CENTRAL BANK OF TURKMENISTAN OPEN TO RENEWED U.S.

UNCLAS SECTION 01 OF 02 ASHGABAT 000757

SIPDIS

SIPDIS

SENSITIVE

STATE FOR SCA/CEN, EUR/ACE, EEB

E.O. 12958: N/A
TAGS: PREL PGOV EAGR ECON EAID EFIN TX
SUBJECT: CENTRAL BANK OF TURKMENISTAN OPEN TO RENEWED U.S.
ASSISTANCE AND COOPERATION ACROSS BANKING SPECTRUM



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

SUMMARY


2. (SBU) During a July 23 meeting with USAID Deputy Assistant
Administrator Drew Luten, the Central Bank of Turkmenistan indicated
openness to assistance from the United States for the first time in
two years. Assistance ceased more than two years ago following the
dismissal of the bank's former chairwoman. Despite current Chairman
Geldimyrat Abylov's absence at this most recent meeting, Deputy
Chairman Dovlet Akhadov and several department heads shared the
bank's short-, medium-, and long-term priorities, and how and where
USAID's assistance would be helpful. Areas for potential further
cooperation and assistance include: macroeconomic modeling,
international accounting standards, combating money laundering and
terrorism financing, banking supervision, monetary policies, and
credit and computer systems. END SUMMARY.

RECONFIRMING U.S. COMMITMENT TO TURKMENISTAN'S DEVELOPMENT


3. (SBU) Luten stressed that his delegation's purpose was to
reconfirm and also extend the U.S. commitment to Turkmenistan's
progress. Luten said the delegation hoped to learn the bank's
priorities for the next five years and longer. He also brought with
him an offer: USAID wants to help the Central Bank of Turkmenistan
(CBT) tackle issues of monetary management.

CENTRAL BANK'S RENEWED REQUEST FOR USAID ASSISTANCE


4. (SBU) CBT Monetary Department Director Gurbanbibi Atayeva said
the bank has been able to control the inflation rate in 2006 at
target levels and is providing credit services and assisting
privatization efforts in Turkmenistan. The bank previously had
USAID help on macroeconomic modeling and other issues. USAID had
also provided various training programs. CBT welcomed renewed
cooperation in modeling and would be pleased to participate in
additional training programs.

FIRST PRIORITY: INTERNATIONAL ACCOUNTING STANDARDS


5. (SBU) CBT Banking Supervision Department Director Halmurad
Orayev said the bank's first short- to medium-term priority was to
complete the transition to meeting international accounting
standards. CBT has already taken steps in that direction and
currently receives technical assistance from UNDP. (COMMENT:
Although an agreement has been signed, UNDP has limited funds and
has not yet provided any technical assistance. END COMMENT.) If
the bank wants additional training, Orayev said, it might apply for
USAID assistance if this process proceeds.

SECOND PRIORITY: COMBATING MONEY LAUNDERING AND TERRORISM FINANCING


6. (SBU) The second priority, said Orayev, is combating money
laundering and terrorism financing. CBT will be the principal
implementer of new legislation being developed on those fronts. In
preparation, the bank needs to improve its infrastructure and staff
training, which it began to do with the International Monetary Fund
but which requires more action. The bank has been working directly
with donors and countries that wanted to help. It was noted USAID's
Partners for Financial Stability (PFS) program may do seminars and
training relevant to this effort.

THIRD PRIORITY: BANKING SUPERVISION AND CAPITAL


7. (SBU) The Banking Supervision Department expressed doubt about
the sufficiency of capital in banks. The current level stands at 10
percent, said Orayev. The bank aspires to move from this Basel I
level toward Basel II. "To do this, we would really need assistance
from donors," he admitted, "and from your side."

LONGER-TERM PRIORITIES: FROM CREDIT TO COMPUTERS


ASHGABAT 00000757 002 OF 002



8. (SBU) CBT's longer-term priorities include strengthening
monetary policies, the credit system, and computer software.
Through credit, for example, the bank could better provide for
Turkmenistan's small- and medium-sized enterprises, agricultural
development, and housing loans for the general population. As with
more immediate priorities, Orayev again stated, "We would need
assistance from your side and other donors."

USAID: ADDITIONAL AREAS FOR COOPERATION?


9. (SBU) Luten observed that it seemed CBT is already very busy.
Maureen Dugan, USAID Director of the Europe and Eurasia Economic
Growth Office, hoped the two sides might nonetheless expand their
cooperation. The USG is interested in eventually introducing
international accounting standards into Turkmenistan's universities
to train more people. Additionally, USAID and CBT have an
opportunity to work on bank training and supervision through USAID's
PFS program.


10. (SBU) USAID/CAR Senior Economist Michael Boyd added that USAID
has experience establishing mechanisms to deal with a country's
natural resources whose use could have negative consequences for
that country. Boyd also told Orayev he'd like to help facilitate
cooperation between CBT personnel and their counterparts in
Kazakhstan, Azerbaijan, and the international community.

COMMENT


11. (SBU) With no prodding necessary, Central Bank of Turkmenistan
personnel present at the meeting -- including the deputy chairman --
mentioned areas of banking operations in which they not only would
like but also would need USAID assistance. That CBT asked for
renewed help across a broad spectrum of issues, that CBT more than
once praised past USAID trainings and other assistance, and that CBT
detailed steps already taken and results already achieved suggests
the bank seriously values the cooperation it previously enjoyed with
USAID and the future partnership that might develop. That said, it
remains to be seen how far this cooperation might go, given the
current CBT chairman's general lack of receptivity to assistance
from international donors. END COMMENT.


12. (U) DAA Luten has cleared this cable.

HOAGLAND