Turkmenistan at a Turning Point: OECD Calls for Stronger Reforms to Attract Investment

Turkmenistan is making gradual progress toward diversifying its hydrocarbon-dependent economy, modernising trade procedures and improving the business climate, but major barriers, such as currency controls, high digital costs and regulatory complexity, continue to limit competitiveness. The OECD urges deeper reforms, including stronger competition policy, better skills development and a dedicated investment promotion agency, to attract diversified and sustainable foreign investment.

Turkmenistan’s economic direction is examined in a comprehensive study led by the OECD, working under the EU-funded Prosperity Programme and drawing on analytical input from global institutions such as the IMF, ADB, ITC, UNECE, UNDP, and UNEP. Together, these bodies present a portrait of a resource-rich nation eager to modernise, diversify, and integrate into global markets, yet still constrained by structural bottlenecks. Since independence, Turkmenistan has enjoyed rising income levels, fuelled overwhelmingly by its vast natural gas reserves, among the world’s largest, but this very strength has become a strategic vulnerability. China buys more than 90% of Turkmen gas, anchoring the country’s external earnings to a single market and commodity. While the rise of greenhouse-grown tomato exports and surging fertiliser shipments signal early diversification, hydrocarbons still account for about 90% of export revenues, underscoring the depth of dependence.

Momentum for Reform Meets Systemic Challenges

WTO accession ambitions have accelerated legislative updates, customs reforms, and international training programmes. Digital platforms such as the Trade Information Portal and the Single Window for import–export procedures reflect early movement toward transparency and efficiency. Meanwhile, large-scale infrastructure investments, from highways to seaport modernisation, aim to place Turkmenistan firmly along the Trans-Caspian and North–South corridors, as global tensions redirect cargo away from traditional Russian routes. Yet the OECD reports that non-tariff barriers remain high, documentation procedures remain cumbersome, and border operations rely heavily on paper-based authentication. These weaknesses, if unaddressed, could blunt the strategic advantages offered by Turkmenistan’s location.

Private Sector Voices Reveal Cautious Optimism

Drawing on a survey of more than 30 firms, the OECD identifies a business community that sees progress but remains wary of persistent hurdles. Many companies experienced rising turnover and employment over the past two years, crediting improved tax administration, faster customs procedures, and modest regulatory reforms. However, the process of starting a business remains lengthy due to extensive licensing and documentation requirements. Firms also note the market’s small domestic size, limited competition enforcement, and uneven access to finance, where state banks prioritise certain sectors such as agriculture, while others face credit scarcity. Skills shortages emerged as one of the most pressing concerns, with companies struggling to find technicians, logistics specialists, digital professionals, and manufacturing experts. ADB data revealing that only 15% of school graduates secure places in higher education reflects deeper structural issues in human capital development.

Digital Gaps and Currency Controls Weigh on Competitiveness

Digitalisation is described as both a priority and a pain point. Businesses widely report high internet prices, especially prohibitive for foreign firms, uneven connectivity, and insufficient digital literacy among staff. Although infrastructure has improved over the past decade, Turkmenistan still posts some of the region’s highest broadband costs relative to income. This not only constrains business operations but also limits innovation, export readiness, and service-sector growth. Even more obstructive is the dual exchange-rate system. While domestic-focused firms face few difficulties, importers and exporters struggle to access foreign currency, with approvals reportedly covering only small portions of contract values. This has delayed machinery purchases, disrupted payments, and discouraged new foreign investors. The OECD highlights exchange-rate unification as a critical step toward credibility, investment attraction, and integration with international markets.

A Path Forward: Building an Investment-Friendly Future

Legal predictability remains weak, with firms preferring informal dispute settlement over court processes seen as slow and unpredictable. Turkmenistan’s accession to the New York Convention marks progress, but institutionalised arbitration and a dedicated business ombudsman would significantly improve investor confidence. The OECD’s central recommendation is the creation of a national Investment Promotion Agency, an institution standard in emerging markets. A dedicated IPA would consolidate currently fragmented responsibilities, provide a single contact point for investors, promote opportunities abroad, assist investors through administrative processes, and strengthen aftercare and policy feedback. The report also encourages gradually phasing out import-substitution policies, strengthening competition law, expanding vocational and entrepreneurial education, lowering internet tariffs, deepening digital and customs reforms, and aligning regulatory practices with international standards. With coordinated reforms, Turkmenistan could leverage its strategic geography, resource wealth, and growing private sector to transition from a hydrocarbon-dependent economy into a diversified, competitive, and investment-ready nation.