Identifier
Created
Classification
Origin
08ASHGABAT248
2008-02-15 13:03:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Ashgabat
Cable title:  

TURKMENISTAN: VISIT LAYS GROUNDWORK FOR UPCOMING USAID

Tags:  PGOV PREL ECON EAID TX 
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UNCLAS SECTION 01 OF 03 ASHGABAT 000248 

SIPDIS

SIPDIS

SENSITIVE

STATE FOR SCA/CEN, EUR/ACE, EEB
AID/W FOR EE/EA

E.O. 12958: N/A
TAGS: PGOV PREL ECON EAID TX
SUBJECT: TURKMENISTAN: VISIT LAYS GROUNDWORK FOR UPCOMING USAID
ECONOMIC REFORM PROJECT

REF: ASHGABAT 0230

UNCLAS SECTION 01 OF 03 ASHGABAT 000248

SIPDIS

SIPDIS

SENSITIVE

STATE FOR SCA/CEN, EUR/ACE, EEB
AID/W FOR EE/EA

E.O. 12958: N/A
TAGS: PGOV PREL ECON EAID TX
SUBJECT: TURKMENISTAN: VISIT LAYS GROUNDWORK FOR UPCOMING USAID
ECONOMIC REFORM PROJECT

REF: ASHGABAT 0230


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


2. (SBU) SUMMARY: On January 30-31, Almaty-based USAID/CAR Senior
Economist Michael Boyd met with several new economic institutions in
Turkmenistan to discuss potential cooperation with USAID's upcoming
Enhancing Reforms for Economic Competitiveness (EREC) project.
Staff from the Supreme Control Chamber, formed in July 2007 and now
headed by former First Deputy Minister of Economy and Finance
Tuwakmamet Jeparov, were receptive to cooperation, and asked for
more details on USAID's Human and Institutional Capacity Development
project in Kazakhstan. The Deputy Chairman of the Institute for
Strategic Planning and Economic Development outlined the
organization's expected functions and stressed the relative youth of
its staff and their need for training. The next day, one of the
participants in the meeting called USAID and asked how the Institute
could cooperate with USAID. The Parliament Deputy Chair and Social
and Economic Committee Chair expressed appreciation for the program
materials USAID previously provided and were receptive to proposals
for cooperation under EREC. As specific options for cooperation
with new economic institutions become better defined, limited FY08
funding will require a thorough review of the opportunities to avoid
overcommitting to receptive parties. END SUMMARY.

SEEKING NEW PARTNERS FOR UPCOMING ECONOMIC REFORM PROJECT


3. (U) USAID intends to award a three-year regional contract for
the Enhancing Reforms for Economic Competitiveness (EREC) project in
March 2008. Under this project, proposed activities will focus on
windows of opportunity linked to priority interests of the
Government of Turkmenistan, with particular possibilities to assist:
the Ministry of Finance to help strengthen implementation capacity
for budget development and planning, integrate planning and
execution of extra-budgetary funds and the public investment
program, strengthen program budget database management capacity,
revise budget classification to international best practices and

develop budget implementation procedures to support rural
development; assist the Central Bank of Turkmenistan (CBT) on
monetary policy tools and implementation, on strengthening
risk-based bank supervision, and possible support on aspects of
developing mortgage and other assets markets; help the
newly-established Institute for Strategic Planning and Economic
Development to strengthen capacity for development, review and
oversight of economic strategies and policy; and aid the Supreme
Regulatory Chamber to oversee public sector financial and economic
activities.


4. (U) After being told by Ministry of Economy and Finance for the
last year that it was waiting for EU-TACIS to launch its economic
program and following limited substantive engagement with the
Central Bank of Turkmenistan, USAID broadened its outreach in
pre-launch preparation for the EREC project to new economic
institutions. USAID/CAR Senior Economist Michael Boyd traveled to
Ashgabat on January 30-31 to explore cooperation with several
potential new partners, including the Supreme Regulatory Chamber and
the Institute for Strategic Planning and Economic Development.
(NOTE: The meetings took place just prior to the February 2
announcement that split the Ministry of Economy and Finance into
separate Ministry of Finance and Ministry of Economy and
Development. Reftel A. END NOTE.) He also met with the Parliamentary
Committee on Social and Economic Policy to discuss opportunities to
strengthen its capacity for development, review and oversight of
economic and fiscal legislation.

PARLIAMENT: RECEPTIVE, BUT NON-COMMITTAL


5. (U) Deputy Parliament Chair Kasim Babayev outlined the
accomplishments and future priorities of the Parliament as President
Berdimuhamedov approached one year in office. The June 2007 reforms

ASHGABAT 00000248 002 OF 003


were "just the beginning" of intended broader restructuring of the
agricultural sector. Through the new Rural Development Strategy,
the government intended to strengthen local organs of government and
raise the standards of living for rural inhabitants. Finally,
President Berdimuhamedov previously announced a $4 billion capital
investment program and already put money towards these projects, but
improvements in the legal framework for foreign investment, credit
and other areas were necessary to fully realize the intended scope.



6. (U) Babayev explained that he serves as head of a newly formed
state commission to gather inputs related to bringing local
legislation in line with international standards. Economic priority
areas included foreign investment, monetary policy and small and
medium enterprise development. Furthermore, many deputies traveled
in 2007 to study the experience of other countries. In response to
Boyd's question about the possibility of undertaking a Commercial
Legal and Institutional Reform diagnostic, which USAID has supported
in other post-Soviet countries, Babayev thanked Boyd for the
proposal and said that this type of study "may be useful." He also
said that the two sides could cooperate, and USAID should submit any
specific proposals to learn from international standards via the
Ministry of Foreign Affairs.

STRATEGIC PLANNING INSTITUTE: INTERESTED TO CHANGE OLD WAYS


7. (U) The Institute's Deputy Director, Muhammed Atayev, said that
its mission was to project areas for growth and state support based
on statistics. Specifically, President Berdimuhammedov ordered the
Institute to develop both short- and long-term plans in support of
the rural development program, since 80% of Turkmenistan is
considered rural. The Institute was developing these plans, which
will be improved each year. In addition, it was developing a
construction program for 2011-2015, which would also strengthen the
domestic construction industry, and provided analysis and concrete
proposals for state ministries and agencies covering, for example,
the transportation sector.


8. (U) Atayev said that the Institute had a staff of approximately
80 that is "experienced, but young." As a result, one challenge is
to improve its staff's qualifications. With regard to cooperation,
it aims to strengthen the scientific base for its work through joint
activities, but its work depends on the guidance provided by
Presidential decrees. If work is to be successful, this approach
must be followed. Noting that the Institute would "try to
participate" in joint activities under EREC, Atayev said that its
specialists were ready to learn from the experience of others that
have already made an economic transition, like Kazakhstan. The next
day, the Institute's financial department head, who was present in
the initial meeting, called USAID to inquire about how the Institute
should proceed in order to establish a relationship with USAID.

SUPREME CONTROL CHAMBER: COMPETENT YOUNG SPECIALISTS


9. (U) Turkmenistan's Supreme Control Chamber was established in
July 2007 to strengthen state control over financial activities and
to ensure the proper use of state resources and other property.
Batyr Polatov, head of the International Project Analysis
Department, described the structure of organization and its three
functional departments for oversight of: implementation of financial
and economic activities, including managing natural resource,
insurance and banking activities; implementation of budget
activities, including income, expenditure and state property; and
international investment projects.


10. (U) Polatov and other Control Chamber staff showed interest in
cooperation and noted that as a new organization, it can learn from
the experience from similar organizations not only in the region
(primarily Kazakhstan),but from more advanced countries.
Department Head Serdar Charyyev asked for information on USAID's

ASHGABAT 00000248 003 OF 003


Human and Institutional Capacity Development project (HICD) in
Kazakhstan and the audit standards for the U.S. Government
Accountability Office. (NOTE: Prior to joining the Supreme
Chamber, Mr. Charyyev briefly worked for a USAID implementing
partner, and was responsible for developing its local economic
development component. Prior to that, he received a Master's in
Public Administration from Columbia University and was an advisor to
the Chairman of the Central Bank of Turkmenistan. END NOTE.)
Polatov said that the Chamber had not signed agreements for
technical assistance with international organizations yet, but that
it was receptive to cooperative activities after addressing ongoing
organizational issues. As a next step, USAID agreed to provide
materials on its work with similar supreme audit institutions, as
well as the HICD project. The chamber agreed to develop and share a
list of its priorities and potential areas of assistance in advance
of Mr. Boyd's scheduled return visit in March 2008.


11. (SBU) COMMENT: Technical assistance opportunities in
Turkmenistan have been very limited in recent years, a situation
which appears to be slowly changing thanks to the emergence of
several new institutions. Initial discussions during this visit
were promising, with two new potential partners expressing interest
in cooperation. The seemingly old-school Institute for Strategic
Planning and Economic Development expressed interest in receiving
technical assistance and training support for its young staff and
took the almost unprecedented step of calling USAID to ask how its
staff might participate in training sessions organized under the
EREC project. Alternatively, the Supreme Regulatory Chamber's
young, capable professionals were well-prepared for the meeting and
were able to articulate clear interests for potential cooperation
that will help it achieve its objectives. During Boyd's next visit
in March, he will be joined by representatives of the new EREC
project to follow up on these initial discussions and identify
specific areas of cooperation.


12. (SBU) COMMENT CONTINUED: That said, FY08 funding is limited.
The current level of $0.258m for 4.1 Macroeconomic Foundation for
Growth is below the government cost estimate for the project, which
means that hard decisions regarding whom to work with will have to
be made in the months following the contract's award. Although
current FY09 projections are more favorable, the potential demand
for technical assistance appears to outstrip even these higher
funding levels. Additional resources will help build much-needed
capacity in new institutions that are just being stood up under the
leadership of President Berdimuhamedov and a few apparently
reform-minded bureaucrats. Building the necessary capacity to
promote responsible stewardship of Turkmenistan's considerable
natural-resource wealth is a long-term project that will require
sustained U.S. engagement -- with expected additional inputs from a
variety of donors -- for a long time to come. END COMMENT.

HOAGLAND