During the soviet period, Turkmen SSR was the source of raw materials (mainly cotton and energy resources), which where transferred to other countries of the Soviet Union for further processing.

 

Agriculture.

After becoming independent, there was a fall in the agricultural productivity in the main mass of agricultural sector if comparing with the end of 1980 ties. In such conveniences Turkmenistan is forced to import provision.

        The main part of Turkmen plough-lands,(almost 810 000 hectars), is still used under cotton cultivation. In 1980 ties Turkmenistan was producing 1.3 mln. tons of cotton. Almost quarter , where of higher quality types. Nowadays cotton is partially replaced with the grain, which results not only the increase in supplying the country with provision , but also brings the country to use its water resources more rationally. Instead of different plans on giving the land to the private farmers, the agriculture is still staying in the government sector.

        The important role is given to the animal husbandry – rearing “caracul” sheep,  fine-fleeced goats , camels and horses. The main part of animal husbandry is taken by the traditional sheep breeding(approximately 30% of gross product of this sector of agriculture).  

Structural Reforms

During the last five years, Turkmenistan’s progress with the implementation of structural reforms and the transformation to a market economy has been very limited. Only a small number of state enterprises have been privatized and their importance for the economy as whole is limited. Some progress in legal reform was made in recent years, such as the introduction of a bankruptcy law, but the regulatory framework still lacks transparency and laws and regulation are often conflicting. Similarly land reforms and agricultural reforms are yet to take off.

Privatization of Enterprises.

The authorities approach toward privatization has deeply stressed the need for a gradual evolution of private ownership; the importance of avoiding quick economic changes ; and more deeply , the desirability of leaving of key economic sectors under government control. As a result, progress with enterprise privatization has been rather slow. By end – 1998, only 1,948 enterprises have been privatized, out of total of about 4,300 businesses included on the list of business eligible for sale (Table: Turkmenistan: Privatization of State Enterprises, 1993-99).  Moreover, most of these enterprises were privatized in the early stages of transition and progress has slowed considerable in recent years.  In the first half of 1999, an additional 52 enterprises were sold.

The importance for the economy as whole of the enterprises that have been privatized to date is very limited.  Of the enterprises sold, the bulk has consisted of small-scale enterprises, mainly trade and catering businesses.  Larger enterprises are being sold more slowly.  Only 43 enterprises in manufacturing have been sold so far.  About 75 percent of the enterprises privatized were sold directly to their management and employees, while the rest was sold mainly through auctions (Table: Turkmenistan: Methods of Privatization, 1993-99). Only a few enterprises were sold through direct sales to outside buyers.

The slow progress with privatization can be attributed to a number of factors.  A key factor has been the limited set of enterprises eligible for privatization.  Other then small-scale businesses such as shop and restaurants, which have mostly been privatized, the enterprises offered for sale consist mainly of nonoperating or loss-making units with often obsolete technologies, as line ministries have refused to let go of the more attractive/profitable enterprises.  Moreover, sector of the economy excluded from the privatization process are the gas and oil sector, transportation and communications, as well as social sector, such as health, education and culture.

Lack of the coherent institutional framework to implement privatization policy has been another obstacle for the enterprise privatization process.  In addition, line ministries, state associations, and local governments could interfere in the privatization process and effectively exercise veto power over the units offered for sale and their asset valuation.

Reservation prices for enterprises offered for sale are often unrealistic. In most cases, they have been based on official book values and have failed to take into account facts such as the period of the firms technology, the overall situation of the machinery and equipment, the potential market for production and inventories, the likelihood for collecting outstanding claims on other parties, and potential liabilities that do not appear on the firms’ balance sheet.

        Restrictions imposed on buyers have further decreased the attractiveness of enterprises offered for sale. Such restrictions have included requirements such as maintaining the business profile for a number of years or retaining a certain number of employees. In the case of larger enterprises, the government has generally retained a controlling equity share in the enterprise.

        With several competing agencies involved in the privatization process, including interference by line ministries and local governments, procedures governing the selection, and valuation of state property have lacked transparency and consistency. Also, arbitrary cancellations of tenders and auction have undermined investor confidence. In addition, quickness in the financial and regulatory infrastructure, in general, and the lack of post privatization support have further delayed privatization.

        Progress with privatization was the subject of a privatization seminar held by the authorities in early 1999 in cooperation with United States Agency for International Development. Based on the conclusions from these discussions the President has ordered the development of annual implementation programs (starting in 2000 and extending through 2005) In which the line ministries would nominate enterprises suitable for privatization.

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