A plan to establish a free economic zone in the Caspian port city of Turkmenbashi is designed to boost Turkmenistan’s foreign trade, but NBCentralAsia experts say its success will depend on whether the government is genuinely committed to a free market, liberal visa and customs regulations, transparency, and investment guarantees.
At a cabinet meeting on May 23, ministers announced that a package of tax breaks, preferential customs tariffs, and long-term land leases for buildings and roads is being put together for the planned free-trade zone at Turkmenbashi, formerly known as Krasnovodsk. Other arrangements will include services and transport connections, including special flights.
The hope is that Turkmenbashi will attract foreign investors since it is a transport hub for sea, rail, air and road routes, and has a large oil refinery.
NBCentralAsia observers say that for the scheme to work, it is essential for the authorities to create transparent and open economic market conditions and to offer investors legal guarantees that their money is safe.
An economic expert based in Ashgabat says that the Turkmenbashi special zone cannot exist as an isolate “reservation” and the authorities should be prepared to allow some of the new legislation to extent to the rest of the country.
“The question is whether the state will be willing to change its domestic and foreign policy once it adopts the legal regulations governing the free economic zone,” he said. “Once the zone is set, governing bodies will necessarily lose some of their powers of control.”
Experts say investors may be reluctant to come to Turkmenistan because it has not yet signed a number of important international agreements that protect investors. For example, there are no laws obliging businesses to be open and honest about their practices, there is no protection for investors who are prosecuted for illegal reasons.
An NBCentralAsia commentator based in Ashgabat says it is too early to talk about stability and legal guarantees for investors, because Turkmenistan is still in a state of political flux.
“Everything depends on how the legislation develops and what messages the government sends to potential investors,” he said. “There used to be a free economic zone along the Karakum canal, but it didn’t work properly because the laws kept changing.”