Some foreign investors have found opportunities in public works contracts, though state-directed priorities and payment delays pose business risks. Special economic zones near the ports of Turkmenbashi and Alat aim to attract foreign capital into non-resource industries. However, the zones have underperformed with few tenants to date.
Investor-friendly reforms are needed such as establishing independent courts, strengthening property rights, and easing capital controls. Regional cooperation through institutions like the CIS could also help link Turkmenistan to new markets and mitigate reliance on China as the dominant trade partner.
Overcoming isolation and developing human capital will be equally important to maximize foreign investment’s growth impact over the long term. Turkmenistan actively courts foreign investment through preferential PPP models and tax incentives. However— challenges persist in attracting large inflows:
Opaque regulations, inconsistent policymaking and widespread corruption raise investment risks despite recent WTO accession and legal reforms.
The tightly controlled economy offers few opportunities outside hydrocarbons. State dominance crowds out private actors and competition. Difficult business visa procedures, bureaucratic hurdles and an authoritarian political system undermine confidence in contracts and dispute resolution.
Lack of skilled local talent and self-imposed isolation limit technology transfers and partnerships with global firms. Major investors to date include- Chinese, Turkish and Russian companies in— oil/gas, construction and infrastructure. However— investment levels remain well below hydrocarbon export earnings.
With economic headwinds rising, Turkmenistan must address structural impediments to fully unleash foreign capital’s growth potential across multiple sectors. Deeper reforms will be key to transition from fossil fuels.