Turkmenistan - Market OverviewTurkmenistan - Market Overview
Turkmenistan is a physically large country (slightly larger than the state of California) but sparsely inhabited (less than 4 million people). It gained independence in 1991 after the breakup of the Soviet Union. Although Turkmenistan’s vast natural gas and 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 are often not credible. According to the 2018 Statistical Yearbook of Turkmenistan, the country’s Gross Domestic Product (GDP), using the official exchange rate, was USD 38 billion in 2017 (TMT 133 billion) and USD 36.18 billion in 2016 (TMT 126.6 billion), USD 35.8 billion (TMT 125 billion) in 2015, and USD 35.4 billion (TMT 124 billion) in 2014. The conversion from manat was done at the official rate of TMT3.5/USD. The government reported a GDP growth of 6.2 percent in 2018. These GDP figures and growth rate are implausible. The black market currency exchange rate hovers at or over five times the official rate; any GDP estimate in dollars that does not account for that disparity is not credible.
Turkmenistan continues to be a major producer of natural gas and, according to the Statistical Yearbook of Turkmenistan, in 2017 produced an estimated 70.6 billion cubic meters (bcm), a slight increase over 69.4 bcm in 2016. In 2015, Russia’s Gazprom bought 4 bcm from Turkmenistan but ceased to import refined natural gas from Turkmenistan in January 2016. Gazprom resumed import of Turkmen natural gas April 15, 2019 with reportedly a contract to import about 1.1 bcm through June 30, and there have been public reports of negotiations for a five-year contract. Turkmenistan stopped exporting gas to Iran on January 1, 2017 over a payment dispute. Other key sectors include oil and petroleum products, plastics, agriculture, and textiles.
State media announced exports in 2018 reached USD 11.2 billion and imports continued to decline, to USD 7.5 billion, leaving a trade surplus of USD 3.7 billion. This surplus, following two years of trade deficits, is due to a lack of access to dollars at the official exchange rate, making imports expensive, and a long-standing import substitution policy. 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 in 2017. The trade deficit was USD 2.4 billion in 2017 and USD 5.7 billion in 2016. 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 2018 U.S. exports to Turkmenistan totaled USD 30.9 million, down from USD 282 million in 2017, while U.S. imports from Turkmenistan were USD 11.6 milion, down from 13.8 million in 2017. The highest valued U.S. export caterogy was industrial engines, with meat & poultry the second largest category. The U.S.’s largest import from Turkmenistan was U.S. goods returned and reimports, with chemicals-fertilizers the second largest import category. Food inflation averaged 36 percent in Ashgabat in 2017 and reached 51 percent in 2018.
The top four reasons why U.S. companies may want to consider exporting to Turkmenistan include Turkmenistan’s readiness to import innovative technologies and equipment, plans to diversify its economy, strategic geographic location between the Middle East, Europe and Asia, and political stability.
The government provides substantial state subsidies to the general public, as well as to specific sectors such as agriculture, though subsidies to the general public are on the decline as it introduced fees for public utilities including natural gas, electricity, and water starting January 1, 2019. 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 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 around 20 percent. Retail trade, services, processing and production are the main sectors in which private ownership is permitted although sometimes 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, 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 extremely 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 and has hovered around 18 for the first half of 2019. 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 2018, U.S. businesses reported increasing difficulties converting manat into U.S. dollars. Currency conversion usually requires a company (or individual) to receive specific approval from a government bank and even then is usually limited to 2% of the value of the company’s bank account.
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 virtually no effect on political decision-making. The president, first and foremost, dominates the political arena.The Democratic Party and other parties play minor supporting roles.