Turkmenistan - Market OverviewTurkmenistan - Market Overview
Turkmenistan is a physically large country (slightly larger than the state of California) but sparsely inhabited (about 5 million people). It gained independence in 1991 after the breakup of the Soviet Union. Although Turkmenistan’s vast natural gas and its oil resources continue to attract some foreign companies, the Government of Turkmenistan has yet to implement reforms needed to create an inviting business climate where foreign investment and foreign investors are truly welcomed and property rights guaranteed. In addition, the government is centralized and non-transparent, with much information that is readily available in most other countries classified as a “state secret.” Turkmenistan publishes limited national statistics, but its data collection and evaluation methodologies have not been verified by independent third parties and are often not credible. According to the 2017 Statistical Yearbook of Turkmenistan, the country’s 2016 Gross Domestic Product (GDP) was USD 36.18 billion (TMT126.6 billion) while 2015 GDP was USD 35.9 billion (TMT 125 billion), with official GDP figures as yet unavailable for 2017. The conversion from manat was done at the official rate of TMT3.5/USD. The government reported a GDP growth of 6.5 percent in 2017. These GDP figures and growth rate are implausible.
Turkmenistan continues to be a major producer of natural gas and, according to the Statistical Yearbook of Turkmenistan, in 2016 produced an estimated 69.4 billion cubic meters. In 2015, Russia bought 4 bcm from Turkmenistan but ceased to import refined natural gas from Turkmenistan in January 2016. Turkmenistan stopped exporting gas to Iran on January 1, 2017. Other key sectors include oil and petroleum products, plastics and textiles.
According to Turkmenistan’s State Statistics Committee, Turkmenistan’s exports rose from USD 7.5 billion in 2016 to USD 7.8 billion in 2017 while the country’s imports fell from approximately USD 13 billion in 2016 to USD 10 billion. The trade deficit was USD 2.4 billion. Turkmenistan’s largest importer is Turkey, with consumer goods, food, and construction materials. China is Turkmenistan’s largest export market. According to the U.S. Department of Commerce, in 2017 U.S. exports to Turkmenistan totaled USD 282 million while U.S. imports from Turkmenistan were USD 13.8 million. The highest valued U.S. export caterogy was civilian aircraft and spare parts, with industrial engines the second largest category. The U.S.’s largest import from Turkmenistan was cotton cloth and fabrics. Food inflation averaged 36 percent in Ashgabat in 2017.
The top four reasons why U.S. companies may want to consider exporting to Turkmenistan include Turkmenistan’s readiness to import innovative technologies, plans to diversify its economy, strategic geographic location between the Middle East, Europe and Asia, and its political stability.
The government provides substantial state subsidies to the general public, as well as to specific sectors such as agriculture; however in the current economic and financial downturn, these subsidies are under threat. President Gurbanguly Berdimuhamedov, first elected in 2007 and re-elected in 2012 and 2017, initially promised to open up the country and improve its investment climate, but these promises remain yet unfulfilled. Turkmenistan does not allow private ownership of land, and most of its industries are state-owned. The domestic private sector’s share of the economy is estimated to be below 20 percent. Retail trade, services, processing and production are the main sectors in which private ownership is permitted although often with government-set price controls. According to official statistics of the Government of Turkmenistan, the private sector share of GDP (excluding the dominant fuel and energy sector) was 63.1 percent as of April 2018. In 2012, Turkmenistan announced plans to privatize state-held properties under the State Program for Privatization of Enterprises and Objects of State Property during the period 2013-2016, with the goal of increasing the share of the non-state sector in GDP to 70 percent by 2020. Privatization has, however, so far proceeded slowly with few buyers willing to meet the government’s asking prices. A limited number of foreign petroleum companies successfully operate under production sharing agreements (PSAs). Turkmenistan’s economy is centrally managed and most business decisions appear politically motivated.
Turkmenistan devalued its national currency – the manat – by 19 percent on January 1, 2015, to an exchange rate of 3.5 manat to a dollar. Between 2008 and 2014, the rate was 2.85 manat per 1 USD. Converting manat into U.S. dollars (or other hard currencies) is increasingly difficult due to tight government restrictions on exchange. The black market exchange rate reached 25 manat per 1 USD in Ashgabat on May 30, 2018. The government does not release information about its hard currency reserves. Lower global energy prices have slowed Turkmenistan’s economy and put downward pressure on its currency as has its persistent current account deficit. In January 2016, the government eliminated consumers’ easy access to hard currency and placed limitations on currency conversion, which impeded trade and led to extra hurdles for businesses. Throughout 2016, 2017 and Q1 2018, U.S. businesses reported increasing difficulties converting manat into U.S. dollars. On average, companies report receiving only 2% of their conversion requests every other week.
Turkmenistan has maintained a stable political environment since independence in 1991. The president is both the head of state and the head of government. Presidential decrees and resolutions have the force of law and often supersede existing legislation. The ruling Democratic Party is the re-branded Communist Party of Turkmenistan. After the Parliament adopted a new law on political parties in January 2012, a second political party drawn from the membership of the Union of Industrialists and Entrepreneurs, the Party of the Industrialists and Entrepreneurs was established. A third political party, the Agrarian Party, was established in September 2014. While the Party of Industrialists and Entrepreneurs allegedly represents the business interests of private entrepreneurs, it is quasi-governmental and its creation, like that of the Agrarian Party, has had little effect on political decision-making. The Democratic Party dominates the political arena.
Turkmenistan Trade Development and Promotion