CPC - Caspian Policy Center

Research

turkmenistan: land of stability and business opportunities

Turkmenistan: Land of Stability and Business Opportunities

Author: Kakajan Berdiyev

Jan 10, 2024

Image source: shutterstock

This article is a guest contribution from a conference in July 2023, that the CPC hosted together with the Near East South Asia Center of the National Defense University (NDU), “Connecting Central Asia, the South Caucasus and Beyond”.

Turkmenistan has a UN-backed Neutrality status and offers macroeconomic stability. Earlier this year, Fitch Ratings confirmed Turkmenistan’s credit rate as B+ with positive outlook. The IMF estimates Turkmenistan's economy will grow 6.2% this year. This is more than twice the Central Asian regional growth rate of 3%. At a time when developed markets are over-saturated, the emerging Turkmenistan market has a tremendous investment potential with numerous untapped industries that are critical for the stability of the global economy and supply chains. The recent disruptive period of the COVID-19 pandemic and the following war in Ukraine triggered a new series of global crises in many industries, including food and energy. 

Moreover, there is an urgent need for alternate and reliable international trade routes since traditional East-West transportation and supply routes have been severely disrupted. Turkmenistan offers energy, food, and alternative international routes for cross-border trade between East and West. Located at the crossroads of major global supply-chain markets, Turkmenistan provides the shortest and cheapest trade routes between China and Europe.

These industries in Turkmenistan benefit from largely untapped business potential: oil & gas, renewables, supply-chain infrastructures, logistics solutions, petrochemicals, and agricultural processing.

Oil & gas. Turkmenistan holds the fourth-largest natural gas reserves in the world (19.5 trillion cubic meters [BP]) and also has considerable oil reserves (0.6 billion barrels [BP]). The Government of Turkmenistan encourages investments in the oil & gas industry with several financial and tax incentives. This industry has strategic importance, and the country welcomes new investments.

Renewable energy. Renewables have huge potential in Turkmenistan. The country enjoys 235-240 sunny days (65%) per year. The country’s solar and wind energy technical potentials are 655,000 Megawatts (MW) and 10,000 MW respectively (UNDP). As the global transition to renewable energy steps up, world markets can benefit from the country’s potential. Turkmenistan’s first hybrid (solar and wind) renewable project’s construction is underway and is expected to deliver its first output by next year.

 

Supply-chain infrastructure. Turkmenistan is located in Central Asia, the region at the crossroads of East-West and North-South trade routes. As a part of the so-called Middle Corridor, Turkmenistan offers a secure, reliable, and alternate transport and transit corridor for international trade. Infrastructure investments are a high Government priority and have strategic importance for the country. Warehouses, distribution centers, cold-chain storage, and other supply-chain facilities will be essential to fully handle the Middle Corridor’s transportation capacity.

 

Logistics solutions. Especially in the last two decades, Turkmenistan has upgraded its infrastructure network, building roads, railways, and commissioning brand new and the most capable seaport and airport in the region. Ongoing global shifts in trade routes naturally encourage international logistics companies to establish business activities in Turkmenistan. Western logistics companies have a historic chance to grab business opportunities with the highest markup. Turkmenistan and regional countries are working to facilitate trade flows from the Middle Corridor, companies that establish businesses and will most benefit from this investment.

Petrochemical industry. Chemicals are a growing global industry. Turkmenistan has tremendous fossil fuel reserves and cheap energy and labor costs. The country has the potential to successfully compete in the petrochemicals market globally. Petrochemicals is another strategic industry for the Turkmen economy, and the Turkmen Government encourages investments. Compared with other regions, the petrochemical industry in Turkmenistan is underinvested. Petrochemical companies can benefit from low costs and cheap inputs that will increase their sales and net income.

Agricultural processing. Favorable climate conditions are a comparative advantage for agricultural processing in Turkmenistan. Both the global population and global demand for agricultural products are increasing. Other comparative advantages include: cheap energy, cheap labor, low taxes, and relatively low CAPEX requirements. This is another high-priority industry for the global economy, so international companies can benefit from these comparative advantages in Turkmenistan to meet high regional demand by investing and exporting to neighboring Central Asian countries.

Last month, the Turkmen Government organized the Turkmenistan Investment & Development Forum in London. Two-day Investment Forum brought together international companies, organizations, Government and business representatives, senior Turkmen industry decision-makers, and other experts on one platform to build new relationships and expand established ones looking to collaborate in their investment in Turkmenistan.

Last year, Turkmenistan adopted a new Law on Public Private Partnership (PPP) which grants many privileges to private businesses and further secures their commercial interests. Moreover, an updated version of the Law on Enterprises further eases the process of incorporating and running a private company in Turkmenistan. Preparation works for establishing several new free economic zones are underway and expected to be finalized next year; this will further boost business and commercial activities within the country.

Turkmenistan has the potential to become a regional hub of major international companies that are planning to extend their business activities in Central Asia by being the cheapest destination in terms of business operating expenses. Furthermore, stability matters when it comes to business activities. By being the most stable and peaceful country in the region, Turkmenistan significantly reduces security-related risks for companies and individuals.

Scarcity focuses the mind. Turkmenistan offers all scarce resources for the stable operation of businesses without disruptions. At a time when major international companies are searching for stable places for manufacturing, Turkmenistan is a place that has the potential to become the next manufacturing powerhouse of the regional economy.


Related Articles

Georgia

Kobakhidze Takes Over as Prime Minister in Georgia

On February 8, the Parliament of Georgia confirmed the nomination of Irakli Kobakhidze, a long-time Georgian Dream party elite

Georgia

Russia On the Back Foot in the Black Sea: Implications for Georgia and the Caspian Region

Russia has been forced to shift tactics in the Black Sea. Since the beginning of the war