VZCZCXRO9490
RR RUEHAG RUEHAST RUEHBI RUEHCI RUEHDF RUEHIK RUEHLH RUEHLN RUEHLZ
RUEHPW RUEHROV RUEHVK RUEHYG
DE RUEHAH #0248/01 0461303
ZNR UUUUU ZZH
R 151303Z FEB 08
FM AMEMBASSY ASHGABAT
TO RUEHC/SECSTATE WASHDC 0299
INFO RUCNCIS/CIS COLLECTIVE
RUCNMEM/EU MEMBER STATES COLLECTIVE
RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE
RUEHAK/AMEMBASSY ANKARA 3400
RUEHBJ/AMEMBASSY BEIJING 1218
RUEHKO/AMEMBASSY TOKYO 1085
RUEHIT/AMCONSUL ISTANBUL 1654
RUEHVEN/USMISSION USOSCE 2237
RHMFIUU/CDR USCENTCOM MACDILL AFB FL
RHEHNSC/NSC WASHDC
RUEAIIA/CIA WASHDC
RHEFDIA/DIA WASHDC
RUEKJCS/JOINT STAFF WASHDC
RUEKJCS/SECDEF WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS SECTION 01 OF 03 ASHGABAT 000248 
 
SIPDIS 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR SCA/CEN, EUR/ACE, EEB 
AID/W FOR EE/EA 
 
E.O. 12958: N/A 
TAGS: PGOV PREL ECON EAID TX
SUBJECT:  TURKMENISTAN:  VISIT LAYS GROUNDWORK FOR UPCOMING USAID 
ECONOMIC REFORM PROJECT 
 
REF: ASHGABAT 0230 
 
¶1.  (U) Sensitive but unclassified.  Not for public Internet. 
 
¶2.  (SBU) SUMMARY:  On January 30-31, Almaty-based USAID/CAR Senior 
Economist Michael Boyd met with several new economic institutions in 
Turkmenistan to discuss potential cooperation with USAID's upcoming 
Enhancing Reforms for Economic Competitiveness (EREC) project. 
Staff from the Supreme Control Chamber, formed in July 2007 and now 
headed by former First Deputy Minister of Economy and Finance 
Tuwakmamet Jeparov, were receptive to cooperation, and asked for 
more details on USAID's Human and Institutional Capacity Development 
project in Kazakhstan.  The Deputy Chairman of the Institute for 
Strategic Planning and Economic Development outlined the 
organization's expected functions and stressed the relative youth of 
its staff and their need for training.  The next day, one of the 
participants in the meeting called USAID and asked how the Institute 
could cooperate with USAID.  The Parliament Deputy Chair and Social 
and Economic Committee Chair expressed appreciation for the program 
materials USAID previously provided and were receptive to proposals 
for cooperation under EREC.  As specific options for cooperation 
with new economic institutions become better defined, limited FY08 
funding will require a thorough review of the opportunities to avoid 
overcommitting to receptive parties.  END SUMMARY. 
 
SEEKING NEW PARTNERS FOR UPCOMING ECONOMIC REFORM PROJECT 
 
¶3.  (U) USAID intends to award a three-year regional contract for 
the Enhancing Reforms for Economic Competitiveness (EREC) project in 
March 2008.  Under this project, proposed activities will focus on 
windows of opportunity linked to priority interests of the 
Government of Turkmenistan, with particular possibilities to assist: 
the Ministry of Finance to help strengthen implementation capacity 
for budget development and planning, integrate planning and 
execution of extra-budgetary funds and the public investment 
program, strengthen program budget database management capacity, 
revise budget classification to international best practices and 
develop budget implementation procedures to support rural 
development; assist the Central Bank of Turkmenistan (CBT) on 
monetary policy tools and implementation, on strengthening 
risk-based bank supervision, and possible support on aspects of 
developing mortgage and other assets markets; help the 
newly-established Institute for Strategic Planning and Economic 
Development to strengthen capacity for development, review and 
oversight of economic strategies and policy; and aid the Supreme 
Regulatory Chamber to oversee public sector financial and economic 
activities. 
 
¶4.  (U) After being told by Ministry of Economy and Finance for the 
last year that it was waiting for EU-TACIS to launch its economic 
program and following limited substantive engagement with the 
Central Bank of Turkmenistan, USAID broadened its outreach in 
pre-launch preparation for the EREC project to new economic 
institutions.  USAID/CAR Senior Economist Michael Boyd traveled to 
Ashgabat on January 30-31 to explore cooperation with several 
potential new partners, including the Supreme Regulatory Chamber and 
the Institute for Strategic Planning and Economic Development. 
(NOTE: The meetings took place just prior to the February 2 
announcement that split the Ministry of Economy and Finance into 
separate Ministry of Finance and Ministry of Economy and 
Development. Reftel A. END NOTE.) He also met with the Parliamentary 
Committee on Social and Economic Policy to discuss opportunities to 
strengthen its capacity for development, review and oversight of 
economic and fiscal legislation. 
 
PARLIAMENT: RECEPTIVE, BUT NON-COMMITTAL 
 
¶5.  (U) Deputy Parliament Chair Kasim Babayev outlined the 
accomplishments and future priorities of the Parliament as President 
Berdimuhamedov approached one year in office.  The June 2007 reforms 
 
ASHGABAT 00000248  002 OF 003 
 
 
were "just the beginning" of intended broader restructuring of the 
agricultural sector.  Through the new Rural Development Strategy, 
the government intended to strengthen local organs of government and 
raise the standards of living for rural inhabitants.  Finally, 
President Berdimuhamedov previously announced a $4 billion capital 
investment program and already put money towards these projects, but 
improvements in the legal framework for foreign investment, credit 
and other areas were necessary to fully realize the intended scope. 
 
 
¶6.  (U) Babayev explained that he serves as head of a newly formed 
state commission to gather inputs related to bringing local 
legislation in line with international standards.  Economic priority 
areas included foreign investment, monetary policy and small and 
medium enterprise development.  Furthermore, many deputies traveled 
in 2007 to study the experience of other countries.  In response to 
Boyd's question about the possibility of undertaking a Commercial 
Legal and Institutional Reform diagnostic, which USAID has supported 
in other post-Soviet countries, Babayev thanked Boyd for the 
proposal and said that this type of study "may be useful."  He also 
said that the two sides could cooperate, and USAID should submit any 
specific proposals to learn from international standards via the 
Ministry of Foreign Affairs. 
 
STRATEGIC PLANNING INSTITUTE: INTERESTED TO CHANGE OLD WAYS 
 
¶7.  (U) The Institute's Deputy Director, Muhammed Atayev, said that 
its mission was to project areas for growth and state support based 
on statistics.  Specifically, President Berdimuhammedov ordered the 
Institute to develop both short- and long-term plans in support of 
the rural development program, since 80% of Turkmenistan is 
considered rural.  The Institute was developing these plans, which 
will be improved each year.  In addition, it was developing a 
construction program for 2011-2015, which would also strengthen the 
domestic construction industry, and provided analysis and concrete 
proposals for state ministries and agencies covering, for example, 
the transportation sector. 
 
¶8.  (U) Atayev said that the Institute had a staff of approximately 
80 that is "experienced, but young."   As a result, one challenge is 
to improve its staff's qualifications.  With regard to cooperation, 
it aims to strengthen the scientific base for its work through joint 
activities, but its work depends on the guidance provided by 
Presidential decrees.  If work is to be successful, this approach 
must be followed.  Noting that the Institute would "try to 
participate" in joint activities under EREC, Atayev said that its 
specialists were ready to learn from the experience of others that 
have already made an economic transition, like Kazakhstan.  The next 
day, the Institute's financial department head, who was present in 
the initial meeting, called USAID to inquire about how the Institute 
should proceed in order to establish a relationship with USAID. 
 
SUPREME CONTROL CHAMBER: COMPETENT YOUNG SPECIALISTS 
 
¶9.  (U) Turkmenistan's Supreme Control Chamber was established in 
July 2007 to strengthen state control over financial activities and 
to ensure the proper use of state resources and other property. 
Batyr Polatov, head of the International Project Analysis 
Department, described the structure of organization and its three 
functional departments for oversight of: implementation of financial 
and economic activities, including managing natural resource, 
insurance and banking activities; implementation of budget 
activities, including income, expenditure and state property; and 
international investment projects. 
 
¶10.  (U) Polatov and other Control Chamber staff showed interest in 
cooperation and noted that as a new organization, it can learn from 
the experience from similar organizations not only in the region 
(primarily Kazakhstan), but from more advanced countries. 
Department Head Serdar Charyyev asked for information on USAID's 
 
ASHGABAT 00000248  003 OF 003 
 
 
Human and Institutional Capacity Development project (HICD) in 
Kazakhstan and the audit standards for the U.S. Government 
Accountability Office.  (NOTE:  Prior to joining the Supreme 
Chamber, Mr. Charyyev briefly worked for a USAID implementing 
partner, and was responsible for developing its local economic 
development component.  Prior to that, he received a Master's in 
Public Administration from Columbia University and was an advisor to 
the Chairman of the Central Bank of Turkmenistan.  END NOTE.) 
Polatov said that the Chamber had not signed agreements for 
technical assistance with international organizations yet, but that 
it was receptive to cooperative activities after addressing ongoing 
organizational issues.  As a next step, USAID agreed to provide 
materials on its work with similar supreme audit institutions, as 
well as the HICD project.  The chamber agreed to develop and share a 
list of its priorities and potential areas of assistance in advance 
of Mr. Boyd's scheduled return visit in March 2008. 
 
¶11.  (SBU) COMMENT:   Technical assistance opportunities in 
Turkmenistan have been very limited in recent years, a situation 
which appears to be slowly changing thanks to the emergence of 
several new institutions.  Initial discussions during this visit 
were promising, with two new potential partners expressing interest 
in cooperation.  The seemingly old-school Institute for Strategic 
Planning and Economic Development expressed interest in receiving 
technical assistance and training support for its young staff and 
took the almost unprecedented step of calling USAID to ask how its 
staff might participate in training sessions organized under the 
EREC project.  Alternatively, the Supreme Regulatory Chamber's 
young, capable professionals were well-prepared for the meeting and 
were able to articulate clear interests for potential cooperation 
that will help it achieve its objectives.  During Boyd's next visit 
in March, he will be joined by representatives of the new EREC 
project to follow up on these initial discussions and identify 
specific areas of cooperation. 
 
¶12. (SBU) COMMENT CONTINUED:  That said, FY08 funding is limited. 
The current level of $0.258m for 4.1 Macroeconomic Foundation for 
Growth is below the government cost estimate for the project, which 
means that hard decisions regarding whom to work with will have to 
be made in the months following the contract's award.  Although 
current FY09 projections are more favorable, the potential demand 
for technical assistance appears to outstrip even these higher 
funding levels.  Additional resources will help build much-needed 
capacity in new institutions that are just being stood up under the 
leadership of President Berdimuhamedov and a few apparently 
reform-minded bureaucrats.  Building the necessary capacity to 
promote responsible stewardship of Turkmenistan's considerable 
natural-resource wealth is a long-term project that will require 
sustained U.S. engagement -- with expected additional inputs from a 
variety of donors -- for a long time to come.  END COMMENT. 
 
HOAGLAND