Turkmenistan: Investing

FDI in Figures

According to UNCTAD's World Investment Report 2023, FDI inflows to Turkmenistan decreased by 27.3% year-on-year in 2022, totaling USD 936 million, much lower than the three-year average recorded in 2018-20 (USD 1.63 billion). At the end of the same period, the total stock of FDI was estimated at USD 41.53 billion, representing around 53.3% of the country's GDP. Oil and gas, agriculture, and construction are the main investment sectors. Despite the obstacles in the country, hydrocarbons and petrochemicals are attracting foreign investment, and there has recently been an interest in the manufacturing sector. China, Russia, Kazakhstan, and Uzbekistan are the main investors in the country. China is increasingly investing in the gas sector, co-financing pipelines and refineries, and remains the largest gas buyer in the country. It has granted a USD 4.1 billion loan to build the Galkynysh field, the second-largest gas field in the world. During an official meeting, Chinese President Xi Jinping declared that China will support more capable Chinese companies in investing and doing business in Turkmenistan. At the same time, continued strict capital controls on FDI have further slowed down new hydrocarbon projects, in a context of declining international investment. Nevertheless, among the projects announced in 2022, there was the USD 7.5 billion extension of the oil extraction activity of Emirates National Oil Company (United Arab Emirates). Public investment in Turkmenistan significantly exceeds private investment, as just 10% of the investments come from the private sector, which is much lower compared to other countries of similar income levels. Of the total investments, foreign direct investment accounts for around 20%. According to government officials, the volume of investments in Turkmenistan increased by 14.2%, and 4 thousand new jobs were created in 2022.

Although there are formally no limitations to foreign ownership of companies, the government has only allowed fully owned foreign operations in the oil sector, and foreigners cannot invest in the exploration and production of the country’s onshore gas resources. All land belongs to the state and other property rights are limited; moreover, the repatriation of revenues is difficult. The judicial system is subordinate to the president, who appoints and dismisses the judges without legislative review. Potential investors may be discouraged by several factors, including state control measures, exchange rate restrictions, excessive and inconsistent regulations, corruption, lack of an established rule of law, and lack of experience in dealing with foreign investors for international trade. In addition, essential technologies, such as the internet and telephone infrastructures, are not sufficiently developed. Turkmen citizens must make up 90% of the workforce of foreign-owned companies (30% for companies active in the oil and gas sector). The government encourages direct investment to diversify the economy, but the structures in place do not comply with international trade standards, and no commercial code has been adopted apart from the law on commercial activities of 2016. The law on Free Economic Zones has been recently amended; however, there are currently no active FEZs in the country. Foreign investors are disadvantaged because they face higher tax rates than most local companies. The value-added tax rate is 15%, an income tax of 8% is applied to JVs, and an income tax of 20% is applied to wholly-owned foreign companies and state-owned enterprises. Corruption is widespread, and the country ranks 170th among the 180 economies on the 2023 Corruption Perception Index and 162nd out of 184 countries on the latest Index of Economic Freedom.

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Latest Update: May 2024