VZCZCXRO5205
RR RUEHDBU RUEHLN RUEHVK RUEHYG
DE RUEHAH #0389/01 1071300
ZNR UUUUU ZZH
R 171300Z APR 06
FM AMEMBASSY ASHGABAT
TO RUEHC/SECSTATE WASHDC 7199
INFO RUCNCIS/CIS COLLECTIVE
RHMFIUU/CDR USCENTCOM MACDILL AFB FL//CCJ2/HSE/CCJ5//
RUEKJCS/SECDEF WASHINGTON DC
RUEKJCS/JOINT STAFF WASHINGTON DC//J5/RUE//
RUEAIIA/CIA WASHDC
RHEFDIA/DIA WASHDC

UNCLAS SECTION 01 OF 02 ASHGABAT 000389 
 
SIPDIS 
 
SENSITIVE 
 
SIPDIS 
 
STATE FOR SCA/CEN (PERRY) 
 
E.O. 12958: N/A 
TAGS: ECON ETRD PREL TNGD TX
SUBJECT: IN FOREIGN CONSTRUCTION TURKMENBASHY TRUSTS 
 
REF: ASHGABAT 387 
 
Sensitive but Unclassified Q Please handle accordingly. 
 
Summary 
------- 
 
¶1.  (SBU) Foreign companies are primarily responsible for 
transforming Ashgabat into Niyazov's white city. 
The GOTX and construction companies claim that contracts are 
awarded on the basis of open tenders. In reality, Niyazov makes 
the decisions and many of the most important projects are 
awarded without a tender to companies the president trusts.  While 
the construction boom obviously has been good to the 
foreign companies positioned to take advantage of it, there 
are some indications that at least some companies are not 
being paid regularly for their services.  In addition, Turkmenistan is 
not developing significant indigenous capability to address Niyazov's 
building lust, resulting in capital flight of hydrocarbon revenues 
from Turkmenistan's significant needs to largely Turkish and French 
pockets.  End Summary. 
 
Foreign Construction Builds the White City 
------------------------------------------- 
 
¶2.  (SBU) While proceeds from TurkmenistanQs gas industry 
fund the remaking of Ashgabat in President Niyazov's image, 
foreign construction firms do virtually all of the heavy lifting. 
As of February 1, 231 separate construction projects worth 
more than $4.5 billion were ongoing in Turkmenistan.  Turkish 
construction companies account for more than 60% of these projects; 
mainly residential apartment buildings. 
The majority of these companies do little or no construction business 
in Turkey.  The largest construction company in Turkmenistan, Gap 
Insaat, is primarily known in Turkey as a textile company. 
(Comment: Turkish companies frequently are involved in projects even 
when they are not selected as the prime contractor, such 
as Niyazov's ice skating facility, which was awarded to the French 
company Bouygues, but in reality is being built by Gap Insaat as a 
subcontractor.  End Comment.)  Turkish Embassy counselor Ozgur 
Celikel told emboffs that several better known construction companies, 
such as Gamma Construction and Mensel, have tried to do 
business in Turkmenistan, but have been unable/unwilling to adapt to 
the capricious business climate. 
 
¶3.  (SBU) Turkish companies account for the majority of construction 
projects, but they are not the only foreign companies building in 
Turkmenistan.  Bouygues Construction, which has built many of the 
GOTXQs high profile projects, including the Presidential Palace 
and the $113 million Gypchak Mosque, continues to receive 
the most prestigious construction contracts directly from Niyazov, 
according to French DCM Henri Tomasini. 
Meanwhile, official statistics show that Ukrainian companies, which run 
a distant second to the Turks in total number of projects, are building 
most of AshgabatQs roads and other physical infrastructure. 
 
Not So Tender 
-------------- 
 
¶4.  (SBU) Omer Gulchetiner, General Director of the Turkish company 
Sehil Insaat, and Gap Insaat Business Development Manager Aziz 
Cengel told emboffs that their companies obtain new construction 
projects by responding to GOTX public tenders.  According to 
Gulchetiner, the cost and quality of construction are the 
primary factors in a successful bid.  He also said that the 
GOTX tended to be comfortable working with specific 
companies for specific types of projects.  For example, Sehil Insaat 
enjoys a good relationship with the GOTX law enforcement 
agencies and generally is selected for projects associated with the 
Ministries of Interior or National Security. 
 
¶5.  (SBU) Cost and quality may play a role in the process; 
however, as with everything else in Turkmenistan 
the final decision comes down to President Niyazov.  All major 
construction companies have a relationship with the President, 
according to Celikel.  The French DCM told emboffs that Niyazov 
typically does not bother with a tender before awarding the most 
prestigious contracts to Bouygues. 
Rather, details are worked out in private meetings between the 
President Bouygues' chairman.  (Comment: Tomasini was unaware of the 
status of several high profile Bouygues projects in the city.  He 
characterized the company's operations in Ashgabat as a "separate 
embassy" illustrating how the French Embassy distances itself from 
 
ASHGABAT 00000389  002 OF 002 
 
 
Bouygues, when convenient.  The French Embassy does not, on the 
other hand, lend support to human rights or religious freedom issues, 
in order not to jeopardize Bouygues.  End Comment.) 
 
Money Matters 
-------------- 
 
¶6. (SBU) Presidential decrees authorizing construction projects 
allocate the amount and sources of funding. 
Turkish construction company officials told emboffs that construction 
projects are generally paid for out of the state budget or by 
a specific government agency; some larger projects, 
such as manufacturing plants, are financed.  (Comment: Gulchetiner 
said that a recent Sehil Insaat-built project was rejected by the 
Turkish Export Import Bank because of the existence of unpaid GOTX 
debts.  End Comment.)  Thirty percent of the projects 
cost typically is paid up front, while the rest is paid in monthly 
installments according to a schedule laid out in the contract.  The 
Turkish Embassy Counselor told emboffs that he is not aware of any 
current problems with companies being paid.  However, he said, the 
GOTX has refused to pay fully the Turkish company Mensel 
for its construction of Ashgabat's 30,000 seat "Olympic Stadium" 
because it was smaller than Niyazov had wanted.  Gap Insaat's 
Turkmenistan Country Manager initially told emboffs that GOTX 
payments often are slow in coming, a problem he later attributed 
solely to bureaucratic problems.  (Comment: Gap  is the  part of the 
overall Calik Group, owned by dual Turkish-Turkmen citizen Ahmet Calik. 
The Group is involved in everything from textiles to gas and oil to 
construction  and even owns a bank in Albania.  Calik was a dual 
citizen to permit him to serve as Deputy Minister of Textiles 
and Niyazov's envoy for energy sales to Turkey, but he was 
dismissed from these posts in September 2004.  Post has heard 
persistent rumors that Gap Insaat has experienced 
increasing difficulties since Calik was dropped from the government. 
Company officials told emboffs that this was not the case, 
but rumors abound.  End Comment.) 
 
Comment 
-------- 
 
¶7.  (SBU) AshgabatQs construction boom obviously has been very 
good to the select few companies positioned to take 
advantage of it.  Each day's newspaper carried stories on new 
construction plans.  While Turkish and French companies profit from 
building NiyazovQs white city, there is no attendant development of 
indigenous construction capability.  Local companies have minor 
contracts building dour two story buildings on the city's 
outskirts intended to house many of those forced out of 
their homes by the construction frenzy (reftel). 
While Niyazov's construction craze continues, hydrocarbon 
revenues (by definition finite being derived from a 
nonrenewable resources) will continue to fly out of Turkmenistan 
into foreign pockets. 
 
JACOBSON