Republic of Turkmenistan

(Türkmenistan Respublikasy)
Republic of Turkmenistan (Turkmen: Türkmenistan Respublikasy), also known as
Turkmenia, Russian: Туркмения) is a country in Central Asia. Until 1991, it was a constituent
republic of the Soviet Union, the Turkmen Soviet Socialist Republic (Turkmen SSR). It is
bordered by Afghanistan to the southeast, Iran to the south and southwest, Uzbekistan to the east
and northeast, Kazakhstan to the north and northwest and the Caspian Sea to the west.

Turkmenistan's GDP growth rate of 11.5% (IMF estimate for 2007) ranks 11th in the world, it is
wealthy in natural resources in certain areas, most of the country is covered by the Karakum
(Black Sand) Desert.

Until recently it was a single-party system, that was considered to not meet even the most basic
standards of democracy. Turkmenistan was ruled by President for Life Saparmurat Niyazov
(called "Türkmenbaşy" — "leader of the Turkmens") until his sudden death on December 21,
2006. Gurbanguly Berdimuhamedow was elected the new president on February 11, 2007.

History
The territory of Turkmenistan has a long and checkered history, as armies from one empire after
another decamped there on their way to more prosperous territories. The region's written history
begins with its conquest by the Achaemenid Empire of ancient Persia, as the region was divided
between the satrapies of Margiana, Khwarezm and Parthia.

Alexander the Great conquered the territory in the fourth century BC on his way to Central Asia,
around the time that the Silk Road was established as a major trading route between Asia and the
Mediterranean Region. One hundred and fifty years later, Persia's Parthian Kingdom established
its capital in Nisa, now in the suburbs of the capital, Ashgabat. After replacement of the Parthian
empire by Persian Sassanids, another native Iranian dynasty, the region remained territory of the
Persian empire for several centuries.

In the seventh century AD, Arabs conquered this region, bringing with them Islam and
incorporating the Turkmen into the greater Middle Eastern culture. The Turkmenistan region
soon came to be known as the capital of Greater Khorasan, when the caliph Al-Ma'mun moved
his capital to Merv

Magtymguly Pyragy

In the middle of the eleventh century, the Turkoman-ruled Seljuk Empire concentrated its
strength in the territory of modern Turkmenistan in an attempt to expand into Khorasan (modern
Afghanistan). The empire broke down in the second half of the twelfth century, and the Turkmen
lost their independence when Genghis Khan took control of the eastern Caspian Sea region on
his march west.

For the next seven centuries, the Turkmen people lived under various empires and fought
constant inter-tribal wars. Little is documented of Turkmen history prior to Russian engagement.
However, from the thirteenth to the sixteenth centuries, Turkmen formed a distinct
ethnolinguistic group. As the Turkmen migrated from the area around the Mangyshlak Peninsula
in contemporary Kazakhstan toward the Iranian border region and the Amu Darya basin, tribal
Turkmen society further developed cultural traditions that became the foundation of Turkmen
national consciousness.

Between the 17th and 19th centuries, control of Turkmenistan was fought over by Persian Shahs,
Khivan Khans, the Emirs of Bukhara and the rulers of Afghanistan. During this period, Turkmen
spiritual leader Magtymguly Pyragy reached prominence with his efforts to secure independence
and autonomy for his people.

At this time, the vast territory of Central Asia including the region of Turkmenistan was largely
unmapped and virtually unknown to Europe and the Western world. Rivalry for control of the
area between the British Empire and Tsarist Russia was characterized as The Great Game.
Throughout their conquest of Central Asia, the Russians were met with the stiffest resistance by
the Turkmen. By 1894, however, Russia had gained control of Turkmenistan and incorporated it
into its empire.
Economy & Country potential of Turkmenistan
Economy of Turkmenistan

Currency Turkmen Manat = 100 Tenge

Fiscal year Calendar year

Trade CIS, ECO

organisations

Statistics

GDP ranking 127th (As of 2004)

GDP $27.6 billion (As of 2004)

GDP growth 7.5% (IMF est) note: official government statistics show 21.4% growth, but
these estimates are notoriously unreliable (As of 2004)

GDP per capita $5,700 (As of 2004)

GDP by sector agriculture (28.5%), industry (42.7%), services (28.8%%) (As of 2004)

Inflation 3.5% (As of 2004)

Pop below 58% (As of 2003)

poverty line

Labour force 2.32 million (As of 2003)

Labour force by agriculture (48.2%), industry (13.8%), services (37%) (As of 2003)
occupation

Unemployment 60% (As of 2004)

Main industries natural gas, oil, petroleum products, textiles, food processing

Trading Partners

Exports $4bn (As of 2004)

Main partners Ukraine 49.8%, Iran 17.2%, Italy 5.3%, Turkey 4.7% (As of 2004)
Imports $2.85bn (As of 2004)

Main Partners Russia 14%, Ukraine 13.8%, U.S, 11.1%, UAE 8.1%, Turkey 8%, Germany
6.8%, France 4.6% (As of 2004)

Public finances

Public debt N/A

Revenues $3.05 billion (As of 2004)

Expenses $3.05 billion (As of 2004)

Economic aid $16 million from the US (As of 2001)

HQ of the Ministry of oil and gas of Turkmenistan.

Natural gas

Turkmenistan ranks fourth in the world to Russia, Iran and the United States in natural gas
reserves. The Turkmenistan Natural Gas Company (Türkmengaz), under the auspices of the
Ministry of Oil and Gas, controls gas extraction in the country. Gas production is the most
dynamic and promising sector of the national economy. Turkmenistan's gas reserves are
estimated at 8.1-8.7 trillion cubic meters and its prospecting potential at up to 21 trillion cubic
meters. The country cooperates with China in the construction of pipelines for the export of
natural gas

Agriculture

Half of the country's irrigated land is planted with cotton, making the country the world's tenth-
largest producer of it. It possesses the world's fourth-largest reserves of natural gas and
substantial oil resources. In 1994, the Russian government's refusal to export Turkmen gas to
hard currency markets and mounting debts of its major customers in the former Soviet Union for
gas deliveries contributed to a sharp fall in industrial production and caused the budget to shift
from a surplus to a slight deficit.

Turkmenistan has taken a cautious approach to economic reform, hoping to use gas and cotton
sales to sustain its economy. In 2004, the unemployment rate was estimated to be 60% the
percentage of the population living below the poverty line was thought to be 58% a year earlier.
Privatization goals remain limited.

Between 1998 and 2002, 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, the value of total exports has risen sharply because of increases in international
oil and gas prices. Economic prospects in the near future are discouraging because of widespread
internal poverty and the burden of foreign debt.

President Niyazov spent much of the country's revenue on extensively renovating cities,
Ashgabat in particular. Corruption watchdogs voiced particular concern over the management of
Turkmenistan's currency reserves, most of which are held in off-budget funds such as the
Foreign Exchange Reserve Fund in the Deutsche Bank in Frankfurt, according to a report
released in April 2006 by London-based non-governmental organization Global Witness.

According to the decree of the Peoples' Council of 14 August 2003, electricity, natural gas, water
and salt will be subsidized for citizens up to 2030; however, shortages are frequent. On 5
September 2006, after Turkmenistan threatened to cut off supplies, Russia agreed to raise the
price it pays for Turkmen natural gas from $65 to $100 per 1,000 cubic meters. Two-thirds of
Turkmen gas goes through the Russian state-owned Gazprom.

Energy

Turkmenistan is a net exporter of electrical power to Central Asian republics and southern
neighbors. The most important generating installations are the Hindukush Hydroelectric Station,
which has a rated capacity of 350 megawatts, and the Mary Thermoelectric Power Station, which
has a rated capacity of 1,370 megawatts. In 1992 electrical power production totaled 14.9 billion
kilowatt-hours.
Oil

Most of Turkmenistan's oil is extracted by the Turkmenistan State Company (Concern)

Türkmennebit from fields at Koturdepe, Balkanabad, and Chekelen near the Caspian Sea, which
have a combined estimated reserve of 700 million tons. The oil extraction industry started with
the exploitation of the fields in Chekelen in 1909 (by Nobel brothers) and Balkanabad in the
1930s, then production leaped ahead with the discovery of the Kumdag field in 1948 and the
Koturdepe field in 1959. Big part of the oil produced in Turkmenistan is refined in
Turkmenbashy and Seidi refineries. Also, oil is exported by tankers through Caspian Sea to
Europe via canals.

Fiscal Policy
The budget making process and its implementation goes 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
Medjlis of Turkmenistan (Parliament) the State budget draft for consideration and adoption
Budget statistics are unreliable because the government spends large amounts of extra-budgetary
funds. In 2004 official expenditures totaled US$3.05 billion, and revenues totaled US$3.05
billion, creating a balanced budget. The government also reported a roughly balanced budget for
2005, at an undisclosed level of revenue and expenditure. In an effort to increase revenues, the
tax code was streamlined in 2004.

Monetary policy
Inflation

Since 1991 – the last year of existence of the USSR – up to 1993 – the last year of rouble zone
existence – the rate of inflation was measured in tens, hundreds and even thousands per cent per
year. However the price growth continued and by November 1996 the total price level in
Turkmenistan had increased tens of thousands times in comparison with December 1991.
Simultaneously with the price growth the currency (dollar) exchange rates dropped. First it was
rouble rate (1991)and later on, with the launching of the national currency. The Turkmen
national currency – manat – was launched on November 1, 1993. The official exchange rate was
established as $1equal to 2 manats.

In 1993 – 1995 Turkmenistan increased monetary base by 20 - 28% monthly; thus prices reacted
by a monthly growth of 25 – 43%.The cash growth in circulation in 1993 – 1995 constituted
47.8%. The issue of cash increased 3 times and made up 7 billion manats. For the recent years
the process of involving internal sources of investment into the sphere of currency turnover and
currency accrual has become unprecedented in its scale. The tendency of the growth of this
process and its significance require special study. It is worth noting that the major factors
accounting for the quality of monetary policy are: rate of monetary base growth, rates of changes
of velocity of money and rates of real GDP growth. Transition from a soft to a tougher monetary
policy in the middle of 1996 immediately affected the dynamics of prices. In the world economy
one of the most important sources of maintaining high rates of monetary base increase (though
not the only one) is monetization of a budget deficit – its financing at the cost of issuing money
instruments.

Industry
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.

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. It also opened its first pipeline not to pass through Russia, the Korpezhe-Kurt Kui
Pipeline.

Official estimates indicate that Turkmenistan is still the second largest gas producer in the CIS,
after Russia, and a 2004 official estimate places reserves at about 23 trillion m³. Government
statistics projected extraction of 75.4 billion m³ of gas in 2004, and 120 billion m³ in 2010.
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.

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.
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]

Average wages in 2009 hover around $5-7 per day or $250-300 per month.

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 enlarge-ment of the sphere of
entrepreneurship. The private sector dominates in agriculture (60%), trade (70%) and transport
(56%).

Foreign Investment
In November 1991, Turkmenistan officially opened its system to foreign economic activity by
ratifying the laws "On Enterprises in Turkmenistan" and "On Entrepreneur Activity in
Turkmenistan." Subsequent laws on foreign investment have covered protection against
nationalization, tax breaks on reinvestment of hard currency obtained for profits, property
ownership, and intellectual property rights protection to attract foreign investment, and the
important 1993 decree allowing domestic enterprises to form joint ventures with foreign oil
companies. The Ten Years of Prosperity plan envisages "free economic zones, joint enterprises,
and a broadening of entrepreneurship."

Foreign investors have been attracted by the republic's calm and receptive atmosphere. In 1993
parts of the country took on the appearance of a huge construction site, with twenty-six foreign
joint ventures operating there. Turkish joint ventures alone were building sixty factories for the
processing of agricultural produce. Despite official discouragement of economic activity on the
grounds of human rights violations in Turkmenistan, United States business people have been
attracted by the republic's stable conditions, and they have invested in a number of significant
projects. In the early 1990s, United States companies paid particular attention to the oil and gas
industry, establishing investment agreements with the consultative aid of former United States
secretaries of state Alexander Haig and James Baker.
Economic Agreements Abroad

In the formative phase following independence, Turkmenistan concluded several key agreements
with trade partners. In December 1991, President Niyazov became the first Central Asian leader
to secure cooperation agreements with Turkey on trade, rail and air links, communications,
education, and culture. Turkmenistan also secured Turkey's agreement on a gas pipeline routed
through its territory and assistance in the trading of petroleum, electricity, and cotton. Also in
1991, Turkmenistan established terms with Russia on cotton-for-oil trades, as well as for other
industrial goods such as automobiles. In 1992 agreements with Iran established Iranian aid to
Turkmenistan's gas and oil industry and its livestock raising, grain, sugar beet, and fruit sectors,
in return for aid to Iran's cotton sector. At the same time, Iran pledged support for
Turkmenistan's pipeline project through Iran to Turkey.

Since its initial agreement, Turkmenistan has pursued its trade relationship with Iran with great
vigor. Agreements focus on the pipeline project that will bring gas from Turkmenistan to Europe
via Iran and Turkey, transportation projects such as the Tejen-Saragt-Mashhad railroad link,
whose construction was undertaken in 1993, and development of the oil and gas industries,
including the establishment of a joint venture in Turkmenistan for the transport of petroleum
products and construction of a plant to produce motor oil. Cooperation in mining and other fields
also has been discussed.

At the beginning of 1992, Turkmenistan, Iran, Azerbaijan, Russia and Kazakstan formed the
Caspian States Cooperation Organization to reach regional agreements on fishing, shipping,
environmental protection, and cooperation among the member nations' oil and gas operations.
Iran also has sought to gain support for a project, discontinued in 1979, that would replenish the
sturgeon population of the Caspian Sea.

The participation of foreign companies in the development of Turkmenistan's oil industry is

expected to triple extraction by the year 2000. In February 1993, the United States firm Vivtex
designed a competition among oil companies to win contracts in Turkmenistan. The "winners"
for three of the seven blocks put up for bid were Larmag Energy of the Netherlands, Noble
Drilling of the United States, Eastpac of the United Arab Emirates, and the Bridas firm of
Argentina. Just for holding the competition, Turkmenistan received an initial non-returnable
"bonus" payment of US$65 million. The total investment of competition winners was to amount
to US$160 million over the course of three years. Turkmenistan would receive between 71 and
75 percent of the profits from these joint enterprises.

In the mid-1990s, Turkmenistan has sought to establish a natural gas pipeline that would pass
through Afghanistan, Pakistan, and China to reach Japan, as well as an interim rail line for
liquefied gas through China until the pipeline is finished. President Niyazov visited Beijing in
November 1992 for talks on the pipeline, at the same time securing credits of 45 million Chinese
yuan to be repaid after two years. Niyazov then held talks with representatives of the Japanese
firm Mitsubishi and the Chinese Ministry of Oil in December 1992. A delegation of Japanese
experts visited Ashgabat in February 1993 to discuss prospects for aid. Declaring Turkmenistan
the "most solvent" of the Central Asian republics, the delegation signed agreements for the
development of oil deposits in the Caspian shelf, communications, and water desalinization.
In the mid-1990s, the International Monetary Fund (IMF) denied assistance to Turkmenistan on
the grounds that Turkmenistan has not taken the required human rights steps for economic
cooperation. However, in March 1993, the United States conferred most-favored-nation trading
status on Turkmenistan.

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: 11.41 TWH(2004 est.)

• consumption: 8.847 TWh (2002)
• exports: 1.136 TWh (2004)
• imports: 0 kWh (2002)

Electricity - production by source:

• fossil fuel: 99.9%

• hydro: 0.1%
• nuclear: 0%
• other: 0% (2001)

Agriculture - products: cotton, grain; livestock

Main article:Agriculture in Turkmenistan

Debt - external: $2.4 billion to $5 billion (2001 est.)

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.
Reference:
1. www.wikipedia.com

2. www.nationsencyclopedia.com

3. Trade.ec.europa.eu

4. countrystudies.us/turkmenistan