Academic journal article Current Politics and Economics of South, Southeastern, and Central Asia

Turkmenistan: Investment Climate Statement 2015

Academic journal article Current Politics and Economics of South, Southeastern, and Central Asia

Turkmenistan: Investment Climate Statement 2015

Article excerpt

U.S. Department of State Bureau of Economic and Business Affairs

Executive Summary

Turkmenistan is a relatively large country (slightly larger than the state of California), but sparsely inhabited (about 5.6 million), with abundant hydrocarbon resources, particularly natural gas. Turkmenistan's economy depends heavily on the production of natural gas, oil, petrochemicals and, to a lesser degree, cotton and textiles. Based on data provided by the Government of Turkmenistan, the country's 2014 Gross Domestic Product (GDP) was USD 43.5 billion.

In 2008, in an effort to improve investment conditions in the country, the government adopted legal reforms on foreign investment and licensing. Nevertheless, the lack of established rule of law, inconsistent regulatory practices, and unfamiliarity with international business norms are major disincentives to foreign investment. Corruption remains widespread in both public and private sectors in Turkmenistan, and the ability to develop and maintain good relationships with the government is essential for doing business in the country. The government strictly controls foreign exchange flows, and the conversion of excess amounts of the local currency, the manat, remains problematic. Expropriation is not common in Turkmenistan. The government's dispute settlement clause in contracts generally allows for arbitration in a venue outside of

Turkmenistan. While Turkmenistan has undertaken some initiatives to improve Intellectual Property Rights (IPR) protection, including the creation of the State Agency for Intellectual Property and the signing of some WIPO (World Intellectual Property Organization) conventions, it has not adopted comprehensive administrative and civil procedures to improve the enforcement of IPR.

Although Turkmenistan is incrementally amending its laws to meet international standards, the country's regulatory system is not implemented transparently, and the government has influence over courts' decision-making processes. The country's autocratic political system has been stable. Turkmenistan has not had much success in attracting FDI from American companies. Although slowly maturing and diversifying, the economy is still underdeveloped.

1.Openness to, and Restrictions upon, Foreign Investment

Attitude toward Foreign Direct Investment

Turkmenistan regularly announces its desire to attract more foreign investment, but tight state control of the economy, the slow pace of economic reform, and 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. Given the arbitrary nature of this assessment, the agency will likely further increase already arduous bureaucratic procedures.

Historically, the most promising areas for investment are in the oil and gas, agricultural, and construction sectors. The government seeks foreign technology and investment in order to diversify its economy through the development of domestic chemical and petrochemical industry facilities. As a result of President Gurbanguly Berdimuhamedov's policy to provide Internet access to every home, school and kindergarten, the visibility of Turkmenistan's communication sector has also grown. Decisions to allow foreign investment are politically driven; companies from "friendly" countries are often more successful in winning tenders and signing contracts.

According to the government sources, foreign direct investment during the first three quarters of 2014 was USD 2.9 billion, of which 97 percent was in the extractive industries.

In 2012, the government announced that it would invest USD 80. …

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