TURKISH EMBASSY WANTS BETTER INVESTMENT CLIMATE IN

C O N F I D E N T I A L SECTION 01 OF 02 DUSHANBE 001067 SIPDIS SIPDIS STATE FOR SCA/CEN, EUR/SE, EB E.O. 12958: DECL: 6/2/2016 TAGS: PGOV PREL ECON ENRG EINV EAID TI TU SUBJECT: TURKISH EMBASSY WANTS BETTER INVESTMENT CLIMATE IN TAJIKISTAN CLASSIFIED BY: Richard Hoagland, Ambassador, US Embassy Dushanbe, State. REASON: 1.4 (d) ¶1. (C) Turkey supports U.S. efforts to develop Tajikistan's energy sector and other infrastructure projects, but Turkish Embassy Chargi d' Affaires Askin Cakmak suggested that for those projects to succeed, donor countries need to send the Tajik government a strong message to improve the investment climate. Cakmak requested a June 6 meeting with PolOff to discuss U.S. policy and areas where Turkey and the United States might cooperate in Tajikistan. The upcoming U.S.-sponsored "Energy Without Borders" conference in Istanbul could stimulate international interest in Tajikistan's energy projects, but he cautioned that without a transparent business environment, most investors would not commit. "If there are no guarantees for investors, it is meaningless to invest," he stated. ¶2. (C) Cakmak highlighted the frustration Turkish construction businesses experienced in Tajikistan. Bribes were high, inspections frequent, tax exemptions for imported equipment not honored and investments not guaranteed. Even Oyak, the company that successfully -- and profitably -- repaved a long stretch of road along the Afghan border, was tired of working in Tajikistan, and would not seek more projects here. Enka, the Turkish company building the Dushanbe Hyatt for Russian Hotels (a sister company to Russian Aluminum giant RusAl),had experienced significant problems importing construction equipment, despite existing tax and customs exemptions for foreign investors. The Tajik government, he said, is "keen to attract foreign investment, but they do nothing to protect investors." Tajik partners, required by law for foreign investors, often take advantage of this situation. ¶3. (C) No Turkish companies plan to develop any of Tajikistan's hydropower projects, because the Tajik government could not guarantee financing. However, they may be willing to subcontract on some projects backed by international partners. Cakmak suggested Turkish firms would be interested in working with U.S. partners on infrastructure projects in the region. Turkey currently has about $20 million in direct investments, in hotels and a business center. A $75 million textile project is also in the works. ¶4. (C) Turkish Airlines' attempts to get more flights to Dushanbe further highlighted the Tajik's "small mindedness" and the difficulties for successful international businesses in Tajikistan. Since February, when Turkish Airlines inaugurated a weekly flight between Dushanbe and Istanbul (much to the delight of the international community),Turkish Airlines has flown at 100 percent capacity. "You can't get a seat for a month," Cakmak said of the unexpectedly profitable flight. Turkish Airlines requested additional days, and offered Tajikistan State Airlines (TSA) additional routes, but the Tajiks refused on both accounts. "TSA cannot support more than one flight a week to Europe," said Cakmak, noting TSA had recently consolidated its weekly Dushanbe-Munich and Dushanbe-Istanbul flights into a weekly Dushanbe-Istanbul-Munich-Istanbul-Dushanbe milk run. "We'd give them the right to fly to Istanbul every day, but because we are profitable and they are not, they refuse." ¶5. (C) Cakmak reported Turkey grants only small amounts of technical assistance and humanitarian aid, but agreed that as a secular Islamic democracy, Turkey could be an example to Tajikistan. He suggested Turkey should identify areas where they could provide Tajiks with training, possibly in civil society support. The U.S. regional priorities - particularly security and economic development - match Turkey's. As he noted, "We are in cooperation, not in competition here." He closed the meeting by reiterating his opening comment: International donors at the Istanbul conference must insist on a DUSHANBE 00001067 002 OF 002 better business environment. ¶6. (SBU) COMMENT: Considering that Turkish companies operate with relative success and ease in Tajikistan, Cakmak's sharp comments about Tajikistan's poor business environment came as a surprising indictment. If Tajikistan plays its cards right, it could attract much investment from Turkey, which would make it even more attractive to players outside the region. However, if Turkish companies decide the climate is too corrupt for them to operate, Tajikistan has little chance of truly developing its economy. END COMMENT. HOAGLAND