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Executive Summary

Turkmenistan is currently considered high risk for U.S. foreign direct investment due to endemic corruption, a weak commercial law and regulatory regime, opaque and onerous bureaucratic processes, and strict foreign currency controls. The government has not taken measures to incentivize foreign direct investment outside the petroleum industry and there is no significant U.S. FDI in the country. Turkmenistan has the fourth largest natural gas reserves in the world, though just outside the top ten largest natural gas producers. Almost all government revenue comes from the sale of natural gas, mostly to China, with a lesser dependence on export of petrochemicals, cotton, and textiles.

Strict foreign currency controls have resulted in a black-market exchange rate for dollars that averaged over five times the official rate in 2020-2021. This results in an inability to repatriate profits or to convert local currency to dollars to import supplies or equipment. It also distorts data, especially GDP, contributing to the widely held view that most economic indicators released by the government are unreliable.

The government often fails to implement or consistently enforce investment-related legislation. There are no meaningful legal protections against government expropriation of assets and there is no independent judiciary. Foreign companies typically pay significantly higher prices for services. Weak education and healthcare systems, as well as underdeveloped physical and telecommunications infrastructure are also challenges.

Turkmenistan’s status as one of the most restrictive and isolated countries in the world only grew during the pandemic; the country’s borders were closed for average Turkmen citizens, internal movement between provinces restricted, and regularly scheduled commercial air traffic completely stopped in March 2020 and continuing through publication in April 2022. International travelers, to include foreign workers in the construction, oil and gas industries, travel in and out of the country on charter flights.

The government often counts foreign loans as FDI, but there is little genuine FDI in the country. The government has promoted efforts to expand downstream petrochemical production, reduce greenhouse gasses, especially methane, improve energy and water efficiency, increase digitalization, and begin production of hydrogen.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 169 of 180
Global Innovation Index 2021 N/A
U.S. FDI in partner country ($M USD, stock positions) 2021 N/A
World Bank GNI per capita 2019 7,220

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

7. State-Owned Enterprises

State-owned enterprises (SOEs) dominate Turkmenistan’s economy and control the lion’s share of the country’s industrial production, especially in onshore hydrocarbon production, transportation, refining, electricity generation and distribution, chemicals, transportation, and construction material production. Education, healthcare, and media enterprises are, with some rare exceptions, also state owned and tightly controlled. SOEs are also to varying degrees involved in agriculture, food processing, textiles, communications, construction, trade, and services.

Although SOEs are often inefficient, the government considers them strategically important. While there are some small-scale private enterprises in Turkmenistan, the government continues to exert significant influence on most economic sectors. There are no mechanisms to ensure transparency or accountability in the business decisions or operations of SOEs. There is no publicly available information on the total assets of SOEs, total net income of SOEs, the number of people employed by SOEs and the expenses these SOEs allocate to research and development (R&D). There is no published list of SOEs. Turkmenistan is not a party to the Government Procurement Agreement (GPA) within the framework of the WTO. SOEs are not uniformly subject to the same tax burden as their private sector competitors

8. Responsible Business Conduct

The government implements various policies and regulations that it states promote socially responsible business conduct (RBC), though there is no point of contact or ombudsperson for stakeholders to raise concerns about RBC. In the past, foreign companies operating in Turkmenistan were not required to implement social projects. Social welfare activities connected with doing business in Turkmenistan generally take the form of financial sponsorship of cultural or athletic events, providing academic scholarships to Turkmen students, or the construction of small-scale facilities, such as medical clinics, to benefit the locality around a company’s facilities. Some large foreign firms have felt pressured to make significant contributions to government construction projects. There are no independent NGOs, investment funds, worker organizations/unions, or business associations promoting or monitoring RBC.

In March 2013, Turkmenistan introduced mandatory environmental insurance for all types of enterprises and organizations (with the exception of government-financed entities) carrying out activities that are potentially hazardous to the environment. This insurance program was adopted to raise environmental awareness and hold industries and businesses accountable for violating environmental laws and regulations.  The mandatory environmental insurance regulation includes a list of hazardous work and facilities subject to such insurance. The insurance is also required foreign legal entities, their branch offices, and entrepreneurs.  The State Committee for Environmental Protection and Land Resources conducts ecological inspections for companies’ compliance with regulations.

Turkmenistan is not a participant in the  Extractive Industries Transparency Initiative (EITI) . It is not clear if the government of Turkmenistan follows the OECD Guidelines for Multinational Enterprises and the United Nations Guiding Principles on Business and Human Rights.

9. Corruption

There is no single specifically designated government agency responsible for combating corruption. In June 2017, Turkmenistan set up the State Service for Combating Economic Crimes (SSCEC) to investigate officials and state-owned enterprises on corruption charges. SSCEC was later terminated by the President.

There is no independent corruption watchdog organization.

Anti-corruption laws are not generally enforced, and endemic corruption remains a problem. Formally, the Ministry of Internal Affairs (including the police), the Ministry of National Security, and the General Prosecutor’s Office are responsible for combating corruption. President Berdimuhamedov has publicly stated that corruption will not be tolerated.

In 2021, Transparency International ranked Turkmenistan 169 among 180 countries in its Corruption Perceptions Index. Foreign firms have identified widespread government corruption, including in the form of bribe seeking, as an obstacle to investment and business development throughout all economic sectors and regions. It is most pervasive in the areas of government procurement, the awarding of licenses, and customs.

In March 2014, the parliament adopted the Law on Combating Corruption to help identify and prosecute cases of corruption. The law prohibits government officials from accepting gifts (in person or through an intermediary) from foreign states, international organizations, and political parties. It also severely limits the ability of government officials to travel on business at the expense of foreign entities. Notwithstanding the 2014 law, corruption remains rampant. There are no NGOs involved in monitoring or investigating corruption. Certain government officials, including traffic police, are known to ask for bribes.

10. Political and Security Environment

Turkmenistan’s political system has remained stable since Gurbanguly Berdimuhamedov became president in February 2007 and had a peaceful transfer of power to his son, Serdar Berdimuhamedov in 2022. With the exception of a reported coup attempt in 2002, there is no history of politically motivated violence. There have been no recorded examples of damage to projects or installations.

The government does not permit political opposition and maintains a tight grip on all politically sensitive issues, in part by requiring all organizations to register their activities. The Ministry of National Security and the Ministry of Internal Affairs actively monitor locals and foreigners. The country’s parliament passed a Law on Political Parties in January 2012 that defines the legal grounds for the establishment of political parties, including their rights and obligations. In August 2012, under the directive of President Berdimuhamedov, Turkmenistan created a second political party, the Party of Industrialists and Entrepreneurs. This pro-government party, created from the membership of the Union of Industrialists and Entrepreneurs, has a platform nearly identical to the President’s Democratic Party. The same is true for the Agrarian Party, which was created in September 2014 in an effort to move Turkmenistan towards a multi-party system.

Organized crime is rare, and authorities have effectively rooted out organized crime groups and syndicates. Turkmenistan does not publish crime statistics or information about crime.

11. Labor Policies and Practices

Labor issues are governed by the Labor Code of Turkmenistan (last amended in July 2009), the Social Welfare code, and a number of regulations approved by presidential resolutions. Turkmenistan joined the International Labor Organization in 1993.

Unemployment and underemployment are major societal issues, particularly among Turkmenistan’s youth and in rural communities. Unofficial estimates of unemployment range from 10 to 50 percent. Due to a severe shortage of jobs and low salaries in the country, anecdotal evidence indicates that growing numbers of young Turkmen have emigrated or are emigrating to other countries, including Turkey, Russia, and other former Soviet republics. In order to stop outward migration, the State Migration Service of Turkmenistan on numerous occasions has arbitrarily denied exit to citizens at the airport and border points.

In February 2016, President Berdimuhamedov signed a decree “On Matters of Registration of the Individuals Arriving in Ashgabat for Employment Purposes,” making it more difficult for residents from other regions to seek employment in the capital city, Ashgabat. The decree introduces a work permit system by the Ministry of Labor and Social Protection, which may issue work permits for a maximum of one year. Ashgabat residents are given priority over non-residents for job openings in the city. The government has also introduced a requirement that 90 percent of any firm’s workforce be Turkmen citizens. The government continues to be the largest employer in the country. The Law on Child Labor (2004) prohibits the employment of children under the age of 16 and makes employment in hazardous and harmful labor illegal for any individual under the age of 18.

The National Center of Trade Unions of Turkmenistan, the successor to the Soviet-era system of government-controlled trade unions, is the only trade union association allowed in the country. When oil and gas prices fell in 2015, the government took steps to reduce expenses by laying off some public sector employees. There have been many reports of ministries not meeting payroll requirements for staff. Article 294 of the Labor Code of Turkmenistan states that the courts handle employer-employee labor disputes. Article 368 states that disputes arising out of collective bargaining and collective agreements can be investigated by commissions on labor disputes, trade unions of enterprises, and the court system. Although the Labor Code allows for collective bargaining, in practice it is not used and the courts do not perform the labor dispute resolution function they are assigned.

The official workday in Turkmenistan is eight hours, with the standard work week consisting of 40 hours over five days. The 2009 Labor Code reconfirmed a 40-hour work week, protected workers’ rights by promoting the role of trade unions, guaranteed job security by restricting short-term contracts, and extended the duration of annual leave from 24 calendar days to 30 calendar days.

In practice, however, government and many private sector employees are often required to work 10 hours per day and/or a sixth day without compensation. Health and safety regulations exist but are not commonly enforced. Foreigners with government permission to reside in Turkmenistan may work and are subject to the same labor regulations as citizens unless otherwise specified by law.

14. Contact for More Information

Ed O’Bryan
Economic Officer
U.S. Embassy Ashgabat
Economic-Commercial Section
9 Pushkin Street,
Ashgabat, Turkmenistan (+993 12) 94-00-45 

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