TURKMENISTAN: DELL INC. TAKES ANOTHER LOOK; SEES

C O N F I D E N T I A L SECTION 01 OF 02 ASHGABAT 000669 SIPDIS STATE FOR SCA/CEN, EEB STATE PLEASE PASS TO USTDA DAN STEIN TREASURY FOR BAKER/LANIER E.O. 12958: DECL: 05/27/2018 TAGS: PREL ETRD TINT KZ RS UP TX SUBJECT: TURKMENISTAN: DELL INC. TAKES ANOTHER LOOK; SEES POTENTIAL, BARRIERS Classified By: CDA Richard E. Hoagland: 1.4 (B) and (D). ¶1. (C) SUMMARY: The Dell Inc. Regional Manager for the Commonwealth of Independent States (CIS) (except Russia and Ukraine) from Dell Inc. visited Ashgabat to investigate reshaping their business in Turkmenistan. Dell has been active in Turkmenistan since 2006, mostly selling workstations to the Ministry of Education, but wants to "regularize" its local business by cutting off the unofficial distributorships that resell equipment, and by offering Dell's standard service to customers. Dell sees great potential in offering data centers and data storage services, server sales and maintenance, and supplying Automatic Teller Machine (ATM) equipment in Turkmenistan. Nevertheless, serious barriers to business remain, such as the expectation of bribes and difficulty in guaranteeing payment. It may be difficult for Dell to find a way around the barriers to increase their footprint. END SUMMARY. MUCH OF CURRENT BUSINESS WITHIN EDUCATION SECTOR ¶2. (C) Dell Inc.'s Regional Manager, Rustem Taishibayev, told EmbOff May 22 that Dell has been working in Turkmenistan since 2006. Much of the company's work has been with the Ministry of Education, to which Dell sold 4,000 computers under the Ukraine-Turkmenistan barter scheme. Recently, Dell sold 11 workstations to the Ruhnama High School in Ashgabat. In the next few months, Taishibayev expects to finalize a deal for 16,000 new workstations for the Ministry of Education, along with cabling, Asymmetric Digital Subscriber Lines (ADSL) for Internet, and multimedia equipment such as SMART Boards. DELL WANTS TO OFFER STANDARD SERVICE AND REGULARIZE SERVICE ¶3. (C) Dell is changing distributors in Turkmenistan from Intek to MMIBS because Intek does not offer service. MMIBS will offer service to Dell customers in the future, thereby allowing the company to offer its standard service to customers in Turkmenistan. It is also a priority for Dell to phase out unofficial partnerships such as the dealership at the Yimpash Supermarket that resells Dell equipment that is purchased by private vendors in the United Arab Emirates or the United States and then sold in Turkmenistan without any service agreement. TURKMENISTAN IS FAR BEHIND THE I.T. CURVE IN CENTRAL ASIA ¶4. (C) Taishibayev said that "Turkmenistan is far behind the curve in Central Asia" in terms of technology, and sees potential for expansion for Dell in the areas of data centers and data storage, server sales and maintenance, and supplying Automatic Teller Machine (ATM) equipment. According to Taishibayev, "They (the Turkmen) know that they need this equipment." He said that Dell has discussed the government's needs with the State Tax Committee and the Ministry of Internal Affairs, the latter of which is interested in video surveillance systems. TURKMENISTAN IS CHANGING, BUT SIGNIFICANT BUSINESS BARRIERS REMAIN ¶5. (C) Emerging markets have offered an area of "hypergrowth" for Dell, with an increase of sales from $150 million to $3 billion over the past three years. Michael Dell is very interested in the CIS region right now, especially Russia, which he has visited several times in the past two years. Taishibayev said that Dell would like to open an office in Ashgabat, but this will likely occur at some as yet undetermined time in the future. Dell is opening an office in Tashkent in February. He noted that the ASHGABAT 00000669 002 OF 002 atmosphere in Turkmenistan appears to have improved. For example, while it used to take four hours to receive his visa upon arriving at Ashgabat International Airport, he only waited 15 minutes this time. On the other hand, he also mentioned that people all over Central Asia prefer doing business with their fellow countrymen, and this attitude is especially prevalent in Turkmenistan. Dell considers Turkmenistan a "high-risk sales area." Taishibayev expressed concerns about receiving payment from Turkmen government agencies and contending with government officials expecting bribes. The lack of international air links also is a barrier to business. ¶6. (C) COMMENT: Dell is the latest in a stream of U.S. investment banks, law firms, business services providers, and companies to visit Turkmenistan with an eye to rethinking their business strategy in this country. All know that the potential is enormous, but the significant investment barriers that remain must be resolved before business really takes off. END COMMENT. HOAGLAND