Doing business in Turkmenistan involves navigating a heavily state-controlled economy with specific legal and regulatory procedures, as well as significant operational challenges for foreign investors.
Here is an overview of how to approach doing business in Turkmenistan, including the steps for company registration, key investment sectors, and major challenges.
I. Steps for Company Registration (for Foreigners)
The process of establishing a company typically involves several steps under the supervision of the Ministry of Finance and Economy:
- Choose a Legal Structure: Common options for foreign entities include:
- Limited Liability Company (LLC): Often the most optimal solution. The minimum statutory fund is a low TMT 5,000 (about $1,430), but a higher contributed statutory fund (e.g., $100,000 – $200,000) is often seen in practice.
- Joint Stock Company (JSC)
- Joint Venture (JE)
- Branch/Representative Office: Branches are subject to a higher corporate income tax (20% vs. 8% for most other entities) and are generally accredited for a limited period (e.g., three years).
- Name and Documents:
- Reserve a company name. The name must be translated into the Turkmen language, and you should generally not use the words “Turkmenistan” or “Ashgabat.”
- Prepare and legalize/apostille incorporation documents, including the Charter (Articles of Association) and Founding Agreement.
- Capital Deposit:
- Open a temporary bank account and deposit the minimum share capital. Obtain a bank certificate as proof.
- Submission and Approval:
- Submit the incorporation application and all required notarized documents to the Ministry of Finance and Economy.
- Foreign companies without approved government contracts must go through a lengthy and complex registration and approval process involving an inter-ministerial commission.
- Tax and Other Registration:
- Register for taxes at the State Tax Service to obtain a Taxpayer Identification Number (TIN).
- The standard Corporate Tax Rate is 8% for most companies, and the standard VAT rate is 15%.
- Licenses and Permits:
- Obtain any necessary operational licenses or permits based on your industry from the relevant sectoral ministries (e.g., Ministry of Health, Ministry of Energy).
- Hiring Foreign Employees:
- A license is required to employ foreign workers.
- Generally, Turkmen law requires that local citizens make up 90% of the workforce of foreign-owned companies, though this is a more lenient 30% for those in the oil and gas sector.
II. Key Sectors for Foreign Investment
The economy is largely dependent on its vast natural resources. Key sectors attracting foreign investment include:
- Energy Sector (Oil and Gas): Turkmenistan has the world’s fourth-largest natural gas reserves. This remains the dominant area for foreign direct investment, including exploration, production, processing (petrochemicals), and pipeline projects.
- Construction: Driven by large government-backed infrastructure projects and urban development, including the new “smart city” of Arkadag.
- Agriculture: A vital sector for employment and economic diversification, focusing on cotton, wheat, textiles, and agro-industrial complexes.
- Transport and Communications: Opportunities related to Turkmenistan’s strategic location as a transit hub, including the modernization of port, rail, and air infrastructure.
- Tourism: Focus on developing the Avaza resort area on the Caspian Sea.
III. Major Economic and Operational Challenges
Foreign investors must be aware of significant challenges in the business climate:
- Currency Controls and Repatriation: This is the most serious impediment. The government enforces strict foreign currency controls and severely limits the conversion of local currency (Manat) to hard currency (USD), making it extremely difficult to repatriate profits or make payments to foreign suppliers. A black market exchange rate is widely used and significantly higher than the official rate.
- State Dominance and Bureaucracy: The economy is heavily dominated by state-owned enterprises (SOEs). The regulatory system can be opaque, cumbersome, and non-transparent, often requiring high-level political approval for significant investments.
- Corruption: Endemic corruption and a lack of established rule of law are commonly reported as serious risks. Contracts are sometimes awarded to companies with political ties.
- Lack of Independent Judiciary: There is no independent judiciary or meaningful legal protection against government expropriation of assets.
- Internet Restrictions: The government strictly controls internet access, blocking many foreign company portals and common websites. Foreign companies also face significantly higher costs for internet access.
- Real Estate: Foreigners are generally prohibited from owning land, though they can obtain long-term land leases for non-agricultural use. Foreign entities are permitted to acquire residential and commercial buildings.
In summary, successfully doing business in Turkmenistan often requires a long-term perspective, an alignment with government-approved projects (especially in the energy or infrastructure sectors), and professional guidance to navigate the complex legal, bureaucratic, and financial constraints.