TURKMENISTAN: U.S. FIRMS DOMINATE COMMERCIAL AIR

UNCLAS SECTION 01 OF 02 ASHGABAT 001008

SENSITIVE

SIPDIS

STATE FOR SCA/CEN; EB

E.O. 12958: N/A
TAGS: ETRD ECON PGOV EINV TX
SUBJECT: TURKMENISTAN: U.S. FIRMS DOMINATE COMMERCIAL AIR
CONDITIONING MARKET


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


2. (SBU) SUMMARY: U.S. companies have supplied almost
all the commercial air conditioning systems (central air
conditioning systems, not single-household units) for
new, foreign-built government, commercial, and
residential buildings in Turkmenistan during the past
eight years. The products of two U.S. companies --
Johnson Controls and Carrier -- dominate the local market
for these systems. In the case of Johnson Controls, it
used its strong market position in Turkey to become the
nearly exclusive provider of commercial air conditioning
units ("chillers") to Turkish-built projects in
Turkmenistan. As the years pass, the need for parts and
service of its systems led Johnson Controls to open a
local office. END SUMMARY.


3. (SBU) Central air-conditioning systems appeared in
Turkmenistan in the mid-1990s, when the first Western-
style hotels were built in Ashgabat. By the end of the
decade, these systems spread to newly-built or renovated
government buildings. The market for central air
conditioning systems started booming in 2000-2001, when
the Turkmen government launched mass construction of
government and residential high-rises equipped with
central air conditioning.


4. (SBU) Johnson Controls entered the market through
Turkish construction companies who managed to win the
lion's share of construction contracts thanks to late
President Niyazov's preference for Turkish construction
companies. Johnson Controls' Istanbul branch became the
major supplier of York-branded central air conditioning
systems to Turkish construction companies doing business
in Turkmenistan. The air conditioning equipment was
procured and delivered in Turkey and then shipped by the
Turkish companies to their projects in Turkmenistan.
According to a Johnson Controls representative, the
company currently enjoys the advantage of being the
almost exclusive supplier of central air conditioning
systems to Turkish construction companies operating in
the country, controlling about 90% of the market. Since
parts and service are becoming an important factor given
the age of the earliest installed systems, Johnson
Controls recently completed registration of its branch in
Turkmenistan and is in the process of opening an office.
The Ashgabat branch will provide spare parts and
technical maintenance service to users and owners of the
company's products.


5. (SBU) Carrier controls the remaining ten percent of
the Turkmen market for central air conditioning systems,
supplying the French Bouygues construction company.
Bouygues typically wins contracts for the highest
prestige government buildings and is the only non-Turkish
foreign construction company operating in Turkmenistan.


6. (SBU) COMMENT: The U.S. companies supplying central
air conditioning systems to construction projects in
Turkmenistan are unlikely to face any serious competition
in the near future, as their main customers (Turkish
companies and Bouygues) still have very strong positions
in the country. By establishing a permanent presence in
Turkmenistan, Johnson Controls, besides providing spare
parts and services, might start supplying equipment not
only to Turkish companies' projects, but also to Turkmen
customers directly. Local governmental organizations and
state-owned and private sector enterprises could become
customers. Moreover, the Turkmen Government has declared

ASHGABAT 00001008 002 OF 002


that it will facilitate and encourage the development of
local construction companies and has already awarded a
few contracts to them. If the government continues this
policy and gradually increases the share of local
companies in the construction market, Johnson Controls
will be in a strong position to become a major supplier
of central air conditioning systems for their projects as
well. END COMMENT.

MILES