TURKMENISTAN: NEW TRANSPARENCY IN DISCUSSING

UNCLAS SECTION 01 OF 02 ASHGABAT 000430

SIPDIS

SENSITIVE
SIPDIS

STATE FOR SCA/CEN, EEB
USAID/W FOR EE/AA

E.O. 12958: N/A
TAGS: PGOV ECON TX
SUBJECT: TURKMENISTAN: NEW TRANSPARENCY IN DISCUSSING
ECONOMIC REFORM


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


2. (SBU) SUMMARY: On April 2, the state-owned,
Russian-language daily, "Neytralniy Turkmenistan,"
prominently featured on page 2 an article written by the
Deputy Head of Macroeconomic Analysis and Forecast at
Turkmenistan's newly established Institute of Strategic
Planning and Economic Development, Mr. Komarov. In his
article, entitled "Macroeconomic Regulatory System -- Basis
for Further Development of Turkmenistan," Komarov makes the
case for why President Berdimuhamedov's current economic and
foreign policies help secure stable economic development and
ultimately bring prosperity to the people. In laying out his
justification for macroeconomic reform, however, Komarov's
discussion goes well beyond the president's current
initiatives to discuss areas where more reform is needed. We
see this as a positive development. The government is being
more transparent by putting ideas out for discussion rather
than simply issuing presidential decress as faits accomplis.
END SUMMARY.


3. (SBU) On April 2, the state-owned, Russian-language
daily, "Neytralniy Turkmenistan," prominently printed a 3/4
page article written by Mr. Komarov of the Institute of
Strategic Planning and Economic Development, a think tank
established during the October 11, 2007, reorganization of
the National Institute of State Statistics. The article,
"Macroeconomic Regulatory System -- Basis for Further
Development of Turkmenistan," both supports President
Berdimuhamedov's current economic and foreign policies and
suggests additional reforms.

A GRADUAL APPROACH TO ECONOMIC REFORM


4. (U) Noting that President Berdimuhamedov called during a
February 8 cabinet meeting to maintain an 8-10% GDP annual
growth rate, Komarov argues that a strategic development plan
aimed at such an outcome should take into account
macroeconomic concepts. However, the author believes that
reform of national monetary, fiscal/budgetary, investment,
trade, and social policies should be balanced and gradual.
He holds that implementation of advanced market mechanisms is
necessary, but at the same time proposes to protect interests
of both the public and private sectors. President
Berdimuhamedov, Komarov points out, instructed his government
to elaborate an "optimal" concept of state regulation and
promotion of the non-government sector.

DIVERSIFY REVENUE-PRODUCING SECTORS


5. (U) Komarov emphasizes that, although gas and oil exports
generate significant foreign exchange revenue, such exports
have certain limiting aspects -- namely, market conditions
and locations. He suggests using Turkmenistan's accumulated
reserves to diversify into sectors such as transport,
telecommunications and tourism. Komarov believes that
Turkmenistan could increase the volume of cargo transiting
through the country because of its geographic location. He
also urges the government to limit imports by enhancing local
production -- and recommends that production should take into
account domestic consumer demand, as well as the overseas
markets for such goods.

A COMMENDATION FOR CURRENCY RATE UNIFICATION


6. (U) Komarov commends the Turkmen government's decision to
unify the currency exchange rates. Benefits of such a course
will include increased market competition, a strengthened
export potential for Turkmenistan, and increased real income
for the population, though such increased income would only
be possible under conditions of low inflation.

A CALL TO ESTABLISH FOREIGN FINANCIAL INSTITUTIONS

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7. (U) The author states that an increase in consumer income
and savings would encourage financial mechanisms that would
channel the savings into attractive financial instruments.
He also suggests that the Avaza National Tourism Zone on the
Caspian Sea could serve as the driving force for transforming
the country's financial sector. "Establishment of branches
of foreign banks, insurance companies, investment funds, etc.
is possible," Komarov concludes.

DEVELOP CAPITAL MARKETS


8. (U) According to Komarov, his think tank considers
development of capital markets in Turkmenistan to be an
integral part of market reform -- and the most important
prerequisite for transforming Turkmenistan into an
international economy. Large government corporations could
become the initial platform for developing such markets.
Komarov suggests that a corporate model in which shareholders
influence decision-making and profit distribution would be
relevant for Turkmenistan. He also does not exclude the
possibility of introducing mutual funds to Turkmenistan.

MODERN LEGAL FRAMEWORK NEEDED


9. (U) The article concludes by noting that the development
of new economic processes, instruments, and institutions
requires a modern and effective legal framework and
implementation mechanisms.


10. (SBU) COMMENT: Up to now, the rule of thumb has been
that the president makes the decisions, and nobody publicly
gets out in front of him. Chafing for months over the lack
of initiative (and capacity) shown by his officials,
Berdimuhamedov has begun establishing a series of think
tanks, including the Institute of Strategic Planning and
Economic Development, to assist government agencies in making
reforms. We see this article as a positive development. The
government is being more transparent by putting ideas out for
discussion rather than simply issuing presidential decrees as
faits accomplis. END COMMENT.
HOAGLAND