TURKMENISTAN: AVAZA -- THEY'RE BUILDING IT, BUT

C O N F I D E N T I A L SECTION 01 OF 04 ASHGABAT 000158

SIPDIS

STATE FOR SCA/CEN; EEB;
COMMERCE FOR DSTARKS/EHOUSE

E.O. 12958: DECL: 02/02/2020
TAGS: ECON PGOV PREL EINV ETRD BTIO TX
SUBJECT: TURKMENISTAN: AVAZA -- THEY'RE BUILDING IT, BUT
WHO'S GONNA COME?

REF: 09 ASHGABAT 769

Classified By: Charge Sylvia Reed Curran for reasons 1.4 (b) and (d).


1. (SBU) SUMMARY: Turkmen President Gurbanguly Berdimuhamedov
decreed the creation of the Avaza Tourist Zone (ATZ) in 2007.
He envisioned a place where Turkmen could rest, exercise,
and receive medical and health treatment, right next to the
Caspian Sea. To implement his decree, Berdimuhamedov
established an Avaza Committee, which reports directly to the
president on all matters regarding ATZ. He also ordered that
the port town of Turkmenbashy, located 20 minutes from the
ATZ, be renovated. In three years, the Government of
Turkmenistan (GOTX) has quickly constructed four luxury
hotels in Avaza, and plans to complete three more in 2010.
The GOTX has committed to build several luxury hotels on its
own, while providing the entire tourist zone with the
necessary infrastructure needed, including electricity,
water, and gas. Avaza Committee officials hope that foreign
investors will see the benefits of building world class
resorts and entertainment facilities in the ATZ, claiming it
will soon become one of the world's hottest vacation spots
that will "even rival Dubai." At the same time, the Avaza
project faces serious challenges including: An uninviting
business climate, an undereducated and undertrained
workforce, the fact that other resorts outside of
Turkmenistan are currently price-competitive with Avaza, and
a restrictive visa regime. END SUMMARY.

THE AVAZA TOURIST ZONE


2. (SBU) On January 28-29, econoff visited the Caspian port
city of Turkmenbashy (formerly known as Krasnovotdsk) and the
ATZ. Turkmen President Berdimuhamedov officially opened the
ATZ on June 15, 2009 (reftel). The total tourist zone is a
19 square mile peninsula, which juts out into the Caspian Sea
and borders the seaport town of Turkmenbashy. The current
Head of the Avaza Committee, Satlyk Satlykov, explained that
President Berdimuhamedov envisioned a family friendly place
where all Turkmen citizens could go to rest, exercise,
recreate, re-energize and heal with their families. To date,
there are six operational hotels in Avaza, four of which were
built after 2007. Three more are under construction.
Currently, only 0.3 square miles of the total 19 square miles
has been developed. In addition, a 7 km cement canal runs
through the ATZ, and is expected to be completed by April.
Sea water from the Caspian will fill the canal, and guests to
Avaza will be able to take small boats up and down the canal.

A PLACE THAT WILL "RIVAL DUBAI"


3. (C) During a tour of all six operating hotels, Avaza
officials showed off the spacious hotels, opining that the
peninsula will soon "rival Dubai" as a modern vacation spot.
They emphasized the proximity of the hotels to the Caspian,
the manicured beaches, outdoor cafes, amphitheaters, sports
courts, outdoor water slides and oversized swimming pools.
When entering each of the hotels, a larger than life portrait
of President Berdimuhamedov greets each guest. The lobbies
are lavishly decorated and each hotel has at least one full
service restaurant, decorated and staffed on par with
European restaurants. All hotel rooms have a view of the
Caspian and have been decorated to European standards.
Guests can choose between standard, VIP, deluxe rooms, and
presidential suites. Avaza officials stated that Turkmen
citizens will spend between $70 and $120 per night for hotel
rooms during the high season, while foreign guests can expect
to pay between $100 and $150 per night. Rates generally
include two meals per day.


4. (C) In line with President Berdimuhamedov's objectives for

ASHGABAT 00000158 002 OF 004


the ATZ, all guests can seek "state-of-the-art" health
treatments, as each hotel has a wing dedicated to health
services. Guests can visit heart specialists, dentists,
gynecologists, pediatricians, massage therapists, and
alternative medicine practitioners, just to name a few.
Hotel doctors proudly displayed their electric pulse therapy
machines, magnetic therapy equipment, hydrotherapy showers
and baths, mud baths, steam rooms, salt-water baths, and
acupuncture therapy stations. Turkmen insurance does not
cover these services, and doctors reported that many of the
health services at Avaza are cost prohibitive for most
Turkmen.


5. (C) Avaza officials showed off a model of the Avaza
project, which in addition to numerous luxury hotels,
includes fitness centers, luxury apartments, schools,
libraries, casinos, an amusement park for children, and an
indoor cross-country skiing center, to be filled year-round
with artificial snow. Plans are also in the works for
eco-tourism venues where guests can ride camels and the world
famous Ahal-Teke horses. Avaza officials pointed to two
artificial islands that would host luxury resorts built by
Russian and Turkish companies. When asked if all of the
projects would come to fruition, the officials admitted that
most of the projects were merely "proposals." They
acknowledged that the GOTX would not finance these projects,
and foreign companies would have to invest in them, rather
than simply selling high-dollar buildings to the GOTX. The
proposed casino, for instance, has a price tag of close to $1
billion.

THE AVAZA COMMITTEE


6. (C) When the Turkmen President created the ATZ in 2007,
he also created the Avaza Committee. The current Head of the
Avaza Committee, Satlyk Satlykov, stressed that in addition
to attracting investment to Avaza, he was also responsible
for ensuring the renovation and or construction of the
Turkmenbashy oil processing plant, Turkmenbashy square, and
additional construction projects in the region of
Turkmenbashy. He maintained that President Berdimuhamedov is
concerned with almost every detail concerning, and that he
sees it as one of his most important initiatives for his
presidency. As a result, he added, the Head of the Avaza
Committee reports directly to the president.

SELLING AVAZA TO FOREIGN INVESTORS--NOT AN EASY SALE


7. (C) The Avaza Committee Head boasted that the global
economic crisis had not affected Turkmenistan like it did
Dubai. At the same time, he stated that foreign companies
had mistakenly thought that the GOTX wanted to simply buy
multi-miilion dollar buildings from them. He insisted that
foreign companies would soon see the value of investing in
Avaza, and within five to ten years most of the proposed
projects would come to fruition. Potential investors,
however, have said that they are concerned about the
commercial viability of Avaza, citing the fact that there
would be virtually no visitors in the off season, a less than
transparent tender process, and a restrictive visa regime, as
just some of their major concerns. They have also identified
the lack of a moderately skilled workforce as an additional
concern. Few Turkmen speak English, and there are few
graduates with hospitality sector experience.


8. (C) The mayor of Turkmanbashy, Oraz Atayev, felt that as
soon as the Turkmenbashy airport renovation was completed,
visitors would be able to receive visas at the airport
without having to receive a letter of invitation from the
GOTX, similar to the practice in Turkey. He acknowledged
that requiring foreigners to first receive a letter of

ASHGABAT 00000158 003 OF 004


invitation from the government had negatively impacted
foreign interest in Avaza. He asserted that the ability to
receive a Turkmen visa at the airport without a letter of
invitation would attract more foreign visitors to
Turkmenbashy and the ATZ, but locals have also reported that
other coastal resorts outside of Turkmenistan are
competitively priced with Avaza. As a result, many locals
plan their vacations in Turkey and the UAE, since a vacation
at Avaza is reportedly not that much cheaper than popular
destinations outside the country.


9. (C) Locals in Ashgabat continue to report that government
employees are being told by their supervisors to spend their
vacations in Avaza. In addition, some government workers
have told Embassy staff that government employees are even
being urged to visit Avaza in the off season. Some have
speculated that the GOTX might actually be pressuring its
employees to populate Avaza in order to spur the foreign
investment needed to bring the ambitious project to fruition.

RENOVATING THE PORT CITY OF TURKMENBASHY


10. (C) The city of Turkmenbashy, founded in 1869, has about
70,000 residents. President Berdimuhamedov ordered that the
city be modernized, especially since foreign tourists headed
for Avaza will first land at the Turkmenbashy airport before
arriving in Avaza by car or bus. The Mayor of Turkmenbashy
noted that renovation of the Turkmenbashy airport will be
completed in April 2010, and was the first project on a
presidential list of buildings and complexes to be renovated.
After completion of the airport, plans are in the works to
create a new Turkmenbashy square by first moving all
government offices into modern, white-marble buildings not
far from the current town center. New office buildings,
shopping centers, schools, hospitals, and apartments would
follow suit, he added. British and Japanese settlers built
many of the existing buildings, which have since been
declared historical markers, meaning they cannot be
demolished. He was not sure whether the historical buildings
would be refurbished or just left unoccupied once the new
city is completed.


11. (C) The Turkmenbashy Mayor characterized the city as a
multi-ethnic and multilingual hub with a busy port and a
large industrial complex. He described the city as an active
seaport for commerce to and from Kazakhstan, Uzbekistan,
Azerbaijan, Russia, Iran, and other former Soviet Union
Republics. He added that foreign workers in Turkmenbashy
come from over 60 countries, with the largest number of
foreign workers hailing from Malaysia, Turkey, and Russia.
He posited that most of the workers work for the Malaysian
energy company Petronas, which is developing an offshore
exploration block in the Caspian (Block 1),close to
Turkmenbashy. He noted that most of the other foreign
workers represent Turkish and Russian construction companies
with contracts in both Turkmenbashy and Avaza.


12. (C) COMMENT: Construction of a few hotels continues in
the Avaza Tourist Zone. GOTX officials are implementing
Berdimuhamedov's orders to create an attractive and inviting
resort town. At the same time, the president's plans for
Avaza are much more ambitious. The GOTX does not plan to
spend too much more of its money on Avaza, hoping instead
that large foreign companies will come to the rescue and
invest billions of dollars in the project. In reality, the
project still makes little sense commercially for most
investors. Some ompanies might agree to invest in order to
secure future energy or other business deals with the GOTX
(since Avaza is the President's pet project). Overall,
however, foreign investors have not taken Avaza too
seriously. Since saving face is extremely important to

ASHGABAT 00000158 004 OF 004


President Berdimuhamedov, and he continues to push the
development of Avaza and Turkmenbashy, it is quite possible
that more and more Turkmen will be "encouraged" to vacation
in Avaza, like it or not. END COMMENT.
CURRAN