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