EurasiaNet Business & Economics - Turkish Businessman Weaves Textile Empire in Turkmenistan

BUSINESS & ECONOMICS

TURKISH BUSINESSMAN WEAVES TEXTILE EMPIRE IN TURKMENISTAN

Maya Artikova 8/10/01

Since Turkmenistan gained independence, many of the country’s textile factories have come under the control of Turkish businessmen. These foreign-run concerns are manipulating artificially established exchange rates to reap huge profits.

A leading Turkish textile baron reportedly is Ahmet Chalyk, whose involvement in Turkmenistan began in 1993 with the construction of an apparel factory outside Ashgabat that manufactures blue jeans. Since then, Chalyk has steadily built his economic and political influence within Turkmenistan. According to the US Department of Commerce’s Commercial Service, which cites official Turkmen government statistics, the Turkish-based Ahmet Chalyk Group invested $44 million US in construction of a textile complex in the Ashgabat region in 1998. That same year he was appointed Turkmenistan’s Deputy Minister of Textile Industries.

Chalyk has subsequently been appointed as President Saparmurat Niyazov’s personal emissary for the development of the gas, oil, electric and textile industries in Turkey and Europe. Although his appointment was not widely reported, in March of this year Press-Courier Turkmenbashi, Turkmenistan.RU and the National Information Agency of Uzbekistan all refer to Chalyk as an emissary. Observers say that presently Chalyk directly owns or controls most of Turkmenistan’s textile industry, and is accumulating a significant interest in oil and gas ventures.

On July 12, the news website Gazeta SNG reported that a new textile factory named Turkmenbashi, built by a holding company controlled by Chalyk, opened in the outskirts of Ashgabat. The factory has an estimated processing capacity of 9,000 tons of cotton fiber per year, producing from that 8,000 tons of cotton yarn. To cover the investment in the construction of the factory a portion of the production will be sold for export, according to Gazeta SNG.

On paper, the Turkmenbashi plant, as well as Chalyk’s other business interests, are registered locally as joint ventures. Sources say this allows the factories to purchase cotton with manats (Turkmenistan’s currency) and sell the finished fabric for manats as well. But the difference between the official and black market prices allows the business to turn large profits. In recent years the value of the manat on the black market has fallen by more than 50 percent against the US dollar, to a current exchange rate of 22,000 manats to $1US. The official rate is 5,200 manats to $1US.

Sources in Turkmenistan allege that Turkish managers of textile factories controlled by Chalyk and others sell at the low government exchange rate the material they produce to trading companies they themselves have established. These firms in turn sell the fabric to third parties at world market prices. This keeps the revenues of Turkmen joint ventures looking much smaller on paper, and minimizes their taxable income.

In addition to manipulation of exchange rates, a thriving trade in manats has arisen among traders and textile businesses. Some import-export concerns are able to exploit loopholes in Turkmen legislation that allow them to accumulate large amount of manats through sales made at the official, and artificially low, government rate. They make money by selling their manats to textile traders for up to 15 percent below the black market rate. The traders then reap huge profits themselves by purchasing textiles at the official rate. According to one source, currency manipulation is not limited to the textile industry, but is also prevalent in other economic sectors, including the oil and gas sector.

Turkmenistan now processes between 100,000 and 150,000 tons of cotton per year. With wholesale prices for cotton being in the range of $950 to $1,200 per ton over the last few years, annual revenues can reach $150 million.

Speaking on condition of anonymity, sources within Turkmenistan’s textile industry allege managers and traders have shared their hefty profits in currency dealings with Turkmen officials and bankers. Inter-business currency machinations have been publicly uncovered on several occasions, but in each case authorities have not investigated allegations of wrongdoing. Sources also assert that incriminating documentation has been destroyed.

The manipulation of exchange rates has cost the state up to $500 million per year in lost revenue, according to some estimates. Meanwhile, Turkish sources say they wonder whether Turkmenistan’s textile factories, operating under current conditions, will ever produce an adequate return on investments.

Editor�s Note: Maya Artikova is a freelance writer.

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