Discusses key economic indicators and trade statistics, which countries are dominant in the market, and other issues that affect trade.
Turkmenistan is a physically large country (slightly larger than the state of California) but sparsely inhabited. The Turkmen government reports a population of 6 million people, but this number is widely viewed as inflated; most estimates are closer to 4 million. Although Turkmenistan’s vast natural gas and oil resources continue to attract some foreign companies, the Government of Turkmenistan has yet to implement reforms needed to create an inviting business climate where foreign investment is truly welcomed and property rights are guaranteed. In addition, the government is centralized and non-transparent, with much information that is readily available in most other countries classified as a “state secret.” Turkmenistan publishes limited national statistics, but its data collection and evaluation methodologies are often not credible. According to official government figures, the country’s Gross Domestic Product (GDP), using the official exchange rate of 3.5 TMT/1 USD was $40.76 billion in 2018 (TMT 142.7 billion), $38 billion in 2017 (TMT 133 billion), and $36.18 billion (TMT 126.6 billion) in 2016. An official number for 2019 GDP was not yet available, though the government reported an implausibly high GDP growth of 6.2 percent in 2019. GDP growth in 2018 was reported as 6.5 percent. Most economic indicators released by the government are widely seen as unreliable. The black market exchange rate in 2019 and early 2020 hovered at five to seven times the official rate.
Turkmenistan continues to be a major producer and exporter of natural gas. According to the BP Statistical Review of World Energy 2020, Turkmenistan produced 63.2 billion cubic meters (bcm) of natural gas in 2019, a slight increase over its 2018 production of 61.5 bcm. Roughly half of Turkmenistan’s natural gas production is used domestically and the remainder is exported. China is by far Turkmenistan’s biggest gas customer, importing 33.2 bcm of Turkmen gas in 2019. Russia suspended its Turkmen gas imports entirely from January 2016 to April 2019 over a pricing dispute and now buys only low volumes of gas from Turkmenistan. Exports to Iran, Turkmenistan’s only other significant market, have been suspended since January 2017, also due to a dispute over pricing.
According to UN Comtrade data and International Trade Centre statistics, Turkmenistan’s total exports rose from $10.1 billion in 2018 to $10.3 billion in 2019, while imports fell from $2.8 billion in 2018 to $2.7 billion in 2019. The trade surplus, therefore, was reportedly $7.6 billion in 2019 and $7.3 billion in 2018.
In 2019 Turkmenistan’s largest import partner was Turkey, followed closely by Russia. Turkmenistan’s largest export partner after China is Turkey. According to the U.S. Census Bureau, in 2019 U.S. exports to Turkmenistan totaled $28.3 million, down from $30.9 million in 2018, while U.S. imports from Turkmenistan were $16.2 milion, up from $11.5 million in 2018. The top U.S. exports to Turkmenistan in 2019 were agricultural machines and chemical products. The top U.S. imports from Turkmenistan were miscellaneous carbon products and vegetable extracts.
The top four reasons why U.S. companies may want to consider exporting to Turkmenistan include Turkmenistan’s readiness to import innovative technologies and equipment, plans to diversify its economy, strategic geographic location between the Middle East, Europe and Asia, and political stability.
President Gurbanguly Berdimuhamedov, first elected in 2007 and re-elected in 2012 and 2017, initially promised to open up the country and improve its investment climate, but these promises remain unfulfilled. Turkmenistan does not allow private ownership of land, and most of its industries are state-owned. The government provides subsidies in key sectors such as agriculture. State subsidies to the general public for utilities including natural gas, electricity, and water were eliminated in January 2019. According to official figures from the Turkmen government, the private sector share of the economy has reached 70 percent. This figure cannot be independently verified, however, and does not include the hydrocarbon sector, which makes up an estimated 35 percent or more of GDP. Retail trade, services, processing and production are the main sectors in which private ownership is permitted, although sometimes with government-set price controls. In 2012, Turkmenistan announced plans to privatize state-held properties under the State Program for Privatization of Enterprises and Objects of State Property. However, the process has so far proceeded slowly with few buyers willing to meet the government’s asking prices. A limited number of foreign petroleum companies successfully operate under production sharing agreements (PSAs).
Turkmenistan’s economy is centrally managed and many business decisions appear politically motivated. Turkmenistan devalued its national currency – the manat (TMT) – by 19 percent on January 1, 2015, to an exchange rate of 3.5 TMT/1 USD. Between 2008 and 2014, the rate was 2.85 TMT/1 USD. Converting manat into U.S. dollars (or other hard currencies) is extremely difficult due to tight government restrictions on exchange. The black market exchange rate in 2019 was relatively steady at 18 TMT/1 USD but became more volatile during the COVID-19 pandemic, at times spiking to 25 TMT/1 USD. The government does not release information about its hard currency reserves. Lower global energy prices have slowed Turkmenistan’s economy and put downward pressure on its currency, as has its persistent current account deficit. In January 2016, the government eliminated consumers’ easy access to hard currency and placed limitations on currency conversion, which has impeded trade and led to extra hurdles for businesses. In recent years, U.S. businesses have reported increasing difficulties converting manat into U.S. dollars. Currency conversion usually requires a company (or individual) to receive specific approval from a government bank and even then is usually limited to as little as 1.5-2% of the value of the company’s bank account.
Turkmenistan has maintained a stable political environment since independence in 1991. The president is both the head of state and the head of government. Presidential decrees and resolutions have the force of law and often supersede existing legislation. The ruling Democratic Party is the re-branded Communist Party of Turkmenistan. After the Parliament adopted a new law on political parties in January 2012, a second political party drawn from the membership of the Union of Industrialists and Entrepreneurs, the Party of the Industrialists and Entrepreneurs, was established. A third political party, the Agrarian Party, was established in September 2014. While the Party of Industrialists and Entrepreneurs purports to represent the business interests of private entrepreneurs, it is quasi-governmental and its creation, like that of the Agrarian Party, has had virtually no effect on political decision making. The president, first and foremost, dominates the political arena. The Democratic Party and other parties play minor supporting roles.