VZCZCXRO2543
RR RUEHIK
DE RUEHAH #0077/01 0200536
ZNR UUUUU ZZH
R 200536Z JAN 10
FM AMEMBASSY ASHGABAT
TO RUEHC/SECSTATE WASHDC 4092
INFO RUCNCIS/CIS COLLECTIVE
RUCNMEM/EU MEMBER STATES COLLECTIVE
RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE
RHMCSUU/CDR USCENTCOM MACDILL AFB FL
RUEAIIA/CIA WASHDC
RHEFDIA/DIA WASHDC
RHEHNSC/NSC WASHDC
RUETIAA/NSA FORT MEADE MD
RUEKJCS/JOINT STAFF WASHDC
RUEKJCS/SECDEF WASHDC

UNCLAS SECTION 01 OF 02 ASHGABAT 000077 
 
SENSITIVE 
 
SIPDIS 
 
TATE FOR SCA/CEN, EUR/ACE, EEB 
AID/W FOR EE/EA 
 
E.O. 12958: N/A 
TAGS: PGOV PREL EAID TX
SUBJECT: TURKMEN COUNTERPARTS READY TO BROADEN ECONOMIC REFORM 
COOPERATION 
 
ASHGABAT 00000077  001.2 OF 002 
 
 
¶1.  (U) Sensitive but unclassified.  Not for public Internet. 
 
¶2.  (U) SUMMARY: During meetings on December 9-10, 2009 between 
USAID's Economic Reform to Enhance Competitiveness (EREC) Chief of 
Party and officials from the Institute for Strategic Planning and 
Economic Development (ISPED) and the Ministry of Economy and 
Development (MOED), USAID was asked to expand its cooperation in 
support of Turkmenistan's ongoing economic reforms.  Recent EREC 
activities supported the drafting of the Private Sector Development 
Concept Paper, and trainings on econometrics and macroeconomic 
forecasting.  The growing relationship indicates increasing 
confidence in the USG's ability to deliver quality assistance in 
response to the country's priorities.  The ISPED director's desire 
to move from training to application reflects the still-limited 
capacity of fledgling government institutions and highlights the 
importance of continued engagement.  END SUMMARY. 
 
ECONOMIC RESEARCH INSTITUTION GRATEFUL FOR USAID ASSISTANCE 
 
¶3.  (U) The December 9, 2009, meeting with the Institute for 
Strategic Planning and Economic Development (ISPED) started with a 
summary of USAID/EREC's joint activities in 2009.  The project's 
work included assistance with preparing the Private Sector 
Development Concept Paper, trainings on econometrics, macroeconomic 
forecasting, and English language. 
 
¶4.  (U) The ISPED director expressed his gratitude for USAID/EREC's 
continued support, and acknowledged the project's close cooperation 
with ISPED, Ministry of Economy and Development (MOED), and Union of 
Entrepreneurs and Industrialists in identifying and developing six 
directions in the Private Sector Development (PSD) program.  After 
reviewing the project's inputs, ISPED and the Ministry of Economy 
and Development (MOED) added two more directions before submitting 
the final version to the Cabinet of Ministers for consideration.  He 
also acknowledged that the August 2009 law for state support of 
private business contained some of the recommendations outlined in 
the PSD program paper. 
 
¶5.  (U) He then described ISPED's role in the government structure, 
noting that it is subordinate to the Cabinet of Ministers and works 
under short term (i.e., 3-6 month) plans as well as longer term 
objectives to promote economic growth of Turkmenistan.  He said it 
was the only institute in the country that deals with monitoring, 
forecasting, economic modeling, research and analysis of 
Turkmenistan's economy. 
 
COOPERATION ON APPLICATION OF KNOWLEDGE WELCOMED 
 
¶6.  (SBU) Looking to the first quarter of 2010, the director 
identified several areas where USAID/EREC's assistance would be 
particularly welcome.  Specifically, he mentioned creation of 
business incubators, techno-parks, and other innovations that might 
be helpful to promote growth of the private sector.  He said that a 
new private sector support law will be implemented by a state 
commission led by the Cabinet of Ministers, and that they would 
likely welcome assistance in that area as well.  Although ISPED 
staff already received training on econometrics, the next step 
should be actual application of the new knowledge by jointly 
analyzing a specific branch of industry. 
 
¶7. (U) With regard to ISPED's broader mandate, the director 
suggested that USAID projects should focus not only on small and 
medium enterprise (SME) development.  No developed economies rely on 
small scale production, and Turkmenistan also intends to increase 
the efficiency of its large industries.  Turkmenistan's objective is 
to create a mixed economy composed of both SMEs and large 
corporations.  Where natural monopoly exists, the government will 
retain this monopoly, but other industries can be developed. 
Economic growth can be achieved through processing in the country. 
For example, natural gas can be liquefied and oil can be processed 
into valued-added end products.  Likewise, to support the 
construction industry, more cement is now produced locally in place 
of imports, and the same was possible for marble materials or 
chemical paints.  In agriculture, there was good potential to 
promote exports of Turkmen melons to outside markets. 
 
MINISTRY SEEKS BROADER COOPERATION IN ECONOMIC SECTOR 
 
ASHGABAT 00000077  002.2 OF 002 
 
 
 
¶8.  (U) In a December 10, 2009, meeting with Deputy Minister of 
Economy and Development Akmurad Mamedov and the Foreign Economic 
Relations and Licensing Departments heads, the Deputy Minister first 
thanked USAID/EREC for assistance in 2009 on Private Sector 
Development (PSD) strategy, econometrics trainings, Private-Public 
Partnership (PPP) development, and selection and monitoring of 
public investment programs.  Once the Cabinet of Ministers approves 
the PSD program, USAID/EREC's assistance will be needed to implement 
the strategy.  Continuing, he described the current process of 
improving private sector climate, in terms of liberalized 
legislation, tax breaks, low interest credits, simplified custom 
procedures, access to foreign currency and improvements in currency 
conversion after unification of the exchange rate. 
 
¶9. (U) The Deputy Minister welcomed further assistance in terms of 
learning about the experience of other countries in supporting 
private sector growth, especially Kazakhstan.  He suggested 
opportunities to learn about the experience of other countries in 
PPP selection, monitoring, evaluation and implementation.  This 
assistance was needed due to Turkmenistan's desire to move ahead 
with greater government contracts with local private sector firms, 
like in construction sphere. 
 
¶10.  (U) The Licensing Department Head stated that support for 
Turkmenistan's SME sector has gone beyond its initial stage.  There 
were already a large number of SMEs, a sign that the private was 
ready for the next stage of development.  As a result, the ministry 
now faced the transition situation that other countries had already 
passed through.  Offers by USAID/EREC to conduct study tours geared 
toward objectives of the PSD paper were timely and most needed.  The 
ministry needed to see business incubators and free economic zones 
in other countries, and how they have been implemented in other 
countries.  Training on evaluation of public investment programs was 
also in demand.  Future capacity building activities should focus on 
market-oriented tools for assessing real estate, brand names, and 
business evaluation, among others. 
 
¶11.  (SBU) COMMENT: Apart from their non-credible assertions that 
Turkmenistan's SME sector had progressed beyond initial stages, the 
GOTX interlocutors appeared to deliver a coordinated message on the 
future role of SMEs in Turkmenistan.  They were also consistent in 
welcoming expanded USG support to achieve their objectives.  As part 
of the government's increasing openness to learn from other 
countries' experience in economic transition, Kazakhstan continues 
to appear as an attractive example for Turkmenistan.  The ISPED 
director's desire to move from training to application reflects the 
still-limited capacity of fledgling institutions like ISPED and 
highlights the importance of continued USG engagement.  USAID's 
regional economic program is well-positioned to address these needs 
until its projected conclusion in February 2011. 
 
¶12.  (SBU) COMMENT CONTINUED: USAID/EREC has already submitted draft 
action plans based on these discussions for review by ISPED and 
MOED.  As noted above, the current USAID/EREC project runs through 
February 2011, and existing funding will allow the project to 
respond to planned activities.  As options for future programming 
are considered, it is expected that increased funding will be 
necessary to fully capitalize on these opportunities, each of which 
support the stated USG priority of promoting introduction of basic 
market reforms to move Turkmenistan toward greater integration with 
the region.  END COMMENT. 
 
CURRAN