This information is derived from the State Department's Office of Investment Affairs' 2016 Investment Climate Statement. Any questions on the ICS can be directed to EB-ICS-DL@state.gov
Last Published: 10/19/2017

Turkmenistan is a physically large country (slightly larger than the state of California) but is sparsely inhabited (about 5 million people), with abundant hydrocarbon resources, particularly natural gas. Turkmenistan’s economy depends heavily on the production and export of natural gas, oil, petrochemicals and, to a lesser degree, cotton, wheat and textiles. According to the Statistical Yearbook of Turkmenistan, the country’s 2015 Gross Domestic Product (GDP) was USD 35.8 billion (TMT 125 billion) and its 2014 GDP was USD 43.5 billion (TMT 124 billion), with official figures as yet unavailable for 2016. The government reported an implausibly high GDP growth of 6.2 percent in 2016. The economy actually appears to have been in recession since the last quarter of 2014 when global hydrocarbon prices fell. The current investment climate is not conducive to U.S. investment. Due to heavy official limitations on data sharing, official economic figures cannot be verified
Foreign businesses in Turkmenistan face steep barriers to realizing return on investment, including the government’s non-payment on orders received; failure to respect contract law; and the inability to convert local money into hard currency for repatriation of profits, dividends, and payment to foreign suppliers. Turkmenistan has had little success in attracting FDI from American companies. While American companies, including Coca-Cola and Caterpillar, have been present in the local market for years and have performed successfully, government delays in payment to foreign companies and restrictions on converting earnings into hard currency have begun to complicate the investment picture. French (Bouygues, Vinci), Korean (Hyundai) and Turkish (Polimeks) companies have reportedly faced similar issues during the last year as energy-related revenues dry up. In August 2016, Turkmen-Turkish University was closed down. In December 2016, the government expropriated the largest (and only foreign-owned) grocery store, Yimpas shopping and business center, in Ashgabat without compensation or other legal remedy, ostensibly to build a parking lot. In April 2017, the Turkish Hospital in Ashgabat was closed indefinitely. There have been consistent reports over the last year that officials or their agents seized local companies run by individuals purportedly associated with the Turkish Gulenist movement. In many cases, authorities jailed the legal owners of the enterprises using security-related laws as a legal pretext and reopened the businesses under new ownership.
A lack of established rule of law, an opaque regulatory framework, and rampant corruption remain serious problems in Turkmenistan. The government has a preference for doing business with entities who are members of the quasi-statist Union of Industrialists and Entrepreneurs, membership in which appears to be a key criterion for access to contracts and state loans. The government strictly controls foreign exchange flows and the conversion to hard currency of the local currency, the manat (TMT), is increasingly difficult. The government’s dispute settlement clause in contracts generally allows for arbitration in a venue outside of Turkmenistan.
Although Turkmenistan regularly amends its laws ostensibly to meet international standards, the country fails to implement investment-related legislation. There is no independent judiciary. The country’s autocratic political system has been relatively stable, despite a reported coup attempt in 2002. The constitution was amended in September 2016 to extend the presidential term from five to seven years, remove the 70-year age limit, and to allow the president to serve without term limits. Lower global oil and natural gas prices slowed the economy and put pressure on its currency. The government’s introduction of severe limitations on currency conversion and a pursuit of an import substitution policy serve as impediments to foreign trade. In May 2016 the IMF projected a 15% decrease in export of Turkmen goods from $11.8 billion to $10.1 billion in 2016 while imports also fell over 16% from $10.4 billion to $8.4 billion for the same year. According to the State Committee on Statistics, Turkmenistan’s foreign trade turnover dropped from USD 26.21 billion in 2015 to USD 20.7 billion in 2016.
Political stability is probably the most positive aspect, although rampant corruption, high inflation, failure to uphold private contract law, and an inability to convert currency are the most negative conditions underpinning the country’s investment climate. The GoTX has also not traditionally allowed for a PSA agreement, which hampers additional interest in energy exploration.
The Energy sector, construction, and petrochemicals are the sectors that have historically attracted the most investment in Turkmenistan.
The government is currently attempting to implement a labor rule that requires foreign companies to hire 9 local employees for every one international staff member employed in the country.
Key issues to watch: developments in the financial sector, including the TMT/USD exchange rate and the severity of restrictions on currency conversion, and the degree to which the Government of Turkmenistan pays its debts to foreign and domestic companies.
Table 1

MeasureYearIndex/RankWebsite Address
TI Corruption Perceptions Index2016154 of 175Transparency International
World Bank’s Doing Business Report “Ease of Doing Business”2016not rankedThe World Bank: Doing Business
Global Innovation Index2016not rankedThe Global Innovation Index
U.S. FDI in partner country ($M USD, stock positions)2015No data disclosed.Bureau of Economic Analysis
World Bank GNI per capita20157,380The World Bank
 

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Turkmenistan Economic Development and Investment Law