TURKMENISTAN PASSES NEW LAW ON LICENSING

UNCLAS SECTION 01 OF 02 ASHGABAT 000869 SENSITIVE SIPDIS STATE FOR SCA/CEN, EEB PLEASE PASS TO USTDA DAN STEIN COMMERCE FOR HUEPER ENERGY FOR EKIMOFF/THOMPSON E.O. 12958: N/A TAGS: PGOV PREL ECON EPET TX SUBJECT: TURKMENISTAN PASSES NEW LAW ON LICENSING REF: a) ASHGABAT 0683 b) ASHGABAT 0697 ¶1. (U) Sensitive but unclassified. Not for public Internet. ¶2. (U) SUMMARY: Less than two months after amending Turkmenistan's licensing law, President Berdimuhamedov on July 8 signed a newly redrafted licensing law. The new version of the law reduces the list of licensed activities and clarifies supervision of licensing agencies. The new law also for the first time exempts petroleum sector operations covered by the Petroleum Law, supporting earlier suggestions that Turkmenistan's Petroleum Law, which reportedly is being redrafted, will eventually cover licensing for certain types of petroleum operations. In general, the new licensing law should be seen as a moderate step toward gradual implementation of a market economy. END SUMMARY. ¶3. (U) On July 8, President Berdimuhamedov signed a new Law on Licensing of Certain Activities. The law was originally adopted in 1999 and subsequently amended five times, most recently on May 8 (reftel A). The new licensing law does not differ substantially from the previous version, but it does reduce the list of licensed activities from 66 to 44 and clarifies supervision of licensing agencies. LICENSED ACTIVITIES ¶4. (U) The new list of licensed activities shrank from 66 to 44 items. Among the most significant abolished items are those related to the purchase, storage, sale of grain and cereals, processing of grain and production of flour and grits/cereals, oil and gas processing, design, construction, repair and operation of main gas, oil and oil products pipelines, and operation of gas stations. The list has become more general in description than before. For example, rather than list individual licensed food production business sectors, the new law instead lists food stuffs production in general. The July 8 Law now requires licensing for aviation, banking, pedigree cattle breeding and Astrakhan fur production, fire fighting and prevention, production and sale of food stuffs and feed, real estate appraisal, petroleum products trading, activities in special customs regimes and customs clearance related services, securities trading, and overseas job placement. ¶5. (U) The law specifically states that it does not apply to intellectual property rights, petroleum operations regulated by the Petroleum law, and law enforcement, defense, and security. REGULATION OF LICENSING ¶6. (U) The Cabinet of Ministers remains the key policy-making instrument in licensing. The Cabinet appoints licensing agencies, as well as licensing supervision bodies. The Cabinet also approves all licensing procedures. Relevant agencies are authorized to issue licenses in specific sectors after mandatory due diligence. ¶7. (U) Although the previous law did not provide for the supervision of licensing agencies, the new version of the law dedicates an entire chapter to this issue. Although the law does not clearly state which government body will serve as the licensing supervisory entity, its language suggests that there will be only one such entity. The licensing supervisory entity is authorized to coordinate operations of licensing agencies, provide policy advice on licensing, including on the list of licensed activities and procedures, and maintain the registry of licenses. The supervisory entity has the right to demand relevant data and documents from licensing agencies, conduct inspections, including those related to complaints of licensees, demand licensing agencies to cancel their decisions made in violation of the licensing legislation. PRIVATE VS. STATE ENTITIES ASHGABAT 00000869 002 OF 002 ¶8. (SBU) The newly approved law still exempts state-owned entities from getting licenses. However, the law now allows private entities to operate without licenses in free trade zones, including free tourism zones. ¶9. (U) Licenses for professional services, for example legal counsel, auditing, appraisal and others, under the provisions of the new law, do not expire. Business activities are licensed for at least three years, as was previously the case. The new law also streamlines license application and extension procedures for physical entities (including individual businessmen). ¶10. (SBU) COMMENT: Although the text of the new licensing law has not been dramatically amended, it should be viewed as a moderate step toward a market economy. The text incorporates a statement that licensing should not support monopolization or inhibit free enterprise or professional services activities. Private businesses and individuals now have a forum-licensing supervisory body that can address their issues. ¶11. (SBU) COMMENT CONTINUED: Petroleum sector-related activities, other than trading, are not covered. In addition, there is a specific reference to the Petroleum Law as the applicable legislation for licensing of petroleum activities. This supports reftel B's suggestion that the government might be currently working on revised licensing arrangements for petroleum operations like geophysical, well drilling, well completion, well work-over operations, offshore construction, and abandonment. END COMMENT. HOAGLAND