TURKMENISTAN: PRESIDENT SHAKES UP HIS ECONOMIC

UNCLAS SECTION 01 OF 04 ASHGABAT 001230

SIPDIS

SENSITIVE
SIPDIS

STATE FOR SCA/CEN, EEB

E.O. 12958: N/A
TAGS: PGOV PINR ECON EFIN EAGR ETRD SCUL TX
SUBJECT: TURKMENISTAN: PRESIDENT SHAKES UP HIS ECONOMIC
MANAGERS; UNOFFICIAL EXCHANGE RATE PLUNGES

REF: ASHGABAT 1124


1. (U) Sensitive but unclassified. Not for public Internet.


2. (SBU) SUMMARY: During a November 12 session of the
Cabinet of Ministers held less than a week after his return
from Brussels, President Berdimuhamedov renamed the Ministry
of Trade and Consumer Cooperation the Ministry of Trade and
Foreign Economic Relations, and cleared out a number of
economic and some educational non-performers in his
administration in a lengthy cabinet meeting on November 12.
He also removed two provincial governors, allowed a third to
resign for health reasons, and put the remaining two on
notice that their performance had also been below par. He
also called on Turkmenistan's financial bodies to pull
together a plan within ten days to unify the currency rate by

2009. On November 14, the unofficial exchange rate began to
collapse (see para 15 below). Berdimuhamedov seems to be
acting in parallel, by his own lights, to what he has
recently heard in New York and Brussels, and seems to be
attempting to put some substance behind assurances that the
foreign investment climate will improve. END SUMMARY.


3. (SBU) During an expanded Cabinet of Ministers meeting on
November 12, President Berdimuhamedov announced a multitude
of firings on the local, provincial, and national level for
shortcomings on the job. In addition, the Ministry of Trade
and Consumer Cooperation was renamed the Ministry of Trade
and Foreign Economic Activity. Deputy Minister of Economy
and Finance Tuvakmament Japarov, a frequent Embassy
interlocutor, was appointed Chairman of the Supreme Auditing
Chamber. Berdimuhamedov announced that the dual exchange
rate must be unified by 2009 and declared there would soon be
a ten percent salary increase for all state employees.

ANNOUNCMENTS RELATED TO ECONOMIC SECTOR


4. (SBU) Berdimuhamedov named Nokerguly Atagulyev, head of
the Food Industry Association, the new Minister of the
Ministry of Trade and Foreign Economic Activity. Previously
known as the Ministry of Trade and Consumer Cooperation, this
ministry's new name reflects a greater emphasis on
coordinating all foreign economic transactions, including
investment activities. Berdimuhamedov gave former minister
Gurban Melekeev a gracious exit by thanking him for his hard
work and awarding him with the "For Love to His Motherland"
order. His dismissal is seen not as a firing, but as a way
to make room for a younger and more capable performer who
will be able to make the changes that need to be made.


5. (SBU) Berdimuhamedov also announced the appointment of
Hojamuhammet Muhammedov, former Director of the Supreme
Control Chamber, to the post of Deputy Chairman of the
Cabinet of Ministers for trade and commerce issues. This
extensive portfolio also includes economy, finance, textiles,
and agriculture. Deputy Minister of Economy and Finance
Tuvakmamemt Japarov was appointed Chairman of the Supreme
Auditing Chamber. (NOTE: Embassy officers have often met
with Japarov at MOEF meetings and found him engaged and
open-minded. END NOTE.)

DUAL EXCHANGE RATE: IT'S TIME TO GO AWAY


6. (SBU) Berdimuhamedov stated that Turkmenistan is losing
too much money as a result of its dual currency exchange
rate. He tasked Central Bank (CBT) Chairman Geldimyrat
Abylov and Minister of Economy and Finance Hojamyrat
Geldimyradov to prepare a plan within ten days for fully
implementing a unified exchange rate by the time
Turkmenistan's new currency is circulated in 2009 (reftel).

ASHGABAT 00001230 002 OF 004


He also announced a ten percent salary increase for all state
employees, effective January 1, 2008, although teachers are
exempt from this raise since they just received raises in
September.

SHUFFLES LINKED TO SHORTCOMINGS IN AGRICULTURE SECTOR


7. (SBU) Berdimuhamedov announced several demotions and
appointments primarily on the provincial and local level.
While he did not directly link these dismissals to
shortcomings in the agricultural sector, they seem to reflect
a dissatisfaction with this year's cotton harvest.

-- Governor of Ahal province Gurbanberdi Orazmyradov was
demoted. In announcing his decision, Berdimuhamedov said
that Orazmyradov had not made any improvements in Ahal during
his tenure. Mayor of Dashoguz City Mammetniyaz Nurmammedov
was named the new governor. Berdimuhamedov acknowledged
inflated statistics, and announced that the General
Procurator's Office is investigating an unspecified situation
in Ahal province. Berdimuhamedov also referred to a
videotape that proves that the farmers did not receive
necessary support.

-- Governor of Mary province Muhammet Gurbannazarov was
demoted. Mary City Mayor Kakageldi Gurbanov was named new
governor.

-- The governor of Lebap province, Tagaymyrat Mammedov, was
allowed to resign for health reasons. Charyyar Odeberdiyev
was appointed governor of Lebap province.

-- Chairman of Dayhanbank Tumar Mammedov was fired.
Berdimuhamedov criticized him and Central Bank Chairman
Abylov for not paying farmers on a timely basis. Rejepgeldi
Sopyev was appointed the new chairman.

-- Livestock Association Chairman Atanazar Bayramlyev was
fired. Berdimuhamedov mentioned his connection to
construction of an apartment building that lacked an elevator
and heating, from which he financially benefited.

CHANGES TO PAYMENT STRUCTURE FOR AND MARKETING OF COTTON


8. (SBU) Berdimuhamedov stated that entities should properly
compensate farmers, since the farmers are doing the hard
work. The Stock Exchange sells cotton for hard currency, and
therefore, half of all payments to cotton farmers should be
made in foreign currency. Dayhanbank will extend credit to a
new sales organization that will pay farmers immediately for
crops.

CHANGES IN LEADERSHIP OF EDUCATION INSTITUTIONS


9. (SBU) Noting the need for rapid reforms in education,
Berdimuhamedov also announced dismissals and appointments in
higher education:

-- The Rector of the Turkmen Polytechnical Institute,
Gurbanberdi Garyagdyev, was dismissed due to poor health, and
is replaced by Yaza Mowlamov.

-- The Rector of the Turkmen Agricultural University,
Annaberdi Mammedov, was dismissed due to poor health, and is
replaced by Gurbandurdy Mammetgulyev.

-- The Rector of Turkmen State University, Ashyrgeldi
Gulgarayev, was dismissed for poor management of the
institution. Berdimuhamedov noted his youth and lack of
experience. Rector of the Asadi Institute of World Languages

ASHGABAT 00001230 003 OF 004


Charyyar Tugyev was appointed the new rector. Until February
2007, Gulgarayev was also Minister of Justice.

CABINET OF MINISTERS TO REVIEW ELEVEN MONTHS OF
BERDIMUHAMEDOV; MORE SHUFFLES PROBABLE


10. (SBU) In ten days, the Cabinet of Ministers will review
the first 11 months of Berdimuhamedov's administration. The
Cabinet will also review the performance of the Deputy
Chairman for Industry and Communications Gurbannazar Ashyrov
and the Deputy Chairman for Education Hydyr Saparlyev, who
Berdimuhamedov criticized specifically for the slow pace of
reforms. Berdimuhamedov did not give the floor to Ashyrov at
this meeting.

BIOGRAPHIES


11. (SBU) Minister of Trade and Foreign Economic Relations
Nokerguly Atagulyev was born in 1964 in Gokdepe, Ahal
province. He graduated in 1995 from Turkmen Agricultural
University with a degree in economics. He was chairman of
the Food Industry of Turkmenistan from October 2006 to
November 2007. From 1998, he held various positions
including Acting General Director and Deputy General Director
of the Mary Sugar Joint-Stock Company, and Senior Accountant
at the Serdar Joint-Stock Company.


12. (SBU) Chairman of the Supreme Auditing Chamber
Tuwakmammed Japarov was born in 1966 in Bereket, Balkan
province. He graduated from Turkmen Polytechnic Institute in
1993 with a degree in mechanical engineering. From February
to November 2007, he held the position of Deputy Minister of
Economy and Finance. From 1999 to 2005 he was a Chief
Specialist at the Cabinet of Ministers, working with the
Ministry of Economy and Finance and the State Tax Service on
Income and expenditure issues of the state budget.


13. (SBU) Deputy Chairman of the Cabinet of Ministers for
Economy, Finance, Textiles, and Agriculture Hojamuhammet
Muhammedov was born in 1966 in Ashgabat. He graduated from
the Turkmen Institute of National Economy in 1993 with a
degree in economics. From July to November 2007, he was
Chairman of the Supreme Auditing Chamber. From January to
July 2007, he was Chairman of the State Commodity and Raw
Materials Exchange. From September 2005 to January 2006, he
was Deputy Chairman of the State Commodity and Raw Materials
Exchange. From 1998-2005, Muhammedov was Director of the
Gulistan trade center, otherwise known as Russian Bazaar in
Ashgabat.


14. (SBU) COMMENT: By declaring how officials violated the
public trust at their firing, Berdimuhamedov is continuing
his fight against corruption. While the stated intentions to
compensate farmers more fairly, to improve education, and to
implement currency reform are good news, we await further
developments -- and results -- in these areas. But the very
fact that Berdimuhamedov is making these changes indicates a
wish on his part to follow through on promises that
Turkmenistan's foreign investment climate will improve. Hias
moves required a degree of political bravery, since currency
reform, in particular, will break some iron rice bowls and
cause some social disruption (reftel).


15. (SBU) COMMENT CONTINUED: The few who are paid in hard
currency -- employees of foreign missions, international
organizations, and foreign companies -- will be hurt in the
short term as the value of their paychecks is virtually cut
in half, if as projected the united exchange rate meets in
the middle of 5,000 and 23,600. (NOTE: On November 14, the
unofficial exchange rate began collapsing precipitously. At

ASHGABAT 00001230 004 OF 004


noon, it was 21,000 to the dollar. By 1400 hours, it had
plunged to 19,000. According to street rumor, the rate was
expected to hover at 15,000 by the end of the business day.
It is too early to speculate why this is happening, although
some observers have long suspected the Central Bank actually
controls the unofficial rate. END NOTE.) Those who have not
yet realized the potential effects of exchange rate
unification almost certainly will do so when food prices --
many of which already are higher than a year ago -- rise even
more steeply. Right now, those who understand the inevitable
economic changes are buying goods such as automobiles, real
estate, and gold. END COMMENT.
HOAGLAND