Discusses the distribution network within the country from how products enter to final destination, including reliability and condition of distribution mechanisms, major distribution centers, ports, etc.
Despite the country’s central geographic location, reliable transportation routes through Turkmenistan are limited. One of the main entry points is the port of Turkmenbashy on the Caspian Sea, located 270 kilometers (170 miles) east of and across the Caspian from Baku, Azerbaijan. Turkmenbashy is an important gateway to Central Asia and is an import and export transit point for a variety of products. A renovated and expanded port opened in May 2018 and has a total annual capacity of 17 million tons of dry cargo, 300,000 passengers, and 75,000 vehicles.
Turkmenistan has a number of rail links with Uzbekistan in the north and east, with rail and road crossings in the Farap district near Turkmenabat the most heavily used. In March 2017, the president opened new railway and highway bridges between the cities of Turkmenabat and Farap. The bridges are expected to improve transportation between eastern Turkmenistan and the Uzbek border. There is limited capability for crossboundary deliveries by trucks with Kazakhstan via Garabogaz in the northwest; the road is in very poor condition. The North-South Railway connecting Iran, Kazakhstan and Turkmenistan was opened in December 2014. It has an anticipated transportation capacity of 10 million tons of goods annually. In November 2016, a rail line linking Kerki, Turkmenistan to Aqina, Afghanistan was opened. In February 2018, a rail link from Serhetabat, Turkmenistan to Toraghundi, Afghanistan was opened, and expansion of this line is currently underway. The bulk of air cargo enters the country via the Ashgabat airport, although there are airports in all provincial centers. Airports in Ashgabat, Mary, Turkmenbashy and Turkmenabat can handle heavy aircraft. Most cargo transportation within the country is by truck. Mary, Turkmenbashy, Balkanabat, and to a lesser extent Ashgabat, are the main destinations for heavy industrial equipment and supplies, while Ashgabat is the major destination for most consumer products.
Severe disruptions to air travel associated with the COVID-19 pandemic have affected both passenger and cargo flights. Consult the embassy website or individual air carriers for the latest information.
The procurement of equipment, spare parts, and consumables for Turkmenistan’s major industries, such as oil and gas, power generation, railway, air transportation, and telecommunications, is state controlled. However, the government does not have a centralized procurement and distribution agency. Individual ministries and state entities procure their needs via a tender process. Announcements in Russian and Turkmen are made in the local press and on some websites. Tenders offered by agencies in the state-controlled oil and gas sector can be found here:
Producers of heavy equipment usually sell their goods in Turkmenistan by establishing a local office or through a locally established distributor. Most local distributors provide some repair and maintenance services. Pharmaceuticals, food items, and consumer goods are sold mostly through quasi-private and public channels; distributorships are numerous and are often foreign based. Finding a reliable distributor is challenging because of a lack of accessible information on private companies. The Economic-Commercial section of the U.S. Embassy in Ashgabat can help identify potential partners for U.S. firms.
- Representative office,
- Individual enterprise with 100 percent foreign capital, or a
- Joint venture (JV).
A representative office is defined as a separate division of a legal entity, located at a different location from the registered address of the legal entity, which protects and represents the legal entity’s interests, and/or concludes contracts and conducts other legal acts on the legal entity’s behalf.
A branch is defined as a separate division of a legal entity, located at a different location from the registered address of the legal entity, that undertakes all or a part of the functions of the legal entity, including representation functions.
Representative offices and branches are not legal entities. They operate within regulations set by the legal entities that formed them.
For all types of offices, documents should be submitted as originals in the language of the investor’s country with appropriate official stamps (faxed copies are not accepted), with Turkmen and Russian translations. Translations should be certified by the entity that translated the documents. Representative offices and branches are registered for two years, with the right to extend registration. Registration at Turkmenistan’s Main State Tax Service and the Local Statistics Office may also be required. A foreign company seeking to establish an office in Ashgabat may rent space in business centers, hotels, or in a building that belongs to a state organization or state/private enterprise. After a company has chosen office space, it must apply for approval of its legal address with the appropriate local government office.
Turkmenistan’s small population, underdeveloped private sector, and severe limitations on currency conversion hinder franchising attempts. Only three U.S. franchises – Pepsi, Coca-Cola, and Levi’s — currently operate in Turkmenistan. Coca-Cola suspended operations in early 2019, largely due to limitations on currency conversion, but resumed partial operations in mid-2020.
Joint ventures can be established in the form of a corporation (also referred to in Turkmenistan as a “joint-stock company”) or as a partnership (also known as a “business society”). Article 29 of the Law on Enterprises defines business societies as “associations of two or more individuals and/or individuals [established] to conduct joint activities.” Article 1 of the Law on Corporations classifies corporations as companies, in which capital contributions by physical and/or legal entities are combined as charter capital, which is divided into a certain number of shares certifying the contractual rights of shareholders of the corporation. Corporations can be close-ended (private) or open-ended (public). Registration and activities of corporations are regulated by the Law on Corporations, the Law on Foreign Investment in Turkmenistan, and the Law on Investment Activity in Turkmenistan.
The Law on Enterprises and the Law on Corporations provide for mergers and acquisitions. However, Turkmenistan’s relevant legislation does not clearly define activities involving foreign parties, nor does it have specific provisions for disposition of interests in business enterprises, both local and those involving foreign participation. Government approval is necessary for acquisitions and mergers of certain enterprises, specifically those with state shares. The Law on Licensing Certain Types of Activities lists the kinds of businesses that are subject to licensing and governs the licensing process. The law lists 44 activities. There is no comprehensive licensing agency; licenses should be obtained from the relevant authorized government agencies and are generally not issued for less than three years. Oil and gas production and exploration licenses are issued by Turkmen Oil State Concern and TurkmenGas State Concern respectively for a duration of 20-25 years. Below is the list of the main business activities subject to licensing:
The Express Mailing Service (EMS) of the state-owned Turkmenpochta (Turkmen Postal Service) was the only express delivery service in the country until July 2018, when a private company, Beyik Yupek Yoly, became an authorized service contractor for DHL.
Due diligence is extremely difficult to carry out. Turkmenistan does not have company disclosure requirements and companies in most cases do not publish their annual financial statements. The government does not publish lists of individuals or companies that are known to have violated tax, environmental, or other laws. Business Turkmenistan is the business news and information service accredited to operate in Turkmenistan. Hiring a local professional may help with collecting some data and anecdotal information on the ground. Consulting other outlets, like the Economist Intelligence Unit, may also be helpful.