Turkmenistan Finance Profile 2012

Market-based competition The foundations of market-based competition are not secure. The state continues to control almost all aspects of the economy; state companies carry out all production and export of oil, natural gas and other raw materials. The state also enforces purchasing and trade monopolies on cotton and grain at prices well below world market levels. Nevertheless, President Berdymukhamedov initiated some economic reforms: in March 2008 currency convertibility was introduced, which freely floated the Turkmen manat at around 14,300 per U.S. dollar. This value represented a middle point between the former market exchange rates and the former official U.S. dollar exchange rate of 5,200 manat. Currency reform continued in January 2009 when the new manat was introduced at an exchange rate of 5,000 old manat. Import and export taxes have been sliced in half. Turkmenistan has initiated these reforms without IMF loans. Both the European Bank for Reconstruction and Development (EBRD) and the Asian Development Bank (ADB) continued to keep their financial commitment in Turkmenistan on a low scale but declared interest in financing larger Caspian oil and gas projects.

Anti-monopoly policy The state monopolizes all strategically important economic resources like gas, petrochemical products, cotton and grain. In other areas, such as the import and trade of goods, it does not impede monopolies.

Liberalization of foreign trade Freedom of trade is highly limited. Foreign businesspeople, primarily from Turkey, are given preferential treatment when concessions are awarded. Repatriation of profits is difficult and tied to reinvestment with the result that financially less powerful investors or investors without personal business relations with the president and governmental officials avoid investments in Turkmenistan. Nevertheless, the governmet’s recent reduction of export and import taxes slightly improved the country’s business environment.

Banking system Foreign trade is to a great extent state-controlled. After the regional financial crisis caused by the devaluation of the Russian rubble in August 1998, the banking sector was restructured by presidential decree, which strengthened the state’s control. The state now owns or controls at least eight of the twelve domestic banks. State directive, such as the abolition of the debts of certain ministries, limit the banks’ business practices. Overall credit grew strongly in the second half of 2007 due to increased directed lending to the cotton sector. President Berdymukhamedov promised that Turkmen residents would have the opportunity to obtain 30-year mortgages at just 1 percent interest to buy apartments, but this promises has not yet materialized.