DOING BUSINESS IN TURKMENISTAN

C O N F I D E N T I A L SECTION 01 OF 02 ASHGABAT 000217

SIPDIS

SIPDIS

STATE FOR SCA/CEN, EEB

E.O. 12958: DECL: 02/11/2018
TAGS: PREL PGOV ECON KCOR TX
SUBJECT: DOING BUSINESS IN TURKMENISTAN

Classified By: CDA RICHARD E. HOAGLAND: 1.4 (B),(D)


1. (C) SUMMARY: A resident American businessman explained
how he is able to navigate the local business culture, where
paying bribes and corruption are endemic. The only way he is
able to avoid paying bribes and still do business is to work
with another foreign company (usually Turkish) as lead on a
project and "not ask questions." Despite the challenge
corruption poses, the businessman is hopeful that he can
successfully compete for several multi-million dollar
projects dealing with desalination, sewage treatment, and oil
cleanup. END SUMMARY.


2. (SBU) An Amcit businessman told EmbOff on February 6
that he was hopeful about making a go of it in Turkmenistan
as the country opens up more to foreign businesses. Already
in the country for several years, he had not bothered to
register his natural resource and environmental management
firm, Resource Analytics, until recently. Given the small
volume of business, it made more sense to operate under the
radar. Now that the company was pursuing several
multi-million dollar commercial projects "in a big way,"
registration was a necessity. And he chose to register the
company not as a joint venture (which it is not) or as a
branch or representative office as most foreigners would, but
as a local sole-proprietorship. He chose this path, because
it would make it easier to do business in manat (the local
currency),rent offices, and it also streamlines the
registration process and dealings with the government. He
decided not to register as a Turkmenistan invested
corporation, because it would have necessitated bringing on a
Turkmen partner (which he did not want to do),and would have
required him to commit to a sizable investment in the
country. One advantage of an invested corporation is that it
allows companies to open branches around the country, which
the businessman said a number of Chinese companies have done.
Our contact said he had no intention of opening branch
offices, however.


3. (SBU) While it is not required to work through an agent
for registration, the businessman decided to do so. He said
he was lucky to have found someone who doesn't pay bribes and
is very competent. At the same time, however, she is
extremely busy. He said others have chosen to hire agents
who charge as much as $15,000 and promise registration within
weeks. However, he said, foreign companies that opt for
quick registration, often end up regretting it as soon as it
is time for the company's re-registration two years later.
For example, one acquaintance of the businessman paid for
quick registration and found that he had lots of problems to
untangle when it was time to re-register.


4. (C) While he does not have a local partner, the
businessman said he prefers bidding for jobs with other
foreign (often Turkish) companies as the lead. He said the
only way to get business is to pay kickbacks, which he
claimed he will not do. With the Turkish company as the
lead, they pay the kickback and he is still able to work. He
said he never asks how much or to whom. He said other
foreign companies get tripped up, because they expect or
demand that the Turkmen side pay within 30-45 days for
products or services. The businessman said the Turkish
companies are patient, work out deals, and are comfortable
waiting a year or more for full payment.


5. (SBU) Resource Analytics, which is the local distributor
of Water Engineered Technologies (WET),has been primarily a
turn-key contractor for water purification systems. The
company is currently working on a bid to provide drinking
water for Petronas and Dragon Oil on their platforms in the
Caspian. The company also supplies water treatment and
desalination technology. It is bidding on a desalination

ASHGABAT 00000217 002 OF 002


plant in Turkmenbashy, sewage treatment plants near the
future resort area of Avaza, Bayramaly, and Yolatan. In
addition, it hopes to bid on a water purification plant for
Yolatan that would pull potable water directly from the
Karakum canal. The businessman said his company recently
made a presentation to the Ministry of Oil and Gas Industry
on technology to clean up oil waste. He said the officials
who attended the presentation reacted favorably.


6. (C) COMMENT: While our contact seemed very hopeful about
business prospects, the corruption he mentioned does present
a serious obstacle to him and other American businesses. His
stance regarding paying bribes probably reflects his personal
convictions, but also, since he was speaking with an Embassy
official, recognition that such behavior is illegal for
American citizens. Nevertheless, he has found a practical
solution that allows him to do business and not run afoul of
U.S. law. END COMMENT.
HOAGLAND