WHY ONE PERSON IS LEAVING THE FRONT LINES OF

C O N F I D E N T I A L ASHGABAT 000502 SIPDIS STATE FOR SCA/CEN, EEB E.O. 12958: DECL: 04/17/2019 TAGS: PGOV EIND TX TU SUBJECT: WHY ONE PERSON IS LEAVING THE FRONT LINES OF TURKMENISTAN'S CONSTRUCTION INDUSTRY REF: A. 08 ASHGABAT 1377 ¶B. 08 ASHGABAT 1493 ¶C. ASHGABAT 431 ¶D. 08 ASHGABAT 1370 ¶E. 08 ASHGABAT 573 ¶F. ASHGABAT 475 Classified By: Charge Richard Miles, reasons 1.4 (B) and (D). ¶1. (SBU) SUMMARY: A construction industry professional with several years of experience in Turkmenistan explained that he is leaving another firm to consult because he cannot deal with working in the middle of this environment, including battling with ministers who do not want to pay for projects on a timely basis. He repeated rumors of impact of the international financial crisis on Turkmenistan and said that the government incited recent speculation on the exchange market in order to raise needed cash. He claimed that large Turkish construction companies would not enter the Turkmen market because they don't want to have to pay bribes, and explained how Polimeks established itself. If Turkmenistan really wants other international players to work here, it will have to learn that it has to pay gradually for large projects, not on delivery -- which is reminiscent of the law that forbids companies from paying for goods until they reach Turkmen soil. END SUMMARY. "I DON'T WANT TO BE IN THESE PROBLEMS" ¶2. (C) Former Deputy Manger of Planning at Turkish construction firm Polimeks, Caner Demir (strictly protect throughout),has been working for Yapi Construction since fall 2008 (Ref. A). Demir said in a meeting on April 16 that working in Turkmenistan's construction industry is full of problems. He said this was a result of the irresponsible actions from a rash of Turkish firms that have negatively impacted relationships with good companies. He added, "I don't want to be in those problems." He is in the midst of working out a deal with Yapi's partners to work as an advisor for the company on a consultant basis. This would put him behind the scenes and not on the front lines of this difficult environment, which is what he would prefer. If the deal is worked out, Demir will consult for companies behind the scenes but will not be a public face, nor will he work on construction sites. MINISTERS HOSTILE TO CONSTRUCTION COMPANIES OVER PAYMENT ISSUES ¶3. (C) Demir said that the Ministry of Healthcare and Medical Industry made an incomplete down payment for the construction of the Vili Suw health spa. After this money ran out, Yapi continued to work on the project for two months without receiving additional funds from the Ministry. The Ministry made another small payment, but as Demir says, "The company (Yapi) is refusing to give its own money, and why should it?" He noted that ministers are angry at the foreign construction companies, asking why "you are always crying for money?" HOW THE INTERNATIONAL FINANCIAL CRISIS IS AFFECTING TURKMENISTAN ¶4. (C) Demir repeated the rumor that one encounters all over business circles in Ashgabat regarding the Government of Turkmenistan's cash shortage (Ref. B). Demir said that Russia owes Turkmenistan $5 billion for gas, and that Russia has turned to bartering weapons in exchange for gas because Russia lacks cash. (NOTE: Post heard from other sources in the international community here that Russia paid its debt to Turkmenistan on the eve of President Berdimuhammedov's March visit to Moscow. DATT has heard the report of a weapons barter with the Russians from several sources (septel). END NOTE.) He cited rumors about the recent panic about a strengthening of the manat were artificially introduced by the government in order to create circumstances that would bring in a lot of dollars (Ref. C). He said that the lack of cash flow has also impacted the construction industry, with companies such as Yapi that refuse to continue working without getting paid. EASIER JUST TO CONSULT (WITH LESS HEADACHES) ¶5. (C) Demir plans on using his experience in Turkmenistan's unique business milieu to consult for several Turkish firms until his planned departure in August. According to Demir, one or two Turkish companies are coming to look at Turkmenistan's business environment every day, adding that these companies are not using their Turkish company names because they are often trying to escape credit problems in Turkey and want to start fresh in Turkmenistan, which they do in Turkmenistan by giving the appearance of having cash in order to get contracts with the government. According to Demir, large Turkish construction companies won't bother with entering the Turkmen market because they won't pay bribes. Demir said that Chinese oil and gas companies are also looking for business consultants familiar with Turkmenistan's business environment. THE STORY ON POLIMEKS ¶6. (C) Demir claimed that Polimeks is not a player in Turkey. The company began its business 12 years ago in Turkmenistan with a $200,000 project, and has worked on about $3 billion in projects to date. Demir estimates that the Olympic Village project is worth about $1.5 billion (Ref. D). Polimeks' prominence today stems from the good relationship the company's founders built with President Berdimuhamedov when he was Minister of Healthcare and Medical Industry. In addition, "(Erol) Tabanca and (Abdullah) Gozener love Turkmenistan and they show it every time," Demir said, adding "Polimeks is a good company for this country, but not for Turkey or other countries," because of the chaotic atmosphere in a company without rules or guidelines and an atmosphere in which companies work "only for today and didn't settle down...and didn't plan for the future" due to "fears of debt and of losing everything." POLIMEKS' FUTURE ¶7. (C) Demir said that "Polimeks is a Turkmen company now. They know the country well, and the President loves them. Before, they were afraid of this country, but now Polimeks means something to this country." Demir has noticed some changes at the company's new offices in the Yimpash Business Center, where personnel now wear ties in the modern "open style" office. The company has added support staff, whereas "they used to have two secretaries who didn't know how to talk to people." Demir added that the company may have refused to move Independence Monument (Ref. E) "because it is impossible. Nobody is talking about it anymore." ¶8. (SBU) COMMENT: Polimeks is not going anywhere, but the company's significant operating capital and willingness to work with the Turkmen on their terms will make it hard for other companies accustomed to working in the rest of the world to enter this market. At some point, Turkmenistan will have to learn that it has to pay gradually for large projects, not on delivery -- which is reminiscent of the law that forbids companies from paying for goods until they reach Turkmen soil (Ref. F). END COMMENT. MILES