Turkmenistan

Politics:

• Analysis

  Turkmenistan politics: Quick View - A new party enters the political scene

  Event

  A new political party, the Union of Industrialists and Entrepreneurs, held its founding congress in the capital of Turkmenistan, Ashgabat, on August 21st.

  Analysis

  The party will represent the views of business owners, primarily those involved in managing the state-owned industries, as business opportunities outside the state sector remain minimal. In theory, at least, its formation will end the dominance of the Democratic Party of Turkmenistan, which is led by the president, Gurbanguly Berdymukhamedov, and was previously the only political party allowed to operate in the country. Undoubtedly, the creation of the party was sanctioned by the authoritarian president.

  Since 2010 Mr Berdymukhamedov has shown an increasing interest in developing the party system-he has previously indicated that the establishment of an agrarian party would also be desirable. In January 2012 parliament approved legislation that enabled the establishment of political parties and fleshed out the role they would play in the political system. The rationale behind Mr Berdymukhamedov's moves to develop the political system is unclear; it is possible that the president wants to allow some members of the elite group to have a greater voice in the political system, albeit within a constrained framework. This could imply that there are tensions among the main political forces. Nonetheless, given the tight control that the Berdymukhamedov administration exerts over all components of the political, social and economic spheres, the founding of the new political party will not bring any substantive improvement to the level of democratisation in Turkmenistan.

  August 24, 2012

• Background

  Turkmenistan: Key figures

  Gurbanguly Berdymukhamedov

  Mr Berdymukhamedov was one of the longest-serving ministers in Saparmurad Niyazov's cabinet, but his accession to the presidency in late 2006 was nevertheless unexpected, given the absence of an obvious successor to Mr Niyazov. A dentist by training, and health minister until his appointment as acting president, the 50-year-old Mr Berdymukhamedov survived the frequent ministerial reshuffles that characterised Mr Niyazov's presidency. Whether this was because he was not considered a threat to Mr Niyazov is unclear, but his ascent to power in December 2006 was so smoothly co-ordinated that he must have won broad support among the political and security elite. His appointment as head of the commission overseeing Mr Niyazov's funeral appeared to secure Mr Berdymukhamedov's status as president-in-waiting, as did his public endorsement by the head of the Central Election Commission. Mr Berdymukhamedov went on to win a presidential election in February 2007, easily beating the other five candidates. His election campaign promised policy continuity with the Niyazov era while nevertheless pledging certain shifts in policy in sectors such as education and social security. Although he has started to fulfil these commitments and has demonstrated a greater willingness to engage with foreign partners, particularly in the hydrocarbons sector, Mr Berdymukhamedov has retained several features of the Niyazov presidency, including the frequent reshuffling of senior officials in order to reinforce presidential control over the political scene.

  Boris Shikhmuradov

  Mr Shikhmuradov, once a prominent opposition figure, is currently serving a life sentence in prison. For much of the 1990s he was one of the most high-profile figures in Turkmenistan. Mr Shikhmuradov served as foreign minister and then as Mr Niyazov's special envoy on Caspian affairs. He is said to have strong connections to the Russian energy sector and intelligence services, dating back to his time as a journalist in Moscow in the Soviet era. Until his demotion to the position of ambassador to China in 2000, he was regarded by many observers as a possible successor to Mr Niyazov. Mr Shikhmuradov joined the Moscow-based opposition in exile in November 2001, where he sought to gain international support for the removal of Mr Niyazov by democratic means. Mr Shikhmuradov returned secretly to Turkmenistan in late 2002, but turned himself in to the authorities after an alleged attempt on Mr Niyazov's life. Subjected to a summary show trial, he acknowledged his role in the incident, in what appears to have been a forced confession. Mr Shikhmuradov received a 25-year prison sentence, which was subsequently extended to life imprisonment. Since then there has been little word of his wellbeing.

  August 08, 2008

• Structure

  Turkmenistan: Political structure

  Official name

  Turkmenistan

  Legal system

  Turkmenistan became a constituent republic of the Soviet Union in 1924, and became independent in December 1991; a new constitution came into effect in May 1992

  National legislature

  Under constitutional amendments in September 2008, the Khalk Maslakhaty (People's Council) was dissolved and its powers transferred to the unicameral Mejles (parliament). After a parliamentary election in December 2008 the number of deputies in the Mejles, who are elected in single-mandate constituencies, rose from 65 to 125

  Electoral system

  Universal suffrage over the age of 18

  National elections

  February 12th 2012 (presidential); December 14th 2008 (parliamentary). Next elections: February 2017 (presidential); December 2013 (parliamentary)

  Head of state

  The president, Gurbanguly Berdymukhamedov

  National government

  Cabinet of ministers, appointed and headed by the president; the current government was formed in February-March 2012, but has had many small reshuffles since then

  Main political parties

  In December 1991 the Turkmen Communist Party changed its name to the Democratic Party of Turkmenistan, which has become the party of power. A new political party, the Union of Industrialists and Entrepreneurs, was formed in August 2012 and will represent the interests of business owners. Undoubtedly, the creation of the party was sanctioned by Mr Berdymukhamedov. The presidential administration has also indicated that the establishment of an agrarian party is desirable. All genuine opposition parties are banned

  Cabinet of Ministers

  Chair: Gurbanguly Berdymukhamedov

  Deputy prime ministers:

  Rashid Meredov (also foreign minister)

  Annageldy Yazmuradov

  Sapardurdy Toyliyev

  Rozmurad Seyihuliyev

  Byagul Nurmyradova

  Nazarguly Sagarliyev

  Baimyrat Khojamuhammedov

  Akmyrat Yegeleyev

  Annamukhamet Gochiyev

  Yagsygeldi Kaksyev

  Hojamuhammet Muhammedov

  Key ministers

  Agriculture: Rejep Bazarov

  Construction: Jumageldi Bayramov

  Defence: Begenc Gundogdiyev

  Economy & development: Bashimmyrat Khojamammedov

  Education: Gulsat Mammedova

  Energy: Myrat Artykov

  Finance: Dovletgeldi Sadikov

  Internal affairs: Isgender Mulikov

  Justice: Murad Karryyev

  National security: Yaylim Berdiyev

  Oil & gas industry & mineral resources: Kakageldi Abdyllayev

  Textile industry: Saparmyrat Batyrov

  Water economy: Seyitmurad Taganov

  Central Bank governor

  Tuvakmammet Japarov

  October 01, 2012

Economy:

• Background

  Turkmenistan: Economic background

  Real gross domestic product by sector
  (% share of GDP)
  	2003	2004	2005	2006	2007
  Agriculture	21.0	19.9	16.9	16.6	11.5
  Industry	44.6	40.8	40.6	39.3	40.8
  Services	34.4	39.3	42.5	44.1	47.7
  Source: Economist Intelligence Unit.

  Download text file (csv format)

  We estimate that exports of goods and services account for more than 90% of GDP by expenditure, a share that has risen sharply since the later years of the 1990s, following the resumption of gas exports to Russia and Ukraine. Imports are also estimated to have risen, to around 90% of GDP, owing partly to growth in capital-intensive sectors such as construction. However, gross fixed investment has fallen as a share of GDP in recent years, partly reflecting the lack of investment in pipeline infrastructure. Private consumption is believed to have stagnated, as incomes have failed to keep pace with rising prices, and difficulties in the public finances have resulted in government consumption falling slightly as a share of GDP.

  August 08, 2008

• Structure

  Turkmenistan: Economic structure

  Economic structure: Annual indicators

  	2007a	2008a	2009a	2010a	2011a
  GDP at market prices (Manat bn)	27.0	43.7	41.8	48.7	60.0
  GDP (US$ bn)	12.7	17.0	14.7	17.1	21.1
  Real GDP growth (%)	11.6	9.8	-8.0	6.0	10.0
  Consumer price inflation (av; %)	6.3	14.5	4.0	10.0	12.0
  Population (m)	5.0b	5.0b	4.9b	4.9	5.0
  Exports of goods fob (US$ m)	9,114b	11,786b	8,946b	10,551b	14,776
  Imports of goods fob (US$ m)	-3,780b	-5,363b	-8,071b	-8,326b	-9,604
  Current-account balance (US$ m)	3,564b	2,689b	-2,838b	-1,376	1,005
  Foreign-exchange reserves excl gold (US$ m)	13,461	14,837	16,873	17,568	19,401
  Exchange rate (av; estimated market) Manat:US$	2.1	2.6	2.9	2.9	2.9
  Exchange rate (av; official) Manat:US$	1.0c	2.3c	2.9c	2.9c	2.9c
  a Economist Intelligence Unit estimates. b Actual. c In January 2009 the manat was redenominated by 5000.

  Download the numbers in Excel

  Origins of gross domestic product 2008	% of total	Components of gross domestic product 2008	% of total
  Industry	53.7	Private consumption	55.5
  Agriculture & forestry	12.3	Public consumption	8.3
  Services	34	Gross fixed investment	6.5
  		Net exports	29.7
  Principal exports 2001	% of total	Principal imports 1999	% of total
  Gas	57	Machinery & equipment	60
  Crude & refined oil	26	Food products	15
  Cotton fibre	3
  Textiles	2
  Main destinations of exports 2010	% of total	Main origins of imports 2010	% of total
  China	9.0	Turkey	15.1
  Turkey	3.3	Russia	9.5
  UAE	2.3	China	6.9
  Afghanistan	2.0	UAE	5.8

  Download the numbers in Excel

  Download text file (csv format)

  October 01, 2012

• Outlook

  Turkmenistan: Country outlook

  Turkmenistan: Country outlook

  FROM THE ECONOMIST INTELLIGENCE UNIT

  OVERVIEW: Turkmenistan's president, Gurbanguly Berdymukhamedov, was elected for a further term in February 2012. The Economist Intelligence Unit expects Mr Berdymukhamedov to remain in power throughout the 2013-14 forecast period. Only limited progress towards democratisation is expected in 2012-13. The entrance of another party into the political arena will not lead to a change in the status quo, and will only add to the veneer of democracy. Foreign policy will continue to move gradually away from its focus on Russia as stronger ties with countries such as China and Iran are pursued. Chinese investment will focus particularly on the energy sector. The government will continue to pursue statist economic policies in 2012-13. Although some small reforms may be introduced, the business environment will remain extremely difficult for foreign investors. Real GDP grew by 10% in 2011, according to our estimates. We forecast that growth will average 7% in 2012-13, supported by rising gas exports to China and robust private consumption. The current account swung back into surplus in 2011. It will remain in surplus in 2012-13, averaging around 6% of GDP.

  DOMESTIC POLITICS: In February 2012 Mr Berdymukhamedov was re-elected president, in a process that was heavily criticised by the international community for being neither free nor fair. Much of the government team was reappointed shortly afterwards, signalling policy continuity. His presidency has not brought about any meaningful improvements in political, social or media freedom and the economy remains dominated by state-owned monopolies. Mr Berdymukhamedov's survival in office will depend on rewarding officials and balancing competing interests. Since 2010 Mr Berdymukhamedov has shown an increasing interest in developing the party system, and in January 2012 parliament approved legislation that enabled the establishment of political parties and fleshed out the role they would play in the political system. In August 2012 a new party, the Union of Industrialists and Entrepreneurs, entered the political scene to compete against the Democratic Party of Turkmenistan (the only registered party since independence). The new party is a top-down creation and has not emerged from civil society. The rationale behind Mr Berdymukhamedov's eagerness to develop the political system is unclear. It is possible that the president wants to allow some members of the elite to have a greater voice in the political system, albeit within a constrained framework, implying that there are tensions among the main political forces. Nonetheless, given the tight control that the Berdymukhamedov administration exerts over all components of the political, social and economic spheres, the founding of the new political party will not bring any substantive improvement to the level of democratisation. Turkmenistan looks well insulated from the wave of political democratisation that swept the Middle East and North Africa (MENA) in 2011. The maintenance of an extensive subsidy system for the population reduces social discontent, and there seems little prospect of radical Islam gaining a foothold. The authorities' control over political, media and religious freedoms is much tighter than in MENA, perhaps curbing the potential for upheaval. Crucial to maintaining domestic stability will be ensuring the continued flow of gas exports, and hence foreign-exchange inflows, which underpin patronage and subsidies. If natural gas prices should fall sharply, this could have significant repercussions for the political status quo. The next parliamentary election is not due until December 2013, but the new party is likely to obtain only token representation in parliament, and will not attempt to hold the government to account.

  INTERNATIONAL RELATIONS: Foreign policy will continue to shift away from its overwhelming focus on Russia as more diversified hydrocarbon export routes raise the importance of ties with China and Iran. Mr Berdymukhamedov has maintained that Turkmenistan is open to foreign investors, mainly because it lacks technical expertise in important areas. China started importing Turkmen gas through the Central Asia-China pipeline in late 2009, with a new agreement in November 2011 raising planned supply levels further. The EU is interested in securing a share of Turkmen gas through transit across the Caspian Sea to Europe as part of its Southern Gas Corridor project, aimed at diversifying sources of energy imports away from Russia-controlled routes. Mr Berdymukhamedov has said that his country is interested in supplying gas to Europe. Tripartite negotiations that include Azerbaijan continue, but concrete progress remains slow, with greater enthusiasm on the European than on the Turkmen side. The signing of a Turkish-Azerbaijani agreement in June 2012 over the construction of the Trans-Anatolian pipeline, which will transit gas from the Caspian Sea through Turkey to Europe, renewed speculation concerning Turkmen support for a Trans-Caspian pipeline. However, an increase in Turkmen-Azerbaijani tensions over the disputed Serdar oilfield will result in any plans for the Trans-Caspian pipeline being shelved for the time being. In addition, construction of the pipeline will be complicated by the issue of the delimitation of the Caspian Sea, which has yet to be resolved. Turkmenistan will continue to promote plans for the Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline. The four countries signed an agreement on gas supplies through the pipeline in May 2012, the most significant step for several years. Although this is a step forward, TAPI still faces considerable obstacles. Funding issues and the unstable situation in Afghanistan pose sizeable risks, making the four governments' plan to build the pipeline by 2018 appear unlikely.

  POLICY TRENDS: Turkmenistan is to a large extent isolated from the direct effects of turbulence on global financial markets and the euro zone crisis. However, it is affected by price movements in international commodity markets. The state retains a dominant role in all sectors, and continues to rely on subsidies, price controls and the free provision of utilities. Monetary policy remains rudimentary and the public finances are opaque. Following his re-election, Mr Berdymukhamedov reiterated his goal of pushing ahead with industrialisation, focusing on chemicals, energy and higher value-added operations. Diversification of energy markets will be a central element of this strategy. The authorities are also taking small steps to increase the country's attractiveness to investors, and to provide more scope for small and medium-sized enterprises. Nonetheless, we expect that the business environment, particularly outside of the natural resources sector, will remain very difficult for foreign investors to penetrate. Over the next two years investment in the oil and gas sector will continue to rise. China in particular will remain keen to increase its access to Turkmenistan's energy reserves. In 2009 Turkmenistan secured a US$4bn credit line from China, and in April 2011 this was followed up with a second loan, of US$4.1bn, to fund development of gas reserves and other projects. Field service contracts have also been concluded with South Korea and the United Arab Emirates for the development of onshore gas reserves. In addition, the authorities are beginning to conclude production-sharing agreements (PSAs) to develop offshore gasfields in the Caspian Sea. However, the authorities' unwillingness to conclude PSAs for onshore fields presents an impediment to investment. Official statistics show state budget revenue 37 percentage points above target and expenditure more than 6 percentage points below target in 2011. They show revenue rising by almost 50% and spending rising by around 40% compared with 2010. Although it is difficult to take at face value the government's positive budgetary story, fast growth in gas sales will have seen public income expand quickly. The budget plan for 2012 envisages a small deficit. However, it may be based on conservative revenue assumptions. Pressure on the public finances will gradually ameliorate as gas exports rise. We forecast that the surplus will rise over 2013-14 to reach 2% of GDP in 2013. Directed lending by the government through the banking system is likely to remain significant in 2012-13.

  ECONOMIC GROWTH: Real GDP grew by 14.7% in 2011, according to the State Statistics Committee. However, the reliability of official data is questionable, and official economic data appear to consistently exaggerate growth. Broader economic trends indicate that the robust growth in 2011 was driven by an increase in gas production, owing to high demand for Turkmen gas in China and Iran, both major export destinations. The rising demand from China for natural gas will provide a boost to budget and export revenue, which are both heavily reliant on energy profits. The rise in state revenue allowed faster growth in public investment in hydrocarbons development, utilities, the rural economy and grandiose prestige projects. This has supported construction. Domestic trade and transport have been sustained by expanding private consumption. Global natural gas prices are set to remain high in 2012-13. Investment to build hydrocarbons capacity and production, and new pipeline projects, will provide an additional prop for economic growth. Although prospects for further growth in gas exports to China remain solid, Iran has implied that it does not wish to raise import levels soon, and the Western powers, driven mainly by the US, have imposed extensive economic sanctions on Iran in response to fears about its nuclear programme. We forecast an economic contraction in the EU of 0.4% in 2012. This could affect economic growth in Turkmenistan through its direct impact on markets such as Turkey, an important trading partner. However, a more important factor behind the slowdown in 2012 is likely to be the high base resulting from fast growth in 2011. Over 2013-14 growth will be supported by an increase in gas production. In July 2012 the government announced that it plans to produce a total of around 450bn cu metres in 2012-16. However, government targets across all sectors tend to be overly optimistic, and it seems unlikely that this target will be reached. That said, gas production will rise more rapidly from 2015 onwards as the Central Asia-China pipeline will have the capacity to export the increased output. We forecast that real GDP growth will average 7% in 2012-13. Risks of external economic shocks persist. Should concerns over the euro zone become more acute, this could lead to a fall in natural gas prices, which would have a negative impact on the country's economic outlook.

  EXTERNAL ACCOUNT: The current account is likely to have stayed in deficit in 2010: gas exports were lower than in 2008, and imports of capital goods for investment and services debits remained large. The rapid rise in gas earnings in 2011 is estimated to have lifted the current account back into surplus, and a continuation of this broad pattern will see the surplus rise, albeit slowly, in subsequent years. We forecast that it will average around 6% of GDP in 2012-13. Gas exports will remain the main driver of exports. Transit trade will provide only limited services credits, and Turkmenistan will continue to rely on imported services in sectors such as construction and hydrocarbons. An expected increase in investment will result in significant growth in imported services, and the sizeable services deficit will therefore expand.

  October 29, 2012

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Country Briefing

Total area

488,100 sq km

Population

5m (2008; World Bank)

Main towns

Population in '000, beginning of 2004:

Ashgabat (capital): 828

Turkmenabat: 256

Dashoguz: 210

Climate

Continental desert; summer temperatures regularly reach 45-50°C

Languages

Turkmen is the state language; Russian is widely spoken in the towns and Uzbek is spoken by the ethnic Uzbek minority, mainly in northern Turkmenistan

Weights and measures

Metric system

Currency

Manat; redenominated in January 2009, at a rate of 5,000 old manat = 1 new manat

Time

Five hours ahead of GMT

Public holidays

January 1st (New Year's Day); January 12th (Memorial Day); February 19th (Turkmen Flag Day); March 8th (International Women's Day); March 21st-22nd (Spring holiday); May 9th (Victory Day); May 18th (Revival and Unity Day); August 19th (end of Ramadan); October 6th (Remembrance Day for the victims of the 1948 earthquake); October 26th-28th (Independence Day and Feast of Sacrifice); November 17th-19th (Kurban Bairam); December 12th (Day of Neutrality of Turkmenistan)

July 12, 2012