"Within one month our revenues had jumped over 50%."

Doing Business in Turkmenistan

Business in Turkmenistan
Turkmenistan’s GDP growth rate of 11% in 2010 ranks 4th in the world, but these figures are subject to wide margins of error, according to the CIA World Factbook. One of the reasons why the numbers regarding business in Turkmenistan is so skewed is because it possesses the world’s fourth largest reserves of natural gas resources. Although it is wealthy in natural resources in certain areas, most of the country is covered by the Karakum Desert. Turkmenistan has taken a cautious approach to economic reform, hoping to use gas and cotton sales to sustain its economy. In 2004, the unemployment rate was estimated to be 60%. With a population of 5,110,000, according to a 2011 government census, it is one of the smaller of the central asian states. Turkmenistan is a member of the Economic Cooperation Organization (ECO).

Agricultural business in Turkmenistan

Turkmenistan is largely desert country with nomadic cattle raising, intensive agriculture in irrigated oases, and huge gas and oil resources. One-half of its irrigated land is planted in cotton, placing the country in the top 10-15 producers, according to INA. The financial system is under full state control. The banking system, which was reduced substantially after the 1998 financial crisis, includes 12 national banks. The financial system is under full state control. In 2005 an estimated 95 percent of loans went to state enterprises. The Turkmen Government claims to have placed great emphasis on foreign economic relations and foreign trade and an “open door” trade policy, as declared by the President. At present 73 countries are partners of Turkmenistan, including the republics of the NIS. The most prominent trade partners of Turkmenistan are the United States, Turkey, Switzerland, Hong Kong, Germany, the United Kingdom,Cyprus, Iran, and the United Arab Emirates. By 1999, privatization in trade, catering, consumer services was fully completed. Availability of adequate legal base, opening of credit lines, including the foreign ones, and simplified the procedure of private enterprises opening and licensing. The private sector dominates in agriculture (60%), trade (70%) and transport (56%).

Industrial business in Turkmenistan

In the post-Soviet era, Turkmenistan’s industrial sector has been dominated increasingly by the fuel and cotton processing industries to the detriment of light industry. Between 1991 and 2004, some 14 new cotton-processing plants were opened, sharply increasing the capability of processing domestically produced cotton. The construction industry depends mainly on government building projects because construction of private housing is a low priority. Official estimates indicate that Turkmenistan is still the second largest gas producer in the CIS, after Russia, and a 2004 official estimate places reserves at about 23 trillion metric tons. Government statistics projected extraction of 75.4 billion  metric tons of gas in 2004, and 120 billion metric tons in 2010. Governemnt extraction and sale of resources represents the biggest portion of earnings for the state, which it uses to subsidize a wide variety of commodities and services.

Overall, Turkmenistan is a relatively poor market to invest or do trade in. It has a small economy measured at $36.047 billion by the IMF in 2011, and a relatively low GDP per capita measured at $6,627. It also suffers from bad governance and corruption.  Turkmenistan has been widely criticised for human rights abuses and has imposed severe restrictions on foreign travel for its citizens, according to BBC. According to Reporters Without Borders’ 2011 World Press Freedom Index, Turkmenistan had the 3rd worst press freedom conditions in the world, behind North Korea and Burma. It is considered to be one of the “10 Most Censored Countries”. While the Turkmen market is relatively untapped, it is also fraught with risk.

 

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Author:Globial International Business Team

The Globial International Business Team researches, analyzes, and reports on all things related to global trade and business.

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