Discusses distribution network from how products enter to final destination, including reliability of distribution systems, distribution centers, ports, etc.
Reliable transportation routes through Turkmenistan are limited. International commercial flights restarted after a two year suspension but are extremely limited. Charter flights are often used to supplement the limited number of international flights, but eextensive planning is required, and they often land in cities outside Ashgabat, requiring 5-10 hour drives to get to the capital.
The port of Turkmenbashy on the Caspian Sea, located 270 kilometers (170 miles) east of and across the Caspian from Baku, Azerbaijan, is the most active seaport. The port was renovated and expanded in 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 neighboring countries. The North-South Railway connecting Iran, Kazakhstan and Turkmenistan was opened in December 2014. 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. There are also rail links to Uzbekistan.
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.
Using an Agent or Distributor
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 companies 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 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.
Establishing an Office
All legal information in this report is provided based on available information at the time of publication. However, laws and rules in Turkmenistan change regularly and with little notice. Furthermore, the judicial system, particularly related to commercial law, is underdeveloped, and laws, policies, rules, and processes are not consistently enforced. The following is meant to provide a general overview, not constitute legal guidance.
The laws regulating the establishment of a local office are the Law on Enterprises, the Civil Code, and the Law on Corporations (joint stock companies). A foreign investor may establish a:
- 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.
Refer to the State Department’s Investment Climate Statements website for information on investment and business environments in foreign economies pertinent to establishing and operating an office and to hiring employees.
Few examples of U.S. franchises exist in Turkmenistan. Lack of manat conversion is a significant concern for repatriating profits or procuring supplies.
Elements of direct marketing exist, but this approach is not common.
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 State owned Turkmen Oil and Turkmen Gas respectively for a duration of 20-25 years. Below is the list of the main business activities subject to licensing:
1. Oil and gas exploration and production
2. Oil and gas processing
3. Design, construction, maintenance and operation of trunk pipelines and power transmission lines
4. Production, transmission, and distribution of electricity
5. Design and construction of buildings and facilities
6. Production of construction materials
7. Transportation and freight forwarding services
11. Legal counsel or services
12. Quality and product certification
13. Healthcare services and production, and sale of pharmaceuticals
14. Import, production, and sale of alcohol and tobacco
The Express Mailing Service (EMS) of the state-owned Turkmenpochta (Turkmen Postal Service) offers express delivery, as well as Beyik Yupek Yoly, which is 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. The country does not have a professional business press that covers the market or provides company reports. 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.