Turkmenistan - 7-State-Owned EnterprisesTurkmenistan - State Enterprises
State-owned enterprises (SOEs) still dominate Turkmenistan’s economy and control the lion’s share of the country’s industrial production, especially in the sectors of onshore hydrocarbon production, transportation, refining, electricity generation and distribution, chemicals, transportation, and construction material production. Education, healthcare, and media enterprises are state-owned and tightly controlled. State-owned enterprises are also heavily involved in agriculture, food processing, textiles, communications, construction, trade, and services. Although state-owned enterprises are often inefficient, the government considers them strategically important. While there are some small-scale private enterprises in Turkmenistan, the government continues to exert significant influence over these enterprises. There are no mechanisms to ensure transparency or accountability in the business decisions or operations of state-owned enterprises. There is no publicly available information on the total assets of SOEs, total net income of SOEs, the number of people employed by SOEs and the expenses these SOEs allocate to research and development (R&D). There is no published list of SOEs. Turkmenistan is not a member of the WTO and is not a party to the Government Procurement Agreement (GPA) within the framework of the WTO. SOEs are not uniformly subject to the same tax burden as their private sector competitors, as SOEs are entirely subsidized by the government.
OECD Guidelines on Corporate Governance of SOEs
There is no publicly available information on corporate governance within SOEs or whether they comply with the Organization for Economic Co-operation and Development (OECD) guidelines on corporate governance.
Efforts to privatize former state enterprises have attracted little foreign investment. Privatization has been limited by the government to the service, trade, and agricultural sectors and includes facilities such as old cattle farms, shops, restaurants and tomato processing plants built several decades ago; most industry remains under state control. Outdated technology, poor infrastructure, and bureaucratic obstacles make privatized enterprises unattractive for foreign and local investors.
In November 2012, Turkmenistan adopted a national program related to the privatization of state-owned enterprises and facilities. The document identifies the main goals and procedures for privatizing state property. The program is scheduled to be implemented in three phases: in 2013 (privatization of small enterprises), during the period 2014-2015 (privatization of mid-size enterprises), and 2016 (privatization of large enterprises). The third phase actually started in 2017. The privatization of state enterprises in the sectors of construction, transportation, communications, and the creation of joint stock companies are part of the program. Strategic facilities, as identified by the government, are not subject to privatization, including those related to natural resources. Other property not subject to privatization includes objects of cultural importance, the property of the armed and security forces, government institutions, research institutes, the facilities of the Academy of Sciences, the integrated energy system, and the public transportation system.
The rules and procedures governing privatization in Turkmenistan lack transparency, leading to corruption. Foreign investors are allowed to participate in the bidding process only after they have been approved by the State Agency for Protection from Economic Risks under the Ministry of Economy and Development. In December 2013, the parliament passed the Law on the Denationalization and Privatization of State Property, which took effect in July 2014. The Ministry of Economy and Development reported that 36 and 30 facilities were privatized in 2015 and 2016 respectively under the State Program for Privatization of Enterprises and Objects of State Property in Turkmenistan for 2013-2016.
Despite official comments regarding the priority of the growth of the private sector, supporting privatization has been low on the government’s agenda. All land is government-owned, for example, and neither domestic nor foreign businesses can receive long-term land-use rights for “non-agricultural” purposes. While private citizens have some land usage rights, these rights exclude the sale or mortgage of land. Land rights can be transferred only through inheritance. Foreign companies or individuals are permitted to lease land for non-agricultural purposes, but only the president has the authority to grant the lease.
The government has attempted to introduce an element of competition for state contracts by announcing international tenders for some projects. Often these projects are driven by political rather than economic considerations. The tender process, in addition, is often badly managed and nontransparent. On December 20, 2014, Turkmenistan adopted the Law on Tenders that went into effect on July 1, 2015. The law seeks to develop competition among bidders, ensure transparency and effective implementation of tender procedures, and compliance with international standards.
Turkmenistan Economic Development and Investment