Economy of Turkmenistan

Economy of Turkmenistan

Oil platform of Turkmenistan in Caspian sea
Fixed exchange rates	Turkmen manat = 100 tenge
Fiscal year	Calendar year
Trade organisations	CIS, ECO
Statistics
GDP	$82.29 billion (PPP, 2014 est.)[1]
GDP rank	87th (PPP, 2014)
GDP growth	5.7% (2016 est.)
GDP per capita	$11.630 (2016 est.)
GDP by sector	agriculture (12.7%), industry (49.3%), services (37.9%) (2016 est.)
Inflation (CPI)	11% (CPI, 2016 est.)
Population below poverty line	0.2% (2014 est.)
Labour force	2.305 million (2013 est.)
Labour force by occupation	agriculture (48.2%), industry (14%), services (37.8%) (2004 est.)
Unemployment	11% (2016 est.)
Main industries	natural gas, oil, petroleum products, textiles, food processing
External
Exports	$17.2 billion (2016 est.)
Export goods	gas, crude oil petrochemicals, textiles, cotton fiber
Main export partners	China 68.5%  Turkey 5% (2015) [2]
Imports	$13.8 billion (2016 est.)
Import goods	machinery and equipment, chemicals, foodstuffs
Main import partners	Turkey 24.9%  Russia 12.3%  China 10.9%  United Arab Emirates 9.1%  Kazakhstan 5.1%  Germany 4.6%  Iran 4.4% (2015)[3]
Gross external debt	$578.4 million (31 December 2014 est.)
Public finances
Public debt	N/A
Revenues	$7.047 billion (2014 est.)
Expenses	$6.699 billion (2014 est.)
Economic aid	$16 million from the US (As of 2001)
Foreign reserves	$27.04 billion (31 December 2014 est.)[4]
Main data source: CIA World Fact Book All values, unless otherwise stated, are in US dollars.

Turkmenistan is one of the world's fastest-growing economies. It is largely a desert country with intensive agriculture in irrigated areas, and huge gas and oil resources. In terms of natural gas reserves, it is ranked 4th in the world. Regarding agriculture, the two largest crops are cotton, most of which is produced for export, and wheat, which is domestically consumed.^[5] Turkmenistan is among the top ten producers of cotton in the world. From 1998 to 2005, Turkmenistan suffered from the continued lack of adequate export routes for natural gas and from obligations on extensive short-term external debt. At the same time, however, total exports rose by an average of roughly 15% per year from 2003 to 2008, largely because of higher international oil and gas prices. As in the Soviet era, central planning and state control pervade the system, and the Niyazov government (in power 1991–2006) consistently rejected market reform programs. The state subsidizes a wide variety of commodities and services. Since his election in 2007, President Gurbanguly Berdimuhamedow has unified the country's dual currency exchange rate, ordered the redenomination of the manat, reduced state subsidies for gasoline, and initiated development of a special tourism zone (Avaza) on the Caspian Sea. Since 2009, Turkmenistan has maintained the fixed exchange rate. As of June 18, 2016, 1 United States dollar is equivalent to 3.50^[6] Turkmenistan manat.^[5]

Fiscal policy

The budget-making process and its implementation go according to the Law “On Budget System”. The law fixes legal foundations of organizing management and operating budget system, regulates interrelations between budgets of all levels. The government of Turkmenistan discusses the state budget draft and submits it to the President of Turkmenistan. Prior to one month of the beginning of the financial year the President of Turkmenistan submits to the Assembly of Turkmenistan (Mejlis) the state budget draft for consideration and adoption. Budget statistics are unreliable because the government spends large amounts of extra-budgetary funds. In 2012, it is estimated that the budget expenditures are US$26.9 billion, and revenues are US$26.4 billion, creating a slight deficit.

Industry

HQ of the Ministry of Oil and Gas of Turkmensistan, Ashgabat

In the post-Soviet era, Turkmenistan’s industrial sector has been dominated increasingly by the fuel and cotton processing industries to the detriment of light industry. Between 1991 and 2004, some 14 new cotton-processing plants were opened, sharply increasing the capability of processing domestically produced cotton. The construction industry depends mainly on government building projects because construction of private housing is a low priority.

Gas

Turkmenistan's major gas deposits were discovered in its central and eastern areas in the 1940s and '50s, and in the 1980s the republic became the second largest producer of gas in the Soviet Union, behind the Russian SFSR. During the Soviet era gas was exported mainly to other Soviet republics, as Turkmenistan steadily increased delivery from about 9.2 million m³ in 1940 to about 234 million m³ in 1960 and about 51 billion m³ in 1975. This export was under centralised control, and most of the export revenue was absorbed into the Soviet central budget.^[7]

This changed in 1991, when Turkmenistan gained independence and established full control over gas export and export revenues. However, Soviet-era pipelines dictate that much of the gas goes to the Caucasus, Russia and Ukraine. In the 1990s many of Turkmenistan's gas customers in the CIS failed to pay on time or negotiated barter deals. In the mid-1990s Turkmenistan stopped delivering gas to some CIS members, citing failure to pay and unprofitable barter deals. At the same time, the government tried to attract investments in building gas pipelines via Iran to Turkey and Western Europe via Afghanistan to Pakistan. Neither deal went through due to an unfavourable regional security environment and high costs; inflation and the budget deficit rose but privatisation was resisted. In the late 1990s the government renegotiated its export and price arrangements with Gazprom and renewed deliveries to Georgia, Ukraine, and some other countries.^[7] It also opened its first pipeline not to pass through Russia, the Korpezhe-Kurt Kui Pipeline.

The figures in the table below are taken from BP Statistical Review.^[8] The unit is billion cubic meters (bcm) per year. It lists gas production, consumption, exports as total and also divided into countries. One observes that the production and exports peaked in 2008 and dramatically decreaded in 2009. This is due an explosion that occurred in the Central Asia–Center gas pipeline system in April 2009 for which Turkmenistan blamed the Gazprom company.^[9] Since then Russia restricted its imports to only around 10 bcm. The production and exports started increasing again from 2010 owing to an opening of the Central Asia–China gas pipeline.

Oil

As of 2010, Turkmenistan had 202,000 barrels per day oil production. Dragon Oil produced around 50,000 barrels per day. Domestic consumption was about 100,000 barrels per day.^[10] The oil production data in the table below are taken from BP Statistical Review.^[8]

Construction materials

Three cement plants operate in Turkmenistan. These are located near Ashgabat, Balkan and Lebap provinces. Total production in 2013 is estimated to exceed 2 million tonnes.^[11]

Chemicals

Turkmenistan is construction potash plant with annual capacity of 2.8 million tonnes of potash fertilizers. The bulk of them will be exported since the domestic demand in the country does not exceed 10,000 tonnes.^[12] The construction of the plant that would produce 640,000 tonnes/year of urea (carbamide) and 400,000 tonnes/year of ammonia is due to be completed by June 2014. ^[13] By 2016, the country is expected to produce 1m tonnes of urea (carbamide) annually. ^[14]

Services

Banking

The financial system is under full state control. The banking system, which was reduced substantially after the 1998 financial crisis, includes 12 national banks. These institutions have the same basic division of responsibility as in the Soviet era, overseen by the Central Bank of Turkmenistan. Lending operations and household savings have not been important functions of this system. In 2005 an estimated 95 percent of loans went to state enterprises. Turkmengosstrakh, the state insurance firm, has a complete monopoly of the very small insurance industry.

Agriculture

In the early 2000s, the contribution of Turkmenistan’s state-run agriculture sector to gross domestic product increased under close state supervision. As during the Soviet era, cotton is the dominant agricultural commodity because it is an export staple. However, in recent years state policy makers have increased the range of crops with the aim of making Turkmenistan self-sufficient in food. In the post-Soviet era, the area planted to grains (mainly wheat) has nearly tripled. However, most agricultural land is of poor quality and requires irrigation. Turkmenistan’s irrigation infrastructure and water-use policies have not responded efficiently to this need. Irrigation now depends mainly on the decrepit Garagum Canal, which carries water across Turkmenistan from the Amu Darya. The Dostluk dam, opened at Serakhs on the Iranian border in 2005, has increased available irrigation water and improved efficiency. Plans call for a similar dam on the Atrek River west of Ashgabat. Private farmers grow most of Turkmenistan’s fruits and vegetables (chiefly tomatoes, watermelons, grapes, and onions), but all production phases of the main cash crops—grain and cotton—remain under state control. In 2006 grain crop failures led to steadily increasing bread lines and reinstatement of a ration system in most regions. At the root of those failures was a culture of falsifying output figures together with poor administration of the sector

External trade

Turkmen exports in 2006

The Turkmen Government claims to have placed great emphasis on foreign economic relations and foreign trade and an "open door" trade policy, as declared by the President. At present 73 countries are partners of Turkmenistan, including the republics of the NIS. The most prominent trade partners of Turkmenistan are the United States, Turkey, Switzerland, Hong Kong, Germany, the United Kingdom, Cyprus, Iran, and the United Arab Emirates. Turkmenistan is a member of the Economic Cooperation Organization (ECO).

Export of industrial and agricultural raw materials remain the most important goals of the Turkmen Government. Price controls on most goods, the stabilization of reproduction processes, the creation of stable economic growth, and flexibility to innovations and a socially oriented economy also are very important. The government is attempting to strengthen state regulation of foreign trade and create a state system of insurance to expand and consolidate foreign economic relations. Because of considerable growth of foreign investments, improvements are taking place in the economy. Privatization of medium and large enterprises are proceeding slowly.

In January 2006, Saparmurat Niyazov ordered to stop paying pensions to ⅓ (more than 100,000) of elderly people, cutting pensions to another 200,000, and ordering to pay the pensions received in the past two years back to the State. This has resulted in a huge number of deaths of old people, who may have had their pension (ranging from $10 to $90) as the only source of money.^[15]

Labor

Recent statistics are not available on Turkmenistan’s labor force. In 2003 the labor force was estimated to include more than 2.3 million workers, 48 percent of whom worked in agriculture, 38 percent in services, and 14 percent in industry and construction. Because the state dominates the economy, an estimated 90 percent of workers are in effect state employees. Unemployment statistics are not available because unemployment does not exist officially. It is believed that downsizing the government workforce, which began in 2003, increased unemployment in subsequent years.

The average monthly salary in Turkmenistan in 2007 was 507 TMT (178 USD) and the same indicator in 2012 was 943 TMT (331 USD).^[16] This is equivalent to 86% increase. This dramatic increase is mainly due to the yearly increase of 10% of the state employer salaries by the Government of Turkmenistan.

Privatization

By 1999, privatization in trade, catering, consumer services was fully completed. Availability of adequate legal base, opening of credit lines, including the foreign ones, simplified the procedure of private enterprises opening and licensing, led to enlargement of the sphere of entrepreneurship. The private sector dominates in agriculture (60%), trade (70%) and transport (56%). Turkmenistan plans to privatize several state companies during 2013-2016. ^[17]

Other statistics

Household income or consumption by percentage share:

• lowest 10%: 2.6%
• highest 10%: 31.7% (1998)

Industrial production growth rate: official government estimate: 22% (2003 est.)

Electricity:

• production: 15.02 TWh (2009)
• consumption: 11.22 TWh (2009)
• exports: 1.56 TWh (2009)
• imports: 0 kWh (2002)

Electricity - production by source:

• fossil fuel: 99.9%
• hydro: 0.1%
• nuclear: 0%
• other: 0% (2001)

Exchange rates: Turkmen manats per US$1 – 5,200 (January 2000), 5,350 (January 1999), 4,070 (January 1997), 2,400 (January 1996)

in recent years the unofficial rate has hovered around 24,000 to 25,000 Turkmen manats to the dollar. The official rate has consistently been 5,200 Manat to the dollar.

After denomination of national currency the last official rate is 2.85 manat-1$

Notes

 This article incorporates public domain material from websites or documents of the Library of Congress.

External links

• Turkmenistan: Potential 'Super-Giant' Emerges On Energy Scene
• Turkmenistan: The ongoing development of agricultural industry
• Map of the oil and gas infrastructure in Turkmenistan