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

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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