ALMATY: Some foreign companies in Turkmenistan are struggling to make sales and collect payments as economic pressures mount in large part because of a sharp drop in the Central Asian nation’s crucial gas exports.
There is little economic data beyond official statistics that paint a picture of sustained growth, but some foreign executives say hard currency shortages have crippled the state-dominated economy.
Turkmenistan, with the world’s fourth-largest gas reserves, is still awarding contracts to foreign and domestic firms, but some projects have stalled and the International Monetary Fund says it should cut spending or devalue its currency, the manat.
“The government has run out of financial resources, and it hasn’t been paying for finished contracts, let alone being able to pay for new ones,” said Oguzhan Cakiroglu, board member at Cakiroglu Grup, a Turkish metals and construction company that has now stopped operating in Turkmenistan.
Ashgabat’s problems began in 2016 when Russia, its main gas buyer, stopped buying, citing pricing disputes and shifts in the global energy market.
Exports to China have failed to offset the loss of Russian sales and the country’s total export revenue dropped to $8.0-8.5 billion in 2016-17, about half of what it was receiving between 2000 and 2014.
In response, the government of President Kurbanguly Berdymukhamedov has gradually tightened foreign exchange controls to conserve hard currency for priority projects.
On the black market, the manat has fallen to 17-18 per dollar from 13-14 at the beginning of this year and 7 in late 2016. The official rate is 3.5 per dollar.
Private local companies such as importers of consumer goods receive only a fraction of the dollars they request, Turkmen entrepreneurs say. And, according to Cakiroglu, the government itself has trouble paying foreign contractors.
“The government has not been paying companies for more than three years, and it’s pushing the market into a more troubled situation, with a shortage of dollars pushing black market prices to 3-4 times the official exchange rate,” he said.
“We have pending payments of around a few million dollars, but we have been waiting for 4-5 years for this payment,” Cakiroglu said. “So we’ve stopped operating completely in Turkmenistan.” He declined to say what reasons the government had given for delaying payment.
Another Turkish contractor, Polimeks, which in 2016 completed a $2.3bn air terminal shaped like a giant white falcon in Ashgabat, has stopped work on a highway to connect the capital to the Caspian port of Turkmenbashi.
Polimeks declined to comment on its relationship with Turkmenistan, which has since made no official announcements on the highway project. The foreign ministry and the Turkmen embassy in Ankara did not reply to questions about the government’s debt to foreign companies.
Instead of providing investment figures as it does for other countries, a page on Turkmenistan on the website of Turkey’s Economy Ministry reads like a warning.
Risks such as “tax audits carried out like sudden raids”, visa denials and “the expropriation of certain investments made in previous years” are deterring foreign investment, it said.
The ministry said payments to Turkish contractors are often delayed and they have problems transferring foreign currency from their bank accounts.
NEW BALL GAME: Turkish contractors are probably owed the most by Ashgabat, because Turkey has for years been the main source of Turkmen imports and invested $1.5bn in Turkmenistan between 2002 and 2016. But other companies have taken a hit.
Two Belarussian government sources told Reuters Ashgabat has not fully paid a Belarussian state-owned company for building a fertiliser plant launched in March 2017. One source said the outstanding debt was $52 million, the other said it was “a significant sum”.
DRC International, a US-based technical procurement and distribution company for the mining, oil and gas and construction industries, has been in Ashgabat since 2004.
“We got some good traction in the early days. The largest project was in 2015 with Hyundai Amco on the navy shipyard, which was a great success for both Hyundai and DRC,” DRC chief executive Steve Crabtree said in an email.
“But sadly, those days are far behind us and it’s a whole new ball game,” he said. “I have cut expenses, replaced management, and keep pushing forward. I’m hopeful that conditions change for the country and we can get back to supporting great projects.” An executive of another Western company who asked not to be named said his firm, which used to supply oil and gas equipment, had shut its Turkmen office late last year.
The executive said Turkmen customers could no longer buy his firm’s products due to foreign currency shortages.
A Turkmen émigré, who requested anonymity to protect relatives at home, said more and more of his contacts were looking for work abroad, with Turkey a top choice.
According to Turkey’s interior ministry, the number of Turkmens with Turkish short-term residency permits – separate from student and family permits – more than doubled last year to 25,693.
In an unusual move, Berdymukhamedov in March ordered the central bank to extend $3bn in soft loans to the Union of Industrialists and Entrepreneurs of Turkmenistan, a body made up of local companies, to build a highway and a fertiliSer plant. The Union did not reply to a request for comment.
Published in Dawn, June 5th, 2018