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P 241306Z MAR 08
FM AMEMBASSY ASHGABAT
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UNCLAS SECTION 01 OF 02 ASHGABAT 000369 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR SCA/CEN, EEB 
PLEASE PASS TO USTDA DAN STEIN 
TREASURY FOR BAKER/LANIER 
ENERGY FOR EKIMOFF/THOMPSON 
 
E.O. 12958: N/A 
TAGS: PGOV EINV BTIO KIRF TX
SUBJECT:  TURKMENISTAN:  PRESIDENT SIGNS NEW LAW ON FOREIGN 
INVESTMENT 
 
¶1.  (U) Sensitive but unclassified.  Not for public Internet. 
 
¶2.  (SBU) SUMMARY:  Turkmenistan's President Gurbanguly 
Berdimuhamedov on March 17 unveiled a new government program 
to promote domestic entrepreneural development and foreign 
investment, including substantial changes to Turkmenistan's 
tax code and a new law on foreign investment.  While all 
documents will require substantial further analysis, the new 
law on foreign investment, which includes substantially 
broadened protections for foreign investors (including a 
simplified visa regime), seems to represent a genuine effort 
by the government to improve the foreign investment climate, 
although we believe it was drafted with relatively little 
foreign consultation and input.  END SUMMARY. 
 
¶3.  (U) During a cabinet meeting on the fringes of an 
entrepreneurial exhibit, Turkmenistan's President Gurbanguly 
Berdimuhamedov on March 17 announced that his government is 
embarking on a program to promote development of small and 
medium enterprises in Turkmenistan and improve the foreign 
investment climate.  The president announced he is requiring 
the Justice Ministry and other relevant government agencies 
to develop a new plan for promoting private business within 
30 days (septel).  On the same day, he signed a law making 
major revisions to Turkmenistan's tax code (septel) and a 
totally new law on foreign investment. 
 
NEW LAW ON FOREIGN INVESTMENT LONGER THAN PREVIOUS LAW 
 
¶4.  (U) The new law on foreign investment replaces an old law 
foreign investment law dating back to 1992.  Its six chapters 
and 30 articles greatly expand the previous law.  New 
additions in the definition of foreign investments include 
new references to (and protection for) intellectual property 
rights and rights for the results of intellectual activities, 
and also for services and information.  As in the previous 
law, foreign investors can include international 
organizations and foreign governments, as well as foreign 
juridical entities and foreign physical entities that are 
permanent residents in foreign countries at the time of 
investment.  The new law also states that any international 
agreements to which Turkmenistan is a party supercede the 
foreign investment law. 
 
NEW "COMPETENT BODIES" FOR NON-HYDROCARBON SECTORS 
 
¶5.  (U) The new law gives the Council of Ministers 
responsibility for development and realization f government 
policies for attracting foreign investment and for 
coordinating foreign investment activities on Turkmenistan's 
soil.  Drawing on the example provided by the State Agency 
for Management and Use of Hydrocarbon Resources, however, the 
law also creates a series of representative organs that will 
function as "competent bodies" for the day-to-day management 
of foreign investment.  These bodies will be tasked with 
developing measures to promote foreign investment, 
coordinating activities in the foreign investment sector 
(including formulating effective mechanisms for partnerships 
between the government and businesses), and assisting foreign 
investors with the process of meeting relevant officials, 
registering their investments, providing marketing 
information and consulting services.  These bodies will also 
monitor investment monies from international financial 
institutions and donor countries, study international capital 
markets and make suggestions to the Cabinet of Ministers for 
improving the investment climate.  All investment projects 
with foreign investment must be registered and approved by a 
body of experts. 
 
ASHGABAT 00000369  002 OF 002 
 
 
 
NEW, BROADER PROTECTIONS FOR INVESTORS 
 
¶6.  (U) In laying out the legal regime for foreign investment 
activities, the new law states that such activities may be 
limited only to the degree to which such limitations are 
required to protect the basis of Turkmenistan's constitution 
and security.  If there are changes in Turkmenistan's 
legislation that lead to new prohibitions or restrictions, 
the laws in effect at the time the investment was registered 
will continue to be applied for ten years. 
 
¶7.  (U) The new law gives enterprises with foreign 
investments and branch offices of foreign juridical entities 
the right to export their products and to import products for 
their own use.  Foreign investors are given special 
incentives in free economic zones, including the right to 
rent land under special terms, and fee-free services for 
themselves, their contractors and sub-contractors. 
Enterprises with foreign investment are given the right to 
set the conditions for selling all products where prices are 
not state-regulated.  The law also authorizes, in the 
interests of improving Turkmenistan's social-economic 
development, any other benefits needed to attract foreign 
investment. 
 
¶8.  (U) One of the areas of broadest difference between the 
new and old foreign investment laws is the substantially 
broader legal protections given to foreign investors under 
the new law.  New guarantees include the free use of wages 
and profit on the territory of Turkmenistan, including for 
re-investment, unblocked repatriation of wages, profit, and 
other legally received moneys in foreign currencies, the 
right to pass on contractual rights and financial obligations 
to other parties, a simplified visa regime (investors, their 
representatives and families working in Turkmenistan are 
guaranteed multi-entry visas for terms not less than one 
year), access to information, repayment for termination of 
investment activities and compensation for forced 
confiscation of property. 
 
¶9.  (U) The law states that trade disputes will be resolved 
through negotiation, in a Turkmen court of arbitration, or -- 
with the agreement of both sides -- in a third-party court. 
 
¶10.  (SBU) COMMENT:  The government has enacted this new law 
in response to growing pressure from foreign governments and 
businessmen to improve Turkmenistan's foreign investment 
climate.  At first glance, there seem to be a number of 
improvements, especially the guarantee of an eased visa 
regime, that represent a real effort to respond to the points 
of greatest contention.  However, post will follow up in the 
coming days with experts from international financial 
institutes and foreign businessmen to see how they view this 
new law.  EBRD and World Bank, for example, tell us they had 
very little input during the drafting.  END COMMENT. 
HOAGLAND