Turkmenistan

1989-90 1990-91 1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 Ethnic Groups: Turkmen (73 percent), Russian (10 percent), Uzbek (9 percent), Kazakh (3 percent), others Political Process
1. When did national legislative elections occur? Were they free and fair? How were they judged
by the domestic and international election monitoring organizations? Who composes the gov-
ernment? Elections to the 175-member Turkmen Supreme Soviet took place on January 7, 1990.
This body, however, was supplanted by both the 50-member Mejlis (parliament or assembly) in
elections which took place on December 11, 1994, and the 150-member Khalq Maslakhati (People’s
Council), which includes Mejlis deputies and appointed officials, and is chaired by the president.
Whereas elections to the Supreme Soviet were contested by two or three candidates in each district, only one seat was contested in elections to the new Mejlis. Deputies were overwhelminglynominated by the Democratic Party of Turkmenistan, which was the direct successor to the TurkmenCommunist Party. The Mejlis was elected in a holiday atmosphere without party registration orcampaigning and in the absence of international observers; as such, it can be considered neitherfree nor fair. The Khalq Maslakhati is effectively an appointed body. Both bodies lack any sem-blance of independence and are entirely supportive of the president’s policies. In 1997, the Mejlistook steps to become a more professional body and undertook to debate and amend some legisla-tion. The next parliamentary elections are scheduled to occur in 1999. New election regulations,providing for candidates to be nominated by uncertain “public organizations” were passed by par-liament in November 1997. President Niyazov declared his intent to see the constitution altered tostrengthen the role of parliament in February 1998, just prior to visiting the United States.
2. When did presidential elections occur? Were they free and fair? In direct but unopposed
elections, former First Secretary of the Turkmen Communist Party and Chairman of the Supreme
Soviet Saparmurad Niyazov was elected President on January 27, 1990. Following elections in which
he ran unopposed, Niyazov was reinvested as President on June 26, 1992. A referendum on Janu-ary 15, 1994 extended his term until 2002. The uncontested elections were reminiscent of Soviet-era practices. As such, they can be considered neither free nor fair.
3. Is the electoral system multi-party based? Are there at least two viable political parties
functioning at all levels of the government? Turkmenistan is a single party state led by an au-
thoritarian president and his advisors. The ruling National Democratic Party of Turkmenistan is the
only registered political party and is headed by President Niyazov. The party is the direct successor
to the Turkmen Communist Party. The party’s name was changed and adherence to Marxism-Leninism
were eschewed at the XXV Party Congress of December 16, 1991.
4. How many parties have been legalized? Are any particular parties illegal? The National
Democratic Party of Turkmenistan is the country’s only political party. Two small democratic-re-
form oriented parties, Agzybirlik and the Democratic Party of Turkmenistan (not to be confused
with the ruling party), surfaced respectively in 1989 and 1990. Neither party was registered nor
permitted to operate. Most of those involved in opposition activity have left Turkmenistan and re-
side in Russia, Turkey, Sweden, or the Czech Republic.
5. What proportion of the population belongs to political parties? The National Democratic
Party claimed a membership of 60,000 in early 1995. Party membership is likely to be of impor-
tance mainly to government officials and those seeking government office.
6. What has been the trend of voter turnout at the municipal, provincial and national levels in
recent years? October 1990 presidential election: 99.95 percent; June 1992 presidential election:
99.9 percent; 1994 referendum on extending the president’s tenure: 99.9 percent (with 99.9 percent
voting in favor); December 1994 Mejlis elections: 99.8 percent. Voter turnout, as officially de-
clared, contrasted with reports of low voter turnout at polling stations.
Civil Society
1. How many nongovernmental organizations (NGOs) have come into existence since 1988?
What is the number of charitable/nonprofit organizations? Are there locally led efforts to increase
philanthropy and volunteerism? What proportion of the population is active in private volun-
tary activity (from polling data)? The constitution permits peaceful assembly and association,
but severely restricts it in practice. Only a handful of unregistered organizations without a political
agenda are permitted to function in Turkmenistan. Among them are the Ashgabat Ecology Club,
Dialogue Youth Leadership Center, Information Consultative Center of Turkmenistan, Society for
Preservation of Nature, and the Dashkavouz Ecological Club. Other even less formalized organiza-
tions exist including those that undertake social work such as assisting battered women. Informa-
tion on these groups is sketchy; they fear exposure and contact with foreigners as it may result in
their work being suspended.
There are several government controlled entities which attempt to occupy a niche filled by NGOs in democratic societies. One of them, the Institute for Democracy and Human Rights, was estab-lished in October 1996 and is attached to the Office of the President, helped bring some limited 2. What is the legal and regulatory environment for NGOs (i.e. ease of registration, legal rights,
government regulation, taxation, procurement and access-to-information issues)? To what
extent is NGO activism focused on improving the legal and regulatory environment? The
government of Turkmenistan does not encourage the emergence of NGOs. It uses registration re-
quirements to prevent the emergence of potential opposition groups. The political environment in
Turkmenistan is hostile to organized independent activity of almost any variety.
3. What is the organizational capacity of NGOs? Do management structures clearly delineate
authority and responsibility? Is information available on NGO management issues in the native
language? Is there a core of experienced practitioners/trainers to serve as consultants or mentors
to less developed organizations? The handful of NGOs which exist in Turkmenistan do so by
remaining uncontroversial and limiting their activities. Given Turkmenistan’s totalitarian charac-
ter, conditions for expanding the NGO sector are poor; little information on the functioning of Turkmen
NGOs is available. Presumably, information on NGO management issues trickle in from other Central
Asian republics. While some experienced practitioners exist, it is unclear to what extent they are
willing to risk confrontation with the authorities by serving as mentors.
4. Are NGOs financially viable? What is their tax status? Are they obliged to and do they
typically disclose revenue sources? Do government procurement opportunities exist for pri-
vate not-for-profit providers of services? Little information concerning the financial status of
NGOs is available. Some, however, have received external support and work in conjunction with
other organizations based in Central Asia. Some citizens with links to foreigners have been subject
to intimidation.
5. Are there free trade unions? How many workers belong to these unions? Is the number of
workers belonging to trade unions growing or decreasing? What is the numerical/proportional
membership of farmers’ groups, small business associations, etc. There are no legal guarantees
entitling workers to form or join unions. The central trade union, the Trade Union Federation of
Turkmenistan, is the successor to the Soviet-era system of government-controlled trade unions. Its
unions are divided along both sectoral and regional lines. Unions may not form or join other federa-
tions. The federation claims a membership of 1.6 million. State and collective farms were trans-
formed into Peasant Unions (Daikhan) in 1995. Statistics concerning their membership are unavailable.
In March 1998, President Niyazov said the Peasant Unions ‘did not justify expectations.’
6. What forms of interest group participation in politics are legal? What types of interest groups
are active in the political and policy process? Interest group participation is limited to govern-
ment-controlled organizations which take their cue from the president and his most senior advisors.
The only very limited intervention in the policy process which has been accepted, particularly since
1996, has been advice from some international lending institutions.
7. How is the not-for-profit/NGO sector perceived by the public and government officials?
What is the nature of media coverage of NGO’s? To what extent do government officials en-
gage with NGO’s? The handful of NGOs in Turkmenistan are known only to a limited segment of
the intelligentsia. Coverage in the state-controlled media is negligible. NGOs avoid interacting
with government officials out of prudence.
Independent Media
1. Are there legal protections for press freedoms? The constitution provides for the right to hold
personal convictions and express them freely. The relatively liberal 1991 Law on the Media, iden-
tical to the all-Union legislation passed the same year, also supports these notions. In practice, the
government completely controls both print and broadcast media. The government prohibits the media
from reporting the views of opposition political leaders and critics and rarely allows the mildest
form of criticism of the government and its policies.
According to Internews, independent media briefly emerged in Turkmenistan in the early 1990s but was throttled in 1994-1995. The print media, which is funded from the state budget, are care-fully censored by the Committee for the Protection of State Secrets (a Soviet-era institution). For-eign print media are not widely available and may be confiscated at the border.
Whereas cable television existed in the late 1980s in all of Turkmenistan’s cities and three com- mercial television stations existed in the early 1990s, none currently exist. In the transformation ofState TV to National TV and Radio, it appears the new body took effective control over all broad-casting in the republic.
2. Are there legal penalties for libeling officials? Are there legal penalties for “irresponsible”
journalism? Have these laws been enforced to harass journalists? Libel is a criminal offense
(Articles 132 and 192 of the Criminal Code). Libel in the mass media is punishable by either a fine
or up to two years of forced labor. Libel of a state official is punishable by a prison term of up to
five years. In practice, libel is not at issue because the media is more strictly controlled than in the
Soviet era. Journalists, both foreign and domestic, have experienced harassment and intimidation.
The Izvestiya office in Ashgabat was closed in 1995. Journalists working for Radio Liberty have
experienced problems with the authorities repeatedly. Foreign journalists attempting to cover events
in Turkmenistan have been denied visas to enter the country.
3. What proportion of media is privatized? What are the major private newspapers, televi-
sion stations, and radio stations? None. At present only two papers, Adalat (Justice) and Galkynysh
(Revival), are even notionally independent. However, both were created by presidential decree. In
September 1996, President Niyazov was declared the “founder” of all newspapers in Turkmenistan.
With the contribution of political exiles, clandestine publications are smuggled into Turkmenistan
sporadically from Russia.
4. Are the private media financially viable? The financial viability of the private media is not at
issue because the media is state-controlled.
5. Are the media editorially independent? Are the media’s news gathering functions affected
by interference from government or private owners? Journalists are state employees. News
coverage focuses on the activities of the president.
6. Is the distribution system for newspapers privately or governmentally controlled? The dis-
tribution system for newspapers is government controlled. For a time, the state-run publishing house
existed under a Government Press Committee before that body was abolished, and the publishing
house was subordinated directly to the cabinet of ministers.
7. What proportion of the population is connected to the Internet? Are there any restrictions
on Internet access to private citizens? E-mail service routed through Russia was available only
through the Ashgabat Ecology Club until late 1997. In November of that year, the government announced
it had established an Internet center in Ashgabat. The Scientific Information Bureau, in coopera-
tion with the Ministry of Communication and State Telecom and MCI, is expected to increase con-
nectivity to provincial cities in the future.
8. What has been the trend in press freedom as measured by Freedom House’s Survey of Press
Freedom? Turkmenistan has been consistently rated not free.
Governance and Public Administration
1. Is the legislature the effective rule-making institution? Both the Mejlis and Khalq Maslakhati
are subordinate to the executive branch, which itself is dominated by the president. Nominees to
both bodies are vetted, if not hand-picked, by the president. The Mejlis is the supreme legislative
body in Turkmenistan. While it meets regularly to pass legislation, the Khalq Maslakhati is termed
the supreme representative body and meets infrequently, i.e., a minimum of once per year. It is
responsible for adopting constitutional amendments, treaties and referenda. The 150-member body,
chaired by the president, is composed of 50 Mejlis deputies, the cabinet of ministers, regional, dis-
trict and city hakims, i.e., governors and mayors, and peoples’ representatives elected in each of 50
etrap.
2. Is substantial power decentralized to subnational levels of government? What specific au-
thority do subnational levels have? Turkmenistan is a unitary, centralized state in which the greatest
authority is vested in the president, a self-described “presidential republic.” Subnational govern-
ments, first and foremost the regional and city hakim — governor and mayor, respectively — are
appointed and beholden to the president. A regular feature of Niyazov’s exercise of authority has
been the bewildering pace at which hakims, like other government officials, have been shuffled,
dismissed, and often reappointed.
3. Are subnational officials chosen in free and fair elections? Subnational officials are appointed
by the president.
4. Do the executive and legislative bodies operate openly and with transparency? Is draft leg-
islation easily accessible to the media and the public? Neither the executive nor legislative bod-
ies operates openly. Decisions are made at the highest level by the president; the legislature passes
all laws put before it; and the media duly publishes them.
5. Do municipal governments have sufficient revenues to carry out their duties? Do municipal
governments have control of their own local budgets? Do they raise revenues autonomously
or from the central state budget? Turkmenistan’s municipal governments are dependent upon
the central state budget, which is strained to the breaking point due to a shortfall in revenue from
gas, oil, and cotton exports. Economic conditions are poor.
6. Do the elected local leaders and local civil servants know how to manage municipal govern-
ments effectively? Local civil servants are notoriously corrupt. Their official status is often ex-
ploited for personal benefit and that of their cronies, who are usually connected by clan or regional
affiliation.
7. When did the constitutional/legislative changes on local power come into effect? Has there
been a reform of the civil service code/system? Are local civil servants employees of the local
or central government? No reform of the civil service in Turkmenistan has occurred. Local civil
servants are appointed effectively by the central government and are responsible to it.
Rule of Law
1. Is there a post-Communist constitution? How does the judicial system interpret and en-
force the constitution? Are there specific examples of judicial enforcement of the constitution
in the last year? On May 18, 1992, Turkmenistan’s legislature unanimously approved a new con-
stitution. It stresses the country’s “neutrality” and identifies the country as a “democratic” state. It
clearly outlines the extensive powers of the president, including the right to appoint all executive,
judicial, and regional offices, to initiate legislation and budget proposals, and to veto parliamentary
proposals. There are no checks on the authority of the president. The judiciary is controlled by the
executive and has played no role in interpreting or enforcing the constitution.
President Niyazov has consistently declared that economic reform and national revival requires political stability, which his rule is designed to provide. He claims that his leadership is building arule of law-based, democratic, and secular country on a gradual basis so as to prevent a decline isthe standard of living of the population and to prevent “social confrontations.” Most internationalobservers view these claims with great skepticism.
2. Does the constitutional framework provide for human rights? Do the human rights include
business and property rights? A wide range of human rights, including the rights to assembly,
free speech, free association, and religion, are enshrined in the constitution — along with a caveat
restricting them in the event that they threaten the social order. In conjunction with its bid to be
recognized as a neutral country by the United Nations, Turkmenistan declared its adherence to the
principles of the United Nations Charter and the Universal Declaration on Human Rights. In prac-
tice, the government continues to commit human rights abuses, and the authorities severely restrict
both political and civil liberties. In 1996, as part of an effort to improve the country’s image in the
area of human rights and as an ostensible public resource, the National Institute for Democracy and
Human Rights was established in the office of the president. Institute personnel led an investiga-tive tour of prisons and the offices of regional and local authorities. This appears to have played arole in a subsequent declaration of a general amnesty and changes to the criminal code. Beforemaking an official visit to the United States, President Niyazov issued a decree calling on citizensto send letters to the government citing violations of their rights by members of law enforcementbodies.
3. Has there been basic reform of the criminal code/criminal law? Who authorizes searches
and issues warrants? Are suspects and prisoners beaten or abused? Are there excessive delays
in the criminal justice system? A new criminal code was approved on June 12, 1997. It is not
considered a particularly liberal document: it details 17 crimes considered capital offenses, includ-
ing the possession of narcotics. Although Turkmenistan’s laws provide for due process for defen-
dants, including a public trial, the right to a defense attorney, access to accusatory material, and the
right to call witnesses to testify on behalf of the accused, these rights are seldom recognized. As in
the Soviet era, the authority of the state prosecutor overshadows that of judges or defense attorneys.
According to Radio Liberty, suspects and prisoners have been routinely beaten. The criminal jus-
tice system is widely feared and considered corrupt.
4. Do most judges rule fairly and impartially? Do many remain from the Communist era? As
political appointees in an authoritarian system, judges cannot be considered to rule fairly or impar-
tially. There has been no evidence of reform of the judiciary or court system; it may be presumed
many judges remain from the Communist era. Of the 1,400 complaints received by the National
Institute of Democracy and Human Rights, over 50 percent concerned the judicial process.
5. Are the courts free of political control and influence? Are the courts linked directly to the
Ministry of Justice or any other executive body? All judges are appointed by the president to
five-year terms and without legislative review, except the Chairman of the Supreme Court. The
president has the authority to remove them from the bench before their terms expire.
6. What proportion of lawyers is in private practice? How does this compare with the previ-
ous year? A handful of retired legal officials reportedly practice on an ad hoc basis. Otherwise,
there are no independent lawyers in Turkmenistan.
7. Does the state provide public defenders? Yes, although their ability to challenge the state’s
charges is extremely limited. Often, they see their clients only at trial.
8. Are there effective anti-bias/discrimination laws, including protection of ethnic minority
rights? The constitution provides for equal rights and freedoms for all citizens. While there is no
legal basis for discrimination against women or religious or ethnic minorities, cultural traditions
and government policy of promoting ethnic Turkmen limit the employment and educational oppor-
tunities of women and non-ethnic Turkmen. The constitution provides for the rights of speakers of
languages other than Turkmen to use them. As part of its efforts to promote Turkmen national pride,
Turkmen has been declared the official language; by July 1999, all official documents and declara-tions are to be in Turkmen. Despite the seemingly privileged status Turkmen enjoys, Russian-lan-guage instruction and usage are widespread. Ethnic Russians also have the right to hold dual citi-zenship, in keeping with a 1995 bilateral treaty between Turkmenistan and Russia. Between 1991and 1995, some 40,000 ethnic Russians emigrated from Turkmenistan.
Corruption
1. What is the magnitude of official corruption in the civil service? Must an average citizen
pay a bribe to a bureaucrat in order to receive a service? What services are subject to bribe
requests for example, university entrance, hospital admission, telephone installation, obtain-
ing a license to operate a business, applying for a passport or other official documents? What
is the average salary of civil servants at various levels? Corruption is endemic in Turkmenistan.
Government officials at all levels expect payments in order to allow enterprises to operate, to have
access to raw materials and equipment, and to sell products. Law enforcement and the justice sys-
tem are notoriously corrupt, as are regional and local administrations. The threat of imprisonment
has been used to collect pay-offs; those in prison must pay bribes to satisfy elementary needs or the
hope of release. All services involving interaction with officials require payment. Officials’ sala-
ries are on average about $30 per month.
2. Do top policy makers (the president, ministers, vice-ministers, top court justices, and heads
of agencies and commissions) have direct ties to businesses? How strong are such connections
and what kinds of businesses are these? Contracts have frequently been awarded for political
rather than economic reasons with little regard for feasibility, economic viability, or the best com-
pany to do the job. Significant commercial contracts require approval at the highest level of gov-
ernment, specifically, the president and his closest advisors. They are widely believed to have di-
rect ties and interests in the agricultural, extractive, i.e., oil and gas, and industrial sectors of the
country. Smaller deals must pass muster with ministerial level officials who are frequently shifted,
requiring re-negotiation of the contract, as well as additional bribes.
There has been an increase in corruption allegations surrounding the oil and gas sectors. The risk of further government insider deals has risen with the intense foreign interest in exploitingthese reserves.
3. Do laws requiring financial disclosure and disallowing conflict of interest exist? Have pub-
licized anti corruption cases been pursued. To what conclusion? Turkmenistan does not have
laws, regulations, or penalties to combat corruption effectively. Government officials at all levels
have been sacked for corruption. The Minister of Agriculture, Tagandurdy Nuriyev, was sacked,
tried, and convicted of corruption. Though sentenced to 13 years imprisonment, he was released
after being ‘forgiven,’ according to Radio Liberty. In 1997, the governor the Balkan province, Rejep
Pukhanov, was sacked for corruption, as was Dashauz governor Yagmyr Oevezov.
4. What major anti-corruption initiatives have been implemented? How often are anti-cor-
ruption laws and decrees adopted? Most high officials charged with corruption are never for-
mally charged with a crime. In some cases, they are simply re-appointed later to new high levelpositions. Dismissal on corruption charges is often interpreted as a mere pretext for removal be-cause the practice is so widespread.
5. How do major corruption-ranking organizations like Transparency International rate this
country? Transparency International has not rated Turkmenistan.
Privatization
1. What percentage of the GDP comes from private ownership? What percentage of the labor
force is employed in the private sector? How large is the informal sector of the economy? Current
data on private ownership as a percent of gross domestic product (GDP) is unavailable. According
to Turkmen government estimates, the officially recognized private production or service units employed
about 22 percent of the labor force and accounted for 10.1 percent of the GDP in 1995 (4.4 exclud-
ing private agriculture). Government estimates indicate a total private sector share of GDP of about
18 percent in 1995, including the “home industry” and Sunday market trading. In 1997, the Euro-
pean Bank for Reconstruction and Development (EBRD) estimated the total private sector as un-
likely to exceed 25 percent of GDP . The government does not utilize international accounting methods
and generally withholds information on the economy. There is no data concerning Turkmenistan’s
informal economy. Overall, it appears Turkmenistan has experienced six years of deepening eco-
nomic crisis characterized by output collapse and falling revenues from exports.
2. What major privatization legislation has been passed? What were its substantive features?
Turkmenistan’s economy remains dependent upon central planning mechanisms and state control,
The government, however, has taken a number of steps that appear designed to give the impression
that it is being won over to the cause of economic liberalization. Since independence, Niyazov has
repeatedly emphasized his desire to undertake a gradual approach to economic transition. In 1993,
the State Property and Privatization Agency was established. At the close of the year, the govern-
ment enacted a law on privatization which resulted in the privatization of about half of the minus-
cule trade and service sector (catering shops, barbershops, etc.) in 1995 and 1996. In January 1994,
a program of economic reform, “Ten Years of Prosperity,” was enacted with the approval of the
Khalq Maslakhati. Key elements of the plan include the privatization of state enterprises, the re-
form of land ownership, including the privatization of collective and state farms, and investment in
new pipelines for the export of gas and oil outside the Newly Independent States (NIS). According
to the EBRD, one of the greatest reform achievements in the area of establishing private ownership
rights has been made in agriculture. In December 1996, a land reform initiative was announced
allowing for private land ownership. During the first half of 1997, almost all land had been allo-
cated to individual farmers and transfer of land titles into private ownership are envisaged after a
two-year lease.
In the spring and summer of 1997, the government issued a presidential order and three presi- dential decrees privatizing industrial enterprises and allowing the auctioning of small- and medium-size enterprises. Up to 330 firms were concerned. Only 45 firms primarily involved in public utili-ties were exempted from privatization according to these decrees.
Foreign and Turkmen individuals and legal entities are allowed to participate on an equal foot- ing in privatization. The government intends to auction enterprises that have fewer than 100 work-ers and do not need significant investment. The transformation of larger state enterprises into pri-vate joint stock companies will be more gradual and require the creation of investment funds, astock exchange (perhaps), and other organizations to handle a securities market. Whether and howfast any such plans materialize are unclear despite declarations the government is preparing a massprivatization program.
In November 1997, President Niyazov declared that the privatization of 50 state-owned enter- prises, half of which are in the textile sector, would go forward. According to the EBRD, in thefirst seven months of 1997, 108 large and small-scale enterprises were privatized raising 63 billionmanats ($16 million). Of these, 93 were auctioned off, 14 taken over by worker collectives, andone was privatized through an investment tender.
3. What proportion of agriculture, housing and land, industry, and small business and ser-
vices is in private hands? In 1995, state and collective farms were converted into Peasant Unions.
While land has been leased to farmers, they are permitted to hold only an estimated three hectares
which cannot be traded. The government retains control over all inputs, access to irrigation and
equipment, pricing, transportation and international markets. Land remains controlled by the state.
A 1996 law makes Turkmen eligible to own land, but does not grant them the right to sell, ex-
change, or transfer it. Housing has been privatized to a modest extent and remains heavily subsi-
dized by the government. Industry remains overwhelmingly state-controlled. Most of the tiny
service sector was privatized after 1993. According to the U.S. Department of Commerce, there
are 23,500 private enterprises operating in Turkmenistan. In the first nine months of 1997, entre-
preneurs produced goods and services valued at $49.1 million.
4. What has been the extent of insider (management, labor and nomenklatura) participation
in the privatization process? What explicit and implicit preferences have been awarded to
insiders? Privatization has not been a priority for the Turkmen authorities. There is no data avail-
able on insider participation in the privatization process. Of the 1,856 small enterprises privatized
by the end of 1996, one-third went to individuals while the remainder became cooperatives. Ac-
cording to the EBRD, large-scale privatization is usually initiated by line ministries, which for-
mally hold the ownership rights in public enterprises. In 1996, six departments of the Ministry of
Agriculture, which is responsible for the bulk of industrial enterprises outside the energy sector;
mainly textiles and food processing, were turned into so-called associations that are to act as hold-
ing companies in its care. Proposals are submitted to the privatization agency and decided upon
by an inter-governmental committee. The incentives for the associations to initiate privatization
are contradictory: while attracting a foreign investor can significantly ease access to foreign ex-
change and government concessions, all sales revenues accrue to the Ministry of Finance and the
Council of Ministers, which must approve majority private ownership and can cancel contracts
within three months of agreement.
5. How much public awareness of and support for privatization has there been? What is the
nature of support and opposition to privatization by major interest groups? Information on
privatization and the functioning of a market economy is not widely available due to the government’s
information policy and its fundamental hostility to the process. As Turkmenistan is an effectively
closed society, it is impossible to determine which groups support or oppose privatization. The
steady economic decline the country has experienced, particularly since 1996, may, however, in-
duce a change in policy. It appears possible that Turkmenistan may be forced to follow Interna-
tional Monetary Fund recommendations in order to receive a stand-by loan to stabilize the economy.
Macroeconomics
1. Has the taxation system been reformed? (What areas have and have not been overhauled?
To what degree are taxpayers complying? Is tax compliance difficult to achieve? Has the level
of revenues increased? Is the revenue-collection body overburdened? What is the overall tax
burden?) The government is trying to broaden the tax base in the face of a massive shortfall in gas
revenue, particularly in 1997. Although international lending institutions and individual donor countries
have undertaken to support the government’s avowed desire to do so, it is unclear if a reformed tax
system is a government priority. The existing tax system has been built on an ad hoc basis without
concern for the practical possibility of implementation. Changes to the contradictory and often
incoherent tax system were made in 1997, but details are unavailable. Although income and cor-
porate taxes range from 25 percent to 35 percent, there are no tax laws detailing specific rates,
liability, and collection procedures. As a result, rates often are applied arbitrarily. The government
also imposes a 20 percent value added tax and various taxes on foreign exchange earnings and
capital gains. No data on tax compliance is available.
2. Does fiscal policy encourage private savings, investment and earnings? (Has there been
any reform/alteration of revenue and budget policies? How large are budget deficits and overall
debt? Is there financing of the social insurance/pension system sustainable? What propor-
tion of the budget is taken up by subsidies to firms and individuals)? Private savings, invest-
ment and earnings are negligible for most Turkmen citizens who are struggling to meet basic ne-
cessities. The government routinely presents ambitious targets which it fails to meet. Major expen-
diture items are also off-budget, thereby distorting the real versus reported deficit. Delayed pay-
ment of wages and pensions, a regular feature of post-Communist Turkmenistan, also serves to
artificially improve appearances on the expenditure side. There is no data on the size of the budget
deficit. The authorities aim for a 1.4 percent overall fiscal deficit in 1998; in 1997, the target was
0.9 percent. The outcome remains unreported for 1997.
According to the EBRD, the social security system is partly financed by payroll taxes set at 30 percent of wages in the enterprise sector and 20 percent in agricultural associations. The largestcomponents of the social security system are subsidized basic goods, public pensions provided toapproximately 425,000 people in 1995, family allowances, and an employment guarantee. In 1996,price subsidies amounted to 4.2 percent of budgetary expenditures and 15 percent to pensions.
Another 12 percent was spent on health and education, but because of generally low revenues,social expenditures as a share of GDP did not exceed 3-4 percent. EBRD notes thatconsiderablepressure on the social security system may be anticipated as a result of demographic developments.
The employment guarantee is particularly problematic considering the country's high populationgrowth and significant excess employment in the state sector.
3. Has there been banking reform? (Is the central bank independent? What are its responsi-
bilities? Is it effective in setting and/or implementing monetary policy? What is the actual
state of the private banking sector? Does it conform to international standards? Are deposi-
tors protected?) Banking by Western standards is still in its infancy in Turkmenistan. The central
bank is not independent, but acts as the government’s main lending institution. It attempts to implement
monetary policy, but lacks the necessary mechanisms and authority to do so. A total of 67 banks,
including state and commercial, local and foreign, have registered with the Central Bank of
Turkmenistan. This includes two state banks, 52 state agricultural banks, and 13 commercial banks.
According to the EBRD, three major state banks established in the 1980s dominate the financial
sector with control of over 83 percent of bank credits. As of December 1996, 90 percent of bank
credit was extended to state enterprises, which also hold most bank deposits. Bank supervision
was strengthened in 1996. The minimum reserve requirements were increased to manat 500 mil-
lion from 100 million in July 1997. There is no depositor insurance in Turkmenistan.
An Interbank training center was established in 1995 to train staff for commercial banks. An estimated 300 students have gone through its program. In June 1997, the government establishedthe Interbank Council to oversee the reorganization of the banking system. The status of this en-deavor and the government’s commitment to such a reorganization are uncertain.
4. How sound is the national currency? (Is the value of the currency fixed or does it float?
How convertible is the currency? How large are the hard currency reserves? Has the exchange
rate policy been stable and predictable?) Turkmenistan introduced it currency, the manat, in
November 1993. The Central Bank has declared its desire to unify Turkmenistan’s two exchange
rates and attempted to do so unsuccessfully in January and April 1996. The main foreign exchange
market is controlled by the Central Bank and government. Access to foreign exchange auctions is
limited, allowing the Central Bank to set the official rate. There is also a smaller foreign-exchange
market operated by commercial banks. The commercial bank of the generally values the manat at
30 percent below the official rate. The black market rate runs slightly below the commercial bank
rate. According to the EBRD, since January 1997 the central bank has aimed at stabilizing both the
exchange rate and the domestic price level by injecting additional foreign exchange (approximately
$15 million per week) into the banking sector. The size of Turkmenistan’s hard currency reserves
are not known but were estimated to be $1 billion by the U.S. Department of Commerce in August
1997.
5. Is there a functioning capital market infrastructure? (Are there existing or planned com-
modities, bond and stock markets? What are the mechanisms for investment and lending?
What government bodies have authority to regulate capital markets?) Capital markets are
undeveloped in Turkmenistan. There is a State Commodity Exchange in Ashgabat. There is no
stock market in Turkmenistan. The government has been selling small amounts of Treasury bonds
to local commercial banks since August 1996.
Microeconomics
1. Are property rights guaranteed? (Are there both formal and de facto protections of pri-
vate real estate and intellectual property? Is there a land registry with the authority and ca-
pability to ensure accurate recording of who owns what? What are the procedures for expro-
priation, including measures for compensations and challenge? Have any seizures taken place?)
The concept of private property and its protection is not well known or widely accepted in Turkmenistan.
The government has been working on developing a civil code, dubbed the “economic constitu-
tion” by the authorities, which will guarantee property rights. It is expected to be adopted in 1998,
though details are unavailable. A genuine real estate market does not exist; citizens may own property
but cannot sell, trade, or transfer it. Commercial businesses exist and are protected under a contra-
dictory mix of laws and regulations.
2. To what extent have prices been liberalized? What subsidies remain? According to the EBRD,
during the course of 1995 and 1996, Turkmenistan’s formerly comprehensive system of price controls
was loosened significantly. A wide range of basic goods, including meat, sugar, vegetable oil, tea,
bread, salt, and flour, were subsidized until spring 1998. In March 1998, although accompanied
by wage increases, subsidies were removed from the prices of all items sold in state shops, except
for flour and meat. Price controls still apply to energy, public services (rent, heating and water),
telecommunications, transport, and selected construction materials.
3. Is it possible to own and operate a business? (Has there been legislation regarding the for-
mation, dissolution and transfer of businesses, and is the law respected? Do there exist overly
cumbersome bureaucratic hurdles that effectively hinder the ability to own and dispose of a
business? Are citizens given access to information on commercial law? Is the law applied
fairly? Does regulation (or licensing requirements) impose significant costs on business and
consumers? Do they create significant barriers to entry and seriously hamper competition?)
Small businesses in the trade and service sector are permitted. The laws which regulate them, in-
cluding numerous presidential decrees, legislative acts, and administrative rules are not only con-
tradictory, but changes are often applied retroactively. Private citizens are poorly informed con-
cerning commercial law and there are few private lawyers available to provide them with profes-
sional advice. Although a bankruptcy law was passed in June 1992, few companies have been
forced into bankruptcy to date. The state retains extensive influence and coercive power over the
private sector. For example, it has reserved the right to control employment in privatized enter-
prises. Licensing procedures involve navigating a corrupt bureaucracy. Turkmenistan’s economy
remains overwhelmingly state-owned and domestic competition is weak.
4. Are courts effective, transparent, efficient and quick in reaching decisions on property
and contract disputes? What alternative mechanisms for adjudicating disputes exist? The
court system is unreformed. It lacks the resources, independence, and experience necessary to handle
commercial disputes. While private parties generally believe that courts may recognize their legal
rights against other private parties, they do not believe that courts would enforce such rights against
the state. Disputes tend to be resolved through informal channels, not institutionalized ones.
5. Is business competition encouraged? (Are monopolistic practices limited in law and in practice?
If so, how? To what degree is “insider” dealing a hindrance to opencompetition? Are govern-
ment procurement policies open and unbiased?) The state dominates the most profitable, and
potentially profitable, sectors of the economy such as energy, agriculture, and industry. Competi-
tion is an alien concept and can be seen only to a very modest extent among small businesses
which have cropped up. Competition has been introduced to government contracts through inter-
national tenders. Previously, they were awarded for purely political reasons, and some still are.
6. To what extent has international trade been liberalized? To what degree has there been
simplification/overhaul of customs and tariff procedures, and are these applied fairly? What
informal trade barriers exist? Turkmenistan is not a member of any free trade arrangements.
There are formally few quota restrictions on imports and exports, but most foreign trade is subject
to licensing. Centralized state trading remains a prevalent influence on both foreign trade and pro-
duction. Outside this system, licenses can be obtained for most imports and exports. Import duties,
however, can be very high — (up to 100 percent in selected categories of consumer goods). Since
1994, all domestic and foreign export transactions with the exception of natural gas, and all im-
ports by public enterprises, by law, have to be processed or registered and endorsed at the official
State Commodity Exchange.
According to the U.S. Department of Commerce, excise taxes constitute the most significant trade barriers; in 1997, the number of items subject to excise taxes rose from 11 to 104. Delays,paperwork, and corruption constitute informal trade barriers. Although Turkmenistan has estab-lished several free economic zones, they are not well utilized due to infrastructure problems 7. To what extent has foreign investment and capital flow been encouraged or constrained?
Turkmenistan officially welcomes foreign investment in all areas. Since the passage of a new law
on hydrocarbon resources in March 1997, the government has been actively courting energy mul-
tinationals to participate in the development of Turkmenistan’s large oil and gas reserves in par-
ticular, through production sharing agreements and as minority joint venture partners. Corruption,
forced contract renegotiation, poor infrastructure, and geopolitical realities, notably U.S. policy
toward Iran, have dampened investors' ardor to enter the market in Turkmenistan. The tax and
legal environment are less than fully satisfactory. According to the profit tax law, foreign inves-
tors must pay: a 25 percent profit tax; a 15 percent tax on income and dividends, interest, copy-
rights, licenses, leases, royalties, and other income earned in any sector of the economy; and a 6
percent tax on income from international cargo transport. These burdens are mutable under vary-
ing circumstances.
8. Has there been reform of the energy sector? (To what degree has the energy sector been
restructured? Is the energy sector more varied, and is it open to private competition? Is the
country overly dependant on one or two other countries for energy [including whether ex-
ported fuels must pass through one or more countries to reach markets]?) The energy sector
like the agricultural sector is of prime economic importance to Turkmenistan and has not been
restructured. The country has huge natural gas reserves, the fourth largest in the world, as well as
its substantial on and off-shore oil deposits. It is controlled by the Office of the President. Tradi-tionally, some two-thirds of Turkmenistan’s budget comes directly from gas export revenues.
Turkmenistan seeks significant investment and Western participation in the exploration, ex- ploitation, and transport of Turkmenistan’s hydrocarbons. Legislation passed to encourage thiswas passed in 1997, after it became apparent Turkmenistan could not become a new Kuwait, as itdeclared its intention to do, without attracting foreign investment. The need for doing so was un-derscored in 1997 when gas production and exports fell to an all-time low due to a pricing andtransport disagreement with Russia’s Gazprom.
Aside from a small pipeline to Iran which became operational in 1997, Turkmenistan remains dependent upon exporting its gas via the Russian pipeline system. Russia has thwarted Turkmenistan’sambitions to sell its gas to hard-currency paying Western countries and instead directed the flow toinsolvent Commonwealth of Independent States countries in the South Caucasus and Ukraine. Inthe face of this, Turkmenistan has declared its desire to export gas via Iran to Turkey, via Iran orAfghanistan to Pakistan and India, and potentially under the Caspian Sea to Azerbaijan from whenceit would cross Georgia into Turkey. All of these potential export routes remain problematic forpolitical and commercial reasons.

Source: http://psychologie.dev.czu.cz/stred-asie/html/CD/stredni_asie/turkmenistan-freedom-world-ratings-1998.pdf