Turkmenistan: Investing

FDI in Figures

According to UNCTAD 2021 World Investment Report, FDI inflows to Turkmenistan declined by 45% to USD 1.2 billion in 2020 from USD 2.1 billion in 2019, mainly due to the global health and economic crisis triggered by the Covid-19 pandemic. The estimated FDI stock was USD 39.3 billion in 2020. The COVID-19 pandemic severely affected export revenues and investment projects, both of which are dependent on natural gas. The country has implemented relatively limited measures against the pandemic but has suffered from falling international demand for hydrocarbons, especially from China, an important trade and investment partner. The Central Asia-China pipeline became operative in April 2022, whereas the commissioning of the Turkmenistan-Afghanistan-Pakistan-India pipeline, which is expected to double exports, is not going to come onstream until 2023. At the same time, continued strict capital controls on FDI have further slowed down new hydrocarbon projects, in a context of declining international investment. China, Russia, Kazakhstan and Uzbekistan are the main investors in the country. Oil and gas, agriculture and construction are the main investment sectors. Despite the obstacles in the country, hydrocarbons and petrochemicals are attracting foreign investment and there had recently been an interest in the manufacturing sector. China is increasingly investing in the gas sector, co-financing pipelines and refineries, and remains the largest gas buyer in the country. It has granted a USD 4.1 billion loan to build the Galkynysh field, the second-largest gas field in the world. According to the British government, companies are advised to target the sectors in which Turkmenistan is investing and to call upon a trusted local partner to manage bureaucratic and political hurdles. Public investment in Turkmenistan significantly exceeds private investment, as just 10% of the investments come from the private sector, which is much lower compared to other countries of similar income levels. Of the total investments, foreign direct investment accounts for 20%.

Although there are formally no limitations to foreign ownership of companies, the government has only allowed fully owned foreign operations in the oil sector. Foreigners cannot invest in the exploration and production of the country’s onshore gas resources. All land belongs to the state and other property rights are limited; moreover, the repatriation of revenues is difficult. The judicial system is subordinate to the president, who appoints and dismisses the judges without legislative review. Potential investors may be discouraged by several factors, including state control measures, exchange rate restrictions, excessive and inconsistent regulations, corruption, lack of established rule of law and lack of experience in dealing with foreign investors for international trade. In addition, essential technologies, such as the internet and telephone infrastructures, are not sufficiently developed. Turkmen citizens must make up 90% of the workforce of foreign-owned companies (30% for companies active in the oil and gas sector). The government encourages direct investment in order to diversify the economy, but the structures in place do not comply with international trade standards, and no commercial code has been adopted apart from the law on commercial activities of 2016. The law on Free Economic Zones has been recently amended; however, there are currently no FEZs in the country. Turkmenistan is not ranked in the World Bank’s latest Doing Business ranking due to the lack of reliable data.

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Latest Update: February 2023