TURKMENISTAN: TREASURY DELEGATION ENCOUNTERS A

C O N F I D E N T I A L SECTION 01 OF 03 ASHGABAT 000745

SIPDIS

STATE FOR SCA/CEN, EUR/ACE, EEB
STATE PLEASE PASS TO USTDA DAN STEIN
TREASURY FOR BAKER/LANIER
USAID/W FOR EA/AA

E.O. 12958: DECL: 06/11/2017
TAGS: PREL ECON EFIN TX
SUBJECT: TURKMENISTAN: TREASURY DELEGATION ENCOUNTERS A
NEWLY OPEN AND ENGAGING ECONOMIC AND FINANCIAL SECTOR


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


1. (SBU) SUMMARY: A team of four U.S. Department of the
Treasury assistance advisors representing public finance and
management, economic policy, and banking visited Ashgabat
June 2-6 to evaluate possible areas of technical cooperation
with Turkmenistan. The delegation met with various
government officials from the economic and financial sector
in lengthy and -- unusual for Turkmenistan -- interactive
meetings. Although a European Commission project that began
in March 2008 at the Ministry of Finance will most likely
preclude any involvement there, delegation members felt there
was potentially good support for cooperation at the Ministry
of Economy and Development and Central Bank, and are
preparing technical assistance proposals for those two
agencies. There was a nigh-and-day difference between these
meetings and those Treasury had in Ashgabat late last year.
END SUMMARY.

OFFICIAL MEETINGS


2. (SBU) Four advisors representing different areas of the
Department of the Treasury's Office of Technical Assistance
visited Ashgabat June 2-6: Linda Decker (Public Finance and
Management),Thomas Lanier (Economic Policy),George Mullinax
(Banking),Gail Ostler (Public Finance and Management). The
team attended official meetings with Deputy Prime Minister
for Economy and Finance Hojamyrat Geldimuradov, Chairman of
the Central Bank Guvanchmurat Goklenov, Minister of Economy
and Development Gurbanmurat Gurbanmuradov, Minister of
Finance Annamuhamed Gochiyev, Deputy Minister of Finance
Dovletgeldi Sadykov, Head of the Government Finance
Consolidation Department Galina Romanova, Head of the Budget
and Fiscal Policy Division of the Department of Economic
Development within the Cabinet of Ministers Shemshat Amanova,
as well as working-level officials.

DEPUTY PRIME MINISTER CONFIRMS REDENOMINATION BY JANUARY 1


3. (SBU) Deputy Prime Minister Geldimuradov explained on
June 2 that Turkmenistan currently has a technical assistance
program with EU-TACIS, and cooperates with other
organizations as well. Geldimuradov confirmed that
Turkmenistan intends to introduce currency redenomination on
January 1, 2009, and emphasized Turkmenistan is doing this
for "reintegration" (into the international financial sector)
purposes, as well as to regulate inflation and create
economic stability. Next year, Turkmenistan plans to
introduce legislation regulating small and medium enterprises
and a new Tax Code. Minister of Economy and Development
Gurbanmuradov said that Turkmenistan is sending students to
study in China and other countries, and that it will spend
$14 billion on the Rural Development Plan by 2020. At this
meeting, Turkmen officials were interested in the team's
experience in Central Asia, as well as lengths of technical
assistance projects and costs. Treasury Policy Advisor
Thomas Lanier agreed to provide project proposals in the
areas of domestic debt, general economic policy advisory
services, and foreign exchange reserve funds.

EC PROJECT IN FULL SWING AT FINANCE MINISTRY


4. (SBU) Minister of Finance Gochiyev highlighted his
ministry's cooperation with various international financial
institutions and the "good level of relationships within
TIFA" at a meeting on June 2. The Ministry's priorities are
organization of public finance, budgeting, fiscal standards,
capital markets, insurance, analysis and finance of
ministries and the national budget. It also wishes to
control implementation of national debt and undertake

ASHGABAT 00000745 002 OF 003


financial control. Gochiyev stated that 60-70% of
Turkmenistan's gross domestic product should come from the
small and medium enterprise sector. Romanova said that the
Ministry would like involvement in improving legislation of
new economic forms. At a working-level meeting held on June
3 with Romanova and Deputy Minister Sadykov, Deputy Chief of
Treasury Department Batyr Atayev, Chief of Tax Policy and
Accounting Standards Babajan Charyev, and Chief of Social
Sector and Scientific Finance Gulmuradov suggested that an
existing European Commission (EC) project led by Louis Berger
Group consultant Arnold Hoiting makes it unlikely that
Treasury will be able to provide any assistance -- at least
not until the EC project is underway and the Ministry can
identify gaps in the existing project. Gulmuradov showed
interest in budgeting for social services on the local level,
and the Treasury officials offered to provide school district
budgets and other information on public spending to him.

CENTRAL BANK WANTS TO IMPROVE PUBLIC TRUST IN THE BANKING
SECTOR


5. (SBU) Central Bank Chairman Goklenov said on June 3 that
his organization is interested in implementing Basel II
banking stabilization principles, since the Bank already
implemented Basel I to a certain degree and Basel II allows
for more investments. Goklenov added that assistance with
cash management would be appropriate as the next task is
redenomination. He also said that small and medium
enterprise development is relevant because of its priority in
national policy, and also asked many questions about the
advisors' experience assisting other countries in this area.
After the meeting with Goklenov, one of the specialists
attending the meeting quickly arranged a meeting with Chief
of the Banking Supervision Department Halmurad Orayev to
discuss working-level issues. The Treasury advisors will
prepare a proposal on writing a deposit insurance law. This
was an offer that Goklenov received well and said, "One of
the main objectives is to increase people's trust in the
banking system." Treasury Banking Advisor George Mullinax
will provide proposals for projects in insurance, deposit
insurance, a guarantee fund for small and medium enterprises,
and a workshop on Basel II.

UNOFFICIAL MEETINGS ROUND OUT VIEWS OF TURKMENISTAN


6. (C) Meetings with National Bank of Pakistan General
Manager Rizwan Khan, European Bank for Reconstruction and
Development Ashgabat Resident Office Head Neil McKain and
Central Asia Director Masuro Honma, United Nations
Development Programme Deputy Resident Director Inita
Paulovica, World Bank Operations Officer Serdar Jepbarov,
European Commission's (EC) Europa House Coordinator Emilio
Valli, and Deutsche Bank Representative Office Director Peter
Puhl offered insights into the political and organizational
issues surrounding Turkmenistan's economic and financial
sector. The delegation also met with EC contractor Arnold
Hoiting. While the meetings with IFIs and other donors
confirmed that organizations are moving forward to provide
assistance -- World Bank, for example, will be offering one
Ministry of Finance official an internship-type program at
its headquarters -- all agreed there remains plenty of room
for new donors and activities.


7. (C) COMMENT: There was a night-and-day difference
between these meetings and those Treasure had in Ashgabat
late last year when President Berdimuhamedov's economics and
finance team clearly did not yet have its act together. In a
country where the norm for meetings has been sessions with
pre-cooked 30-minute recitations of policy, the give-and-take
of these meetings stood out as a strongly positive

ASHGABAT 00000745 003 OF 003


development. Turkmen officials were engaged and engaging,
asking questions and responding to queries in turn with a
genuineness that made it clear that they were interested in
what Treasury has to offer. Clearly, the ministries have a
green light to discuss cooperation in detail. These meetings
are valuable in that they give an opportunity for all
participants to get acquainted, a necessity in Turkmenistan
before agreements can get signed. END COMMENT.
HOAGLAND