MINISTRY OF ECONOMY AND DVELOPMENT OFFICIALS SAY

UNCLAS SECTION 01 OF 02 ASHGABAT 000271 SENSITIVE SIPDIS STATE FOR SCA/CEN, EEB E.O. 12958: N/A TAGS: PREL PGOV EAGR EFIN EIND TX SUBJECT: MINISTRY OF ECONOMY AND DVELOPMENT OFFICIALS SAY WORLDWIDE ECONOMIC CRISIS HASN'T EFFECTED TURKMENISTAN REF: A. 08 ASHGABAT 1493 ¶B. 08 ASHGABAT 551 ¶C. 08 ASHGABAT 1285 ¶D. ASHGABAT 115 ¶E. ASHGABAT 254 ¶1. (U) Sensitive but unclassified. Not for public Internet. ¶2. (SBU) SUMMARY: Officials from the Ministry of Economy and Development said that Turkmenistan has not been affected by the worldwide economic crisis, and furthermore, listed many "improvements" in the country's economic and business climate. Among these were the abolishment of food subsidies, the fact that one local company is building elite buildings, streamlining of the registration process for foreign companies -- which makes it better than that in Germany and many other European countries, and a simplified Tax Act. They also insisted that unemployment has virtually vanished from the Turkmen landscape, including in the provinces. Post does not dispute the lack of the effect of the worldwide economic crisis on Turkmenistan, but most of these points are leaky -- although it was entertaining to meet with officials with such an impressive command of talking points. END SUMMARY. WORLDWIDE ECONOMIC CRISIS HAS NOT AFFECTED TURKMENISTAN ¶3. (SBU) In a meeting on February 20, Acting Head of the Ministry of Economy and Development's Foreign Economic Activity Department, Atajan Atayev; Acting Head of the Economic Development, Analysis, and Forecasting Department, Serdar Atakashiyev; and Economic Specialist, Elena Niktinka, said that recent comments in local press regarding official actions to counter effects of the international financial crisis were made in reference to the stabilization fund, which was created to counter adverse effects of future crises (Ref A). Atakashiyev noted that a positive side of the economic crisis worldwide was the drop in oil prices, which is not affecting Turkmenistan negatively because it does not export oil. He added that the Ministry continues to monitor the crisis on a monthly basis. GOOD NEWS: FALLING CONSTRUCTION MATERIAL PRICES MAKE CONSTRUCTION PROJECTS CHEAPER ¶4. (SBU) The Ministry is also buoyed by the falling price of construction materials worldwide, making Turkmenistan's construction projects cheaper, especially the $5 billion slated for construction and refurbishment projects in Turkmenistan's rural areas (Rural Development Plan until 2020). In addition, the Ministry officials said that the high cost of imported food did not affect the country adversely in this period of economic crisis because the country imported more food before unification of the exchange rates in May 2008 (Ref B),and also because of the growth of small and medium enterprises in the country, adding that the country stabilized prices at the end of 2007 and beginning of ¶2008. Atakashiyev asserted that rising costs of local food products was due to the improved quality. Atakashiyev said that negative effects of exchange rate unification were minimal for those who keep money in manat (vice dollars). ACCORDING TO THE MINISTRY: REASONS WHY THE BUSINESS CLIMATE IS IMPROVING IN TURKMENISTAN ¶5. (SBU) Atakashiyev then launched into a list of improvements in Turkmenistan's economic and business climate: -- the new Constitution (Ref C) reduced import duties; -- registration of foreign companies has become easier -- even easier than in Germany and many other European countries, Atakashiyev maintained -- if documents are properly filled out; ASHGABAT 00000271 002 OF 002 -- among all food products, only salt is subsidized; -- amendments to the Tax Act of 2004 in 2008 simplified the tax system for enterprises, especially for producers of food and construction materials; -- in part because the country recognizes the need to diversify its economy to guard against Dutch disease, Turkmen food producers are now participating in international trade shows, and are planning on attending more in the future (currently Turkmenistan exports fruits, vegetables, and herbs to Russia); and -- citing local company Aktam, local construction firms are building elite apartment buildings and other buildings which Turkish companies and Bouygues have built in Turkmenistan for years (Ref D). NO UNEMPLOYMENT! EVEN IN THE PROVINCES! AND -- PEOPLE ARE OPENING UP THEIR OWN FIRMS! ¶6. (SBU) The officials claimed that there is "no unemployment because so many companies are opening (in Turkmenistan)." They added that unemployment is down in the provinces -- which makes it hard to find unemployed people. He also said that "it's easy to open a company," and that unemployed people are choosing entrepreneurship as an alternative to unemployment. (NOTE: Although there are no published official statistics, some observers believe that unemployment and underemployment in Turkmenistan could be as high as 50 percent. END NOTE.) ¶7. (SBU) COMMENT: Post does not dispute the lack of significant effect of the worldwide economic crisis on Turkmenistan. However, one obvious leaky argument is that most Turkmen citizens keep at least some money in dollars, making it likely that practically everyone in the country was adversely affected by exchange rate unification, which devalued the dollar. Post knows that many locals would likely object to several of these assertions. From regular visits to the provinces, we know that there is still massive unemployment (Ref. E). We also know that all is not as rosy in the private sector as these officials would have us believe. For example, EBRD estimates that Turkmenistan's GDP went downin the last quarter of 2008. Nevertheless, their backwards-and-forwards knowledge of their talking points was impressive. END COMMENT. MILES