Turkmenistan: Investment Conference Highlights Slow Pace of Reform

Attempting to develop an image as an investment-friendly destination, Ashgabat hosted what was billed as the inaugural International Investment Forum of Turkmenistan in mid-October. Turkmen leaders spent lavishly to produce a slick three-day event. Nevertheless, some business executives were not sold on the concept of Turkmenistan being an open economic environment.

Roughly 450 international participants from approximately 50 countries attended the October 15-17 conference, according to the forum's co-organizer, the London-based conference management consultancy IC Energy. Attendees included high-level representatives of oil majors, but also a wide range of mid-sized and non-energy companies looking to get involved in Turkmenistan.

During the tenure of Turkmenistan's mercurial former dictator Saparmurat Niyazov, the self-styled Turkmenbashi, or father of all Turkmen, the country was largely closed to foreign businesses, save for a few large and opaque gas and construction firms. But since Gurbanguly Berdymukhamedov took over the presidency in 2007, the Turkmen government has proclaimed an interest in opening up its economy.

Berdymukhamedov himself was due to open the conference, but pulled out at the last minute because he was "very busy," according to Turkmen officials. He was, however, able to find time to attend the lengthy opening of a local chicken farm, which took place on the forum's second day, and which was widely covered on local television.

During the opening session, Hans Gerd Prodoehl, Managing Director of Goetzpartners Management Consultants, extolled the virtues of the country as an investment destination. His firm has been employed by the Turkmen government for a little over a year with the task of aiding economic reform.
"His Excellency the President of Turkmenistan is a driving force for continuous reform and modernization of this state. This president is truly an innovator," said Prodoehl, to smiles and applause from the large delegation of Turkmen officials present. Meanwhile, the small group of foreign journalists covering the event had quizzical looks on their faces.

Prodoehl mentioned the country's "very high political stability and internal security" as a key factor that made Turkmenistan a secure foreign investment bet. Despite the much-trumped political stability, none of the forum participants thought it fit to mention that just days before the forum's opening, Berdymukhamedov carried out a wide-scale purge of energy-sector officials. [For background see the Eurasia Insight archive].

Praise for the Turkmen government's reform performance did not come only from those on the state's payroll. "During the past five years, Turkmenistan has had impressive economic growth, even during the global crisis," said Dr. Ahmen Mohammed Ali Madani, President of the Islamic Development Bank. "The wise leadership of the country leads to political and economic stability."

"In the last couple of years, we have found that a lot of cooperation is now possible with the Turkmen government," said Neil McKain, Head of the European Bank for Reconstruction and Development (EBRD) office in Turkmenistan. He referred to the textile factory in the Caspian port town Turkmenbashi, which produces jeans for Dolce & Gabbana, Lee and Levi's, as "an excellent demonstration of what is possible when investing in Turkmenistan."

But amid the praise for Berdymukhamedov's regime, there was the occasional dissenting voice among the forum delegates.

"It's one thing to thank the president and government for inviting you to speak, but when people start lavishing praise on the country's system of governance, it can make you feel quite uneasy," said one forum delegate, who questioned whether such obsequiousness and flattery was the most healthy approach for foreign delegates to be taking towards the Turkmen government, which remains, under Berdymukhamedov, one of the most repressive countries on the planet. [For background see the Eurasia Insight archive].

Delegates agreed, however, that the country had become somewhat easier to work with since the death of Niyazov. Some noted the currency reforms of May 2008 that allowed the country's currency, the manat, to be freely exchanged on international markets. This helped remove the huge discrepancy between the official and black market dollar exchange rates.

"This reform almost overnight changed the number of projects we could consider investing in," said McKain of the EBRD.

Prodoehl of Goetzpartners admitted that one of the most pressing problems for foreign businesses was the difficulty obtaining Turkmen visas. "We know that the government is on the way to liberalization of the visa regime," he insisted.

While the oil majors and top-level investors are able to arrange meetings with the president or ministers, smaller companies found the unusually easy access to Turkmen ministers and top officials available at the conference to be a genuine help. Many were confident that the first steps towards lucrative contracts had been made at the forum.

However, there were doubts from some quarters as to whether international companies really are ready for genuine non-energy-sector investment in the country, where almost all enterprises are still state controlled.

"There's no denying that people have made a lot of money in Turkmenistan, but while this might be called an investment forum, very few people here are actually investors," said one Western participant on the sidelines of the conference. "They're vendors. They will happily build the Turkmens a sparkling new building; they'll even gold-plate it if paid well enough. But there's a big difference between that, and actually risking money with a long-term investment in the country."

For that to happen, he said, the country needs to make genuine systemic reforms, rather than simply pay lip service to the idea.