Kazakhs Unmoved By The Move To Akmola

Before the end of next year, Kazakhstan's government is due to abandon the capital of Almaty, in the southeastern corner of this vast country, and cross 1,000 km of desert to set up shop in the northern farming town of Akmola.

Amid the marshy, mosquito-ridden fields that stretch behind the run-down houses, a brand new presidential palace, business centre and numerous government offices are due to arise before the end of the decade.

Total costs of this ambitious project, already under construction, have yet to be calculated.

While local officials are delighted by the plan, President Nursultan Nazarbayev's critics warn that expenditure could derail tight budget reforms or simply come to naught, much like the Virgin Land campaign of the 1950s. It's not a bad idea to make this the capital, Tikhonyuk says.

 

Almaty is too close to the border and too far from the people. But there is no money now. It needs to be built slowly, for at least 10 years. They want to do it in two years.

Nazarbayev decided last year his government would be better off running Kazakhstan from its heartland than from the smog-filled, earthquake-prone and distant corner of Almaty. One presidential aide speculates that his government is eager to base itself in northern Kazakhstan, home to millions of Russians, before the nationalists in Moscow make a serious claim on the region.

However, others say that Nazarbayev is more worried about an expansionist China, just 300 km from Almaty. The president assures the population of 17 million that construction will all be paid out of aNew Capital Fund, financed by foreign and domestic investors, in exchange for tax breaks.

But according to Bair Dosmagambetov, in charge of preparing the capital move, the fund holds only about $50 million to date - less than it will cost to build the president's office. We have a problem with financing, he admits. We haven't found major foreign sponsors yet. But construction is moving ahead.

Foreign company representatives say the president and his aides have pressed them for donations, often in kind and usually in the final stage of negotiations for a contract.

One metal producer was asked to build an eight-storey building. I told them instead that I could give them a discount if they needed any steel, he says.

One of the few donors has been Okan, a Turkish construction company. It put $3 million into the fund before winning tenders to build the city's first western-style hotel and Nazarbayev's summer residence.

Both Okan and Naiza, a local construction company hired to build a ministry, have started construction without any guarantee they will get paid. This is a big mistake of the president, says Serikbolsyn Abdildin, first secretary of Kazakhstan's Communist party, one of the few vocal opposition movements. He can't even pay salaries and pensions, and yet he wants to go into history as the president who moved the capital.

Nazarbayev, who has already broken his promise to leave the budget untouched, has now ordered ministries to finance construction of their own offices and staff lodgings.

In addition, each province has to finance construction of one apartment building. That will end up on the shoulders of the taxpayers, says Abdildin. And all those tax credits for sponsors will mean that these funds will not reach the budget.

For the time being, the government plans to make do with renovations and building a few modest office blocks. Dosmagambetov says he has yet to find funding for housing construction, half of the $500 million expected to be spent on the project's first phase.

Western diplomats warn such spending could exacerbate the budget deficit, jeopardising a $450 million credit line offered by the IMF on the understanding that costs would be kept below $500 million. Many officials are reluctant to abandon the mild climate, stunning mountains and relative luxury of Almaty for the 40-degree frosts of Akmola. Built on a swamp, Akmola is frequently flooded and muddy even in summer.