About  |   Contact  |  Mongabay on Facebook  |  Mongabay on Twitter  |  Subscribe
Rainforests | Tropical fish | Environmental news | For kids | Madagascar | Photos

Turkmenistan - ECONOMY




Turkmenistan - The Economy

Turkmenistan

Turkmenistan's economy is predominantly agricultural. Agriculture accounts for almost half of the gross domestic product (GDP) and more than two-fifths of total employment, whereas industry accounts for about one-fifth of GDP and slightly more than one-tenth of total employment. In 1988 the per capita net material product (NMP) output was 61 percent of the Soviet average, fourth lowest of the Soviet republics. In 1991, 17.2 percent of the work force was engaged in private-sector occupations such as farming, individual endeavors, and employment on agreement; 0.7 percent worked in rented enterprises, and the rest worked for state enterprises, social organizations, and collective farms.

Macroeconomic indicators of the performance of Turkmenistan's national economy have differed widely in the late Soviet and early independence years, making precise assessment difficult. According to one source, the per capita GDP was US$2,509 in 1992, placing it higher than Tajikistan and Uzbekistan, but lower than Kazakstan and much lower than some of the other former Soviet republics. Another source lists a 17 percent increase in industrial output between 1991 and 1992. On the other hand, several sources agree that the NMP aggregate figure for 1992 was a 15 percent decline from the previous year. One source claims that GDP in Turkmenistan increased by 8.5 percent in 1993, while another regards as suspect the statistical methods applied to the data on which this figure is based.

<>Natural Resources
<>Agriculture
<>Industry
<>Labor
<>Economic Structure
<>Privatization
<>Foreign Trade

Turkmenistan

Turkmenistan - Natural Resources

Turkmenistan

Turkmenistan has substantial reserves of oil and gas, and geologists have estimated that 99.5 percent of its territory is conducive to prospecting. The republic also has deposits of sulfur, hydrocarbons, iodine, celestine, potassium salt, magnesium salt, sodium chloride, bentonite clays, limestone, gypsum, brown coal, cement, basalt, and dolomite. Its soils, which have been formed under conditions of continental climate, are mostly desert sands, with a variety of other types such as desert loess, meadow clays, and "irrigated" soils, in some regions. Under those conditions, large-scale agriculture must be supported by irrigation in nearly all areas.

Turkmenistan

Turkmenistan - Agriculture

Turkmenistan

Turkmenistan inherited the system of state and collective farms from the Soviet Union, with its command structure of production quotas, fixed procurement prices, and soft budget constraints. The state still controls marketing and distribution of agricultural produce through the Ministry of Trade in urban areas and the Cooperative Alliance in rural locales; the Ministry of Agriculture's Commercial Center has a monopoly on cotton exports. Turkmenistan is highly dependent upon external sources for its agricultural inputs, the price of which has escalated more that those for agricultural products since independence.

Structure of the Agriculture Sector

Instead of restructuring the agricultural economy, the government's "New Countryside" policy envisions only limited privatization of agricultural enterprises and expansion of grain production to reduce dependence on imports. The development of transportation is critical to agricultural reform in Turkmenistan.

In 1991 field and orchard crops accounted for 70.4 percent of the value of agricultural sales prices (computed in 1983 prices), while livestock raising accounted for the remaining 29.6 percent (see table 18, Appendix). Almost half the cultivated land was under cotton, and 45 percent of the land under grains and fodder crops. Livestock raising centered on sheep, especially for the production of Karakul wool. Whereas production of meat and milk rose substantially in the 1986-91 period (increases of 14,000 and 110,000 tons, respectively), actual production in 1991 of 100,000 tons of meat and 458,000 tons of milk represented a decrease from 1990. Production of meat in 1992 declined 21 percent from that of 1991. Fishing, bee-keeping, and silk-rendering occupy small areas of the agricultural sector.

Irrigation

Under the prevailing climatic conditions, irrigation is a necessary input for agriculture and has been developed extensively throughout Turkmenistan. Irrigation management is divided between the Ministry of Irrigation, which is responsible for operation and maintenance along the Garagum Canal and for interrepublic water management, and the Irrigation Institute, which designs, evaluates, and builds new projects. State farms and collective farms are responsible for operation and maintenance on their own farms, but they have no other autonomy. Because only 55 percent of the water delivered to the fields actually reaches the crops, an average of twelve cubic meters of water is expended annually per hectare of cotton.

As a result of the construction of irrigation structures, and especially of the Garagum Canal, the hydrological balance of the republic has changed, with more water in the canals and adjacent areas and less in the rivers and the Aral Sea. The largest of the republic's eleven reservoirs are the Sary Yazy on the Murgap River, which occupies forty-six square kilometers of surface and has a capacity of 239 million cubic meters, and the Hawuz Khan on the Garagum Canal, which occupies ninety square kilometers of surface and has a capacity of 460 million cubic meters.

In 1983 Turkmenistan had an irrigated area of 1,054,000 hectares. Its most developed systems are along the middle and lower course of the Amu Darya and in the Murgap Basin. The Garagum Canal, which flows 1,100 kilometers with a capacity of 500 cubic meters per second, accounts for almost all irrigation in Ahal and Balkan provinces along the northern reaches of the Kopetdag Range. The canal also supplies additional water to the Murgap oasis in southeastern Turkmenistan. The main canal was built in sections between 1959 and 1976, initially providing irrigation for about 500,000 hectares. Plans call for construction to continue until the canal reaches a length of 1,435 kilometers and a carrying capacity of 1,000 cubic meters per second, enabling it to irrigate 1,000,000 hectares.

Cotton

At a rate of 300 kilograms per citizen, Turkmenistan produces more cotton per capita than any other country in the world. Among the Soviet republics, Turkmenistan was second only to Uzbekistan in cotton production. In 1983 Turkmenistan contributed 12.7 percent of the cotton produced in the Soviet Union. Four of the republic's five provinces are considered to be "cotton provinces": Ahal, Mary, Ch�rjew, and Dashhowuz. Convinced that cotton is its most marketable product, the post-Soviet government is committed to maintaining previous levels of cotton production and area under cultivation.

In accordance with the Soviet policy of delegating the Central Asian republics as the nation's cotton belt, the area under cotton climbed rapidly from 150,400 hectares in 1940 to 222,000 hectares in 1960, 508,000 hectares in 1980, and 602,000 hectares in 1991. Because independence brought fuel and spare-parts shortages, the cotton harvest declined in the first half of the 1990s, however.

Industrial inputs for cotton production such as harvesters, sowing machines, mechanized irrigation equipment, fertilizer, pesticides, and defoliants have become less available to cotton farms in Turkmenistan because the other former Soviet republics, which were the chief suppliers of such items, raised their prices sharply in the first years of independence.

For most Turkmen farmers, cotton is the most important source of income, although cotton's potential contribution to the republic's economy was not approached in the Soviet period. Experts predict that by the year 2000, Turkmenistan will process one-third of its raw cotton output in textile mills located within the republic, substantially raising the rate achieved in the Soviet and early post-Soviet periods. In 1993, the state's procurement prices were raised significantly for high-grade raw seeded cotton. State planners envision selling 70 percent of the crop to customers outside the CIS.

Other Crops

Since independence, Turkmenistan's agricultural policy has emphasized grain production in order to increase self-sufficiency in the face of a sharp decline in trade among the former Soviet republics. A 50 percent increase in the grain harvest in 1992 was followed by a rise of 70 percent in 1993, despite unfavorable climatic conditions. Production of vegetables declined in 1992 to 13 percent below the 1991 level, whereas that of potatoes rose by 24 percent. High-quality melons are grown in the lower and middle reaches of the Amu Darya and in the Tejen and Murgap oases. In addition to these crops, subtropical fruits and nuts, especially pomegranates, almonds, figs, and olives, are grown in the Ertek and Sumbar valleys.

Turkmenistan

Turkmenistan - Industry

Turkmenistan

Turkmenistan possesses a formidable resource base for industry, although that base was not utilized to build diversified industry in the Soviet period. In the post-Soviet period, extraction and processing of natural gas and oil remain the country's most important industrial activities.

Structure of Industry

Turkmenistan did not inherit a substantial industrial base from the Soviet Union. Beginning in the 1970s, Moscow made major investments only in the oil and gas production and cotton-processing sectors. As a result, industry is highly specialized and potentially vulnerable to external shocks. Well-developed cotton ginning, natural gas, and cottonseed oil dominate at the expense of other sectors, such as the petrochemical and chemical industries, cotton textile production, food processing, and labor-intensive assemblage, in which Turkmenistan has a comparative advantage (see table 19, Appendix).

The shocks of independence slowed industrial production in the early 1990s. In the first half of 1994, macroeconomic fluctuations caused by the introduction of the manat as the national currency and limitations placed on gas exports caused aggregate industrial production to fall to 68.3 percent compared with the same period in 1993 (see Fiscal and Monetary Conditions, this ch.). The price index for industrial producers was 858 percent, indicating runaway inflation in this sector.

Gas and Oil

Turkmenistan ranks fourth in the world to Russia, the United States, and Canada in natural gas and oil extraction. The Turkmenistan Natural Gas Company (Turkmengaz), under the auspices of the Ministry of Oil and Gas, controls gas extraction in the republic. Gas production is the youngest and most dynamic and promising sector of the national economy. Turkmenistan's gas reserves are estimated at 8.1-8.7 trillion cubic meters and its prospecting potential at 10.5. trillion cubic meters. The Ministry of Oil and Gas oversees exploration of new deposits. Sites under exploration are located in Mary Province, in western and northern Turkmenistan, on the right bank of the Amu Darya, and offshore in the Caspian Sea.

In 1958 Turkmenistan produced only 800,000 cubic meters of natural gas. With the discovery of large deposits of natural gas at Achak, Qizilqum, Mary, and Shatlik, production grew to 1.265 billion cubic meters by 1966, and since then the yield has grown dramatically. In 1992 gas production accounted for about 60 percent of GDP. As a result of a dispute with Ukraine over payments for gas deliveries, in 1992 gas production fell by 20 billion cubic meters to around 60 billion cubic meters. In the first eight months of 1994, transportation restrictions forced Turkmenistan to cut gas production to 26.6 billion cubic meters, only 57 percent of the production for the same period in 1993. An additional factor in this reduction was the failure of CIS partners, to whom Russia distributes Turkmenistan's gas, to pay their bills.

Most of Turkmenistan's oil is extracted from fields at Koturdepe, Nebitdag, and Chekelen near the Caspian Sea, which have a combined estimated reserve of 700 million tons. The oil extraction industry started with the exploitation of the fields in Chekelen in 1909 and Nebitdag in the 1930s, then production leaped ahead with the discovery of the Kumdag field in 1948 and the Koturdepe field in 1959. All the oil produced in Turkmenistan is refined in Turkmenbashy.

Oil production reached peaks of 14,430,000 tons in 1970 and 15,725,000 tons in 1974, compared with 5,400,000 tons in 1991. Since the years of peak production, general neglect of the oil industry in favor of the gas industry has led to equipment depreciation, lack of well repairs, and exhaustion of deposits for which platforms have been drilled.

Other Industries

Besides petrochemical processing at the Turkmenbashy and Ch�rjew refineries, the chemicals industry is underdeveloped in comparison with the potential provided by the republic's mineral and fuel resources. The industry has specialized in fertilizer for cotton at the Ch�rjew superphosphate plant and such chemicals as sulfur, iodine, ammonia, mirabilite, salt, and various sulfates at the Turkmenbashy facility.

Because of the ready availability of natural gas, Turkmenistan is a net exporter of electrical power to Central Asian republics and southern neighbors. The most important generating installations are the Hindukush Hydroelectric Station, which has a rated capacity of 350 megawatts, and the Mary Thermoelectric Power Station, which has a rated capacity of 1,370 megawatts. In 1992 electrical power production totaled 14.9 billion kilowatt-hours.

Turkmenistan's machine building capability has not developed significantly since the conversion of agricultural repair installations for that purpose in Ashgabat and Mary in the late 1960s. Goods produced at these plants include dough kneading and confectionery mixing machines, ventilators, centrifugal oil pumps, gas stove pieces, cables, and lighting equipment.

Construction has grown as a result of a shift in state investment toward housing, education, and joint enterprises. Since 1989, construction has accounted for around 10 percent of the GDP. Building materials produced in the republic include lime, cement, brick and wall stone, ferro-concrete structures, asbestos-concrete pipes, silicate concrete, lime, brick, slate, and glass.

Most food processing consists of rendering cottonseed oil and such related products as soap and grease from cotton plants. Because of the distance between plants and farms and an inadequate transportation infrastructure, only 8 percent of the fruits and vegetables grown in the republic are processed. Other processing capabilities include winemaking, brewing, baking, meat packing and processing, and production of table salt.

Turkmenistan's carpets are famous for their density, which reaches 240,000 knots per square meter in some traditional weaves. The Turkmenistan Carpet Production Association supervises ten carpet factories, but home looms account for a substantial share of production. Other traditional crafts include the fashioning of national clothing such as wool caps and robes, galvanized dishes, and jewelry in forms that state enterprises do not produce or supply. In the mid-1990s, other light industries provided secondary processing of cotton, wool, and silk for yarn, some finished textiles, and wadding.

Turkmenistan

Turkmenistan - Labor

Turkmenistan

The labor force comprised 1,923,000 people in 1991-92, of whom 1,571,000 (almost 46 percent of the population) were employed in the national economy. Over half of this number worked in state enterprises--a number that is expected to decline in general and to vary radically from sector to sector during the transitional phases of privatization.

In 1990, 37 percent of the workforce was in agricultural and 15 percent in industrial employment; however, one-fourth of industrial employment was in industries related to agriculture. Between 1970 and 1990, the percentage of the workforce employed in industry decreased slightly from 23.4 to 20.0 percent. The share of the agricultural sector within the workforce rose slightly in this period from 38.4 to 41.1 percent. In transportation and communications, the percentages were 7.0 and 6.3, respectively, while in the sectors of health, education, social services, arts and sciences, they rose from 16.5 to 18.6 percent. The state apparatus maintained a share ranging from 2.9 percent of the labor force in 1970 to 2.5 in 1989.

In 1989, some 62.5 percent of all workers were employed at state enterprises, 22.3 percent on collective farms, 1.1 percent in cooperatives (up from 0 in 1986), 0.1 percent in individual labor (a constant percentage since 1970), and 14.1 percent in private plots (up from 8.5 percent in 1970, largely at the expense of the collective farm percentage).

Figures from 1989 for the distribution of the populace according to source of sustenance show that of the entire population of Turkmenistan, 40.6 percent worked in the national economy, 1.9 percent held stipends, 10.9 percent were pensioners and others receiving state welfare, 46.5 percent were dependents and those employed only on individual supplemental endeavors, and 0.1 percent had other unspecified means of subsistence.

The percentage of women within the total work force of Turkmenistan was 41.7 in 1989, reflecting a near constant since 1970 (39.5). The percentage of women within the total number of specialists in the work force who have completed middle and upper special education rose from 44.0 in 1970 to 49.4 in 1989. Workers under thirty years of age who have completed a secondary general education accounted for 66.4 percent of Turkmenistan's work force in 1989; those with middle specialized education, 16.0 percent; those with an incomplete higher education, 1.6 percent; and those with a complete higher education, 8.7 percent.

The national minimum wage is a critical component of the macro-level "price-wage feedback" in inflationary processes; this wage is established by presidential decree. The basic wage structure is set by a cross-classification of occupations and physical exertion levels, which determines relative minimum wages for various sectors. After a negotiating process, minimum wages can be set above the national minimum in profitable sectors. Wages in agriculture and industry were similar until 1991, when agricultural wages declined relative to average wage.

Plans call for the Ministry of Labor to be replaced by a State Corporation for Specialist Training, with the bulk of the ministry's nontraining functions to shift to the Ministry of Economy, Finance, and Banking. Those functions include oversight of unemployment, salary administration and minimum wage determination, and labor protection. There is no independent labor union movement in Turkmenistan. Trade union leaders are appointed by the president, meaning that no true collective bargaining can occur.

Labor productivity is one of the major concerns of economic planners in Turkmenistan. According to Soviet statistics, for industrial enterprises this indicator grew at a rate of 6.3 percent per year in the period 1971-5; then it declined drastically to 0.1 percent per year in 1976-80 before reaching 3.2 percent in 1989. Similar changes occurred in agricultural labor productivity in the 1970s and the 1980s, moving from 2.6 percent growth in 1971-75 to negative 1.4 percent in 1976-80 and then to 4.0 percent in 1989.

Turkmenistan

Turkmenistan - Economic Structure

Turkmenistan

Although Turkmenistan's economic situation has deteriorated somewhat since 1990, the overall standard of living has not dropped as dramatically as it has in other former Soviet republics. Economic reforms have been modest, and the majority of businesses remain state-owned. Thanks to government subsidies, basic food products continue to be relatively affordable despite inflation. One of the most important modifications in economic policy took effect in early 1993 when President Niyazov decreed that natural gas, water, and electricity would be supplied virtually free of charge to all homes in Turkmenistan for an indefinite period. Gasoline and other fuels also remain cheap, relative to neighboring republics. Such economic stability has been possible because Turkmenistan has a comparatively small population and it is rich in important resources such as natural gas and oil.

The main blueprint for Turkmenistan's development is the Ten Years of Prosperity program, which was announced in December 1992. It calls for a ten-year transition to a market economy, with a first phase that maintains the Soviet system of planned management accompanied by extensive social protection programs. The program envisages development of Turkmenistan's natural resources and restructuring of industry to provide import substitution.

Turkmenistan

Turkmenistan - Privatization

Turkmenistan

One of the most important reforms of Turkmenistan's economic plan is privatization. Article 9 of the 1992 constitution guarantees citizens the right to own capital, land, and other material or intellectual property, but no law has stipulated the source from which land could be acquired. No fund of land available for private purchase has been established. A law on land ownership allows every citizen the right to own and bequeath to heirs plots smaller than fifty hectares, so long as they are continuously cultivated, and to obtain a long-term lease on up to 500 hectares. Such land may not be bought or sold, however. In 1993 only about 100 peasant farms were privately run, and they were leased rather than owned. Nevertheless, after the government announced the 1993 law allowing fifty-hectare plots, it soon received more than 5,000 applications.

In February 1993, a State Committee on Land Reform was established, with a goal of privatizing 10 to 15 percent of all agricultural land. Beginning in May 1993, the state began leasing land on the condition that 35 percent of the state procurement for cotton be surrendered, with no monetary compensation, as payment of rent. Estimates of the irrigated land since leased or under private ownership range from 3 to 12 percent. The state also intends to privatize all unprofitable agricultural enterprises.

The privatization process is managed by the Department of State Property and Privatization, which is part of the Ministry of Economy, Finance, and Banking. Short-term plans call for continued state control of the gas, oil, railway, communications, and energy industries and agriculture--sectors that combine to account for 80 percent of the economy. Laws on leasing, joint-stock companies, and entrepreneurship were adopted in the early 1990s. A general privatization law passed in 1992 describes the gradual denationalization of state property through a variety of methods.

In 1992 only 2,600 small enterprises--mostly individual ventures such as trading outlets and home-worker operations--were privately owned. Through the end of 1993, only a few small trade and service enterprises had moved to private ownership, mostly sold to foreign buyers. Plans called for conversion of large manufacturing firms into joint-stock enterprises by the end of 1994, and private ownership of all trade and service-sector enterprises with fewer than 500 employees by the end of 1995. However, the state would maintain a "controlling interest" in businesses that become joint stock companies and would retain control over profitable larger concerns.

A second important component of Turkmenistan's economic development plan is marketization. To promote this process, a decree was issued in March 1993 for the formation of a joint-stock bank, the granting of additional credits to the Agroindustrial Bank for the development of entrepreneurship, and the establishment of seven free economic zones. Agricultural entrepreneurs are to be granted special profits tax and land payment exemptions. Within free economic zones, companies with more than 30 percent foreign ownership are to receive special exemptions from profit tax and rental payments.

Turkmenistan

Turkmenistan - Foreign Trade

Turkmenistan

In the early 1990s, Turkmenistan's foreign trade remained completely under the control of the central government. During that period, the most important trading partners remained the former republics of the Soviet Union, with which the great majority of trade had been conducted during the Soviet era. Natural gas is the most profitable item available for foreign sale.

Trade Structure

In controlling Turkmenistan's trade sector, the main goal of government policy is to maintain and expand foreign markets for gas, fuel products, electricity, and cotton. Just prior to independence, trade with other Soviet republics accounted for 93 percent of Turkmenistan's exports and 81 percent of its imports. In the mid-1990s, the country's main trading partners (as they were in 1990) were Russia, Kazakstan, and Uzbekistan in the CIS and Germany and countries in Eastern Europe outside the CIS (see table 20, Appendix). In 1990 nearly 27 percent of exports were mineral products, 6 percent were chemical industry products, 46 percent were some form of cotton fiber, and 17 percent were processed food products.

In 1991 the largest components of Turkmenistan's imports were food (17 percent of the total), chemical products (6 percent), light industry products including textiles (22 percent), and machinery (30 percent). Among Western countries, Turkmenistan imported the most goods from Finland, France, and Italy in 1992.

In 1990, the overall trade deficit was US$500 million, which declined to $US300 million in 1991. In 1991 the trade deficit constituted some 13.9 percent of the net material product (NMP--see Glossary). In 1992 the deficit with Russia, Turkmenistan's main trading partner, was about US$38 million. That year the value of exports to Russia was 52.7 percent of the value of imports from Russia, the highest percentage among Russia's CIS trading partners. However, because it exports fuel, in the mid-1990s Turkmenistan maintained a positive trade balance at world prices with the CIS as a whole, making it the only republic besides Russia to do so.

In 1993 Turkmenistan's main CIS import partners were (in order of import volume) Russia, Azerbaijan, Uzbekistan, Ukraine, and Tajikistan. The main CIS customers were (in order of export volume) Ukraine, Russia, Uzbekistan, Kazakstan, and Georgia. In 1992 Turkmenistan had bilateral trade surpluses with Ukraine, Tajikistan, Uzbekistan, and Georgia.

Russia continues to trade with Turkmenistan in much the same way as in the Soviet era, although by 1992 trade with the other republics was curtailed by difficulties in collecting payments and other factors. Central Asian republics traditionally traded more with Russia than with each other; the conditions of the 1990s promote even less regional trade because several of the republics specialize in similar products. For example, cotton and gas are the chief export products of both Turkmenistan and Uzbekistan.

Because of its specialization in cotton and natural gas, Turkmenistan imports a large percentage of the food it consumes. In 1991 the republic imported 65 percent of its grain consumption, 45 percent of its milk and dairy products, 70 percent of its potatoes, and 100 percent of its sugar--a profile typical of the Central Asian republics. In 1991 the trade deficit was 684 million rubles in food goods, compared with a deficit of 1.25 billion rubles in non-food goods.

Turkmenistan's cotton exports follow the pattern of other Central Asian republics. Governments of these countries have raised the price of cotton for trade with their Central Asian neighbors nearly to world market levels while discounting their cotton on the world market because of its relatively poor quality and less reliable delivery. Since 1991, Central Asian countries have more than doubled their exports of cotton to countries outside the CIS, accounting for 70 percent of West European cotton imports. Exports to the Far East and Mexico also have increased. In 1992 Turkmenistan cut its cotton export prices by 30 percent to stimulate sales. In response, the National Cotton Council of America refused to make subsidized shipments of cotton to Russia, where around 350 textile mills were threatened with closure because of insufficient imports, unless Central Asian republics reversed their aggressive stance in the world cotton market.

Natural gas, Turkmenistan's main export for foreign currency, accounted for an estimated 70 percent of its exports in 1993. Planners expected per capita earnings from sales of gas in 1993 to approach US$1,300, but Azerbaijan and Georgia failed to make payments. Turkmenistan, like Russia, has introduced a policy of cutting off gas supplies in response to such situations. In the case of Azerbaijan and Georgia, supply was curtailed until the bills were paid. In the mid-1990s, the practice of shutting off delivery was a thorny issue between Turkmenistan and Ukraine, which owns the main pipeline to Europe but has failed to pay for gas deliveries on many occasions (see Transportation and Telecommunications, this ch.).

CIS agreements on tariffs and customs have been worked out, but in reality a "legal vacuum" exists with regard to interrepublic economic ties. Technically, CIS members are not allowed to discriminate against one another in trade, but trade wars began to break out immediately upon independence. As a result, most republics have made a series of bilateral accords. A month before the major CIS agreement was worked out in 1992, Turkmenistan signed a customs union agreement with Russia and the other Central Asian republics. Later, it renegotiated its terms with Russia.

In a move toward trade liberalization in early 1993, Turkmenistan abolished import duties on around 600 goods, including all CIS goods. Imports from former Soviet republics outside the ruble zone (see Glossary) were prohibited. Tariffs for goods exported for hard currency have remained in place to increase government revenue and prevent capital flight; thus, for natural gas the tariff is 80 percent; for oil, 20 percent; and for chemicals, 15 percent. The state can fix the volume, price, and tariff of any export leaving Turkmenistan.

Beginning in November 1993, Turkmenistan stopped the Soviet-era practice of accepting goods in exchange for natural gas, restricting payments to hard currency, precious metals, and precious stones. However, this policy may not be successful because Russia buys gas from Turkmenistan and then redistributes it to CIS customers rather than to Europe. Under these conditions, some customers may turn to Uzbekistan, which sells its gas directly and at a much lower price. Turkmenistan found it necessary to negotiate barter agreements with certain nonpaying customers such as Azerbaijan and Georgia. Until the end of 1994, Kazakstan was the only CIS customer to pay in cash.

In 1993 gas constituted 66.2 percent of Turkmenistan's exports to non-CIS countries, cotton 26.1 percent, and other goods 7.7 percent. Turkmenistan barters large quantities of cotton for textile-processing equipment from Italy, Argentina, and Turkey. Almost half of cotton exports (more than 20 percent of total exports) have been diverted to non-CIS customers since 1992. An increase in barter trade with China and Iran partially offsets the collapse of interrepublic supply. In 1994 Iran bought 20,000 tons of cotton fiber, a volume expected to increase by five times in 1995. Turkmenistan also will sell surplus electrical power via Iran.

Despite payment problems, Turkmenistan's export position has improved substantially since independence. Its consolidated current account surplus rose from US$447 million to US$927 million between 1991 and 1992, so that the increase in gas and cotton exports has offset the increase in imports. By mid-1994, the United States Export-Import Bank extended US$75.7 million to insure Turkmenistan's trade deals, and the United States Department of Agriculture offered US$5 million in grain credits. Turkey's export-import bank extended a credit line worth $US90 million to Turkmenistan to help cover the growing volume of trade between these two countries. Japan's Eximbank allocated $5 million in trade credits for machinery.

Investments from Abroad

In November 1991, Turkmenistan officially opened its system to foreign economic activity by ratifying the laws "On Enterprises in Turkmenistan" and "On Entrepreneur Activity in Turkmenistan." Subsequent laws on foreign investment have covered protection against nationalization, tax breaks on reinvestment of hard currency obtained for profits, property ownership, and intellectual property rights protection to attract foreign investment, and the important 1993 decree allowing domestic enterprises to form joint ventures with foreign oil companies. The Ten Years of Prosperity plan envisages "free economic zones, joint enterprises, and a broadening of entrepreneurship."

Foreign investors have been attracted by the republic's calm and receptive atmosphere. In 1993 parts of the country took on the appearance of a huge construction site, with twenty-six foreign joint ventures operating there. Turkish joint ventures alone were building sixty factories for the processing of agricultural produce. Despite official discouragement of economic activity on the grounds of human rights violations in Turkmenistan, United States business people have been attracted by the republic's stable conditions, and they have invested in a number of significant projects. In the early 1990s, United States companies paid particular attention to the oil and gas industry, establishing investment agreements with the consultative aid of former United States secretaries of state Alexander Haig and James Baker.

Economic Agreements Abroad

In the formative phase following independence, Turkmenistan concluded several key agreements with trade partners. In December 1991, President Niyazov became the first Central Asian leader to secure cooperation agreements with Turkey on trade, rail and air links, communications, education, and culture. Turkmenistan also secured Turkey's agreement on a gas pipeline routed through its territory and assistance in the trading of petroleum, electricity, and cotton. Also in 1991, Turkmenistan established terms with Russia on cotton-for-oil trades, as well as for other industrial goods such as automobiles. In 1992 agreements with Iran established Iranian aid to Turkmenistan's gas and oil industry and its livestock raising, grain, sugar beet, and fruit sectors, in return for aid to Iran's cotton sector. At the same time, Iran pledged support for Turkmenistan's pipeline project through Iran to Turkey.

Since its initial agreement, Turkmenistan has pursued its trade relationship with Iran with great vigor. Agreements focus on the pipeline project that will bring gas from Turkmenistan to Europe via Iran and Turkey, transportation projects such as the Tejen-Saragt-Mashhad railroad link, whose construction was undertaken in 1993, and development of the oil and gas industries, including the establishment of a joint venture in Turkmenistan for the transport of petroleum products and construction of a plant to produce motor oil. Cooperation in mining and other fields also has been discussed.

At the beginning of 1992, Turkmenistan, Iran, Azerbaijan, Russia and Kazakstan formed the Caspian States Cooperation Organization to reach regional agreements on fishing, shipping, environmental protection, and cooperation among the member nations' oil and gas operations. Iran also has sought to gain support for a project, discontinued in 1979, that would replenish the sturgeon population of the Caspian Sea.

The participation of foreign companies in the development of Turkmenistan's oil industry is expected to triple extraction by the year 2000. In February 1993, the United States firm Vivtex designed a competition among oil companies to win contracts in Turkmenistan. The "winners" for three of the seven blocks put up for bid were Larmag Energy of the Netherlands, Noble Drilling of the United States, Eastpac of the United Arab Emirates, and the Bridas firm of Argentina. Just for holding the competition, Turkmenistan received an initial non-returnable "bonus" payment of US$65 million. The total investment of competition winners was to amount to US$160 million over the course of three years. Turkmenistan would receive between 71 and 75 percent of the profits from these joint enterprises.

In the mid-1990s, Turkmenistan has sought to establish a natural gas pipeline that would pass through Afghanistan, Pakistan, and China to reach Japan, as well as an interim rail line for liquefied gas through China until the pipeline is finished. President Niyazov visited Beijing in November 1992 for talks on the pipeline, at the same time securing credits of 45 million Chinese yuan to be repaid after two years. Niyazov then held talks with representatives of the Japanese firm Mitsubishi and the Chinese Ministry of Oil in December 1992. A delegation of Japanese experts visited Ashgabat in February 1993 to discuss prospects for aid. Declaring Turkmenistan the "most solvent" of the Central Asian republics, the delegation signed agreements for the development of oil deposits in the Caspian shelf, communications, and water desalinization.

In the mid-1990s, the International Monetary Fund (IMF) denied assistance to Turkmenistan on the grounds that Turkmenistan has not taken the required human rights steps for economic cooperation. However, in March 1993, the United States conferred most-favored-nation trading status on Turkmenistan.

Turkmenistan





CITATION: Federal Research Division of the Library of Congress. The Country Studies Series. Published 1988-1999.

Please note: This text comes from the Country Studies Program, formerly the Army Area Handbook Program. The Country Studies Series presents a description and analysis of the historical setting and the social, economic, political, and national security systems and institutions of countries throughout the world.


TRY USING CTRL-F on your keyboard to find the appropriate section of text



Google
  Web
mongabay.com
travel.mongabay.com
wildmadagascar.org

what's new | rainforests home | for kids | help | madagascar | search | about | languages | contact

Copyright 2013 Mongabay.com