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DE RUEHAH #1205/01 3110407
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R 070407Z NOV 07
FM AMEMBASSY ASHGABAT
TO RUEHC/SECSTATE WASHDC 9661
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE
RUCNCIS/CIS COLLECTIVE
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RUEKJCS/SECDEF WASHINGTON DC
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RUCNOSC/OSCE POST COLLECTIVE

UNCLAS SECTION 01 OF 03 ASHGABAT 001205 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR SCA/CEN AND EB/TPP/BTA 
PLEASE PASS USTR/GBLUE 
 
E.O. 12958: N/A 
TAGS: ETRD ECON EFIN TX
SUBJECT:  TURKMENISTAN 2008 NATIONAL TRADE ESTIMATE REPORT 
 
TRADE SUMMARY 
According to the U.S. Census Bureau, the U.S. trade surplus with 
Turkmenistan was $37 million in 2006 against a surplus of $102 
million in 2005 (64% decrease).  The U.S. exports in 2006 were $113 
million, down by $124 million from 2005 (52% decrease).  U.S. 
imports from Turkmenistan in 2006 were $76 million, down by $59 
million (44% decrease). 
The U.S. FDI stock in Turkmenistan was only $40 million in 2005 (no 
statistics available for 2006). 
The Governments of Turkmenistan and the United States began 
negotiations on a bilateral investment treaty after independence in 
1991, but talks were suspended in early 1994.  The Government of 
Turkmenistan expressed interest in renewing the talks in 1998, but 
negotiations have not recommenced.  However, in 2004, Turkmenistan 
signed the regional Trade and Investment Framework Agreement with 
the United States, Kazakhstan, Kyrgyzstan, Tajikistan and 
Uzbekistan.  Turkmenistan is not a member of -- nor does it   have 
observer status at -- the World Trade Organization (WTO). 
Turkmenistan has not publicly announced plans for accession. 
The United States Government considers the Convention with the Union 
of Soviet Socialist Republics on Matters of Taxation, which entered 
into force in 1976, to continue to be in effect and applicable 
between the United States and Turkmenistan.  There have been no 
formal discussions on a new dual taxation treaty, although the new 
government in Ashgabat has requested this . 
Turkmenistan's economy is closely controlled by the state, and, 
although the government for many years regularly proclaimed its wish 
to attract foreign investment, it made little effort, up to now, to 
change the state control mechanisms and restrictive 
currency-exchange system that created a difficult foreign investment 
climate.  The president publicly expressed his frustration with 
Turkmenistan's complex, opaque web of on- and off-budget funds 
during a cabinet-level meeting in August 2007. 
IMPORT POLICIES 
While Turkmenistan imports the vast majority of its industrial 
equipment and consumer goods, it restricts imports in many ways, 
including through high import duties, a highly restrictive currency 
policy, subsidies and price controls, and graft and excessive 
bureaucracy. 
The top economic development priority of the Government of 
Turkmenistan since independence in 1991 has been self-sustainability 
in food supplies and an increase in import-substituting production 
using hydrocarbon revenues.  However, 94 goods and materials are 
subject to customs duties upon importation into Turkmenistan.  Goods 
and materials not on the list are subject to a 5% customs duty 
payment.  In August 2006, Turkmenistan increased its excise tax on 
imported beer (50%) and wine (100%). 
Taxes on domestically produced beer and hard liquor remain at 
previous rates: 10% and 15%-40% respectively.  Most of these 
imported goods are therefore unaffordable to the vast majority of 
the country's citizens. 
The dual exchange rate regime remains an impediment for foreign 
firms, making repatriation of profits at best complicated, and at 
worst impossible.  Firms are forced to exchange currency at the 
official rate of approximately 5,000 manat to one dollar, rather 
than the still-legal unofficial rate of 23,800 manat to one dollar. 
Government ministries have proceeded cautiously on currency reform 
due to fears that rapid change would financially devastate 
government ministries. 
Slow, bureaucratic customs procedures that are rife with corruption 
unquestionably inhibit imports.  Overall, as Turkmenistan's laws are 
created and enforced by those who only know a command economy, and 
who have had little exposure to the outside world since 
independence, graft encountered at the famously tight borders should 
not be underestimated in its negative effect on imports.  Obstacles 
are created by customs authorities, such as unnecessary additional 
paperwork to hold up customs clearance and citing nonexistent laws 
or regulations in order to encourage graft.  Such measures can 
extend customs clearance for years, as one major American trade 
partner in Turkmenistan has experienced. 
According to Turkmenistan's Law on Foreign Investment, goods and 
properties that are imported temporarily, including those under 
subcontracts, can be imported into the country without duties, but 
only for the duration of an existing contract.  Goods cannot be 
imported under consignment contracts.  Payment for all goods 
 
ASHGABAT 00001205  002 OF 003 
 
 
exported to Turkmenistan is required to be made only upon the 
delivery of the goods. 
In addition, the lack of adequate legal and judicial frameworks for 
the protection of a foreign trade partners' contractual rights, as 
well as the lack of transparency and provision for oversight and 
recourse, are detrimental to import levels. 
Turkmenistan requires that all export and import contracts, 
including civil construction projects, be registered at the State 
Commodity and Raw Materials Exchange (SCRME) and the Ministry of 
Economy and Finance.  The procedure applies not only to the 
contracts signed at the SCRME, but to contracts signed between third 
parties.  The SCRME is government-owned and is the only exchange in 
the country.  The contract registration procedure includes an 
assessment of "price justification."  All import contracts must be 
registered before goods are delivered to Turkmenistan. 
According to the export/import contract registration procedure, the 
process should not exceed 15 days.  However, 2-3 month delays in 
registration are not uncommon.  Theprocedure is rigidly prescribed, 
and import (and export) deals require 3 import passports to be 
signed and checked against the original contract and the Turkmen 
legislation by the Customs, the Central Bank of Turkmenistan and the 
importer's bank.  Without the passport, the importer's bank is 
prohibited from making a payment on the deal.  Any of the above 
three entities may reject an import contract passport or request 
additional information on the seller of goods. 
STANDARDS, TESTING, LABELING AND CERTIFICATION 
Turkmenistan is a member of the International Standard Organization 
(ISO) since 1993. The United States and Turkmenistan do not have an 
intergovernmental agreement on standards, metrology and 
certification which would simplify certification of various 
products, services and processes. 
Turkmenistan uses National Standards of Turkmenistan (TDS) and 
General Interstate Standards (GOST).  GOST standards have been 
developed by 12 FSU countries and incorporate former Soviet Union 
standards.  Turkmenistan is a member of the ISO, and Turkmen 
national standards are developed to meet international standards. 
All imported and exported goods must be certified as adhering to 
quality standards set by the Main State Standards Inspectorate. 
Gauging equipment also needs to be calibrated by the Standards 
Inspectorate. 
Certificates of conformance for food products must be accompanied 
with the product description in the Russian language. 
In 1998 Turkmenistan introduced a sanitary certification requirement 
for food products imported into Turkmenistan.  The State Sanitary 
and Epidemiological Inspectorate (SSEI) conducts radiological, 
radiochemical and chemical tests of imported food products to issue 
certificates of quality. 
In 2004 Turkmenistan passed the law on quality and safety of food 
products.  According to the law, a food product having less than 70 
percent of its shelf life starting from the date of origin may not 
be imported into the country.  Importation of GMO-based food 
products is not allowed.  Imported food items should be labeled in 
the Turkmen or Russian language. 
GOVERNMENT PROCUREMENT 
Turkmenistan's economy is dominated by the state-owned sector.  In 
2002, the country introduced unified tender rules for all public 
entities.  The rules apply to the procurement of both goods and 
services, including construction projects.  Turkmenistan does not 
have a centralized body that procures all entities.  Comparable 
goods are often purchased at different prices by different 
organizations.  The tender processes are not transparent, and 
falsification of bids and cancellation of tender results are common 
place.  The tender rules permit closed tenders.  "Companies with 
good standing" are allowed to participate in closed tenders.  The 
determining factor in selecting tender winners is price, not value. 
Announcement of most tenders is made only in local mass media and in 
Turkmen and/or Russian languages. 
INTELLECTUAL PROPERTY RIGHTS (IPR) PROTECTION 
Significant deficiencies remain in Turkmenistan's intellectual 
property protection regime.  Due to these deficiencies, there is an 
ongoing review of Turkmenistan's status as a beneficiary country 
under the U.S. Generalized System of Preferences (GSP) Program. 
Turkmenistan has been on the Special 301 Watch List since 2000. 
Turkmenistan's Civil and Criminal Codes provide some degree of IPR 
protection and punishment for copyright violations and the Civil 
 
ASHGABAT 00001205  003 OF 003 
 
 
Code provides for counterfeited goods confiscation by a court 
decision, but Turkmenistan has yet to adopt more explicitly and 
comprehensive administrative and civil procedures and criminal 
penalties for IPR violations.  Turkmenistan has not adopted a 
separate Copyright Law and consequently does not provide any 
protection to foreign sound recordings or pre-existing works. 
Turkmenistan is neither a member of the Berne Convention nor the 
Geneva Phonograms Convention, and it has not yet signed the WIPO 
Internet Treaties. 
It is a challenge to purchase legal recorded material in 
Turkmenistan.  Current border enforcement is weak.  As a result, 
pirated recordings freely cross into Turkmenistan for sale. 
Additional personnel and training courses are needed for more 
effective border enforcement.  Turkmenistan does not provide for 
either civil or criminal ex parte search procedures needed for 
effective anti-piracy enforcement. 
SERVICES BARRIERS 
The National Bank of Pakistan is the only wholly-owned foreign bank 
in Turkmenistan.  Turkmen-Turkish Bank is the only Joint Venture. 
Banks are tightly controlled by the Government.  All international 
payments are routed via the Central Bank of Turkmenistan. 
OTHER BARRIERS 
INTRANSPARENCY OF THE REGULATORY SYSTEM 
The government does not use transparent policies to foster 
competition and foreign investment.  Laws have frequent references 
to by-laws that are often not publicly available.  Most by-laws are 
passed in the form of presidential resolutions.  Such resolutions 
are not categorized by subject, which makes it difficult to find 
relevant cross references.  Previously, government officials acted 
on the president's verbal instructions, rather than written orders 
or governing legislation.  Most often, the personal relations of 
government officials have played a decisive role in determining how 
and when government regulations are applied. 
Bureaucratic procedures are confusing and cumbersome.  There is no 
single body that coordinates registration and activities of domestic 
and foreign companies.  The government does not generally provide 
information support to investors, and officials use the lack of 
information to their personal benefit.  Foreign companies may spend 
months conducting due diligence in Turkmenistan. 
A serious impediment to foreign investment is the lack of knowledge 
on internationally-recognized business practices and concepts and 
lack of English speakers.  Good quality English-language material on 
Turkmenistan legislation is scarce, and there are very few business 
consultants to assist investors. 
CORRUPTION 
Turkmenistan has legislation to combat corruption, but the laws are 
ineffective and corruption is rampant.  The non-transparency of the 
economic system provides fertile soil for corruption, and the common 
assumption is that nearly any decision desired can be obtained for a 
price.  U.S. firms have identified widespread government corruption, 
usually in the form of  requests for bribes, as an obstacle to 
investment and business throughout all economic sectors and regions. 
 It is most pervasive in the areas of government procurement and 
performance requirements.  Turkmenistan joined the UN Convention 
against Corruption in March 2005. 
The non-government organization Transparency International, ranked 
Turkmenistan 142 among 163 countries in the world in its Corruption 
Perceptions Index for 2006. 
 
HOAGLAND