Foreign business penetrates Turkmenistan

Very little is written about Turkmenistan in the Russian business media, except for occasional comments on the Turkmen economic system from a local entrepreneur who fled to Russia. Most of these comments are unflattering. Official Russian sources prefer to avoid this topic. Nevertheless, foreign investors are active in the Turkmen market, and not at all in the segment of unprofitable projects such as five-star hotels, towers, or spa resorts in Avaza.

Investment climate at a glance

Foreign companies are involved in most Turkmen projects as contractors, since the country already has enough money for development. For a foreign investor, Turkmenistan is a very isolated country. As many as 98% of entry visa requests are declined. With business travelers, there are fewer denials, but they are still frequent enough. The government tightly controls any foreign activity on its territory, monitoring it even more closely than they did in the Soviet Union. Its business environment is not transparent even in terms of using foreign languages ​​in the media. The main information is in Turkmen; political news is duplicated in Russian, for example, by the Neutral Turkmenistan newspaper. The Turkmen language has long been in isolation from the other languages ​​of the Oghuz branch, so even someone familiar with Turkish or Azerbaijani will be challenged by a text in Turkmen, especially on economic issues – even Crimean Tatar or Gagauz are less challenging for a translator. Moreover, at the dawn of sovereignty, Turkmen linguists adapted the Latin alphabet for their language, creating a script that is quite different from those used in other Oghuz languages, as well as from other Roman-based Turkic alphabets. Therefore, one mostly has to rely on English-language reports on foreign business activities in Turkmenistan. It should be clarified though that we are not discussing Russia or Belarus – countries that generally avoid criticizing the policies of President Gurbanguly Berdimuhamedov – or the United States, which neither criticizes Turkmenistan, nor seems eager to invest in that country. Below are the countries and regions whose governments are criticizing Turkmenistan’s domestic policy; however, they continue to invest in Turkmenistan while keeping a low profile.

Great Britain: Criticism does not hold back investment

UK officials have made public statements on human rights violations in Turkmenistan and spoken out about deep structural issues and chaos in the Turkmen economy. Despite this, there is a Turkmen-British Council on Commerce and Industry that was established by the British Embassy in Ashgabat and the Turkmen government in 2010. The council receives funding from the British companies targeting the local market such as Shell, BP, Buried Hill, De La Rue, Aggreko, JCB, Petrofac and Rolls Royce. Mayfair-based Strategy International and Business Expertise International are in charge of administrative support. The council also closely cooperates with British Prime Minister’s Trade Envoy to Turkmenistan, Baroness Emma Nicholson. Both Nicholson and members of the council refrain from the same rhetoric that we can hear from the official establishment in London addressed at the Turkmen regime. On the contrary, they generously compliment the regime and even praise the marble buildings in Ashgabat that are essentially a reincarnation of Stalinist architecture. They only allow themselves vague comments about the importance of observing human rights. Not a single word about any economic issues in Turkmenistan.

There is a lot of discussion in the West about a Trans-Caspian gas transit route. However, major gas fields are mainly located in eastern Turkmenistan and their product is primarily exported to the East rather than the West, via two main routes. One is the Central Asia–China transit network, China’s quite feasible project. The other one is less feasible and stretches across Turkmenistan, Afghanistan, Pakistan and India (TAPI).  

EBRD: obscure requirements and real investment policy

The European Bank for Reconstruction and Development is currently completing the development of its new country strategy for Turkmenistan for 2019-2024, which is described as active but calibrated. Until recently, the bank’s participation was solely in Turkmenistan’s private sector. In particular, EBRD issued loans to the Berk and Yager breweries, the local Coca-Cola bottler, TOPAK Paper and Turkmen Penjire, a producer of PVC windows. The International Partnership for Human Rights believes that EBRD must not expand its loans to the public sector of Turkmenistan until the country makes efforts to improve human rights. Nevertheless, EBRD considers programs of financial support of municipal governments (khakimiyats) despite the known large-scale, government-implemented forced labor among employees of the local authorities (sending people to harvest cotton, like in Soviet times), with a possible long-term expansion of support of transport and energy projects. Actually, human rights defenders are also unhappy about supporting the private sector because many private companies are deeply integrated in the corrupt government system.

China: The Belt and Road

China is conducting a harsh policy regarding the Uyghurs, a minority group that is relatively close to Turkmens in terms of language and religion. However, this does not stop Turkmenistan from having close economic ties with China.

China has been the main export market of gas for Turkmenistan in the past decade. China’s demand for natural gas, oil and other resources made Turkmenistan an important part of Beijing’s initiative The Belt and Road, aimed at the further development of economic ties, improvement of infrastructure and increasing political influence in a larger region. As a result of the measures to lower carbon emissions, China’s demand for gas is growing rapidly: for up to 30-49 bln cubic meters per year, which, of course, benefits Turkmenistan.

Yet, at least in the short and medium term, selling natural gas to China is not viewed as the primary source of revenue due to a considerable part of sales that is believed to service and cover Turkmenistan’s debts to China, including for the development of the Galkynysh Gas Field (formerly South Yolotan) and the infrastructure that linked it to China’s gas market. China built this infrastructure at it own expense and sent the invoice to Turkmenistan, which at least guaranteed a prompt and efficient implementation of the project. Other projects viewed as useful for China’s strategy as regards the Belt and Road Initiative, including new port facilities in Turkmenbasy (formerly Krasnovodsk), were believed to be financed by Chinese investors. Not all loan sums were made public, but according to Luca Anceschi, Senior Lecturer in Central Asian Studies at the University of Glasgow, the figures amount to $10 bln.

Bringing back all migrant workers

Turkmenistan’s stable and friendly relations with the United Arab Emirates allowed Dragon Oil, a company acquired by the Emirates National Oil Company, to become one of the major players at Turkmenistan’s energy market. It should be mentioned that Dubai remain on of the primary destinations for Turkmen labor migrants, and close relations between the two countries give Ashgabat an opportunity to exert pressure on migrants to bring them back.

Mogherini’s silence

It is important that the European Parliament is seeking to set a number of certain criteria as regards human rights as a condition for ratifying the agreement on cooperation between the EU and Turkmenistan. The EU has held 11 rounds of its standard format meetings on human rights with Turkmenistan, such as a session that took place in March 2019. However, at the opening of an office of an EU delegation in Ashgabat, EU High Representative for Foreign Affairs and Security Policy Federica Mogherini made no statements concerning legal and economic issues. Yet, she was more open at the EU-Central Asia Ministerial Meeting in Kyrgyz capital Bishkek. Currently, the EU is implementing a joint investment project in partnership with the European Bank for Reconstruction and Development, aimed to support small and medium-sized business.

By Roman Mamchits

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