* ADB to add cash, experience to oil money to diversify GDP
* Nazarbayev brooks no dissent but favours market reforms
By Dmitry Solovyov
ASTANA, May 4 Kazakhstan reached a deal on
Sunday with the Asian Development Bank to use ADB funds and
expertise and the country's oil wealth to try to develop
businesses beyond the energy sector.
The second-largest ex-Soviet oil producer after Russia,
Kazakhstan has struggled to develop sustainable businesses
beyond the energy sector, which accounts for about a quarter of
its economy and about 80 percent of its exports.
ADB officials called Sunday's agreement "groundbreaking and
"Not only is it the first of its kind in the ADB's history,
but we are now working with resources from the country in
partnership, as stewards of those resources, to expand our
development impact, and that's very innovative," Matthew
Westfall, country director for Kazakhstan, told a news briefing.
Kazakh President Nursultan Nazarbayev, a 73-year-old former
steelworker who has ruled the country for more than two decades,
ordered his government in February to raid the strategic
National Fund, which is replenished with windfall oil export
revenues, and channel $1 trillion tenge ($5.5 billion) to the
economy to help keep growth at 6-7 percent in the coming years.
Nazarbayev is criticised for his crackdowns on independent
media and political opponents, but has achieved stability and
relative prosperity in his nation which lies in a turbulent
region bordering Afghanistan.
On Sunday, he oversaw the signing of the co-financing
agreement by ADB President Takehiko Nakao and Kazakh Prime
Minister Karim Masimov in the futuristic Kazakh capital Astana.
Under the arrangement, the Manila-based ADB will couple some
$1.3 billion of remaining financing to Kazakhstan under its 2016
programme with $5.5 billion of Kazakh oil cash and add its
expertise to support development.
The agreement aims to support industrial policy, small and
medium-sized enterprises and the banking sector in Kazakhstan, a
nation five times the size of France with a population of just
The economy grew by 6 percent last year and 5 percent in
"What we understand from our discussions with the
government, is that they are very keen to mobilise the resources
that they are bringing and co-financing as quickly as possible,
and that the time frame ... is 2014-2015," Westfall said.
"So by the end of 2015, I believe they would like to see
these resources invested."
A lack of a clear successor to Nazarbayev, is, however, a
major concern for investors.
Hosting the ADB's 47th annual meeting, Nazarbayev said GDP
had grown 10-fold since independence but he gave no estimate for
its current nominal size.
International reserves, including the National Fund, were
worth around $100 billion, including more than $70 billion in
the National Fund, as of late March.
After 20 years of drawing loans, last year Kazakhstan turned
into an ADB donor. "We think it (the co-financing agreement)
serves as a model," said ADB's Westfall.
"This is a ground-breaking initiative ... which we hope we
can replicate in other countries that have a similar economic
profile as a higher middle-income country."
(Reporting by Dmitry Solovyov; Editing by Ruth Pitchford)