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Europe & Central Asia

Turkmenistan risk report

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Ranking among the most corrupt countries in the world, Turkmenistan suffers from widespread corruption in every institution and across every sector of its economy. Bribery is required to obtain any kind of service or to secure a procurement contract, and maintaining close connections with government officials is imperative to doing business. The country's public administration relies heavily on patronage networks. Large projects require a presidential decree, and procurement processes are generally carried out arbitrarily and with no oversight or regulation. The law "On Combatting Corruption" criminalizes a range of corruption offenses, and public officials are subject to a code of conduct. However, enforcement is very poor, and corruption investigations are usually politically motivated. The administration of current President Berdimuhamedow has maintained a tight grip on power, and regime critics resort to self-censorship. Thus, information on corruption in Turkmenistan is scarce.

Judicial system Very high risk

Turkmenistan's judiciary carries a high corruption risk. The institution is corrupt, ineffective and highly politicized in practice (HRR 2014; BTI 2016). Previously delivered court decisions can be modified by the president (BTI 2016). The courts are also undermined by clientelistic networks and patronage (BTI 2016).

Companies are advised to include an arbitration clause in contracts identifying a foreign venue should a dispute arise (commercial disputes have been reported) (ICS 2015). Turkmenistan has ratified the International Centre for Settlement of Investment Disputes (ICSID) but is not a member of the New York Convention 1958 on the Recognition and Enforcement of Foreign Arbitral Awards.

Police Very high risk

Businesses face a high corruption risk when dealing with the police. The security apparatus engages in corrupt practices with impunity (HRR 2014). Police officers often solicit bribes from drivers at traffic stops (approximately USD 100 from drivers, and USD 14 or less from travelers) (Global Security, Oct. 2013; OSAC, Mar. 2014).

Public services Very high risk

The public services sector carries a high corruption risk for businesses. Bribes are often exchanged and are required to obtain public services in Turkmenistan (FitW 2015). For instance, an unofficial payment of between USD 6,000 and USD 10,000 is needed to register a business (Global Security, Oct. 2013). Public employees engage in corrupt practices, patronage is widespread, and government bureaucracy is confusing and cumbersome (Global Security, Oct. 2013; BTI 2016).

Land administration Very high risk

Companies working with the land administration must contend with a very high risk of corruption. The construction sector has been identified as the most corrupt sector in Turkmenistan; contractors are known to inflate costs to cover bribes paid to officials (NiT 2015).

Private ownership of land is not allowed in Turkmenistan, but foreign businesses may lease land provided it will not be used for agricultural purposes (ICS 2015; BTI 2016). Property rights are poorly protected, and the government can force investors to vacate their land or confiscate their property following a court decision (ICS 2015). Businesses should keep in mind the potential threat of expropriation by the government without fair compensation (BTI 2016).

Tax administration Moderate risk

The tax administration is a moderate-risk sector. Extensive tax examinations are sometimes used to discriminate against investors (ICS 2015). Furthermore, foreign companies are subject to higher taxes than those imposed on local companies (ICS 2015).

Customs administration Very high risk

Companies dealing with the customs authorities must contend with a very high risk of corruption (ICS 2015). Bribery is widespread when trading across Turkmenistan's borders; bribes to obtain import certificates range from between USD 100-150 per truckload of goods (NiT 2015; Global Security, Oct. 2013). Importing and exporting is subject to burdensome regulations and lengthy bureaucratic procedures (BTI 2016). Furthermore, foreign businesses are likely to experience more burdensome customs clearance procedures than local enterprises, which enjoy preferential treatment (ICS 2015).

Trade in luxury goods is confined to members of government officials' families, while other goods can be traded freely but are subject to heavy regulation (BTI 2016).

Public procurement Very high risk

The public procurement sector carries a very high risk of corruption. Bribery is an important part of securing government contracts (FitW 2015). All important projects require a presidential decree, so connections and close ties with the president are instrumental to doing business (BTI 2016). Investors coming from countries that are "friendly" to the Turkmenistan regime are more likely to win tenders (ICS 2015). The process of awarding large public contracts is not subject to any legal control or oversight and is ultimately decided by the President, who also enjoys access to non-transparent extra-budgetary funds that he uses for his own benefit, mainly for the arbitrary establishment of prestige projects (FitW 2015; BTI 2016).

Natural resources Very high risk

Even though most foreign investments focus mainly on oil and gas projects, the natural resources and extractive industries are very opaque and are high-risk industries. The sector is not subject to any public oversight nor public audit, and there is almost no government data available on the oil and gas industries (Natural Resource Governance Institute, Jan. 2016). Similarly, there is no information on the licensing process, and contracts and negotiations surrounding these are confidential (Natural Resource Governance Institute, Jan. 2016). The government and state-owned enterprises monopolize the natural resources and extractive industries, including oil and oil-based products, natural gas, cotton, and grain.

Licensing decisions in the hydrocarbon industry cannot be appealed (Natural Resource Governance Institute, Jan. 2016). The diversion of public funds is prominent within the industry; only 20% of revenue from the sale of state-owned hydrocarbons end up in state coffers; the remaining 80% remains under the control of the hydrocarbon agency (FitW 2015).

Legislation

The government of Turkmenistan has a legal framework to curb corruption in place, but enforcement is very poor. The 'On Combating Corruption' law is the main piece of legislation criminalizing corruption offenses, while public officials are also subject to a code on ethical behavior covering bribery. The country lacks an effective and independent auditing mechanism to implement anti-corruption policies, and the political will to enforce anti-corruption laws is missing (BTI 2016). Implementation of the legal framework has also been impeded by the overlap of responsible authorities and agencies (BTI 2016).

Impunity is widespread, and prosecution of corruption cases is typically politically motivated, targeting officials who have fallen out of favor with the President (BTI 2016). High-ranking officials working in key sectors such as the natural resources and extractive industries are frequently dismissed, opening up opportunities for bribery in exchange for lucrative governmental positions (BTI 2016). Reshuffles in ministers and officials within the government are also common, so appointed staff often abuse their office for personal benefit as they know their service time is short-lived (BTI 2016). Appointed officials and elected officials not required to disclose their assets (HRR 2014).

Turkmenistan has acceded to the UN Convention against Corruption but is not a party to the OECD convention on Combatting Bribery of Foreign Public Officials in International Business Transactions.

Civil society

The law provides for media freedom, but in practice, Turkmenistan ranks among the countries with the lowest degree of press freedom in the world (BTI 2016; RWB 2015). The government controls the press, broadcast outlets, and the internet (BTI 2016). The President and his ministers control all content and exclude any critical reporting, and journalists resort to self-censorship for fear of retaliation (BTI 2016; HRR 2014). In one case, freelance journalist Saparmamed Nepeskuliev was arrested and held incommunicado for a month in July 2015 after reporting on corruption. The journalist's family was told by unofficial sources that Nepeskuliev was sentenced to three years in prison on drug offenses, but it is believed that reporting on corruption lie behind his sentence (AI 2015-2016). Citizens have no access to government information even though this right is provided for by law (BTI 2016, HRR 2014). Foreign critical internet sites are blocked, and the media environment in Turkmenistan is considered "not free" (BTI 2016; FotP 2015).

Freedom of assembly is guaranteed by law but is severely restricted in practice. Very few official NGOs exist in Turkmenistan; no political NGOs are allowed to operate, and independent organizations only exist at a rudimentary level (BTI 2016). Active civil society organizations are subject to strict government oversight (BTI 2016). Foreign NGOs often face harassment by authorities, greatly impeding their activities, and civil society is completely excluded from the political process (BTI 2016).

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