Turkmenistan Business Overview

Business and Economic Overview

The Turkmen economy went into recession in 2014 as global energy prices fell, but has almost fully recovered and is expected to maintain a steady growth over the forthcoming years. Nevertheless, the reliance on hydrocarbon exports and the slowdown in the Chinese market, which is the destination for 78% of Turkmen exports, is a continuing cause for concern.

Turkmenistan is not included in the World Bank’s Ease of Doing Business Index owing to the scarcity of reliable data.

The main market challenges in Turkmenistan include the lack of consistent and transparent business legislation, the underdeveloped financial sector, systemic corruption and an unpredictable commercial environment where the state holds a monopoly over all strategic resources, infrastructure, banking and foreign trade, amongst other sectors. Furthermore, there are significant administrative hurdles to cross; there are onerous registration procedures which can be extremely time-consuming and unofficial ‘payments’ of up to US$10,000 are often required.

Turkmenistan’s hydrocarbon sector and its related industries represent the greatest opportunity for investment or commercial activity: Turkmenistan has the fourth largest proven gas reserves in the world. Indeed, true direct investment is almost exclusively limited to the oil and gas industry. Given its importance in Turkmenistan’s economy, the Turkmen government strives to maximise the hydrocarbon sector’s potential. Natural gas production and refining are seen as best prospect industries; foreign technology and investment is needed for the Turkmenistan chemical and petrochemical industries; energy infrastructure is needed as new oil and gas fields are developed and the state has ambitious plans for overhauling Turkmenistan’s transport infrastructure. 

Large-scale construction projects, such as that at Awaza and usually awarded to Turkish firms, have boosted imports of construction materials and technologies for a number of years; and if the Southern Gas Corridor project is extended to Turkmenistan it may provide significant commercial opportunities to Western firms.

Over the last decade, Turkmenistan has increasingly opened up to international trade and foreign investment, however it is still advisable to work with a trusted local partner in order to manage political and bureaucratic hurdles.

Security Situation

Turkmenistan is largely a bastion of stability within Central Asia. President Berdimuhamedow retains a vice-like grip over Turkmenistan’s political environment, and the government controls the press, media outlets and the internet. As such, there is no true political opposition and therefore a very low risk of internal political violence: even regime critics tend to be largely self-censored. There is traditionally a high level of security but often at the expense of individual rights. Petty crime is rare and the threat of terrorism is low.

Turkmenistan is a recognised neutral country, the principle of which is enshrined in their 2016 Military Doctrine. As such, the predominant security threats come from the Turkmen border regions, travel to which is often restricted, and the threat of non-state groups from neighbouring countries, such as the Taliban.

The Turkmen state is vulnerable should external violence spill over its borders owing to its lack of military operational experience. Nevertheless, the Taliban and other regional Islamist groups either do not have aims of expanding into the greater region or the capability, and Turkmenistan repetitively asserts the stability of its border: 70% of its armed forces are deployed on the Turkmen-Afghan border. 

Further transnational issues focus on the demarcation of the Caspian seabed, and thus the hydrocarbon resources there, between Turkmenistan, Kazakhstan, Azerbaijan and Iran, although this is most unlikely to escalate.

References

1 http://www.nyulawglobal.org/globalex/Turkmenistan.html#_A_hierarchy_of_Turkmenistanlaws.

2 http://www.osce.org/odihr/262336?download=true.

3 http://www.bti-project.org/en/reports/country-reports/detail/itc/tkm/itr/pse/; http://www.business-anti-corruption.com/country-profiles/turkmenistan.

4 https://pages.law.illinois.edu/p-maggs/codes.htm.

5 http://www.osce.org/odihr/262336?download=true.

6 https://www.taitwalker.co.uk/wp-content/uploads/2014/10/Doing-Business-Guide-Turkmenistan.pdf.

7 https://www.export.gov/apex/article2?id=Turkmenistan-Market-Opportunities.

8 https://www.gov.uk/government/publications/overseas-business-risk-turkmenistan/overseas-business-risk-turkmenistan.

9 http://www.business-anti-corruption.com/country-profiles/turkmenistan.

10 https://www.riskadvisory.com/news/turkmenistan-moscow-courts-ashgabat-for-security-support.php.

11 https://www.cia.gov/library/publications/the-world-factbook/geos/tx.html.

12 http://www.coface.com/Economic-Studies-and-Country-Risks/Turkmenistan.

13 https://www.gov.uk/foreign-travel-advice/turkmenistan/terrorism

14 https://www.transparency.org/news/feature/corruption_perceptions_index_2016#table.

15 http://www.business-anti-corruption.com/country-profiles/turkmenistan.

16 http://www.imf.org/external/datamapper/NGDPD@WEO/TKM; https://data.worldbank.org/country/turkmenistan.

17 https://www.cia.gov/library/publications/the-world-factbook/geos/tx.html