The Turkmenistan business community still carries clear traces of the central planning of the Soviet period. The privatization program, which started in 1992, has only included small businesses in commerce, crafts and other services. The extraction of gas and oil, which accounts for 80 percent of Turkmenistan’s export revenue and the expanding textile and food industry, is owned by the state. Private ownership of agricultural and industrial land is not allowed, nor is sales. Cotton and grain are bought at state-set prices that are below market prices and half of the population living in the countryside lives only partially in a monetary economy. Food rationing has occurred several times in northern and western Turkmenistan during the 1990s. The currency is not convertible.
The establishment of private companies is limited by a complicated regulatory framework. Personal contacts often determine which decisions the permit authorities make. Foreign investments are only allowed in certain sectors, including: the extraction of oil and gas where Turkmenistan is in need of both capital and technology. According to Transparency International, Turkmenistan is one of the most corrupt states in the world.
Increased privatization of business, outside the oil and gas sector, was promised by the regime that took over after the dictator Nijazov’s death in late 2006, but reform efforts have so far been slow.
The importance of the primary sector to the economy as a whole has declined rapidly. However, the sector still accounts for a third of employment. Agricultural production, which was previously mainly organized in state and collective agriculture, has begun to be transformed in the direction of small farming units. Arable and pasture land is still state-owned, but contracts that allow private use rights are common.
Only 3 percent of Turkmenistan’s territory is suitable for arable farming. Half of this area is irrigated, mainly with water from Amu-Darja, which is led via the Karakum Canal. The dominant crop is cotton. Other crops that are grown to a significant extent are cereals, vegetables, fruits and grapes. In addition to agriculture, livestock management (mainly cattle, sheep and poultry) plays a significant role in the country’s food supply. The country is also known for its breeding of caracal sheep and thoroughbred horses.
Minerals and energy
According to countryaah, Turkmenistan has large deposits of recoverable raw material resources. Sulfur and salt are found in quarantined quantities, as are minerals with use primarily in the construction industry. However, it is energy resources that make up the country’s great resource; Turkmenistan has very large assets of oil and above all natural gas. Oil production has significant potential. Extraction takes place both on land and in the Caspian Sea. However, hopes for the future are primarily linked to natural gas assets. Extraction takes place in the middle parts of the country, in the west in and near the Caspian Sea and in the Lolotan field in the eastern parts of the country. Gas reserves are considered to be among the largest in the world. The sector is therefore predicted a bright future, and the country’s economy with it. Transport capacity has been limited for a long time. To remedy this, a gas pipeline was inaugurated to China in 2009, a gas pipeline to Iran and an oil pipeline to Azerbaijan and Georgia in 2010. From the latter countries, the oil is then transported to the Turkish port city of Ceyhan. Turkmenistan itself has a shortage of oil refineries.
In view of the country’s large supply of fossil fuels, it is natural that the energy supply is built up around this resource. Electricity and heat for both industrial and domestic use are provided by oil and gas power plants.
Industrial production consists mainly of the textile and petrochemical industries. Together with the natural gas, oil also forms the basis of the country’s chemical-technical industry.
In addition to petrochemical production, the textile industry, which accounted for about 1/3 of the total production value and the majority of industrial employment, is the country’s leading industry. The basis for the operation is the cotton grown domestically, which is, however, only to a small extent refined on the spot. Traditionally, carpet production is also important, and it still plays a significant role in the small business sector. Other things include food industry and a limited workshop industrial production.
Few of the former Soviet republics depended more on their foreign trade than Turkmenistan. This relationship still applies. Dominant export goods are gas, oil products, electricity and cotton and cotton products; natural gas and oil account for 85 percent of the total export value. Most of these exports go to China and Turkey. Imports are mainly machinery, chemicals and food.