DEVELOPMENT OF PRIVATE BUSINESS: FROM SIMPLE TO COMPLICATED
The year 2023 marks the 15th anniversary of establishment of the Union of Industrialists and Entrepreneurs of Turkmenistan (UIET). An exhibition in celebration of this anniversary date testified to the impressive results achieved by members of this public association over a fifteen-year period.
According to the UIET, members of the union have increased industrial output 82.2 times since 2008. On top of that, over 15 years, members of the UIET have increased trade turnover 39.3 times, agricultural production 130.4 times (!). Growth in the service sector has exceeded 4 thousand percent.
In 15 years since its establishment, the union has trained over 80.5 thousand entrepreneurs at its vocational schools and implemented over 22.5 thousand projects. More than 28.1 thousand physical persons and legal entities are currently members of the UIET. It is also important that the private sector accounts for more than half of the employed population of Turkmenistan.
When visiting the exhibition, President of Turkmenistan Serdar Berdimuhamedov praised a worthy contribution by the private sector to the economic development of the country. “The achievements of the union members over the past 15 years indicate that the private sector has become a leading force in promoting the economy of our state,” the head of state emphasized in his address to the exhibition participants. The head of state assured that all necessary measures would be taken to further strengthen the small and medium-sized businesses of Turkmenistan.
According to the President, the private sector has a great role to play in solving the task on production of high-quality and competitive products, ensuring food abundance, building industrial enterprises and modern shopping centers. The head of state also spoke about the need to increase the number of small and medium-sized enterprises, pay special attention to development, incentivize private business, build new industries and increase their capacities.
Members of the UIET currently make a significant contribution to ensuring food and commodity abundance and creation of new jobs in the country. Turkmen entrepreneurs increasingly master the production of competitive goods for exports and substitution of imports.
More than 200 exhibitors presented their stands at the exhibition hall of the Chamber of Commerce and Industry. They included private enterprises specializing in the food and processing industry, agriculture, construction, production of building materials industries and electrical equipment, household appliances, as well as trade, education, transport and logistics. Emphasis was placed on demonstrating the UIET achievements in producing import-substituting and export-oriented products.
Turkmen private companies taking part in the import substitution programs currently produce organic food products that meet international standards, including meat and dairy products and baby food, fruit and vegetable concentrates and juices, mayonnaise and ice cream, canned products, fish delicacies and confectionery. Members of the union enjoy a strong position in trade and services and the construction sector.
The results of 2022 provide evidence of the growing potential of the country’s small and medium-sized businesses. In general, in the agro-industrial complex, where the private sector plays a leading role, the output grew to 104.8 percent. High growth rates have been achieved in the output of bread and bakery products, growing of potatoes and vegetables, melons and fruits and berries. The annual plan on investments was fulfilled by 122.2 percent.
According to the Union of Industrialists and Entrepreneurs, the growth in agricultural and food production reached an unprecedented 153.1 percent, production of industrial goods reached 110.3 percent in 2022.
The total area of housing commissioned in 2022 amounted to over 1.5 million square meters. And much of the credit for this goes to the private sector enterprises that play active part in construction of residential facilities.
In June 2022, President Serdar Berdimuhamedov signed a resolution, according to which 150 million US dollars were allocated to the private sector of Turkmenistan in the form of preferential state loans.
It is also important that the program of visits by the head of Turkmenistan to foreign countries traditionally provide for meetings between business circles. In fact, during President Serdar Berdimuhamedov’s official visit to Moscow in June 2022, representatives of the business structures of the two countries signed a cooperation agreement between the retail chain “Halk Market” (Turkmenistan) and Agroholding “Rusagro” (Russia). In November, as part of an official visit to the UAE, Serdar Berdimuhamedov took part in the business forum “Turkmenistan – UAE” that resulted in the signing of contracts by the business structures of the two countries for provision of logistics services and export-import operations.
Regular annual business forums with foreign partners also produce concrete results. In particular, following the Turkmen-Austrian business forum in Ashgabat in November 2022, agreements of intent were signed between “Balam” confectionery enterprise and Akras Flavors GmbH, as well as between “Halk Market” retail chain of Turkmenistan and the Austrian-Turkmen society.
Construction and production of building materials are one of the sectors of the national economy, in which Turkmen businessmen have gained a strong foothold. The government entrusts members of the UIET with construction of social and industrial facilities – residential buildings, schools, kindergartens, factories, medical centers, sports facilities, roads, infrastructure facilities. Construction of the Ashgabat-Turkmenabat highway, the facilities of the new administrative center of Akhal province – the city of Arkadag, “Ashgabat City” and phased construction of facilities in the capital city, a number of industrial enterprises are among the largest state orders being currently implemented by private construction companies.
In 2022, the Union of Industrialists and Entrepreneurs commissioned socially significant facilities – multidisciplinary hospitals in the city of Turkmenbashi and Dashoguz province, the Rowac cottage complex in the Avaza national tourist zone on the coast of the Caspian Sea, new passenger bus stations in the regional centers. In the capital city, 62 four-story residential apartment houses have been built and put into operation.
Members of the UIET implement investment projects to establish agricultural, food and industrial enterprises for growing vegetables, grapes and fruits using water-saving technologies, livestock and poultry complexes, modern greenhouses and refrigerated warehouses for storing food products.
Investments in the private sector aim to modernize production and create new enterprises fitted with modern equipment and technologies. As a result, dozens of companies were established in Turkmenistan that produce household appliances such as gas and electric stoves, ovens, microwave ovens, as well as telephones, payment terminals and smart TVs. The fact that they are not inferior to foreign counterparts in quality is evidenced by the demand for these products not only in Turkmenistan but also abroad.
The further development of small and medium-sized businesses will continue in 2023. The share of the private sector in the national GDP is expected to increase to 71.3 percent.
The construction industry is one of the main sectors in which entrepreneurs play a key role in the so-called public-private partnership for implementation of large-scale projects under state programs for development of the country’s economy. This year, construction of industrial, social and cultural facilities, as well as modern and comfortable residential buildings will continue with the active participation of local construction companies.
The grandiose project for construction of a new administrative center of Akhal province – the city of Arkadag is one of the impressive examples of successful public-private partnership. Arkadag has been recently given a special status of city of state importance. About 70 thousand people will live in this city. It is being built on an area of 950 hectares, 30 kilometers southwest of the Turkmen capital.
As part of the first stage of construction of this city, which started in 2019, there have been already erected “smart” residential buildings, the regional mayor’s office, medical, educational and cultural institutions, a theater, a museum, libraries, the Higher International School of Horse Breeding, the Research and Production Center for Horse Breeding and other facilities. More than 3.3 billion US dollars have been invested in construction of the first stage of Arkadag. It is expected that Arkadag will become the first city in Turkmenistan with environmentally friendly electric public transport. In March 2023, President Serdar Berdimuhamedov signed a decree ordering the implementation of the second phase of construction of Arkadag by 2026. According to preliminary estimates, this will require another 1.5–2 billion US dollars.
Road construction is another segment of the economy in which local private enterprises are actively involved. Work is now underway in Turkmenistan on development of a system of roads and international transport corridors. Construction of new and reconstruction of existing highways will continue, bringing them in line with international standards.
The current state strategy for economic development of Turkmenistan is aimed at further increasing a share of the non-state sector in the national economy and eventually in GDP. Summing up the results of 2022 and outlining plans for 2023, President Serdar Berdimuhamedov noted that “transition to a market economy is steadily underway, and in this regard, we intend to significantly increase the share of private property, removing barriers and restrictions on development of the private and entrepreneurial sector, which ultimately reduces the level of state presence in the economy.”
In 2023, it is expected that 37.4 billion Manat will be invested in the country’s economy from all sources of funding. It is planned to allocate 20.8 billion Manat for construction of industrial facilities and 16.6 billion Manat for social facilities. In fact, this year it is planned to build more than 1 million 58.5 thousand square meters of housing, complete the construction of a complex of buildings of the Academy of Public Administration under the President of Turkmenistan in Ashgabat, build a water treatment facility with the capacity of 150 thousand cubic meters of drinking water, put into operation the first line of facilities in the city of Arkadag, build new villages in a number of regions of the country, as well as schools, kindergartens and hospitals.
Construction of the Tejen-Mary section of the Ashgabat-Turkmenabat highway, other roads, communication systems, water, gas, energy supply and treatment facilities are among other major projects whose implementation will continue this year with the participation of private sector enterprises.
Turkmenistan’s credit policy aimed at supporting entrepreneurship plays an important role in the accelerated development of small and medium-sized businesses. For example, in 2022, the total volume of loans issued by banks increased by 7.6 percent, including by 28.2 percent to the non-state sector and 1.3 times to agricultural producers.
Another area where the private sector is trying its hand is the chemical industry of Turkmenistan. Since 2010, the state has allocated about 8.4 billion US dollars for the development of this industry that made it possible to expand the production of mineral fertilizers, iodine, detergents, and other products. At the same time, Turkmenistan’s private enterprises, some of which were built thanks to the efforts of the UIET, currently produce iodine, soda, chlorine, plastic pipes, adhesive tape, polypropylene and polyethylene bags and coatings, household chemicals, and perfumes.
The main tasks and benchmarks that the state sets for the country’s entrepreneurs in the industrial and agricultural sectors are import substitution, ensuring economic and food security, as well as developing production of finished products that can be exported.
In practice, the state supports national entrepreneurship through privatization programs, a system of preferential taxation and lending and interaction within the framework of public-private partnerships.
Since 2011, the UIET operates Rysgal bank to finance private businesses, in which the state has invested hundreds of millions of US dollars on a gratuitous or preferential basis. Entrepreneurs receive these funds as loans at a low interest rate (1–5 percent) for establishment of new industries in various sectors of the economy and purchase of agricultural equipment. At the same time, the volume of loans issued to support entrepreneurship is increasing every year, and the number of implemented projects is also growing. Similarly, preferential taxation creates opportunities to increase the number of small and medium-sized businesses.
The UIET plans to open the first private university in the country to train highly qualified personnel and specialists for various businesses. This idea was supported by the government, and the university will be built by 2025.
The grand scale of public-private partnership is evidenced by the fact that about two thousand large industrial and social facilities are being built in Turkmenistan for a total amount of more than 30 billion US dollars with participation of foreign companies and national small and medium-sized private enterprises.
In the coming seven years, Turkmenistan will invest more than 278.9 billion US dollars in the further realization of the country’s production potential and development of the social system. These are the tasks that have been set in the Program of the President of Turkmenistan on the socio-economic development of the country for 2022–2028, approved by the head of state in July 2022.
The presidential program attaches importance to measures aimed at supporting entrepreneurship, including creation of a reliable system of protection of rights and guarantees for private property, conditions for increasing the share of the private sector and its role in the development of the national economy, rapid transition of the national economy to market relations and further development of small and medium-sized businesses.
Following the implementation of the presidential program, the country’s GDP growth rate will be at least 6.7 percent by 2028. Retail trade turnover will increase by 14.5 percent, foreign trade turnover will grow 1.9 times. The share of the non-state sector in the GDP will reach 72 percent. The public-private partnership will continue to develop. These plans provide a solid basis for the further dynamic development of entrepreneurship in Turkmenistan, strengthening its industrial potential.