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Identifier
Created
Classification
Origin
07ASHGABAT1308
2007-12-03 07:07:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Ashgabat
Cable title:  

TURKMENISTAN: CREEPING FORWARD ON BANKING REFORM

Tags:   PGOV  ECON  EFIN  TX 
pdf how-to read a cable
VZCZCXRO1635
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ZNR UUUUU ZZH
P 030707Z DEC 07
FM AMEMBASSY ASHGABAT
TO RUEHC/SECSTATE WASHDC PRIORITY 9820
INFO RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE
RUCNCIS/CIS COLLECTIVE
RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHAK/AMEMBASSY ANKARA 3074
RUEHBJ/AMEMBASSY BEIJING 0889
RUEHKO/AMEMBASSY TOKYO 0763
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RUEATRS/DEPT OF TREASURY WASHDC
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RUEAIIA/CIA WASHDC
RHEFDIA/DIA WASHDC
RUEKJCS/JOINT STAFF WASHDC
RUEKJCS/SECDEF WASHINGTON DC
RUEHVEN/USMISSION USOSCE 1968
						UNCLAS SECTION 01 OF 02 ASHGABAT 001308 

SIPDIS

SENSITIVE
SIPDIS

STATE FOR SCA/CEN, EEB
TREASURY FOR JEFFERY BAKER

E.O. 12958: N/A
TAGS: PGOV ECON EFIN TX
SUBJECT: TURKMENISTAN: CREEPING FORWARD ON BANKING REFORM

REF: A. ASHGABAT 1253

B. ASHGABAT 1230



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



2. (SBU) SUMMARY: At a meeting that President
Berdimuhamedov held with senior bank officials on November
28, Central Bank (CBT) Chairman Geldimyrat Abylov reported
that the CBT is continuing to study available options
regarding financial sector reform and reviewing current
international practices. Berdimuhamedov then fired the
chairmen of Halk Bank and Garagum Bank (both government
entities) and reiterated a previous directive to the Dayhan
Bank chairman to work out a better payment structure for
cotton farmers (Ref. A). The meeting also included
discussions related to uniting the dual exchange rates (Ref.
B). These discussions appear to be a step in the right
direction, but the minor proposals discussed thus far are
unlikely to have much impact. Closer technical cooperation
with international organizations, international financial
institutions, and foreign missions that would foster real
reform is still in a nascent stage. END SUMMARY.



3. (U) On November 28, President Berdimuhamedov held a
meeting with the country's bankers, banking regulators,
Minister of Economy and Finance Hojamyrat Geldimyradov, and
Director of the Institute of Strategic Planning and Economic
Development Ashyr Gubanguliyev. The president said that
banks should be in charge of bringing the country's financial
system in line with current economic reforms. Central Bank
(CBT) Chairman Geldimyrat Abylov reported that the CBT is
continuing to study international financial practices, and
that it is currently engaged in dialog with international
financial institutions.



4. (U) Berdimuhamedov fired the chairmen of Halk Bank and
Garagum Bank for incompetence, and appointed Gurbanmyrat
Begmyradov and Akmyrat Mammedov as the new chairmen
respectively. The president cited professionalism as the top
criteria for appointing top bank executives. Berdimuhamedov
instructed the Chairman of Dayhan Bank to work out a better
payment mechanism for cotton producers (Ref. A).



5. (U) The group discussed reform goals in the Turkmen
financial sector and options for determining the value of
ruble deposits that had been made before the introduction of
the manat. (NOTE: No other information was provided
regarding the nature of these deposits, but post assesses
that these were private deposits, left in place in 1993 in
the hope that the abysmal exchange rate would improve. It
did not. END NOTE.) Meeting participants also discussed
potential measures to unify the official and "market"
exchange rates (Ref. B). Berdimuhamedov ordered an increase
in the number of Automatic Teller Machines (ATMs) and asked
the banking sector to support private sector development by
issuing more loans. (NOTE: The only ATMs in Turkmenistan
support cards from Turkmen Bank and Vneshekonombank and are
used only for cash withdrawals in manat. END NOTE.)



6. (SBU) COMMENT: What appears to be another standard
meeting on the financial sector is chockablock with
commentary on Turkmenistan's leadership style and financial
management. It is astounding that 14 years after the
country's conversion to the manat, Turkmenistan has not yet
converted private ruble accounts to manat. Nevertheless,
international financial experts are likely pressuring
Turkmenistan's banks to resolve these old accounting issues
in order to bring the banks into conformance with
international banking standards. It will not be an easy or
painless task. The directive to install ATMs is not
surprising, as technology is absolutely a fad in
Turkmenistan. However, perhaps the government should focus
first on building peoples' trust in banks before taking the

ASHGABAT 00001308 002 OF 002


next higher step.



7. (SBU) COMMENT, CONTINUED: Overall, Turkmenistan's
approach to banking sector reform thus far has been very
tentative. While the fact that they are discussing it is
notable, the Turkmen government needs to make some concrete
decisions about how to work with experts from the many
international organizations, international financial
institutions, and foreign missions, establish a serious
timeline, and finally choose a path forward. END COMMENT.
CURRAN