TUKRMENISTAN: WORLD BANK REP DISCUSSES

C O N F I D E N T I A L SECTION 01 OF 02 ASHGABAT 000378

SIPDIS

SIPDIS

STATE FOR SCA/CEN, EEB
TREASURY FOR BAKER/LANIER
USAID/W FOR EE/AA

E.O. 12958: DECL: 03/26/2018
TAGS: PGOV ECON EFIN KCRM TX
SUBJECT: TUKRMENISTAN: WORLD BANK REP DISCUSSES
ANTI-MONEY LAUNDERING EFFORTS

REF: A. ASHGABAT 0179


B. ASHGABAT 0317

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


1. (C) SUMMARY: A local representative of the World Bank
Liaison Office in Turkmenistan said on March 24 that World
Bank Regional Vice President for Europe and Central Asia
Shigeo Katsu was satisfied with the substantive meetings held
during his second visit to Turkmenistan, although moving
ministerial-level interlocutors from Turkmenistan's
government off of the topic of interest rates and onto the
full range of World Bank services was a challenge. The World
Bank-sponsored anti-money laundering and financial
intelligence unit workshop was well-received by the
government, and the World Bank is optimistic about the
possibility that the Parliament will enact an anti-money
laundering law when it next meets in October. END SUMMARY.

RESULTS OF RECENT HIGH-LEVEL WORLD BANK DELEGATION VISIT


2. (C) On March 24, World Bank Liaison Office in
Turkmenistan Operations Officer Serdar Jepbarov said World
Bank Regional Vice President for Europe and Central Asia
Shigeo Katsu was "happy" with his visit the week of March 17
and with his meeting with four or five ministers at the
Central Bank. During this follow-up to the January visit
(Ref. A),the World Bank continued to urge the Government of
Turkmenistan to convey its assistance needs. The World Bank
is surprised -- as is the European Bank for Reconstruction
and Development (septel) -- by the focus of Government of
Turkmenistan leadership on interest rates. Jepbarov said
that Central Bank Chairman Geldimyrat Abilov seems to support
the World Bank and lobbied for its "package approach" of
loans and technical assistance at a meeting with various
ministers. The ministers wanted fixed interest rates, which
the World Bank does not offer, but Jepbarov said that the
World Bank has instruments available to minimize the effects
of fluctuating interest rates. Jepbarov said that Central
Bank middle management, including the head of the Central
Bank's Credit Department, is "very knowledgeable" about
market-based banking practices.

INSIGHT INTO TURKMEN VIEW OF INTEREST RATES


3. (C) Jepbarov said that President Berdimuhamedov had
experience with loans from international financial
institutions in his role as Minister of Healthcare and
Medical Industry. The Ministry received loans from the
Islamic Development Bank for various projects, most likely
with no obvious interest charged since the Islamic
Development Bank operates under Sharia law and does not
charge interest. In addition, as Jepbarov noted, the Chinese
government offers loans at 2.5 percent, and in general, Asian
market lending rates are extremely low at one percent, in
Japanese yen. These factors may explain why the government
is balking at loans with over five percent interest.

READOUT ON ANTI-MONEY LAUNDERING WORKSHOP


4. (C) Jepbarov said that the World Bank-sponsored
anti-money laundering and financial intelligence unit
workshop for Turkmen financial and law enforcement officials
(Ref. B) was well-received by the government. Central Bank
Chairman Abilov sent a thank-you letter in English to the
World Bank and the International Monetary Fund. Japbarov
noted that the Central Bank must have made a special effort
to compose the letter and to translate it. Jepbarov felt
that the workshop structure was well-designed for the Turkmen
audience, since it gave them an opportunity to network with
their peers from other Russian-speaking countries.

ASHGABAT 00000378 002 OF 002



FINANCIAL INTELLIGENCE UNIT WILL INHIBIT CORRUPTION


5. (C) Jepbarov said that a financial intelligence unit that
the government plans to establish will inhibit companies from
engaging in corruption, because money laundering and
corruption go hand-in-hand. Unresolved issues regarding
setting up a financial intelligence unit in Turkmenistan
include:

-- Turkmenistan's agreement on reporting requirements of a
financial intelligence unit, and deciding whether the Central
Bank or one of the law enforcement agencies will control the
Unit.

-- The Turkmenistan Parliament's enacting the anti-money
laundering law. The law is ready, and Mentor in the World
Bank's Global Programme against Money Laundering Carrie
Votava and Consulting Counsel to the International Monetary
Fund's Financial Integrity Group Giuseppe Lombardo met with
the Parliament and law enforcement agencies to give their
comments on the law and plan next steps after the January
anti-money laundering conference. Jepbarov said that it is
possible that the parliament will enact the law when it meets
next in October. He seemed to think that the Financial
Action Task Force (FATF) statement on Turkmenistan that is
posted on the FATF website is geared towards pressuring the
Turkmen government to establish the financial intelligence
unit this year.


6. (SBU) COMMENT: Turkmenistan has been reluctant to take
on increased debt since uncontrolled borrowing -- much of it
fueled by corruption -- in the 1990's led to a (for
Turkmenistan, at that time) massive debt level of an
estimated $1.6 billion by 2002. Since that time,
Turkmenistan has worked on paying down its debt, and as of
2007 had whittled its debt down to an estimated $500 million.
Most international financial experts believe that
Turkmenistan could benefit from taking on increased debt.
However, a lack of human capacity in the debt and asset
management sector, combined with remnant biases against debt,
will make it difficult to convince Turkmenistan's leaders --
especially if Berdimuhamedov's previous experience with debt
is limited to interest-free loans -- that increased debt
could benefit their country. In the meantime, Turkmenistan
seems to be limiting its borrowing to relatively small,
low-interest loans from China and other Asian markets. END
COMMENT.
HOAGLAND