The contract foundered because it became impossible to deal with "the multitude of parties involved, national and local authorities, and privatized and national companies," said Thomas Gordijn, spokesman at Unilever's head office in Rotterdam.
One of the first big deals of the country's seven-month-old privatization program, signed in June, the margarine contract aimed to revitalize the entire food chain from the growing of the sunflower seeds to processing and local marketing of the margarine.
Cancellation of the contract will be a blow to Kazakhstan's reform-minded President, Nursultan Nazarbayev, who has been keen to attract Western investment and has shown an energetic approach to market reform.
Susan Bruno of KPMG Peat Marwick, which advises the Kazakhstan state property committee, told The Financial Times that Unilever began having difficulty obtaining licenses and guarantees from various government ministries.
According to Bruno, Unilever was unable to obtain a guarantee for a steady supply of sunflower oil, as promised in the original agreement, finally causing the company to break off the deal.
Unilever has not abandoned its plans for the margarine factories, and intends to reopen discussions with the Kazakh government, Gordijn said, but he refused to comment further. Bruno told The Financial Times that the state property committee had given Unilever until Dec. 1 to submit a new bid. She said that the company's new offer could be lower, since it may now have to look outside the country for supplies of sunflower oil.
Kazakhstan is often described as having the brightest future of the former republics of the USSR because of its rich oil, gas and mineral reserves and its pro-reform president.
Political resistance, however, has dogged Nazarbayev's plans to reform the country's economy. In October, he replaced his entire cabinet, blaming them for the slow pace of reform and privatization, and appointed pro-reformist Prime Minister Akezhan Kazhegeldin.
But the parliament has continued to push for suspension of the privatization program, alleging that the sell-off of state assets is corrupt and is benefiting only the country's most powerful families.
Western diplomats in Almaty have said that the country's privatization program is stalling and that the economy remains stagnant with large-scale inter-enterprise debt crippling economic activity.
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