VZCZCXRO7753
PP RUEHAG RUEHAST RUEHBI RUEHCI RUEHDF RUEHIK RUEHLH RUEHLN RUEHLZ
RUEHPW RUEHROV RUEHVK RUEHYG
DE RUEHAH #0514/01 1160731
ZNR UUUUU ZZH
P 250731Z APR 08
FM AMEMBASSY ASHGABAT
TO RUEHC/SECSTATE WASHDC PRIORITY 0668
INFO RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE PRIORITY
RUCNCIS/CIS COLLECTIVE PRIORITY
RUCNMEM/EU MEMBER STATES COLLECTIVE PRIORITY
RUEHAK/AMEMBASSY ANKARA PRIORITY 3679
RUEHBJ/AMEMBASSY BEIJING PRIORITY 1497
RUEHKO/AMEMBASSY TOKYO PRIORITY 1364
RUEHIT/AMCONSUL ISTANBUL PRIORITY 1933
RUEKJCS/JOINT STAFF WASHDC PRIORITY
RHMFIUU/CDR USCENTCOM MACDILL AFB FL PRIORITY
RUEKJCS/SECDEF WASHDC PRIORITY
RUEAIIA/CIA WASHDC PRIORITY
RHEHNSC/NSC WASHDC PRIORITY
RHEFDIA/DIA WASHDC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RHEBAAA/DEPT OF ENERGY WASHDC PRIORITY

UNCLAS SECTION 01 OF 02 ASHGABAT 000514 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR SCA/CEN, EEB 
STATE PLEASE PASS TO USTDA DAN STEIN 
COMMERCE FOR HUEPER 
 
E.O. 12958: N/A 
TAGS: PGOV ECON EINV BEXP TX
SUBJECT: TURKMENISTAN: GOVERNMENT CONTINUES TO BUILD ELITE 
APARTMENTS DESPITE BEING UNAFFORDABLE FOR MOST CITIZENS 
 
REF: A) Ashgabat 0513, B) Ashgabat 1147 
 
¶1.  (U) Sensitive but unclassified.  Not for public Internet. 
 
¶2.  (U) SUMMARY:  At the April 14 Cabinet of Ministers session, 
President Berdimuhamedov approved $575 million in construction 
projects, including 1,764 elite apartments that must be completed by 
February 2010.  Although the president is not satisfied with the 
work of many of the Turkish construction companies (Ref. A), he 
continues to award them contracts.  Elite apartments are not 
affordable for the average citizen even with 50-70 percent 
discounts.  Furthermore, the rising price of an elite apartment is 
having a significant impact on the price of an ordinary apartment. 
A new mortgage program endorsed by the government offers favorable 
terms, but people are skeptical.  END SUMMARY. 
 
TURKISH COMPANIES NEED TO GET THEIR ACT TOGETHER 
 
¶3.  (SBU) The construction sector was one of the main topics on the 
agenda of the April 14 Cabinet of Ministers meeting, during which 
the President expressed dissatisfaction with the performance of some 
construction companies.  He stated that some companies "commit 
wrongdoings and carry out low quality work."  (NOTE: Corruption is 
widespread for foreign construction companies working in 
Turkmenistan.  This is true from applying for a tender, to winning 
it, and executing the project -- regardless of what type it is -- 
and finally, to turning it over to the government.  END NOTE.) 
 
¶4.  (U)  Deputy Chairman of the Cabinet of Ministers for 
Construction Nazarguly Shaguliyev specifically named nine Turkish 
companies that were placed on a "blacklist," including Delta, MACC, 
and Sece Inshaat.  These companies allegedly violated contractual 
commitments related to quality and missed deadlines for project 
completion.  The president, in addition to once again urging all 
construction companies to deliver high quality work on time, 
instructed Turkmen officials not to issue licenses or award 
contracts to foreign companies that do not have capital. 
Berdimuhamedov said in the meeting that some of these companies "do 
not have their own operating assets," and this was the cause of many 
problems. 
 
POLIMEKS CONTINUES TO RISE 
 
¶5.  (U) During the meeting, President Berdimuhamedov also endorsed 
35 construction projects worth a total of $575 million.  The 
projects include "elite" apartment buildings, schools, 
kindergartens, and shopping centers.  Despite his discontent and 
criticism of Turkish companies, all thirty-five projects were 
nevertheless awarded to Turkish companies, except for one that he 
awarded to a Russian company.  (NOTE: One project, an $18 million, 
12-story building with 72 apartments, was awarded to Sece Inshaat, 
one of the companies on the "blacklist."  END NOTE.)  In addition, 
the heads of three "exemplary" Turkish companies -- Polimeks, Engin 
Group, and Erku -- publicly thanked the president for his trust and 
assured him of their honor and willingness to actively participate 
in the socio-economic development of Turkmenistan.  Polimeks, which 
has been winning a number of large projects of late (reftel), once 
again came out a winner, with yet another large scale project -- a 
137 million Euro television tower. 
 
ELITE APARTMENTS -- NOT FOR EVERYBODY 
 
¶6.  (SBU) Many Turkmen citizens were surprised by the president's 
announcement that an additional 1,764 elite apartments would be 
built in Ashgabat by February 2010.  (NOTE: Only those who are 
official residents of Ashgabat - a fact noted in their passports -- 
are allowed to buy these apartments.  END NOTE.)  The late 
president, Niyazov, had a vision that ministries and other 
government agencies would construct elite apartments with "increased 
comfort and improved design" for their employees.  He created this 
program in 2000 to fill Ashgabat with the white marble buildings he 
 
ASHGABAT 00000514  002 OF 002 
 
 
considered beautiful as well as offer incentives to government 
employees.  An employee who has worked for five or more years at a 
ministry is entitled to purchase an elite apartment at a discount of 
50-70 percent (Ref. B). 
 
¶7.  (SBU)  However, in actuality, very few employees actually 
receive the discount.  An Oil and Gas Ministry employee recently 
said that she has been working for 14 years and has been on the list 
for an elite apartment for the last eight years.  "Every year, when 
the committee that decides who gets an apartment in a new building 
convenes, they bypass me, because I don't pay the 'shapka,'" she 
said.  (NOTE:  A shapka is an ad-hoc bribe, at a fixed price ranging 
from $10,000-$20,000, that one has to pay just to get on a "list." 
END NOTE.) 
 
WHY AN ELITE APARTMENT? 
 
¶8.  (SBU) An elite apartment offers luxury and security, and has a 
western-style layout and design.  Most have more than one bathroom, 
a luxury worth noting since several siblings and their individual 
households often live under one roof.  An elite apartment also 
provides security, because those buildings are not susceptible to 
government demolition for "urban renewal," unlike old Soviet-era 
apartments. 
 
¶9.  (SBU)  Finally, elite apartments are perceived as good 
investments, because the prices of elite apartments have more than 
quadrupled in the last three to four years.  A post contact, who 
acquired an elite apartment in the southern part of the city for 
$30,000 in 2003, said that his apartment is now worth at least 
$130,000.  Many people -- especially those who do not currently own 
property, but who would like to -- are concerned that the price for 
elite apartments has skyrocketed and continues to do so.  This also 
may be affecting the housing market in general, especially the price 
of ordinary, Soviet-style apartments.  For example, two-bedroom 
apartments that cost $15,000-$20,000 last year, now sell for 
$25,000-$35,000. 
 
MORTGAGE DECREE NOT CREATING MORE HOMEOWNERS SO FAR 
 
¶10.  (U) At the beginning of 2008, President Berdimuhamedov signed a 
decree authorizing President Bank, which is a state commercial bank 
and allowed to earn a profit from mortgage loans, to provide a new 
mortgage program to Ashgabat residents who want to purchase an elite 
apartment.  The provisions include a one percent interest rate, a 
down payment that has dropped from 30 to 10 percent, and a mortgage 
term that has been extended from 15 to 30 years.  In addition, 
interest will not be charged on the principal for the first five 
years.  A senior employee of President Bank said that, as long as 
all the paperwork is in order, ordinary citizens should have no 
problem obtaining a mortgage.  Rumors are circulating, however, that 
the government primarily established the new mortgage program to 
demonstrate to observers that it is making progress on fair housing 
issues. 
 
¶11.  (SBU) COMMENT: Prices of elite apartments are simply not 
affordable for the average citizen, who typically earns about $100 
per month.  Instead of building lavish, marble-coated elite 
apartment buildings, the government should focus some of its energy 
on building apartments the average person can actually afford.  END 
COMMENT. 
 
CURRAN