Turkmenistan - Country Commercial Guide
Distribution and Sales Channels

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.
 

Last published date: 2020-10-15

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.

Using an Agent to Sell U.S. Products and Services

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:

http://www.oilgas.gov.tm/en/

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. 

Establishing an Office

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,

- Branch,

- 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.

Requirements for Establishing a Representative Office:

  1. An application to establish a representative office signed by an authorized company official. Includes intended line(s) of business in Turkmenistan and information on the investor with an overview of the investor’s activities;
  2. A decision to establish a representative office signed by an authorized company official;
  3. Two notarized copies of the charter of the representative office, in Turkmen and Russian, signed by a company official;
  4. A personal information form for the head of the representative office in Turkmenistan with a 3x4 cm photo and copy of the representative office head’s biographical page of passport;
  5. A duly certified power of attorney for the head of the representative office in Turkmenistan;
  6. A notarized copy of the foreign investor’s charter notarized by a Consulate or Embassy of Turkmenistan overseas, or by the Ministry of Foreign Affairs of Turkmenistan in Ashgabat;
  7. An original transcript of the foreign investor’s official registration, issued by the foreign investor’s national registration agency. The transcript should be notarized by a Consulate or Embassy of Turkmenistan overseas, or by the Ministry of Foreign Affairs of Turkmenistan;
  8. An original foreign investor’s financial status report (bank statement). The bank statement should be notarized by a Consulate or Embassy of Turkmenistan overseas or by the Ministry of Foreign Affairs of Turkmenistan;
  9. Written confirmation from a Turkmenistan governmental authority confirming the legal address;
  10. Receipt for payment of the registration fee.

Requirements for Establishing a Branch:

  1. An application to establish a branch signed by an authorized company official. Includes intended line(s) of business in Turkmenistan and information on the investor and  an overview of the investor’s activities;
  2. A decision to establish a branch signed by an authorized company official;
  3. Two copies of the charter of the branch, in Turkmen and Russian, signed by an authorized company official;
  4. A personal information form for the head of the branch in Turkmenistan with a 3x4 cm photo and a copy of the branch head’s passport biographical page;
  5. Duly certified power of attorney for the head of the branch in Turkmenistan;
  6. A notarized copy of the foreign investor’s charter notarized by a Consulate or Embassy of Turkmenistan overseas or by the Ministry of Foreign Affairs of Turkmenistan;
  7. An original transcript of the foreign investor’s official registration, issued by the foreign investor’s national registration agency. The transcript should be notarized by a Consulate or Embassy of Turkmenistan overseas, or by the Ministry of Foreign Affairs of Turkmenistan;
  8. An original foreign investor’s financial status report (bank statement); The bank statement should be notarized by a Consulate of Turkmenistan overseas or by the Ministry of Foreign Affairs of Turkmenistan;
  9. Written confirmation from a Turkmenistan governmental authority confirming the legal address;
  10. Receipt for payment of the registration fee.

Requirements for Establishing a Joint Venture:

  1. An application to establish a joint venture signed by authorized company officials. Includes intended line(s) of business in Turkmenistan and information on the investor with an overview of its activities;
  2. A protocol to establish a joint venture signed by authorized company officials;
  3. Articles of incorporation and two copies of the charter, in Turkmen and Russian, signed by authorized company officials;
  4. An economic feasibility assessment (investment project) of the joint venture signed by authorized company officials;
  5. A personal information form for the head of the joint venture in Turkmenistan with a 3x4 cm photo and copy of the joint venture head’s passport biographical page;
  6. A notarized copy of the foreign investor’s charter notarized by a Consulate or Embassy of Turkmenistan overseas or by the Ministry of Foreign Affairs of Turkmenistan;
  7. An original transcript of the foreign investor’s official registration, issued by the foreign investor’s national registration agency. The transcript should be notarized by a Consulate or Embassy of Turkmenistan overseas, or by the Ministry of Foreign Affairs of Turkmenistan;
  8. An original foreign investor’s financial status report (bank statement) notarized by a Consulate or Embassy of Turkmenistan overseas, or by the Ministry of Foreign Affairs of Turkmenistan;
  9. Written confirmation from a provincial government or the Ashgabat Municipality of a legal address in Turkmenistan;
  10. A document confirming payment of 50 percent of the charter capital of the joint venture;
  11. Receipt for payment of the registration fee.

Turkmenistan joint venture participants also must submit:

  1. A copy of the charter, Certificate of State Registration, and transcript from the Unified State Register of Legal Entities;
  2. For state enterprises: a decision of the Cabinet of Ministers of Turkmenistan;
  3. For persons physically residing in Turkmenistan: a personal information form with a 3x4 cm photo and copy of the passport biographical page.

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.

Franchising

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. 

Direct Marketing

Elements of direct marketing exist, but this approach is not common.

Joint Ventures/Licensing

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:

  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
  8. Banking
  9. Insurance
  10. Auditing
  11. Legal counsel or services
  12. Quality and product certification
  13. Healthcare services and production, including pharmaceutical sales
  14. Import, production, and sale of alcohol and tobacco
  15. Telecommunications
  16. Tourism
  17. Trade

Express Delivery

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

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.