Investment Climate in Turkmenistan: Problems and Risks

Abstract

In the 1990s Central Asian republics experienced enormous economic problems because their economies were heavily dependent onRussia and could not function separately.  The collapse of the Soviet Union meant also the collapse of the Central Asian economic systems.  TheLeaders of former Soviet republics decided to carry out rapid economic and political reforms.  They adopted economic policies which were knownas “shock therapy”.  Shock therapy caused the emergence of many socio-economic problems, as well as the growth of unemployment and inflation.
It also increasedsocial inequalityandthe gapbetween richandpoor. Withregardsto Turkmenistan,itstransition fromacentrally planned
economyto a free market economy was a very slow process and the central government continued to play strong directive andprotective roles
inthe economy. Much of the economy has not been exposed to market disciplines and remained under the firm control of central government. 



    At first glance Turkmenistan seems a very attractive country for investors.  It has immense amount of natural resources, especially oil andnatural gas.  Each year scientists discover large deposits of natural gas and oil in Turkmenistan.  It is the fourth - largest producer of natural gas inthe world.  But, if one examines the country’s current socio-economic and political situation in details, he/she would discover that it is becomingincreasingly an “investor unfriendly” country.  Turkmenistan is regarded as one of the most oppressive countries in the world.  The country hasa long tradition of dictatorial rule which is a main obstacle to any kind of economic and political reforms.  Turkmenistan has a largely state-runeconomy and the country’s economy is still based on the system of state ownership.  Government still controls the vast majority of lucrative businessesand industrial assets.  Theeconomy of Turkmenistanis still characterized by state control of investment.