Burnt Fingers in Ashgabat

Neweurasia is TOL’s sister site for blogging and citizen journalism in Central Asia. This is a recent post by Annasoltan, who, like Neweurasia’s other bloggers, writes anonymously for security reasons. Here she gives us a peek at the pitfalls faced by foreign companies who venture into Turkmenistan, where information is difficult to come by. The business people she interviewed say things were easier under the country’s longtime ruler, Saparmurat Niyazov, also referred to as Turkmenbashi, than under his successor, Gurbanguly Berdymukhamedov. The post has been edited for clarity and style. 

Running a business in a closed country like Turkmenistan can already be a difficult enterprise, but it can be twice as hard when political elites act irresponsibly by failing to fulfill contractual obligations. One Turkish businessmen who has worked in Turkmenistan for over a decade told me, on condition of anonymity, “Unfortunately, the leadership that succeeded Niyazov is not taking international laws seriously and has begun to take actions that violate the agreements.”

His claims come as three major Turkish construction companies have recently filed a legal inquiry against the Turkmen authorities over lost profits ranging between $600,000 and $1 billion, according to a report in the Hurriyet Daily News. The inquiry has been registered with the International Center for Settlement of Investment Disputes, an arbitration body that deals with disputes around contracts and foreign investment. A Turkish source has informed me on the basis of anonymity that another 22 firms, who have also had problems with getting their projects complete, are also expected to submit complaints soon.

All of this puts into question Turkmenistan’s reliability as a business partner, and with it, may dash the president’s plans of turning the capital into the “Eastern Dubai.”

The government's vision for the Avaza resort, on the Caspian Sea.

Berdymukhamedov took over Niyazov’s ambition of building Turkmenistan into an investment hotspot. Large-scale projects like the Avaza resort and the never-ending construction frenzy all over the capital have all been rationalized as steps toward this goal. Most of these projects have been carried out by foreign, mainly, Turkish companies. Içkale Insaat, Kiliç Insaat, Erku, Sehil Insaat, and Adem Dogan all have sued the Turkmen government, claiming that each has lost three to four projects on average and that as a result more than 1,000 people have been left jobless.

There’s already a precedent for bad commercial behavior in my nation. In 2006 a few Turkish entrepreneurs made similar complaints. Also, a few months ago MTS, the Russian mobile telecommunications company, was caught off-guard when its contract was suddenly annulled and it was expelled from the country while its property was confiscated. Along these lines, another Turkish businessman, whom I shall call “X” to protect his identity, told me that the Turkmen authorities “have imposed restrictions on visas and due payments have not been made.”

Berdymukhamedov hasn’t taken the same attitude as Niyazov to foreign companies. When Niyazov was in charge, there were no restrictions on when Turkish businessmen could leave the country. Besides, the contracts never implied that in case of a dispute, the Turkish companies would be subjected to Turkmen courts, and there were no cases of imprisonment of foreign investors.

“The global crisis, the new exchange rate of the Turkmen currency, and inflation in Turkmenistan have put additional strains upon most Turkish companies. Gasoline prices have increased ninefold, and the price for cement has gone up, caused by a shortage of supply. Yet, Turkish companies have never been compensated for their losses. Instead, construction deadlines have been reduced. Companies that could not cope with the shortened timeframes have been taken to court. Some owners of Turkish companies have been imprisoned for up to two years, others have not been able to leave Turkmenistan.”

“Most Turkish construction companies have already left the country. Their equipment has been confiscated and now they hope to recoup their losses with the help of international courts.”

X adds that the legal action against the Turkmen government can seriously damage the image of the country, drawing away all future foreign investors, since international companies usually avoid investing in countries that have cases before the international arbitration panel. He does not believe that the visit of an official Turkish delegation led by state minister Zafer Caglayan to Ashgabat this month will break the stalemate.

“Our government does not want to harm bilateral relations with a brotherly nation, and therefore is not likely to object as there are many other projects involved,” he said.

Additionally, X points out that Turkmen citizens are able to travel to Turkey without a visa, while Turkmen visa restrictions make it hard to bring people to work in Turkmenistan, since the application process usually takes three to four weeks.

Other Turkish business people complain about the method the Turkmen president applies when canceling contracts: he simply fires the ministers who had signed the agreements with foreign companies. This leaves foreigners with only two options: renegotiate the contracts or leave the country. Yet, despite these issues, X said, Berdymukhamedov does not seem to be affected: he continues offering new contracts to other Turkish or foreign construction companies. In my eyes, it seems like a kind of treachery on my nation’s part combined with a serious lack of due diligence on the newcomers’ parts.