Investment in Turkmenistan: Prospects and Risks
Turkmenistan is a small country but has tons of development potential. Abundantly rich in natural and gas resources, it ranks 4th in the world in this regard. Since a recession in 2014, Turkmenistan has been trying to build its economy from the ground level. This has opened great options for foreign investment. The government has stressed the criticality of foreign investment, on several occasions. Of late, foreign investors have taken up projects like gas processing plants, silk processing plants, highways, and food processing. So what are the prospects of investing in Turkmenistan?
Turkmenistan encourages foreign investment in textile, agriculture, health, education and infrastructure. Agriculture is especially important to the economy. The EBRD has invested €5 million in the country, agriculture being the primary focus. Future investors would find it beneficial to invest in the modernization of agriculture in the country, bringing in tools and technology, setting up processing units and promoting new methods of cultivation. Infrastructure in Turkmenistan remains especially weak. The government has undertaken projects for the construction of roads, ports and railway lines, but the situation remains bleak. Investments are required in transport, energy and electricity generation. The government is inviting foreigners to invest in its 2030 goals which include public transportation, electrification of rail services, pipelines and reducing reliance on natural gas. The best prospect would be to capitalize on the country’s rich natural resources. Natural gas pipelines are an interesting area to invest in. Besides, bromine, iodine salt and other minerals are also largely available. However, it is important to note that foreigners cannot invest in the exploration and production of the country’s onshore gas resources. They can, however, invest in related areas. Real estate is also a growing area of interest for many investors. The price of real estate has gone up in the past years. In lieu of 2004’s Land Code, foreigners are allowed to lease land for non-agricultural purposes. They can own other real estate property like houses and buildings, but not lands.
Despite growing prospects, many investors are wary of investing in Turkmenistan. This is largely due to its highly authoritarian and interventionist government. There is no transparency in the state’s ways of working, and corruption is extremely high. In certain cases, local companies were seen to be seized by the family of the president. Excessive state control, a subordinate judicial system, and negligible legal protections to foreign companies are important situations to consider before investing. Besides, internet and technological facilities are not sufficiently developed. This poses a challenge in the functioning of companies. The government has not properly incentivized foreign investors, despite its insistence on inviting them. The state also exercises control over the activities of large businesses and leaves little control in the hands of producers and owners. It also has a hand in regulating market prices and currency exchange rates.
Though Turkmenistan’s growing economy offers many prospects of profitable investment in agriculture, infrastructure, and natural resource industries, the government’s absolute control over the economy makes investment difficult. An environment of rampant corruption and lack of freedom for companies backfires on the government’s FDI plans. These conditions must be considered before making any investment in the country.