Economic Strategy of Turkmenistan: National Model of Sustainable Development

Serdar Berdimuhamedov
Economic Strategy of Turkmenistan: National Model of Sustainable Development
Today, over 90% of economic entities operating in Turkmenistan are non-state enterprises.

During the past 30 years of independence, Turkmenistan, with high economic development indicators, has firmly consolidated its positions among countries successfully integrating into the global economy. The further development of Turkmenistan by stimulating entrepreneurship, introduction of advanced technologies, creation of joint ventures and joint stock companies, the development of insurance, stock exchange and securities market, and the implementation of fundamental transformations in all industries are outlined among the priority directions of the economic strategy of President Gurbanguly Berdimuhamedov, the author of innovative initiatives. The main goal of the reforms implemented to overcome the raw material orientation of the economy, develop market transformations, efficiently use natural resources, create favorable conditions for the life of people is reflected in the motto "The state is for people!"

The consistent implementation of the strategic course towards industrial and innovative development over the past historical period has ensured the economic independence of our state. This allowed Turkmenistan, during the current period of global economic downturn, an unforeseen and sharp decline in energy prices due to the impact of the coronavirus pandemic, to maintain competitiveness and steadily develop many sectors of the economy. Support for infrastructural transformations and a course towards achieving the Sustainable Development Goals, the implementation of the tasks and goals of the National Program for the Socio-Economic Development of Turkmenistan for 2011-2030, The Program of the President of Turkmenistan for the Socio-Economic Development of the Country for 2019-2025 made a significant contribution to the improvement of production efficiency, thoughtful use of investments, including support for the non-state sector of the economy. The adoption and gradual implementation of the National program to mitigate the impact of the difficulties prevailing in the world economy on the country's economy and sustainable development of the national economy for 2020-2021 and the Plan of operational socio-economic measures in Turkmenistan against an acute infectious disease pandemic have become an effective step in the fight with the coronavirus pandemic, protecting the health of citizens and supporting a number of sectors of the economy.

Analyzing the past steps, Turkmenistan’s transformation from an agrarian country into an industrially developed state over the past years of independence should be outlined. More precisely, if at the initial stage in the country's gross domestic product (GDP) the share of agricultural products was more than 40%, industrial products - 17%, of which over 80% belonged to the extractive industry, now the share of industrial products in GDP is more than 27%, agricultural products - 11-12%. Along with this, the structure of agricultural production has been radically reformed. Simultaneously with the preservation of the role of cotton in the industry, Turkmenistan restored grain growing, creating a basis for the development of animal husbandry, which ensured the country's food security.

A diversified economy has been formed in Turkmenistan, consisting of such important sectors as the electric power, oil and gas industry, mechanical engineering, metallurgy, chemical industry, construction, electronics, light and food industries, and pharmaceuticals. The strategic industry is the gas industry, which includes natural gas production and processing sectors in its structure. The priority projects are the construction of a Turkmenistan-Afghanistan-Pakistan-India transnational pipeline, Turkmenistan-Afghanistan-Pakistan power transmission lines and fiber-optic communications. The implementation of these promising regional projects will open up new strategic directions for energy flows. Supplying natural gas to such large countries with dynamically developing economies as India and Pakistan will assist to enter the markets of the Asia-Pacific region, the Near and Middle East.

In the gas industry, the focus is on deeper and more extensive processing of hydrocarbons. The refining industry continues to implement innovative production and transport infrastructure projects. The commissioning of facilities for vacuum processing of fuel oil, alkylation of light olefins, isomerization and mixing of gasolines and polypropylene at the Turkmenbashi Complex of Oil Refineries makes it possible to produce new types of innovative competitive products. One of the promising directions for the development of the fuel and energy complex is the creation of large enterprises for the production of polymers, the main source material for the manufacture of products necessary in industry, construction, transport, agriculture and everyday life. Another promising and rapidly developing area is the chemical industry, whose enterprises produce mineral fertilizers, technical iodine, sulfate and other specialized products. The rich natural resources of the country allow producing all types of mineral fertilizers.

Turkmenistan’s economy is stable and competitive. The country saw a 2020 GDP growth of 5.9%. Turkmen economy’s GDP growth figure for the first half of 2021 amounted to 6.2%. The country maintains the stability of the financial system, measures are being taken to increase financial involvement and widely attract investment in the financial services sector. Great importance is attached to stimulating the non-state sector of the economy, the share of which is growing from year to year. At the end of 2020, excluding the fuel and energy complex, the share of the non-state sector in the gross domestic product reached 70%.

During the years of independence, large volumes of capital investments have been attracted to diversify the national economy and improve the entire infrastructure. The investment policy aimed at increasing the production potential of the economy contributed to the efficient development of production resources, sustainable growth in total demand and gross domestic product. Investments are also one of the main tools for the comprehensive development of the economy. Their share in the gross domestic product is 25-30%. At the same time, 15% of the total volume is made up of foreign investments. Over the past 30 years, the volume of basic investments in the country's economy has grown a hundredfold to more than $200 billion. Over 66-68% of capital investments are directed to the production sector. This, in turn, creates favorable conditions for reforming the structure of the economy, cardinal modernization of the manufacturing industry, increasing the competitiveness of products of the processing industry, accelerated development of import-substituting and export-oriented industries through the introduction of innovative information technologies. Investments in human capital are of particular importance as a form of quick payback and the most reliable investment. In turn, these investments (in education, healthcare, science, etc.) have strengthened the innovation base of the country's economy.

Developing cooperation with different countries, Turkmenistan is actively entering new foreign markets, which is also facilitated by the created modern transport and logistics infrastructure, the transformation of the country into one of the transport and communication centers along the East-West and North-South directions. In this context, Turkmenistan joined the World Trade Organization as an observer in 2020 and began to improve its trade policy, bringing it in line with international standards. This step is intended to help ensure further sustainable economic development of the country.

At this stage, during the period of accelerated modernization and industrialization of the economy based on the introduction of digital technologies and transition to a new socio-economic model based on the deepening of institutional transformations, statistics are of particular importance. In the gradual transition to market relations, the demand for government statistics is growing even more. Statistics are very important in the management and planning of macroeconomic activities, drafting budgets, and the development of long-term programs for the country's socio-economic development. In accordance with the Law of Turkmenistan on Statistics, the State Statistics Committee uses appropriate methods when compiling statistics, focusing on the standards widely used in international practice. The promising task of national statistics is the introduction of indicators and classifications that meet statistical experience, and the needs of market-oriented economic management.

To this end, work is being carried out on the transition to a modern system of national settlements, which is used to characterize the state of the economy at the macro level and the general form of development, to establish the relationship between the most important macroeconomic indicators and industries. The structure of the economy has changed in Turkmenistan as a result of large-scale transformations in all sectors during the years of independence. In recent years, a plan to improve the balance of key macroeconomic indicators has been taken into account. In the current period of development, non-hydrocarbon industries, such as the agricultural complex, transport and communications, and trade, make a significant contribution to the growth of the gross domestic product. More than 27% of the structure of Turkmenistan's GDP is industry, 11% - transport and communications, 21% - trade.

Institutional reforms carried out during the years of independence have led to qualitative and quantitative transformations in the structure of economic entities. Today, over 90% of economic entities operating in Turkmenistan are non-state enterprises. The increase in the share and enhancement of the private sector is facilitated by the targeted measures to support private initiative, improve the business environment, create reliable systems for protecting and guaranteeing rights to private property, and preferential taxation.

The priority vector of national statistics activities in the field of international cooperation is the assistance in the preparation of statistical reports as part of the implementation of projects in the field of the Sustainable Development Goals. In cooperation with the United Nations in Turkmenistan, large-scale work is underway to form a national database on indicators of the sustainable development system. The creation of a national platform for statistical reporting on SDG indicators will contribute to the process of developing recommendations regarding information flows and their fragmentation.

The social sphere is one of the defining indicators of the development of the state, which is primarily designed to ensure the well-being of citizens. This sphere is assigned a key role in protecting the dignity, freedoms and human rights enshrined in the Constitution of Turkmenistan. Its principles and organization vary depending on the values recognized in society. The humanism inherent in the Turkmen people is really manifested in the essence of the current social reforms and contributes to the consolidation of the foundations of statehood.

Economic successes and achievements over the years of independence have created a solid foundation for a happy life of the people of Turkmenistan. The annual stable dynamics of the development of the national economy, an increase in the volume of investments aimed at building human potential, and an increase in other macroeconomic indicators made it possible to strengthen social security and improve the well-being of the population, to regularly increase its income. In our country, the priority is the satisfaction of the interests, needs and wishes of citizens. The legal basis for activities in this direction is based on the statement that "in Turkmenistan the highest value of society and the state is a person", which is set forth in Article 4 of the Constitution of Turkmenistan. Historically, it determined the methods of state structure of the Turkmen people, the essence of the humanistic principles of our ancestors. And therefore, the social policy pursued today clearly confirms the continuity of the set course.

In Turkmenistan, it was decided to reorganize the pension provision of the population by introducing a notional accumulation method, which became one of the key tasks of the country's Pension Fund. Therefore, on March 31, 2012, the Law of Turkmenistan on State Pension Insurance was adopted, and on October 19, 2012 - the Code of Turkmenistan on Social Protection of the Population. These legislative acts determined the legal, economic and organizational foundations for the creation and implementation of the state pension insurance system, which is the main factor and financial basis for the transition to the notional accumulative method. The positive reforms in this direction predict a further increase in the standard of living of the population, at the same time, the successful achievement of the Sustainable Development Goals at the national level.

The financial and banking sector is assigned a special role in further strengthening the economic foundations of independence. Proceeding from this, with the initiative of the President of Turkmenistan to reform the financial and banking sector, the country approved the State Program for the Development of the Banking System of Turkmenistan for 2011–2030 in 2011. This document outlines priority tasks, as well as measures to improve, in accordance with the modern requirements, the functions of the banking system in large-scale economic reforms implemented in the country, improve the quality and increase the range of banking services in accordance with international standards, and maintain a stable exchange rate of the national manat.

Innovative transformations carried out in this direction have a positive effect on increasing the capitalization ratio of banks, strengthening the base of financial resources, optimizing banking supervision, increasing the volume of banking operations, introducing innovative banking products and technologies, improving the quality of services provided to the population in this area. The consistent incorporation of new technologies into this area allows to provide the population with remote payment and settlement, deposit and other services. In order to further improve the banking sector, develop the national payment system, ensure its efficiency, reliability and security, the payment system is currently being modernized with the introduction of modern information technologies and computer programs. The scale of non-cash payments is increasing day by day, and credit institutions are regularly introducing new types of services.

The high level of economic stability, the provision of legal guarantees and state support led to the growth of foreign investors' interest in Turkmenistan. As a result of investments directed to the production and social segments of the national economy, there is an opportunity for the implementation of large projects at the state and international level, the national production base is radically changing, new industrial facilities, and huge complexes of social and cultural buildings are being built and commissioned. Foreign companies participated in financing projects in such areas as heavy industry, textiles, agriculture, production of building materials from local raw materials, tourism, transport and communications, civil aviation, modernization of rail and sea transport infrastructure, construction of highways, operation of a national artificial satellite.

The State Bank for Foreign Economic Affairs of Turkmenistan is carrying out effective measures to implement the national investment policy and attract foreign capital to the country's economy. This financial institution, one of whose primary tasks is to attract medium and long-term foreign loans to finance strategically significant investment projects, acts as the official representative of our state in the international financial market. To this end, the State Bank for Foreign Economic Affairs of Turkmenistan closely cooperates with leading international financial organizations, development banks and export credit agencies. The bank is currently taking appropriate measures aimed at the implementation of the Program for the development of foreign economic activity of Turkmenistan for 2020-2025 and the development of international partnership. Together with foreign investors, activities are carried out on contracts, production sharing agreements, contracts for the provision of services, the provision of international loans, the creation of joint ventures - contractual forms, which are the main mechanisms for attracting foreign investments to the economy of Turkmenistan.

The development of joint and other organizational and legal forms with the participation of shareholders contributes to the integration of Turkmenistan into the system of world economic relations, and also acquires great importance in creating a market infrastructure. They also play an important role in attracting foreign direct investments. The use of contractual forms has intensified in the construction sector. A number of projects have been implemented on the Turkmen coast of the Caspian Sea and other onshore areas within the framework of licenses issued to foreign companies and investors on the basis of production sharing agreements. International financial institutions take an active part in providing loans for investment programs and large projects implemented in our country, as well as in financing them.

In order to implement the policy of the Turkmen leader to provide state support to small and medium-sized businesses, the banking system provides domestic private sector representatives with different types of concessional lending and sources of foreign financing. The positive experience accumulated in this area also contributes to the development of entrepreneurship. Within the framework of the program of providing loans for investment projects of the country's businesses to create or expand production, long-term lending is intensively developing due to such areas as lending to private producers.

As a result of the globalization of the world economy, competition intensifies in the international market. Based on the current factors of the development of the states, it can be judged that in the coming years those countries that provide an opportunity for their citizens to fully realize their professional skills and abilities, as well as transform new knowledge, practical developments into modern technologies and products, will flourish and be in the economic vanguard. Taking these into account, Turkmenistan currently attaches great importance to vocational education as one of the key components of diversified economic growth. Therefore, in the context of the active integration of our country's economy into the international community, the training of a new generation of specialists with extensive knowledge in different areas of the economy and well versed in innovative technologies is carried out in a coordinated manner, as part of the implementation of the economic strategy.

All the large-scale reforms implemented in the sectors of the economy in accordance with a socially oriented policy determine the confident progress of independent neutral Turkmenistan on the path leading to new achievements and improving the well-being of the people. The fulfillment of all the tasks outlined in the state programs will allow us to form optimal market advantages in the near future, fully integrate into the global economy, and significantly increase foreign trade turnover. And the widespread introduction of innovative technologies in all spheres of production will help to increase the competitiveness of domestic producers, expand the domestic market of goods and services, in a word, strengthen the foundations of the financial and economic system.

The successful implementation of the strategy, implemented under the wise leadership of President Gurbanguly Berdimuhamedov, in accordance with the main principle " The state is for people!", plays a crucial role in further increasing the economic potential of Turkmenistan, increasing the international authority of the sovereign Turkmenistan as a country that is steadily developing in political and economic aspects. And all the achievements in the harmonious development of the national economy have become possible thanks to independence – the basis of our statehood.

Serdar Berdimuhamedov,

Deputy Chairman of the Cabinet of Ministers, Doctor of Political Sciences

The article was originally published in Turkmenistan’s Golden Age outlet on 22.09.2021