Publication: Monitor Volume: 4 Issue: 110

Kazakhstan’s newcapital, Astana, will be presented to foreign dignitaries and investors inan official ceremony on June 10. The city, declared the capital lastDecember, has seen more construction in the past eighteen months than in theprevious thirty years. Still much more remains ahead.

Foreign companies have been involved in a number of high-prestige projects.Turkish companies in particular have risen to the challenge of Astana’sface-lift, dominating the construction of hotels and ministerial apartments.Kazakhstani officials attribute this to Turkey’s low-cost labor rates andgood construction record in Kazakhstan. One exception to the Turkishpredominance is the Swiss-registered company Mabetex–chosen because of itssuccessful completion of some of Moscow’s new government buildings. Mabetexis completing an elaborate presidential residence, as well as government andparliament premises. Over the next few years, too, the Japanese Agency forEconomic Cooperation will allocate US$170 million to Astana’s single largestforeign investment project–a new international airport. (Focus [Almaty], May 29)

A main source of attraction for foreign capital was the four “SpecialEconomic Areas” (SEA) established in Kazakhstan in January 1996. Two of thefour were created in the Astana region. Unlike Kazakhstan’s earlier “FreeEconomic Areas,” which embraced whole regions, the SEA radiate from poorercities in low-income regions. Companies investing in the SEA are exempt bothfrom up to 50 percent of Kazakhstan’s normal taxes and from various customsduties. The SEA surrounding the capital is buttressed by favorable legalprovisions–guaranteed to remain in force until 2010.

Two factors have dampened foreign interest in other projects, however.First, SEA privileges either contradict or are outdone by privileges grantedby the State Investment Committee to sectors other than construction.Second, consensus has not been reached on which organizations will move fromAlmaty to Astana. Only 24 percent of Astana’s construction has, inconsequence, been financed by outside investment. Originally, only thepresidential administration, government and parliament were to relocate,leaving international organizations, companies and financial institutions inAlmaty. Kazakhstan’s leading oil company, Kazakhoil, recently announced,however, that it too will soon move to Astana, as will one of the country’sleading banks, Kazakhstan’s Savings Bank. Foreign governments seem lesscertain. Back in 1996, twenty-two of them reportedly indicated an interestin opening embassies in various sites in Astana. None, however, has yetstarted construction. In contrast, the UN’s local representative officereportedly begins its move on June 10, to coincide with the celebrations.

Russian President Boris Yeltsin will not be among the foreign leadersattending the June 10 celebrations. He is expected to visit Astana on July1-2, when he and President Nursultan Nazarbaev will reportedly sign a treaty”of eternal friendship” between their two countries. (Russian agencies, June5)–SC