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FEDERATION OF EURO-ASIAN STOCK EXCHANGES ANNUAL REPORT APRIL 2011 STATE COMMODITY & RAW MATERIALS EXCHANGE OF TURKMENISTAN The exchange is one of the most important domestic economic institutions to date and acts as the main body for import and export operations in the country as well as a government regulator. Shaberdi Meredov CEO HISTORY AND DEVELOPMENT The State Commodity and Raw Materials Exchange of Turkmenistan (SC&RME) was created by decree of the President of Turkmenistan, Saparmurat Turkmenbashi, in 29 July 1994. The Exchange is one of the most important domestic economic institutions to date and acts as the main body for import and export operations in the country as well as a governmental regulator. There are many indicators of activity regarding the Exchange. During 2004, 1,071 export contracts for the sum of US$ 677,577.3 thousand were registered. These figures are indicative of the favorable political and economic situation in Turkmenistan, its rich natural resources, and of utmost importance, the reliability and stability of state organizational structures to attract business from all over the world. SC&RME has relationships with more than 45 countries. Business people from Turkey, Russia, the USA, the UAE, Germany, Great Britain, buy oil products, liquefied gas, cotton fiber, cotton yarn, handmade Turkmen carpets, hides and knitwear from Turkmenistan. An information and analytical system was created for the SC&RME to enable direct operational control of contract execution as well as for information retrieval. The InfoBase database will be developed to allow the retrieval of world quotations on significant commodities in real time and to facilitate potential marketing outlets for domestic commodity production. FUTURE OUTLOOK The following plans are currently underway: • further development of external economic links with foreign trade companies; • streamlining the uses of PR companies and the services they provide in terms of mass media disclosure; • expansion of external contacts with international and regional organizations; • simplification of the contract registration procedure; and • increasing the level of skill and experience of Exchange staff through interactions between organizations. CONTACT INFORMATION Contact Name Mr. Shaberdi Meredov E-mail info@exchange.gov.tm Website www.turkmenbusiness.org PAGE 112
FEDERATION OF EURO-ASIAN STOCK EXCHANGES ANNUAL REPORT APRIL 2011 STATE COMMODITY & RAW MATERIALS EXCHANGE OF TURKMENISTAN ECONOMIC AND POLITICAL DEVELOPMENTS Politic and Economic Environment Mr Berdymukhamedov has presided over some modest reforms, taking steps to redress some of the more damaging policies implemented by his predecessor, Saparmurad Niyazov. However, prospects for a fundamental shift towards a more liberal political system seem remote. Reforms are not expected to result in a more transparent or democratic political process. The number of deputies in the Mejles (parliament) was increased, ostensibly to ensure better representation of the population, but it enjoys no greater authority than its predecessor. Crucial to Mr Berdymukhamedov's survival in office will be rewarding officials and balancing competing interests–ensuring the flow of gas exports, and hence inflows of foreign exchange–which underpin the patronage network. This will require a resolution to the dispute with Russia stemming from the shutdown (due to an explosion in early April) of the main gas export pipeline to Russia, halting most Turkmen gas exports for at least three months, and evolving into a dispute over the price of Turkmen gas exports to Russia. The administration is considering taking Turkmenistan some way along the path followed by Kazakhstan: making the country more welcoming to foreign investment, but keeping political liberalisation to a minimum. Although Russia will remain Turkmenistan's largest gas export market in 2009-10, it will face growing competition from China, the EU and, potentially, the Middle East. However, with global energy prices set to remain depressed for some time, doubts over the commercial viability of such projects will persist, and will make it more difficult to find the necessary financing, particularly given that many of the EU's larger economies are expected to post negative growth in 2009. For this reason, Russia is expected to remain Turkmenistan's largest gas export market for the foreseeable future. China and Turkmenistan are constructing a gas pipeline that will connect the two countries. Turkmenistan says that it will be ready to start pumping gas at end-2009, with China eventually expected to import up to 30bn cu metres annually from Turkmenistan along this route. Turkmenistan will also promote closer links with countries in the Middle East, such as Jordan, which will give it further leverage. Economic Performance The IMF has praised the authorities' "prudent" macroeconomic policies, but the loss of a sizeable part of gas export revenue is likely to be placing serious strains on the budget. Despite Mr Berdymukhamedov's stated willingness to contemplate economic reforms, he has in practice presided over few reformist measures in his two years in office. The state retains a dominant role in all sectors of the economy, and relies on subsidies, price controls, and the free provision of utilities, to keep the economy afloat. State control over the leading economic sectors remains tight, the public finances remain opaque, and monetary policy remains rudimentary. Some policy changes are possible in the hydrocarbons sector; recognising the country's technological and financial limitations in development of the sector, the president has been more receptive to foreign oil and gas companies wishing to invest in the industry. Companies from countries such as Russia and China, having greater experience of operating in Turkmenistan, will be well prepared to work within existing constraints. Serious restrictions on liquidity, especially in 2009, are likely to limit Russian investment. Owing to likely losses to budget revenue from the disruption to gas exports from early April, it is forecast a deficit equivalent to 1% of GDP in 2009, up from our previous forecast of 0.1%. The deficit is expected to decline moderately in 2010, to 0.5% of GDP. Despite evidence that the global economy is stabilising, the outlook remains extremely subdued. After posting estimated growth of 3% in 2008, the economy is expected to contract by 5% in 2009. Russian investment will be lower than in recent years. Chinese investment into the Turkmen hydrocarbons sector will provide some support for the economy, but investment from other sources will remain minimal. Agricultural output should improve from 2009 owing to the weak base established in 2007- 08, but the sector will continue to experience serious difficulties because of the lack of reform. Estimated inflation in 2008 accelerated to 13% due to large increases in prices of fuel and public transport, as well as higher prices for imported foodstuffs. The rate is expected to accelerate further in 2009, to 15%; although global non-oil commodity prices are forecast to fall, the price of imported goods will be pushed upwards by the devaluation and redenomination of the manat. Base effects should allow consumer price inflation to decelerate to around 12% in 2010. A current-account surplus was estimated at US$4.7bn in 2008, equivalent to more than 50% of GDP, and is expected to continue to post substantial, although smaller, surpluses throughout the forecast period. Price trends for imports of capital goods are favourable, and the devaluation of the official exchange rate and restrictions on access to foreign exchange, in conjunction with tariff and nontariff barriers, will keep import growth muted. Export revenue will be lower. Reliance on imported services in sectors such as construction and hydrocarbons will result in moderate growth in services debits. Transit trade will provide only limited services credits, ensuring that the services deficit remains relatively large. Gas exports will keep the overall current account in strong surplus— albeit substantially lower than previously forecast.* * The Economist Intelligence Unit Limited, July 2009 REAL GDP (TMM millions) CONSUMER PRICES (% CHANGE PA; AV) (%) 25 20 15 10 5 0 6 2005 2006 2007 2008 2009 2010 2005 2006 2007 2008 2009 2010 13 12 11 10 9 8 7 PAGE 113
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