER BORDER TREATY PAST PARLIAMENT. Kyrgyz President Askar Akaev arrived in Astana on 15 December for a two-day visit to attend Kazakhstan's independence celebrations and to discuss a number of bilateral issues such as transit agreements and commercial over-flight rights, the importance of improving trade, and the need to regulate the flow of workers from Kyrgyzstan to its more prosperous neighbor. The two sides further signed documents about coordinating the work of border guard and customs services and developing confidence-building measures along the borders.

To this end they signed the first border-delimitation treaty between Kyrgyzstan and Kazakhstan since the collapse of the USSR, Kazakh television and Russian news agencies reported. The treaty, hailed as an historic event by Nazarbaev, has resolved all outstanding border problems between the two nations, Kazakh government-controlled radio said.

But Kyrgyz parliamentarian Azimbek Beknazarov told RFE/RL's Bishkek bureau on 15 December that a committee he chaired had not finished reviewing the agreement and only signed off on it under pressure from Akaev. He said that Akaev had submitted the document to the committee on 13 December and demanded that its members approve it the same day -- something that they initially had refused to do, saying they lacked time to study the details. But the following morning, seven of the 10 committee members had buckled under government threats and voted for the agreement, according to Beknazarov. In particular, he said he was concerned that Kyrgyzstan could be ceding control of part of the important highway between Bishkek and Balykchy, and moreover was surrendering a quarry in Talas region thought to contain a gold deposit. Meanwhile a government spokesman denied that the treaty ran counter to Bishkek's interests (see "RFE/RL Kyrgyz News," 16-17 December 2001). In any event, Akaev was already signing the agreement in Astana, handing the parliament in effect a fait accompli.

Akaev's handling of the situation so far, and the light it throws on his attitude toward parliament generally, is reminiscent of the ongoing fight over Akaev's attempt to ram through an unpopular border agreement with China (see "RFE/RL Central Asia Report," 29 November 2001). For six months Beknazarov has argued strenuously against the Sino-Kyrgyz frontier delimitation, contending that it gives away too much land to China and that in its present form it is unconstitutional. On 18 December, Akaev was sent a letter by 17 parliament deputies demanding that he stop persecuting Beknazarov. They alleged that the National Security Service and the Prosecutor General's Office had received instructions to delve into Beknazarov's past and dig up any dirt that might be useful in smearing one of the president's most vocal critics.

FRIENDSHIP BRIDGE OPEN, BARELY. On 16 December, U.S. Secretary of Defense Donald Rumsfeld made his third trip in two months to Uzbekistan, where he visited Hanabad air base in the south of the country where some 1,500-2,000 American servicemen are stationed, Uzbek news sources and Interfax reported. There he met his Uzbek counterpart Qodir Ghulomov, with whom he discussed development of military-technical cooperation and the deliveries of humanitarian aid to northern Afghanistan, reported on 18 December. It is a fair assumption that the conversation zeroed in on Uzbekistan's frustrating and apparently irrational reluctance to allow the Friendship Bridge, which spans the Amu Darya River at the Uzbek city of Termez on the Afghan border, to be used for train and truck convoys of humanitarian cargo.

The one-kilometer-long bridge, which was ordered closed by Uzbek President Islam Karimov in 1997 when Taliban militia drew close to the Uzbek border after capturing the Afghan stronghold of Mazar-i-Sharif, remained closed until 9 December despite weeks of lobbying by international relief organizations that have been obliged to transport aid across the Amu Darya, since the border was opened in November, by barge. Barges are now carrying about 330 metric tons of cargo per day from Termez to the Afghan port town on Hairaton, two hours away, but aid agencies have said they aim to send 2,200 tons per day to feed the approximately 3 million people in northern Afghanistan threatened by cold and starvation. Deliveries on that scale require use of the Friendship Bridge. Uzbek Emergencies Minister Ravshan Haidoro told journalists on 14 December that 4,800 tons of assistance had been ferried across so far, AP reported. Meanwhile the director of Termez port acknowledged that the port could send as much as 1,500 tons of cargo downriver per day, but warned that the facilities at Hairaton were in much worse shape and could never receive that amount of goods.

On 14 December a senior American official confirmed that it was U.S. Secretary of State Colin Powell who, in a tense meeting with President Karimov in the Uzbek capital Tashkent the previous weekend, browbeat the Uzbek leader into announcing the bridge would be reopened, AFP reported. But it was clear from the news agency's account that the U.S. side, even after securing the concession, remained exasperated and baffled by Karimov's intransigence, since the official reason for not reopening the bridge -- fear of the Taliban -- had become irrelevant.

A single cargo train carrying 1,000 metric tons of food and medicine crossed the bridge on 9 December and then, with Powell gone, it was abruptly closed again. On 12 December, AP reported that a second shipment of 260 tons of wheat from the UN World Food Program (WFP) was blocked by Uzbek authorities and UN security officials, ostensibly because of logistical problems and the bridge's and rail tracks' state of disrepair. A WFP worker acknowledged that the bridge was in worse condition than the agency had thought, reported on 16 December, and commented that Uzbek officials had been right all along to keep the bridge closed. On 13 December, AP reported that the wheat shipment had been allowed across after two days of stalling by local authorities, while sacks of beans and grain piled up in a warehouse in Termez. A WFP coordinator hinted that Uzbek officials were creating artificial problems to elicit bribes, the news agency said, adding that a culture of bureaucracy, repression, and secrecy were compounding the difficulties of working in Termez, which has been all but closed off to outsiders including foreign journalists.

On 14 December, reportedly following weeks of negotiations, UN Resident Coordinator Richard Conroy and Uzbek Foreign Minister Abdulaziz Komilov signed a protocol on accelerating and simplifying transit of humanitarian cargo into Afghanistan, RIA-Novosti and AP said, addressing the issues of using Uzbek airspace as well as its territory and infrastructure. The agreement guarantees that Tashkent will not levy any transit fees on aid to Afghanistan, but requires the UN to provide the Uzbek Emergencies Ministry with full documentation on, and descriptions of, all freights moving across the border.

The third shipment allowed across the bridge was transported on 16 December, and for the first time went by truck inside of railway cars, Iranian radio reported. The 17-ton shipment was aid for Afghan children provided by UNICEF, the radio said.