* President wants pension fund assets to prop up growth
* Pension reform mastermind hails decision
* Slams local pension funds as corrupt and inefficient
* Nazarbayev says premature to unseal "oil fund"
(Adds analyst, Nazarbayev, updates pension fund assets)
By Raushan Nurshayeva and Mariya Gordeyeva
ASTANA/ALMATY, Jan 23 Kazakhstan's president has
ordered the government to merge the country's private pension
funds and deploy billions of dollars of their assets to sustain
rapid growth rates, without raiding the strategic oil fund.
The planned financial injection in the oil-rich economy -
Central Asia's largest - may outstrip the $10 billion financial
aid allotted from the National Fund, which collects windfall oil
export revenues, after the global financial crisis hit
Kazakhstan in 2007.
The $10-billion package was channelled over several years to
support five local banks that were severely hit by the crisis.
Kazakhstan's economic growth slowed to 5.0 percent in 2012
from 7.5 percent a year earlier as the general instability of
the global economy pulled it down, Prime Minister Serik Akhmetov
said on Wednesday.
Combined pension savings accumulated by 10 private and 1
state-run Kazakh pension funds totalled 3.177 trillion tenge
($20.7 billion) as of Dec. 1, 2012, central bank data show. The
state-run pension fund, GNPF, accounted for 19.3 percent of the
"Some of these (pension fund) assets ... must be used to
credit the real economy ... through banks, to assist
industrialisation, and help develop entrepreneurship. So, let's
decide how to do it," Nursultan Nazarbayev told the government
during a meeting broadcast live on Wednesday.
"Such consolidation, run by the National Bank, will allow us
to more efficiently and safely use the (pension) assets
accumulated by our citizens," he said.
He gave no further detail, telling the government and
central bank to prepare within one month proposals on how to
implement the merger of private pension fund assets, "taking
into account the interests of all parties concerned".
Kazakhstan launched its pension reform in 1998 by allowing
its citizens to accumulate savings for their future pensions in
funds of their choice.
Several private pension funds, contacted by Reuters, were
not immediately available for comments due to a late hour.
Oraz Zhandosov, who headed Kazakhstan's central bank in the
1990s and was one of the authors of pension reform, hailed the
decision to merge private funds' assets into one fund.
"That's the right approach, because our pension funds have
demonstrated nothing positive," he told Reuters.
"What they have really demonstrated is hackneyed thinking
regarding asset management, high level of corruption and
shameless spending of our citizens' pension savings on their
"I myself created this system and, to my regret, made many
mistakes," Zhandosov said.
Zhandosov said one of the main challenges for the
authorities was now to clearly formulate the terms of investing
private pension fund assets and to create an efficient mechanism
of asset management.
"I would imagine that for some part of the portfolio,
foreign asset managers would probably be attracted ... A certain
part of the portfolio would be placed on the internal market."
Deputy Prime Minister Kairat Kelimbetov told Nazarbayev:
"It (the funds' merger) will give us such a powerful pool of
cash, which could be used to develop infrastructure," said
Deputy Prime Minister Kairat Kelimbetov.
Nazarbayev, a 72-year-old former steelworker who has ruled
for more than two decades, also said it was premature to use the
reserves of the National Fund, which is replenished by windfall
oil export revenues, to help sustain economic growth.
The National Fund's reserves from oil revenues stood at
$57.8 billion as of Dec. 31, 2012.
"It is quite easy to beg for and spend the reserves of the
National Fund," Nazarbayev said. "But the (National Fund's)
money - those $10 billion - allotted during the past crisis has
never been seen again, it disappeared and was not repaid."
"The National Fund's cash must be saved for a rainy day to
support social stability and not to allow an economic decline."
(Reporting by Raushan Nurshayeva; Writing by Dmitry Solovyov;
Editing by Ron Askew.)