EurasiaNet Business & Economics - What Can Turkmenistan Offer Investors Apart From Gas?

BUSINESS & ECONOMICS

WHAT CAN TURKMENISTAN OFFER INVESTORS APART FROM GAS?
Gulnoza Saidazimova 9/22/07
A EurasiaNet Partner Post from RFE/RL

In the former Soviet Union, Turkmenistan was famed for its delicious melons that were sold throughout the USSR. Nowadays, this Central Asian nation is known above all for its vast hydrocarbon resources. But what else is known about the Turkmen economy? The question is especially relevant now as Turkmen President Gurbanguly Berdymukhammedov makes his first visit to the United States to meet foreign officials at the United Nations and American business executives.

Berdymukhammedov is due to make his first speech at the UN General Assembly session in New York on September 26. He is also expected to meet U.S. Secretary of State Condoleezza Rice.

On the sidelines of the visit, Berdymukhammedov will also have talks with U.S. business executives.

Americans are among many investors competing for deals with this gas-rich country, which has relied on Russia’s state natural gas monopoly Gazprom for its gas exports so far.

Following Turkmen President Saparmurat Niyazov’s death in December 2006, Western energy corporations intensified contacts with Turkmenistan. Chevron, British Petroleum, Total, and others have expressed interest in its hydrocarbon resources.

What else can Berdymukhammedov offer potential U.S. investors?

Not A Market Economy

Arkadi Dubnov, a Central Asia correspondent for the Russian daily "Vremya Novostei," tells RFE/RL that Turkmenistan does not seem to have very much to offer. "What does Turkmenistan produce? What Turkmen commodities are there on the market that we know about? There is Turkmen cotton," he says. "But there is no Turkmen grain. They import it. There is a minimal private sector. There cannot be a market economy in a country with a fixed currency exchange rate."

Indeed, Turkmenistan was consistently among the world’s top 10 cotton producers. But drought and poor harvests in recent years have led to an almost 50 percent decline in cotton exports.

An overwhelming majority of the enterprises in Turkmenistan remain government-owned and receive plan goals for production just as they did in Soviet times.

Bairam Shikhmuradov is a leader of the unregistered Republican Party of Turkmenistan. He is also a son of former Turkmen Foreign Minister Boris Shikhmuradov, who has been imprisoned on charges of masterminding the alleged November 2002 assassination attempt on Niyazov.

Shikhmuradov tells RFE/RL from Moscow that switching to a market economy is "undoubtedly out of the question" in Turkmenistan because all major contracts with foreign partners have only been made by the government. "It has been very difficult to conduct foreign economic activity by private entities because they faced enormous pressure and had many obstacles in currency exchange, customs, and stock-exchange regulations," he says.

Most Turkmen Still Live In Poverty

Due to the late Niyazov’s unwillingness to adopt market-oriented reforms and the government’s misuse of oil and natural gas revenues, an estimated 60 percent of the population lives below the poverty line.

Before his trip to the United States, Berdymukhammedov vowed to accelerate economic reforms, and make it easier for foreign investors to operate in the country.

He said at a government meeting on September 10 that Turkmenistan needs "an absolutely different pace of growth" in order to "move closer to developed countries and give our people a better life."

He urged his cabinet to stimulate economic growth and restructure state corporations.

Berdymukhammedov had hinted about his intention to reform the economy earlier. His election platform included promises to create a friendly environment for foreign investors. Among his plans was the construction of a natural-gas pipeline to China by 2009, the creation of free-trade zones in border areas in he southern Balkhan Province, and the completion of the Amudarya railroad bridge in Lebap Province.

After becoming independent in 1991, Turkmenistan suffered from a lack of export routes for natural gas and from obligations on extensive short-term external debt.

The situation changed a few years later. Starting in 2003, Turkmenistan saw its total exports grow by an average of 15 percent a year -- largely due to higher oil and gas prices on world markets.

In 2006, the Niyazov’s government raised natural-gas export prices to its main customer, Russia, from $66 per 1,000 cubic meters to $100 per 1,000 cubic meters.

And the country’s GDP grew by 6 percent in 2006, according to the International Monetary Fund.

Lies, Damned Lies, And Statistics

The international financial institutions’ assessments of the Turkmen economy differ greatly from official Turkmen statistics. Ashgabat officials reported some 20 percent economic growth annually in recent years. Most information about the economy remains a state secret.

Berdymukhammedov urged the introduction of a modern accounting system to improve national statistics. He said this would play a "huge role" in attracting more foreign investments.

He also said the state’s control in some state enterprises should be decreased to make them more efficient.

Shikhmuradov says small- and medium-sized entrepreneurship remains in an "embryonic state of development" because of high risks and an unpredictable economic environment.

He says that since Niyazov’s demise and Berdymukhammedov’s promises to liberalize the economy, many foreign companies are more willing to do business with Turkmenistan.

Shikhmuradov sees Berdymukhammedov’s promises to liberalize the economy as a positive step."The fact that he spoke about it is good because no one had been brave enough to say something like this before," he notes.

"Niyazov used to speak about liberalization differently. He understood it differently. The question is what will follow the statement. Are these mere words or will they be followed by concrete actions? We are going to see this very soon."

It is still not known how genuine Berdymukhammedov’s intentions to liberalize the economy are and how far he can go in his reformist attempts within the current political system. Experts note that many members of the Turkmen political elite have benefited from the current economic system and therefore will try to maintain the status quo.

It also remains unclear whether U.S. corporations will express interest in any sector other than energy during Berdymukhammedov’s trip to New York.

So far, few - if any - foreign companies dealing with the Turkmen government have shown an inclination to insist either on adherence to free-market principles or respect for human rights.

The Central Eurasia Project aims, through its website, meetings, papers, and grants, to foster a more informed debate about the social, political and economic developments of the Caucasus and Central Asia. It is a program of the Open Society Institute-New York. The Open Society Institute-New York is a private operating and grantmaking foundation that promotes the development of open societies around the world by supporting educational, social, and legal reform, and by encouraging alternative approaches to complex and controversial issues.

The views expressed in this publication do not necessarily represent the position of the Open Society Institute and are the sole responsibility of the author or authors.