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Turkmenistan
FY 2001 Program Description and Activity Data Sheets
>> Regional Overview >> Turkmenistan Overview FY 2001 Program
USAID will emphasize developing the oil and gas sector as an engine for future growth by improving the operations of regulatory institutions, establishing international standards and practices, and ensuring greater environmental protection. Ancillary activities addressing the inter-related energy and environmental issues of the five, central Asian republics, including Turkmenistan, are implemented through the CAR Regional program. USAID support for business development will include credit, and business and economic education and training.
USAID assistance will be realistic, and take opportunities for effecting change at the local level; e.g., supporting fledgling NGOs and concentrating on community action; e.g., through water user groups, social partnerships, and professional associations. USAID assistance will stress the importance of the rule of law, and the role of civil society organizations as partners with the state to alleviate social problems and lead local community development. The emphasis in health will be on clinical training and education in infectious disease control and family medical care. USAID will support a demographic health survey to provide important data for decision making. A USAID-sponsored health partnership is training family medicine practitioners and nurses in evidence-based medicine at the primary health care level. USAID is also seeking to expand women's understanding of their own reproductive health needs and family planning choices by strengthening a network of reproductive health units.
Faced with a national leadership unwilling to support reform, USAID will place a large share of program resources into training and educational activities for Turkmen youth and students in hopes that providing the next generation with a better understanding of political and economic realities will increase support for reform among future leaders.
FREEDOM Support Act funds will be provided in FY 2001 under the Administration's Expanded Threat Reduction Initiative (ETRI), for programs designed to enhance border security and export control capabilities in Turkmenistan. ETRI assistance will contribute to the nonproliferation of weapons of mass destruction, and associated delivery systems, materials, technologies and expertise.
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ACTIVITY DATA SHEET
PROGRAM: Turkmenistan
TITLE AND NUMBER: Increased Soundness of Fiscal Policies and Fiscal Management Practices, 120-012
PLANNED FY 2000 OBLIGATION AND ACCOUNT: $100,000 FSA
PROPOSED FY 2001 OBLIGATION AND ACCOUNT: $100,000 FSA
STATUS: Continuing
INITIAL OBLIGATION: FY 1998 ESTIMATED COMPLETION DATE: FY 2002Summary: The Government of Turkmenistan faces a potentially severe fiscal crisis. The nation's financial conditions have worsened, in large part due to a sharp drop in export revenues when Turkmenistan ceased exporting gas through the Russian pipeline system. Depressed oil and cotton prices have also had a negative effect on the economy.
Achieving this objective would help combat the worsening economic situation by improving budgetary and expenditure policies and by offering a more rational allocation of scarce government resources. USAID assistance enables the government to make positive changes in budget management procedures.
The pace of change will likely be too gradual to avoid a fiscal crisis, especially in the absence of an IMF macroeconomic program. Turkmenistan has been the slowest country in the region to move toward market liberalization. It has made little progress in privatization and financial sector reform or in liberalization of its trade regime. Slight progress has been made in price liberalization; the government has maintained price controls on energy products and subsidizes some basic consumer goods.
The direct beneficiaries of this objective are the national and local government agencies that need sound budget policies, government employees and all entities with which the government is in arrears. Indirect beneficiaries would include all Turkmen citizens. Sound fiscal policies and management practices contribute to both short- and long-term economic stability and make a significant contribution toward the growth potential of the economy. Thus, achieving this objective contributes to the Mission Performance Plan goal of helping the country become economically viable.
Key Results: Three key results are necessary to achieve this strategic objective: (1) improved budget management; (2) less inflationary government borrowing; and (3) compliance with the conditions of international financial institutions, particularly the World Bank and the IMF.
Performance and Prospects: The national budget in Turkmenistan operates increasingly on a non-cash basis, with mutual offsets, barter and in-kind payments obscuring the government's underlying net position. Cash revenues accounted for only 41% of total revenues in 1998. The central budget deficit on a commitment basis was around 4% of GDP in 1998. This figure excludes deficits of the state funds, i.e., agriculture, cotton, oil and gas. The quasi-fiscal deficit - central budget deficit plus deficits of the state funds - was around 15% in 1998, financed mainly through foreign borrowing, which stood at $1.8 billion (around 120% of GDP) at the middle of 1999. The government has also extended substantial subsidized directed credits to the agricultural sector. The latter are rarely paid back, effectively resulting in money creation by the central bank.
USAID partners provided specialized assistance on the budget process through a resident advisor. The Ministry of Finance has responded positively to USAID's recommendations on fiscal policy. The government incorporated most of the suggestions into its FY 2000 budget documents, all of which were passed by the Parliament. In FY 1998, an estimated 30% of the government's agencies were identified in the budget document. The FY 2000 budget document includes all known spending agencies. The FY 2000 budget document significantly increased the quality and quantity of financial information made available to the Cabinet and the Parliament. In contrast to previous practice, the document was topically organized and specifically separated and presented in volumes: central budgets and expenditures; local government budgets; state funds; and capital investments.
Using models developed during the formulation of the FY 2000 budget, the Government of Turkmenistan plans to introduce performance budgets government-wide in FY 2001. Budget components will include: (1) cost centers; (2) financing plan; (3) performance data; (4) expenditure estimates in economic classification order; and (5) an interpretive commentary. An upgraded computer system, financed by USAID, the World Bank and UNDP, will facilitate and sustain the introduction of recommended reform practices and will permit the introduction of accounting software to support reformed budget procedures.
Possible Adjustments to Plans: The focus of technical assistance is on the design and implementation of a formal budget process to establish modern performance budgeting and analytical methods. As long as the government remains committed to budget reform, USAID will continue to fund a resident budget advisor. The advisor will: (1) support effective implementation of budget reform legislation; (2) train key Ministry of Finance officials in budget analysis and preparation; and (3) introduce new budget formats and procedures consistent with international standards. Such work will complement the privatization or commercialization of state-owned enterprises. USAID is considering additional technical assistance to strengthen the macroeconomic analysis capacity of the Ministry of Economy and Finance.
Other activities that are planned over the course of 2000 and 2001 include expansion of local-level budget reform in the Dashhowuz region, and a linking of this activity with the strategic objective in health in an attempt to rationalize health expenditures.
Other Donor Programs: Although the IMF does not currently have a macroeconomic program, it does provide limited technical assistance to the central bank and the Ministry of Economy and Finance in the area of fiscal policy reform and central bank operations. EU/TACIS, through GTZ, has provided assistance to revise the Tax Code. The World Bank will restart its technical assistance and training in upgrading the computerized budget capability of the Ministry of Economy and Finance. The UNDP just signed an agreement with this ministry to provide technical assistance and training in the budget reform area.
Principal Contractors, Grantees or Agencies: Management Sciences for Development (Rule of Law) and Chemonics International (Democratic Development and Citizen Participation).USAID provides technical assistance in budget and fiscal reform through the KPMG/Barents Group. The Academy for Educational Development coordinates participant training.
Selected Performance Measures:
Baseline
Actual
(1998)Target
(1999)Target
(2000)Target
(2001)General government deficit as percent of GDP
1.6%(1995) 3% 1% 0.095% 0.09% Govt. of Turkmenistan compliance with conditions of international financial institutions*
No(1996) Off-budget share of total public sector expenditures
50% (1997)
5%
20%
10%
0%
__
*During FY 1998, USAID programs were being consolidated and a new strategy was being developed. Decisions were made about the relevance of the indicators for the program. Subsequently, data were not collected on this indicator.
ACTIVITY DATA SHEET
PROGRAM: Turkmenistan
TITLE AND NUMBER: Accelerated Development and Growth of Private Enterprises,120-013
PLANNED FY 2000 OBLIGATION AND ACCOUNT: $700,000 FSA
PROPOSED FY 2001 OBLIGATION AND ACCOUNT: $700,000 FSA
STATUS: Continuing
INITIAL OBLIGATION: FY 1997 ESTIMATED COMPLETION DATE: FY 2001Summary: Turkmenistan's state-controlled economy is failing to meet the needs of its citizens. The private sector must grow to improve the standard of living. In 1997, when USAID began work on this objective in Turkmenistan, the private sector generated only 20% of GDP. While reliable figures for 1998 are unavailable, most estimates place this indicator at not more than 22% for 1998. Privatiza-tion continues to lag. The government has impeded growth in the private sector by requiring burdensome registration procedures, and by limiting access to credit and foreign exchange.
The commercial and official foreign exchange rates were unified in April 1998, implicitly depreciating the official rate by 25%. The Government of Turkmenistan continues to control imports by screening access to non-cash foreign exchange auctions. In addition, surrender requirements on hard currency export earnings remain in place; thereby aggravating currency nonconvertibil-ity. In late 1998, the IMF failed to reach an agreement with the government on the terms for a stand-by arrange-ment. As the general economic situation continued to deteriorate, donors hoped that the government would recognize the need for systematic, economic reform policies. Unfortunately, this has not yet occurred.
USAID continues to provide assistance to achieve market-oriented reform, especially in improving the legal and regulatory environment for private business. This assistance supports the growth of Turkmenistan's small private sector; the direct beneficiaries are the owners of small and medium enterprises. Achieveing increased growth of small and medium enterprises (SMEs) will substantially contribute to the Mission Performance Plan goal of helping Turkmenistan become an economically viable nation. As the legal and regulatory environment for businesses in Turkmenistan improves, USAID will consider increasing direct financial and technical support for SMEs.
Key Results: Three key results are necessary to achieve this strategic objective: (1) an improved operational environment for private sector growth; (2) improved human resources so as to enhance the functioning of a market economy; and (3) increased availability of and access to capital and technological resources for the private sector.
Performance and Prospects: The private sector, outside of agriculture, accounts for less than 10% of GDP. All of the large enterprises - including cotton gins, building material plants, and food processing - remain in the public sector. The number of medium-sized and large enterprises awaiting privatization is 280. Privatizing these companies is likely to be difficult, particularly since the Government of Turkmenistan sets unrealistically high reservation prices, and limits land ownership rights. Turkmenistan's government has yet to adopt a coherent privatization program that would set the stage for rapid divestment; and interferes in the running of private companies. Company registration remains problematic, and government regulation unpredictable.
USAID provided assistance in trade and investment reform. USAID helped draft a progressive law on joint-stock companies that was enacted in November 1999. While these bode well, there are also some significant issues that could hinder prospects for success in the future: 1) the existence of competing state entities involved in privatization whose responsibilities overlap; 2) the lack of a clear political commitment to privatization; and 3) an inadequate legislative and regulatory base for privatization.
USAID suspended its assistance to the government's privatization program in 1999. After numerous efforts to revive the flagging privatization program, USAID has concluded that the Government of Turkmenistan has the expertise to carry out current small-scale privatization efforts. USAID also curtailed efforts with the Ministry of Agriculture and Water Resources in implementing agribusiness and land reform privatization after initial collaboration failed to produce mutually acceptable program plans. USAID, in partnership with the U.S. Department of Agriculture (USDA), continues to work with the ministry on pest management and crop protection.
USAID provided exploratory assistance on land titling and registration, but will not proceed without an unequivocal commitment from the Government of Turkmenistan.
USAID assistance has enabled a number of enterprises to expand their operations. USAID has provided business advice to numerous private-sector companies in different sectors, such as bakeries, wool spinners, a poultry farm, a print shop and a private commercial bank. Unfortunately, introduction of the needed macroeconomic reform has been slow. An improved business regulatory environment is required before business can grow and expand.
Possible Adjustments to Plans: Due to the government's continued postponement of a decision to accede to the World Trade Organization (WTO). USAID has suspended WTO training and accession related activities. Instead, USAID efforts will focus on the legal and regulatory reform to improve the trade and investment environment, as well as on the education of government officials and businessmen.
USAID plans to work with the major institutions of higher education in Turkmenistan to improve the next generation's understanding of a market-oriented economy.
Other Donor Programs: Important donor organizations support private sector growth and development. European Union/Technical Assistance for the Commonwealth of Independent States is providing assistance in the areas of privatization, agriculture and private sector development. The European Bank for Reconstruction and Development is beginning to implement an SME loan program. USDA funded a policy advisor to the Ministry of Agriculture and Water Resources. USDA continues to work with the ministry on pest management and crop protection.
Principal Contractors, Grantees, or Agencies: USAID provides assistance with trade and investment reform and corporate privatization through Booz Allen & Hamilton. The Central Asian American Enterprise Fund provides loan and equity investments to Turkmen companies. USAID provides technical assistance directly to small and medium enterprises through volunteers from the International Executive Service Corps. Mercy Corps International and Winrock International also provide technical assistance. The Academy for Educational Development coordinates participant training.
Baseline
Actual
(1998)Target
(1999)Target
(2000)Target
(2001)Share of GDP generated by private Enterprises
20%(1996) 55% 22% 25% 30% Govt. of Turkmenistan maintains compliance with conditions of international financial institutions
No(1998) No No Yes Yes Percentage of total capital invested in the private sector*
8% (1997)
Dollar volume of joint venture funds invested (millions)* $3 (1997) __
*During FY 1998, USAID programs were being consolidated and a new strategy was being developed. Decisions were made about the relevance of the indicators for the program. Subsequently, data were not collected on these indicators.
EXPLANATION FOR SPECIAL INITIATIVES and CROSS-CUTTING PROGRAMS
Title: Special Initiatives, 120-041
Planned FY 2000 Obligation and Funding Source: $4,880,000 FSA
Proposed FY 2001 Obligation and Funding Source: $6,900,000 FSASummary: This objective includes all of the 632 allocations and transfers to other USG entities. The majority of funding in this objective goes to the State Department for public diplomacy, humanitarian transport, international narcotics and law enforcement programs. Other recipients include the Deaprtment of Customs.
USAID activities under this objective meet criteria oulined in Agency guidance for special objectives and interests. That is, they are of linited scope and/or duration and respond to particular windows of opportunity. For USAID/Turkmenistan, these activities generally support health care improvement.
Title: Cross-cutting Programs, 120-042
Planned FY 2000 Obligation and Funding Source: $600,000 FSA
Proposed FY 2001 Obligation and Funding Source: $300,000 FSASummary: This objective is designed to accommodate activities that make significant contributions to more than one objective. The activities included in this objective for Turkmenistan are the exchanges and training program, and program development and support activities.
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Last Updated on: February 01, 2001 |
