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Viewing cable 10ASHGABAT250, TURKMENISTAN: A TALE OF TWO BUSINESSES: LICORICE

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Reference ID Created Released Classification Origin
10ASHGABAT250 2010-02-26 12:12 2010-11-30 21:09 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Ashgabat
VZCZCXRO4188
PP RUEHIK
DE RUEHAH #0250/01 0571207
ZNR UUUUU ZZH
P 261207Z FEB 10
FM AMEMBASSY ASHGABAT
TO RUEHC/SECSTATE WASHDC PRIORITY 4301
INFO RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE
RUCNCIS/CIS COLLECTIVE
RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHAK/AMEMBASSY ANKARA 6297
RUEHBJ/AMEMBASSY BEIJING 3967
RUEHKO/AMEMBASSY TOKYO 3826
RUEHIT/AMCONSUL ISTANBUL 4541
RHEHNSC/NSC WASHDC
RHMCSUU/CDR USCENTCOM MACDILL AFB FL
RUEAIIA/CIA WASHDC
RHEFDIA/DIA WASHDC
RUEKJCS/JOINT STAFF WASHDC
RUEKJCS/SECDEF WASHINGTON DC
RUEHVEN/USMISSION USOSCE 4436
UNCLAS SECTION 01 OF 02 ASHGABAT 000250 

SENSITIVE 
SIPDIS 

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

E.O. 12958: N/A 
TAGS: BTIO ECON BEXP PGOV EINV TX
SUBJECT: TURKMENISTAN: A TALE OF TWO BUSINESSES: LICORICE 
AND MACHINE PARTS 

ASHGABAT 00000250 001.2 OF 002 


1. (SBU) SUMMARY: Turkmenabat, Turkmenistan's second largest 
city, continues its role as a transport hub and industrial 
center, despite diminished regional commerce in the 
post-Soviet era. A large complex that processes 
locally-harvested licorice root continues to prosper due to 
the availability of inputs and a healthy export market. A 
machine parts factory has faced greater challenges, having 
been forced to find a new product line and relying solely on 
the domestic market. Unlike the licorice complex, which 
pre-dates the Russian Revolution, the machine parts factory 
was a Soviet creation that lacks an obvious market in 
Turkmenistan's current economy. Thanks to government 
subsidies, however, it does not appear that even a 
struggling, Soviet era enterprise is threatened with closure. 
Given its success at maintaining its production equipment, 
the factory could see better days if it found the right 
foreign partner interested in a low-cost metal parts. END 
SUMMARY. 

LOCAL LICORICE ROOT SUPPORTS AN INDUSTRY 

2. (SBU) Poloff recently visited the Buyan Turkmenabat 
Agro-Industrial Complex, which specializes in the production 
of licorice extract in dry and paste forms. The licorice 
processing plant dates back to the Czarist era, when it was 
started by the U.S. firm MacAndrews and Forbes in 1906. A 
meeting with the director of the complex took place in the 
administrative building, adjacent to the processing plant. 
The plant was reportedly modernized in 2008 by a Chinese 
company, although the original 1906 press is still in use. 
The director of the complex declined poloff's request to tour 
the plant, saying that the equipment was currently undergoing 
maintenance prior to the start-up of the harvesting season in 
March. Instead, he offered to describe the process used to 
produce licorice extract, which is essentially a combination 
of steam and pressure applied to the harvested roots. 

3. (SBU) Licorice root grows wild along the banks of the Amu 
Darya. Attempts to cultivate it have not been successful. 
The licorice root is harvested by the Buyan complex's own 
brigades. The harvest takes place between March and October, 
terminating after the first frost. During the Soviet period, 
the Buyan plant processed licorice root from Uzbekistan, 
Tajikistan, Kazakhstan and Azerbaijan. Since the end of the 
Soviet Union, the plant only processes licorice root 
harvested in Turkmenistan. Buyan has 600 employees, the bulk 
of whom work in its harvesting brigades. The company does 
not obtain licorice root from individual harvesters. 

4. (SBU) The Buyan complex processes and sells unprocessed 
licorice root, as well as paste and powder extract. The 
powder extract is a new, higher value-added product, 
following modernization of the plant by the Chinese and 
installation of new equipment. The equipment in the plant is 
Chinese, Russian and American, the still operational 
U.S.-built press dating back to the plant's founding more 
than 100 years ago. Although the plant falls under the 
control of the Ministry of Healthcare and Medical Industry, 
it does not produce higher value-added consumer products such 
as medicine or candy, which are the primarily end uses for 
licorice extract. Buyan ships licorice extract to the U.S., 
Japan, former USSR countries, China and Western Europe. The 
U.S. company Mafco Worldwide Corp. purchases about 2,000 tons 
of extract per annum, all of which is produced on the vintae 
U.S. press, according to the director. Thirty percent of the 
exports are licorice extract, with the remainder sent as 
dried root. 

MACHINE PARTS: WE'LL MAKE WHATEVER YOU NEED 

5. (SBU) Poloff also visited an industrial machinery factory 
in Turkmenabat named "Agromash," which was established in 
1973. The plant is part of the state-owned 

ASHGABAT 00000250 002.2 OF 002 


"Turkmenmashyngurlushyk" (Turkmen Machine Building) 
Enterprise, which falls under the Ministry of Energy and 
Industry. It is one of eleven such factories operated by the 
machine building enterprise at different locations throughout 
the country. The factory has mechanical and welding 
sections, as well as a section for the reconstruction and 
testing of Russian-built YaMZ diesel engines. Greeted by the 
company's director, Muratjan Jumakulyiev, poloff was 
immediately led to the Soviet-era plant's massive shop floor 
in a soaring, hangar-like structure. The better part of the 
shop floor was devoid of activity, although a handful of 
workers were operating some of the equipment. The plant 
remains fully equipped with Soviet-era machine tools such as 
metal lathes and drills. An adjacent building houses a 
foundry with two rows of furnaces for melting metal. 
Although the factory has a capacity to produce 1,800 tons of 
iron and steel castings per annum, and 250 tons of 
non-ferrous metal castings, during the visit none of the 
furnaces were operating. 

6. (SBU) While the factory plant had once specialized in the 
repair of road grading equipment, it no longer performs that 
work and is now clearly scrambling for business for its line 
of products. The factory can also fabricate custom-ordered 
machine parts based on a client's specifications. Agromash's 
product line includes clay mixing machinery for use on 
drilling units; trailers that provide temporary housing and 
offices on construction sites; circulation systems for the 
preparation and storage of drilling solutions for oil and gas 
wells; rototillers; and ironwork such as ornamental fences 
and manhole covers. There was one massive circulation system 
on site ready for shipment, and at least a dozen trailers 
featuring various interior configurations. The factory 
currently does not export its production, although it does 
sell to foreign companies doing business in Turkmenistan. 
The factory's director proposed that U.S. firms could order 
custom machine parts and Agromash could produce them at a 
fraction of the U.S. cost. He also thought the company's 
housing/office trailers could find useful applications in 
Afghanistan, 

7. (SBU) COMMENT: The Buyan licorice complex clearly has a 
longstanding market niche dating back to the early 20th 
century. Even though the complex lost its regional role 
following the break-up of the Soviet Union, its continued 
exclusive access to its basic input, licorice root, and 
well-developed export demand have provided it with continuity 
and favorable prospects. Agromash, on the other hand, had to 
find new lines of business in the post-Soviet Turkmen economy 
and lacks the wherewithal to develop export markets. While 
the factory did not look busy, it has managed to maintain its 
equipment intact, thanks to state support, and could present 
an opportunity for a foreign partner looking for a low-cost 
supplier for machine parts. END COMMENT 
CURRAN