This information is derived from the State Department's Office of Investment Affairs' Investment Climate Statement. Any questions on the ICS can be directed to
Last Published: 10/25/2017

Policies Toward Foreign Direct Investment

Turkmenistan regularly announces its desire to attract more foreign investment, but tight state control of the economy, the government’s inability to meet its financial obligations and a lack of transparency as well as a restrictive visa regime have created a difficult foreign investment climate. In January 2013, Turkmenistan created the Agency for Protection from Economic Risks to oversee international investments in Turkmenistan. The Agency is responsible for a comprehensive review of foreign companies wishing to enter Turkmenistan’s market that includes assessment of the financial and political risks associated with allowing the company to do business in Turkmenistan. The arbitrary nature of the agency’s assessments further increases the already opaque and arduous bureaucratic procedures.

Historically, the most promising areas for investment are in the oil and gas, agricultural, and construction sectors. However, a growing number of foreign companies have been forced out of the market due to their inability to convert local manat into a hard currency and non-payment of invoices by the government. The government seeks foreign technology and investment in order to diversify its economy through the development of domestic chemical and petrochemical industry facilities. Decisions to allow foreign investment are often politically driven; companies offering more “friendly” terms, including sales side credit that is later forgiven, are generally more successful in winning tenders and signing contracts.

According to government sources, the volume of capital investment amounted to more than 53 billion manat (USD 15.1 billion) in 2015 and TMT 59.5 billion (USD 17 billion) in 2016. There is no publicly available information on how much of this amount is foreign direct investment, and there is a general lack of integrity and consistency in official economic numbers.

In 2012, the government announced that it would invest USD 80.6 billion to construct 450 industrial and social facilities throughout the country by 2020. According to the national program for the transformation of the rural areas, of that, TMT 4.9 billion (USD 1.4 billion) was invested in Turkmenistan’s five provinces, including TMT 1.13 million in Ahal; TMT 1.14 million in Balkan, TMT 814 million in Dashoguz, TMT 964 million in Lebap and TMT 850 million in Mary.

Despite having the fourth largest natural gas reserves in the world, Turkmenistan ranked only eleventh in natural gas production at of the end of 2015. Key industries are state-owned. The State Statistics Committee reported that the private sector contributed 63 percent of GDP in 2014. The government later reported that the private sector share of GDP (excluding the fuel and energy sector) reached 65.1 percent end of June 2015. The government numbers, however, are misleading since they exclude the hydrocarbon sector, which is the single largest component of GDP. While the government has stated that it seeks to increase the private sector’s participation in the economy to 70 percent by 2020, there are no independent estimates available to verify the official statistics. The top economic priorities for the government remain achieving self-sufficiency in food supplies and increasing domestic production as part of import substitution. Recent emphasis has been placed on transforming Turkmenistan from a commodity producer to a value-added manufacturer, though this has largely failed to materialize and the economy rests almost entirely on natural resources and extracted resources.

In May 2010, the government adopted its National Program for the Socio-Economic Development of Turkmenistan (2011-2030). The program envisages the diversification of the economy and recognizes the importance of market and institutional reform. The program also includes the privatization of small and medium enterprises (SMEs). In October 2006, Turkmenistan adopted an Oil and Gas Development Plan (2007-2030). Despite these initiatives, however, Turkmenistan remains largely closed to foreign investment.

The government selectively chooses its investment partners, making a strong relationship with a government official often essential to achieve commercial success. Officials may “seek rents” for permitting or assisting foreign investors to enter the local market. Some foreign investors have found success working through foreign business representatives who are able to leverage their personal relationships with senior leaders to advance their business interests. 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.

Turkmenistan has accepted financing from international financial institutions (IFIs) since its independence in 1991. In 2009, the government reportedly accepted a USD 4 billion loan from the Chinese Development Bank (CDB) to develop Galkynysh, the world’s second largest natural gas field, as well as several significantly smaller loans from the Chinese Export-Import Bank for transportation- and communication-related projects. In 2011, Turkmenistan secured a second USD 4.1 billion loan from CDB to further develop the Galkynysh field. The government also accepted a USD 1 billion dollar loan from the Islamic Development Bank in 2010 to fund infrastructure projects. In 2011, the Asian Development Bank (ADB) provided a USD 125 million loan to the government to finance the procurement and installation of power and signaling equipment to a 311-kilometer section of the Kazakhstan–Turkmenistan–Iran railway. Reportedly, in the last few years, Turkmenistan approached a number of international financial organizations and foreign governments in an attempt to secure additional loans to fund large-scale government projects. In November 2013, the Asian Development Bank was appointed a transaction advisor for the Turkmenistan-Afghanistan-Pakistan-India (TAPI) natural gas pipeline project; under the agreement ADB advised on the establishment of TAPI pipeline company and handled the selection of a consortium lead for the project. In October 2016, the government announced that Islamic Development Bank would provide a $710 million loan to finance the Turkmenistan segment of TAPI. TurkmenGas was selected to lead the TAPI consortium in August 2015. Financing appears to still be an open question.

Competition Law

While Turkmenistan does not have a specific law that governs competition, Article 17 (Development of Competition and Antimonopoly Activities) of the Law on State Support to Small and Medium Enterprises seeks to promote fair competition in the country Conversion and Transfer Policies

Limits on Foreign Control and Right to Private Ownership and Establishment

There are no legal limits on the foreign ownership or control of companies. In practice, the government has only allowed fully-owned foreign operations in the oil sector and, in one case, in cellular communications. Foreigners may establish and own businesses and also engage in business activities within the boundaries of domestic laws, but repatriation of revenues is very challenging as currency conversion remains a major issue in the country. The nature of government-awarded contracts may vary in terms of the requirements for ownership of a local enterprises. All contractors operating in Turkmenistan for a period of at least 183 days a year must register at the Main State Tax Service. National accounting and international financial reporting standards apply to foreign investors. In the energy sector, Turkmenistan precludes foreign investors from investing in the exploration and production of its onshore gas resources. All land in Turkmenistan is government-owned. The State Migration Service of Turkmenistan requires that citizens of Turkmenistan make up ninety percent of the workforce of a company owned by a foreign investor.

Moreover, there are several ways for the government to discriminate against investors, including excessive tax examinations, license extension denials, and customs clearance and visa issuance obstacles. In most cases, the government has insisted on maintaining a majority interest in any joint venture (JV). Foreign investors have been reluctant to enter JVs controlled by the government, because of competing business cultures and conflicting management styles. Although there is no specific legislation requiring foreign investors to receive government approval to divest, in practice they are expected to coordinate such actions with the government. The court system is subject to government interference.

Private entities in Turkmenistan have the right to establish and own business enterprises. The 2000 Law on Enterprises defines the legal forms of state and private businesses (state enterprises, sole proprietorships, cooperatives, partnerships, corporations and enterprises of non-government organizations). The law allows foreign companies to establish subsidiaries, though the government does not currently register subsidiaries. The Civil Code of Turkmenistan and the Law on Enterprises govern the operation of representative and branch offices in Turkmenistan. Enterprises must be registered with the Registration Department of the Ministry of Economy. The 2008 Law on the Licensing of Certain Types of Activities (last amended in November 2015) lists 44 activities that require government licenses. The Law on Enterprises and the Law on Joint Stock Societies allow acquisitions and mergers. Turkmenistan’s legislation is not clear, however, about acquisitions and mergers involving foreign parties, nor does it have specific provisions for the disposition of interests in business enterprises, both solely domestic and those with foreign participation. Governmental approval is necessary for acquisitions and mergers of enterprises with state shares.

Other Investment Policy Reviews

The Government of Turkmenistan has not undergone an investment policy review by the Organization for Economic Cooperation and Development (OECD) or World Trade Organization (WTO). While Turkmenistan has expressed interest in exploring the WTO accession process and created an intergovernmental commission in January 2013 to review the benefits of accession, the country has not yet formally applied to join the organization. The United Nations Conference on Trade and Development’s (UNCTAD) World Investment Report (WIR) for 2015 ranked Turkmenistan among the top five countries in the category of Landlocked Developing Countries in its foreign direct investment (FDI) attraction index. According to the report, the volume of foreign direct investments in Turkmenistan amounted to USD4.3 billion in 2015. UNCTAD has not evaluated the country’s legal, regulatory and institutional framework for foreign direct investment. UNCTAD’s WIR 2014 reported that FDI in Turkmenistan amounted to USD 3.076 billion in 2013. According to the WIR 2015 report, FDI inflows into Turkmenistan increased by about 2.8 percent and amounted to USD3.164 billion in 2014 (with the accumulated amount of FDI at 54.7 percent of GDP). The WIR 2015 report did not list Turkmenistan as among the top 20 economies in terms of FDI inflows in 2014.

Laws/Regulations pn Foreign Direct Investment

Incoming foreign investment is regulated by the Law on Foreign Investment (last amended in 2008), the Law on Investments (last amended in 1993), and the Law on Joint Stock Societies (1999), which pertains to start-up corporations, acquisitions, mergers and takeovers. Foreign investment activities are affected by bilateral or multilateral investment treaties, the Law on Enterprises (2000), the Law on Business Activities (last amended in 2008), and the Land Code (2004). Foreign investment in the energy sector is subject to the 2008 Petroleum Law (also known as the Law on Hydrocarbon Resources, which was amended in 2011 and 2012). The Tax Code provides the legal framework for the taxation of foreign investment. The Civil Code (2000) defines what constitutes a legal entity in Turkmenistan. The Organization for Security and Co-operation in Europe (OSCE) Center in Ashgabat maintains a database of Turkmenistan’s laws, presidential decrees and resolutions. Since 2014 this information is also available on the Ministry of Justice of Turkmenistan’s website.

The Government of Turkmenistan has taken a number of steps to promote economic reform, including a law to combat money laundering and terrorism financing and a presidential decree that mandates the use of International Financial Reporting Standards (IFRS). In January 2010, Turkmenistan established a Financial Intelligence Unit under the Ministry of Finance to strengthen its anti-money laundering (AML) efforts and its ability to combat the financing of terrorism (CFT).

On January 1, 2012, Turkmenistan’s banks switched to International Financial Reporting Standards (IFRS). Government agencies transitioned to National Financial Reporting Standards (NFRS) in January 2014. Despite these positive steps, however, Turkmenistan remains one of the most closed economies in the region and some financing of large projects remains off the banks’ books.

Most foreign investment is governed by project-specific presidential decrees, which can grant privileges not provided by legislation. Legally, there are no limits on the foreign ownership of companies. In practice, however, the government has allowed fully-owned foreign operations only in the oil sector and, in one case, in cellular communications. (Note: This cellular company reportedly filed an international arbitration case against Turkmenistan when its license was suspended by the government in December 2010. After months of negotiations, the company re-entered the Turkmenistan market in September 2012. Since re-entry, however, the company has struggled to regain the market share it lost to a Turkmen state monopoly in the intervening period. End Note) Some companies take the presidential decree as a sovereign guarantee.

Industrial Promotion

In 2007, Turkmenistan created the Awaza (Avaza) Tourist Zone (ATZ) to promote tourism and the development of its Caspian Sea coast. It granted some tax incentives to those willing to invest in the construction of hotels and recreational facilities. Amendments to the Tax Code in October 2007 exempted construction and tourist facilities in the ATZ from Value Added Tax (VAT). Services offered at tourist facilities, including catering and room accommodations, are also exempt from VAT until 2020. In general, tax and investment incentives for the ATZ can be negotiated case by case. Turkmenistan also adopted multiple-year national development programs in various sectors of economy, which might include separate sub-sections on attracting investment in these sectors. However, the country’s visa regime is rigid, making an increase in foreign tourism unlikely in the near term. Information on these programs is not publicly available.

Business Facilitation

Turkmenistan does not have a business registration website that could be used by domestic or foreign companies. Depending on the type of business activity a foreign company seeks in Turkmenistan, registration with Turkmenistan’s Main State Tax Service, the Local Statistics Office, the Agency for Protection from Economic Risks, the Registration Department under the Ministry of Economy and Development, and the State Commodity and Raw Materials Exchange of Turkmenistan could all be required. Business registration usually takes about six months and often depends on personal connections in various government offices.

Development and implementation of public policies to attract foreign investment, investment coordination, and assistance to foreign investors are carried out by the Cabinet of Ministers of Turkmenistan and its authorized state body. The Agency for Protection from Economic Risks under the Ministry of Economy and Development makes a decision on providing any investment-related services to potential foreign investors based on criteria such as the financial status of the investor.

Turkmenistan’s Law on State Support to Small and Medium Enterprises (adopted in August 2009) defines small and medium enterprises as follows: small enterprises are those with an average staff number of up to 50 people employed in industry, power generation, construction, gas and water supply and up to 25 people in other sectors; medium enterprises are those with an average staff number of up to 200 people employed in industry, power generation, construction, gas and water supply and up to 100 people in other sectors. However, the benefits of the Law on State Support to Small and Medium Enterprises do not apply to: 1) state-owned enterprises; 2) enterprises with foreign investment carrying out banking or insurance activities; and 3) activities related to gambling and gaming for money.

Almost all business-related activities must be conducted by foreigners in person after receiving a letter of invitation from the MFA to travel to the country; permission also must be received from the government to meet with state ministries, agencies, and enterprises. The only other way to conduct business with the GoTX is to hire a local agent.

The government seeks to attract FDI to Turkmenistan and tends to support companies wishing to invest in the country. Consequently, foreign companies with approved government contracts generally do not face problems or significant delays when registering their operations in Turkmenistan. Under Turkmenistan’s law, all local and foreign entities operating in Turkmenistan are required to register with the Registration Department under the Ministry of Economy. Before the registration is granted, however, an inter-ministerial commission that includes the Ministry of Foreign Affairs, the Agency for Protection from Economic Risks, law enforcement agencies, and industry-specific ministries has to approve it.

Foreign companies without approved government contracts that seek to establish a legal entity in Turkmenistan must go through a lengthy and cumbersome registration process involving the inter-ministerial commission mentioned above. The commission evaluates foreign companies based on their financial standing, work experience, reputation, and perceived political and legal risks. The inter-ministerial commission does not give the reasons for denying a registration of a legal entity.

In order to participate in a government tender, the companies are not required to be registered in Turkmenistan. However, a company interested in participating in a tender process must submit all the tender documents to the respective ministry or agency in person. Many foreign companies with no presence in Turkmenistan provide a limited power of attorney to local representatives who then submit tender documents on their behalf. A list of required documents for screening is usually provided by the state agency announcing the tender.

Before the contract can be signed, the State Commodity and Raw Materials Exchange, the Central Bank, the Supreme Control Chamber, and the Cabinet of Ministers must approve the agreement. The approval process is not transparent and is often politically driven. There is no legal guarantee that the information provided by companies to the Government of Turkmenistan will be kept confidential.

Outward Investment

The Government of Turkmenistan does not promote or incentivize outward investment and there is no investment promotion agency. The existing policies are aimed at substituting imports and promoting exports, though this has not been successful given a growing trade imbalance in 2016. According to unofficial reports, individual entrepreneurs continue investing in real estate abroad including Turkey and the United Arab Emirates. Those entrepreneurs who invest abroad tend not to disclose such information fearing possible retribution from the government. The number of approaches from private businesses that want to invest in the United States has also increased over the past two years.

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Turkmenistan Economic Development and Investment Law