Turkmenistan Business Day to Be Held in Germany. Why Should German Companies Avoid Doing Business in Turkmenistan?

On June 27, 2023 the Düsseldorf Business Club will host a Turkmenistan Business Day featuring the country’s petrochemical, construction, and textile industries. A 35-strong delegation will travel to Germany made up of representatives of various ministries, and state and private companies. The event is designed to interest German business in investing in Turkmenistan and to promote its output on the European market. Turkmen.news explains below why it’s not a good idea to deal with today’s Turkmenistan.

Turkmenistan’s petrochemical sector riddled with corruption

Corruption and nepotism are rife in the sector. Tenders conducted by state enterprises are not transparent. They are won by companies that pay kickbacks, while their “competitors” are named in documentation only for show. Relatives from the Berdimuhamedov presidential clan are directly in charge of some state companies, while other members of the Big Family monopolize exports of the output of state companies. 

Nepotism has reached the highest echelons of power. Not long ago, President Serdar Berdimuhamedov appointed Batyr Amanov deputy prime minister for the fuel and energy complex even though he had struggled to manage the Turkmengaz state concern. Rather than getting the sack, Amanov was promoted because his cousin is married to the president’s sister.

Companies that national media talk about so proudly are practically standing idle: for example, the polymer plant at Kiyanly. Talks are under way on reconstruction of the plant by Hyundai Engineering. The management of the Turkmenhimiya state concern is hoping for kickbacks from the Koreans.

Infrastructure at the Galkynysh field is in a lamentable condition which became clear to partners in Uzbekistan this winter. The gas supply to Uzbekistan was interrupted for several days because corrupt officials had bought shoddy sensors and reagents.

Construction — billions wasted on pointless projects

Billions of dollars from the state budget are sunk into unnecessary facilities on the orders of the country’s president. There isn’t a single body or commission or working group that would evaluate the rationale of such expenditure. No official can say a word in disagreement. If they did, it would be seen as a lack of confidence in the president’s policies. In the past few years alone the president personally approved construction of the following projects:

  • A new government tribune for $110 million. After its construction on the orders of Gurbanguly Berdimuhamedov the old tribune opposite his palace was demolished. Another building is now going up in its place for $215 million. So, $315 million in total will be spent on all this.
  • A new fashionable hotel, named in honor of the president himself, for $448 million. While there are dozens of hotels in Ashgabat and across the country, Turkmenistan has one of the toughest visa regimes in the world. It’s extremely difficult for foreigners, even investors, to enter Turkmenistan.
  • The International Congress Center complex of buildings in Ashgabat at a cost of $540 million. This building, like its twin in the Avaza resort zone, is used at most once or twice a year without any practical benefit.
  • The new town of Arkadag, which bears Gurbanguly Berdimuhamedov’s title, is under construction near Ashgabat at a cost of $5 billion.

Are these facilities any use to ordinary people who stand in line practically every day for limited and very meager food parcels? In a country where fresh meat, butter, and many other products have become a luxury? Where women, men, and children literally eat what they can find in dumpsters?

Major construction projects are an ideal feeding trough. Bribes, kickbacks, good jobs for friends and family… There is just as much of this in construction in Turkmenistan as in the oil and gas sector. Foreigners need to know in advance: the rules for making money here are very different from those in Europe.

Turkmen cotton and textiles — produced by forced labor

Real slavery is flourishing at the state level in Turkmenistan. Every year tens of thousands of public sector workers — schoolteachers, doctors, bankers, electricians, gas engineers, and other professionals — are forced to pick cotton. If they refuse, they might have their hours cut or simply be sacked: the state is the main employer in Turkmenistan so it’s extremely difficult to find a new job. People and often children too are taken to the cotton fields like cattle — in the backs of trucks or on tractor trailers. But corruption is flourishing here as well: you can buy your way out of cotton duties.

This is why Turkmenistan has been right at the bottom of the U.S. State Department’s annual Trafficking in Persons Report for many years running. Over 140 international brands including Adidas, Nike, H&M, Levi Strauss, and Amazon have signed the Cotton Pledge — a commitment not to use Turkmen cotton or textiles produced from Turkmen raw materials.

Since 2018 cotton and textiles from Turkmenistan have been banned on the U.S. market, while the European Union is at present tightening legislation on goods produced with the use of forced labor. Those who decide to import Turkmen cotton or finished textile products will soon have serious problems in future, including reputational.

Turkmenistan’s authorities are not making any effort to resolve the problem, simply denying its existence instead. The Cotton Campaign coalition has written to the organizers of the forum in Düsseldorf, describing in detail the risks associated with Turkmen cotton and textiles. It’s bad form to work with Turkmenistan in this sector today.

Covering up information: persecution of activists and lack of freedom of speech

One of the prerequisites of successful business is the analysis of information, trustworthy information at that. European companies are used to receiving a pretty substantial amount of data from open sources. But you cannot hope for even a minimum of information from Turkmenistan. Some data are simply not published anywhere, while other data bear no resemblance to reality. Any figure can be plucked from the air in Turkmenistan, whether it’s the results of elections or the volume of output in a particular sector.

It is because of the lack of reliable data that the Word Bank has several times excluded Turkmenistan from its Global Economic Prospects reports. There’s even great doubt about the size of the population.  

The official exchange rate of the dollar, 3.5 manats, means hardly anything: because of the restrictions on currency conversion, it is the black market rate, today around 19 manats, that has a real impact on the economy. Local entrepreneurs are forced to wait years for the state to return the money they spent on importing goods into the country to meet state orders. Is it possible to imagine this happening in Germany?

Turkmenistan even contrived not to acknowledge the spread of COVID-19 in the country, although numerous independent sources from the very start of the pandemic reported infections and deaths. The authorities categorically denied the reality through a cover up and direct lies.

There are no independent media in Turkmenistan reporting on the true state of affairs. The few media that try to do this are based abroad because of the high risk. Their correspondents inside Turkmenistan are forced to remain anonymous, or they will be thrown into prison on fabricated charges. For example, Nurgeldi Halykov, who forwarded a harmless photo of a World Health Organization delegation on a working visit to Turkmenistan, is serving a four-year term. Human rights defenders, civil activists, and citizens who simply cannot stand idly by are languishing behind bars.

Finally, reliable modern communications are a basic requirement for doing business today, but three-quarters of the global Internet is blocked in Turkmenistan. The subnets of the world’s largest hosting providers — Vultr, DigitalOcean, Hetzner, Microsoft Azure, Amazon, OVH, OneProvider — have been nearly destroyed in the country. Blocking is done by the State Cyber Security Service, while the authorities are planning to create their own autonomous network soon.

Highly likely business will have to seek justice abroad

There is no independent judiciary in Turkmenistan. All judges are appointed and dismissed by the president. The country’s laws are not bad, but they exist only on paper. Unwritten rules and oral instructions from the authorities, known as telephone justice, are the norm in Turkmenistan. Fiscal, oversight, law-enforcement, and other supervisory bodies also wholly depend on the executive authorities. Often it is these bodies that create problems for business, including foreign business, for personal gain or on the direct instruction of the presidential administration.

Since Turkmenistan became independent dozens of lawsuits have been brought against the country in international arbitration institutions. In 2017 the authorities forced the Russian cell phone operator MTS out of the Turkmen market. The Altyn Asyr company,  the only one in the country, now has the monopoly of cellular communications. It was a state company until 2012, and after the injection of tens of millions of dollars from the state budget the president turned it into a closed joint-stock company and put his relative in charge.

There are plenty of legal stories, which don’t often end well for business. International courts do not go into the specifics of working in the country, while the Turkmen authorities do not hesitate to spend millions on the best foreign lawyers. MTS recently lost at international arbitration. Turkmenistan’s proceedings against Belarusian company Belgorhimprom, who built the Garlyk potash mining and processing plant, have dragged on for years.  

The Russian Karacharovsky engineering works, which produced elevators, went bankrupt before its dispute with Turkmenistan was resolved. The company was trying to get several Turkmen companies to pay their debts. Several Turkish construction companies that built various facilities in Turkmenistan over the years are also waiting for verdicts.

Turkmenistan is of course virgin territory for foreign business. There is a heap of opportunities in the oil and gas, chemicals, transport, construction, banking, and communications sectors. Several German companies too have tried to do business in the country, but Lufthansa has not flown to Ashgabat for several years now, while Germany’s RWE Dea wound down its work in Turkmenistan because of the bureaucracy and ubiquitous corruption. And all because the current Turkmen authorities have no interest in developing the country and improving the well-being of its people. What’s important to them is their own image and opportunities for personal enrichment. Would you like to check this out for yourselves? If so, welcome!