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Turkmenistan: Will Repressive Policies Hinder EBRD Aid? (Part 2)

Following the 11 September terror attacks and the U.S.-led war in Afghanistan, the five Central Asian states have assumed new strategic importance. That importance was underscored this week with an international economic summit in the Kazakh capital, Almaty, and high-profile trips to the region by World Bank President James Wolfensohn and Jean Lemierre, the president of the European Bank for Reconstruction and Development. The theme of the Eurasia Economic Summit was "Sustaining Growth in Uncertain Times." At the meeting, the international business community and top leaders discussed ways to improve the investment climate. Ahead of his visit to Central Asia, Lemierre took time out to talk to RFE/RL. In the second of a three-part series, Lemierre looks at the situation in Turkmenistan, widely viewed as the most repressive and least open of the five Central Asian states.

Prague, 10 April 2002 RFE/RL) -- Jean Lemierre, the president of the European Bank for Reconstruction and Development (EBRD), says his bank will pay more attention this year to the nations of Central Asia, but he says this new attention will not apply equally to all five countries.

In a conversation recently with RFE/RL, Lemierre singled out Turkmenistan as a country that has lost the active support of the EBRD for projects in the public sector because of the repressive policies of its government. But he says the door is still open to projects in the private sector.

"I have written to the president of Turkmenistan to express concern about the democratization process, to say that we have stopped every operation in the public sector in Turkmenistan. And [that we will maintain] operations in the private sector [only] on condition that there is no public interference. In practice, we are not doing anything [in either sector]."

Article 1 of the EBRD's charter affirms the bank's commitment to the principles of "multiparty democracy, pluralism, and market economics." But an EBRD mission to Turkmenistan last year concluded the country, led by autocratic President Saparmurat Niyazov, had not made any progress toward democratization or creating a market economy.

To reverse the situation, Lemierre says Turkmenistan must make more of an effort to support small and medium-sized businesses.

"We set up in Turkmenistan a program in favor of [small and medium-sized enterprises, or SMEs] which has no impact mostly because of [public] interference with the development of SMEs. SMEs are important for us for two reasons. First, the market economy is essentially constituted of SMEs. According to us, the creation of SMEs and the possibility to create SMEs is essential to develop the economic fabric. Second, the ability to support business activities and democracy are strongly tied together."

In addition, he says, Turkmenistan has to improve the "transparency" and quality of its statistical data.

"The second recommendation concerns the improvement of macroeconomic information given on Turkmenistan, which means to introduce transparency and truth about the country's situation in economic matters."

Lemierre says the bank will review Turkmenistan's progress in late summer to see if any of the EBRD's programs can be reinstated.

He says that, thanks to high global energy prices, Turkmenistan's economy is growing. Turkmenistan is a major producer and exporter of natural gas. The Economist Intelligence Unit forecasts a growth in gross domestic product of around 18 percent this year and 13 percent next year.

But Lemierre says a greater challenge is to create what he calls "durable growth" through the development of smaller, privately owned companies.

"A country can always have a growth rate based on an external dependency in terms of gas. Turkmenistan is a big exporter of gas products. So there are resources. Now the question is to know if we can create at the same time durable [economic] development bearable by activity and employment [not related to the gas sector]."

The EBRD says it is the first investor in the private sector in Central Asia outside of the oil and gas industries, with 1.9 billion euros invested over the past 10 years. Lemierre says the EBRD is not committed to investing in the energy sector because the big energy companies do not need the bank's support.

Lemierre says the main purpose of the EBRD is what he calls a "risk minimizer." By assuming some of the economic risks, Lemierre says the EBRD helps to create conditions for a market economy to flourish.

The London-based EBRD was set up in 1991 to help the former communist countries of Eastern Europe and the Soviet Union build open markets and attract investment. Its main shareholders include the United States, Japan, and major Western European countries, as well as the states eligible to receive assistance.

(In Part 3, Lemierre looks at conditions in Kyrgyzstan, Tajikistan, Kazakhstan, and Uzbekistan.)