Should investors consider Turkmenistan? The country has one of the fastest expanding economies in the world. The economic growth rate is projected to be 9.2% for 2014. The country is mostly desert but contains huge gas and oil resources. Turkmenistan is ranked 4th or 5th in the world for the size of it’s natural gas reserves.
As of 2013 it became China’s biggest supplier of natural gas. The country plans to provide more natural gas to Europe with the construction of a new pipeline, under the Caspian Sea. There is also discussion of providing natural gas to Pakistan and India via Afghanistan.
Turkmenistan located in Central Asia, was a former republic of the Soviet Union until 1991. The total area of the country is 491,210 km2 or 188,456 sq mi. It is the 52nd largest country in the world.
The population for 2014 is estimated to be 5.2 million, making it the 112th in size relative to the rest of the world. The labor force stands at about 2.4 million with unemployment estimated for 3.5% as of 2013. The labor force by occupation is 48% in agriculture, 14% in industry, and services at 38%.
Growth rates have been impressive over the last few years. The GDP (Gross Domestic Product) expanded 11% in 2012 and 10.2 % in 2013. The GDP of Turkmenistan stood at $47.55 billion USD (United States Dollar) for the year 2012. Per capita GDP for the same year was estimated at $8,500 USD. The GDP in Purchasing Power Parity (PPP) totaled $43.359 billion and per capita in PPP was $7,846 USD in 2011. In PPP as of 2012 Turkmenistan was ranked 97th in the world.
The main industries of the country are natural gas, oil, petroleum products, food processing, and textiles.
The country although mostly arid, does engage in intensive agriculture in irrigated areas. The two largest crops are cotton which is mostly exported, and wheat which is consumed within the domestic market. Turkmenistan is among the ten top producers of cotton in the world.
Turkmenistan runs an annual trade surplus of between $4 and $5 billion USD. Exports estimated for 2013 was $17.13 billion USD. It ranks 75th in the world in value of exports. The major export partners were China at 69.6% of the total and Italy at 4.7% as of 2012. Exports goods consisted of gas, textiles, cotton fiber, and crude oil petrochemicals.
Import goods consist mostly of machinery and equipment, chemicals, and foodstuffs. The main import partners as of 2012 were China with 19.5% of the total, Turkey with 17.0% and Russia with 12.6%. This is followed by the nations of the United Arab Emirates, Ukraine, Germany and the United Kingdom with 6.8%,6.0%, 4.7% and 4.2% respectively.
Gross external debt at the end of 2012 stood at $428.9 million USD. Also estimated for 2012, revenues stood at $26.4 billion USD and expenses were $26.9 billion USD. This indicates a rough balance in income and outlays by the central government, even though officially there is a slight deficit.
After independence Turkmenistan had several issues that inhibited growth in the economy. From the late 1990’s to 2005 the country struggled with extensive short term debt and inadequate export routes for the all important natural gas.
Later, higher prices for natural gas and oil allowed exports to increase in value by 15% in the years 2003 to 2008.
State planning and central control of the economy continued from independence to 2006. President for Life Niyazov and his government, continued to resist most market oriented reforms. The state subsidized a wide variety of services and commodities. The new President elected in 2007 after the death of Niyazov, began a number of reforms. President Berdimuhamedow reduced subsidies for gasoline and instituted financial reforms, especially the currency which is now pegged to the American Dollar at a fixed rate of $1.00 USD to 2.85 Turkmenistan Manat.
As one can see there is political stability in the country, which is of the utmost importance considering the location of the country. To the northwest is Kazakhstan, but most of the northern and eastern border is with Uzbekistan. To the south is Iran and the southeast border is shared with Afghanistan. However, it is important to note that no form of political dissent is permitted and there have been only two presidents since independence was achieved in 1991.
Directly to the west is the Caspian Sea which has seen major development, especially since the establishment of the Avaza special tourism zone under the new President.
Privatization efforts in trade, catering, and consumer services have been completely successful. The private sector now dominates in agriculture (60%), trade (70%) and transport (56%). Turkmenistan began to privatize several state companies beginning in 2013. The process is to be completed by 2016.
To assist with entrepreneurship and foreign investment the country has developed an adequate legal base, licensing, credit lines and other needed steps to help with business activities.
The only major impediment to foreign investment in the country is the repressive political environment and corruption. It is still manageable, if one does their research and lays the proper groundwork for investing. It also must be said, that these two issues are continually improving, as the nation continues to open up to the world at large. Local partnerships and cooperation can make investment in the country easier. If one would find this task too daunting, an alternative would be an investment in a company that is privatizing or through an existing investment fund.
The country is just beginning real modern development and it is important to note that a percentage of the population, is still below the poverty line. However, the most important aspect for investment is that as prices for oil and natural gas continue to rise, it will benefit the economy of Turkmenistan at large. There will be many opportunities for investors to profit from this influx of wealth and the resulting expansion of business opportunities.
A primary goal of the country is to diversify the delivery of its energy resources to the world. This will require Turkmenistan to make a major investment in new infrastructure.
This week the government of Turkmenistan has decided to create a solar research center, intended to explore the country’s untapped solar potential. The nation can boast an average of 300 sunny days per year country wide. It is also widely believed that Turkmenistan possesses vast mono-crystalline and poly-crystalline silicon reserves, which are important inputs in the development of solar power. It is the first step in developing an alternative energy industry.