2017 Chronicles: Financial and economic sector

Steadily following the course of fundamental reforms, Turkmenistan has entered new stage of its history in 2017, which was formulated by the President of the country Gurbanguly Berdimuhamedov as a period of steadfast development and further successful implementation of large-scale reforms. 

The Head of the State outlined further consolidation of fundamental basis of the country, improvement of its international authority and considerable growth of economic potential among priority directions of the state course in short-term view. All economic and management, without any exceptions, as well as creation of favourable investment climate from the appropriateness and long-term interests point of view, were highlighted as the main direction of new strategy of the President of the country. 

Analysing the outcomes of the last year, it is worth mentioning that chronicle of the events for the period under review proves that Turkmenistan steadily solves grandiose objectives on national and international importance, achieves positive results in all sectors of national economy and rapidly integrates into the world’s economic relations. Integrated work on introduction of advanced technologies for increment of the export volumes of competitive goods, expansion of import substitutive production, support of domestic entrepreneurship and development of market mechanisms in different spheres was continued to achieve set targets. Expanded industrial programme, the course toward the diversification of the branches not related to hydrocarbon resources was implemented together with the policy of wide crediting and reduction of inappropriate expenses. 

Practical measures in this direction taken by the initiative of the Head of the State allowed not only keeping but also increasing the growth rates of national economy, which is indicated by the main macroeconomic indices for 2017. The GDP was provided on 6.5 percent level. Reduction of import of materials, food and industrial goods was observed due to the increment of volumes of import substitutive production inside the country. This was indicated by the following figures - the export volumes of domestic goods increased to 6.6 percent, while the import is reduced to almost 21 percent. 

Banking sphere, which is entrusted with regulation of monetary circulation, control, accumulation and distribution of financial flows, payment settlements between the entities, crediting of entrepreneurs, population and certain branches, plays important role in modern market economy. Taking into account global process in the world, President Gurbanguly Berdimuhamedov outlined the review of traditional principles of monetary policy, protection of financial stability, improvement of national currency exchange rate, provision of stability of payment balance of the country, arrangement of relative standards in accordance with international among the main objectives in this sphere. 

Following set objectives, crediting departments carried out integrated work within the year. As a result, 2017 was marked with the development of the infrastructure of electronic banking, growth of non-cash payments, increment of banks capitalization, improvement of medium and small business crediting as well as active implementation of new types of banking services and their improvement. According to 2016 indicators, the exchange rate of Turkmen manat remained stable and inflation rate was under control within set boundaries. 

According to international experts, extensive measures of monetary and credit, tax and budget policy taken during the year supported the growth of investment potential, consolidation of financial base, wide implementation of the standards of corporate management and banking monitoring and increment of the operations spectrum. As one of the example it is worth mentioning that in 2017, the State Bank of Foreign Economic Affairs, which is official representative of Turkmenistan in international financial market, received the title of the best bank in the country for the 13th time since 2001 according to competent British “The Banker” magazine and was awarded with certificate “The Bank of 2017 in Turkmenistan”. Constantly expanding its presence in retail and corporate segment, the bank supports stable growth of national economy and turns into the largest universal financial institution of the country. Same as in previous years, the greatest attention has been paid to the expansion of fruitful contacts with International Monetary Fund, the World Bank, European Bank for Reconstruction and Development, Islamic Development Bank and other leading international financial institutions what supports further development of national financial and banking system., growth of the investments to different branches of economic complex of the country. It is necessary to mention the signing of the Memorandum of Understanding between the Central Bank of Turkmenistan and the Fund of Savings Banks for International Cooperation of Germany among the main events of the last year. Eventually, practical realization of the agreements under this documents will support the intensification of equal cooperation in the improvement of financial system and professional training of banking specialists of the country. 

Signing of the Resolution on merging of the State Commercial Banks «Prezidentbank» and «Halkbank» was another important step under the reformation of national banking sphere and provision of its efficient activity for the realization of strategic objectives. This measure was taken for the consolidation of financial stability of the banks and provision of Turkmen citizens, legal entities of all forms of ownership and entrepreneurs with different modern quality banking services as well as for the protection of the interests of the investors and creditors. 

Implementation of the programme for transformation of the velayats aimed at the growth of social and economic characteristics and improvement of social demographic and ecological indicators and life quality of the population in the regions are integral part of progressive reforms initiated by the President. Relative plans for each region were elaborated for the implementation of activities outlined in new edition of National Programme of the President of Turkmenistan on improvement of social and living conditions of the population of villages, settlements, etrap towns and centres until 2020”. At the same time, the main attention was paid to the establishment of productions corresponding with real requirements of both internal market and export, to the improvement of investment activity and to the increment of working places. 

Realization of these plans supports the improvement of production, economic, technical, economic, scientific and educational, natural and resource potential in the velayats. Living complexes, numerous schools and kindergartens, medical and tourist as well as engineering facilities were built and put into operation in 2017. At present time, around 1700 large facilities to total amount above 42 billion US dollars are under construction in the country. 

Improvement of financial reporting is the main coordinating instrument for the establishment of the cooperation with different states of the world and attraction of foreign investments to the economy of the country. In this context, it is necessary to mention the adoption of the Resolution, according to which all entities and organizations (excluding crediting institutions) regardless of the ownership were assigned to implement international accounting and financial reporting standards from January 1, 2019. The advantages of the reformation in this sphere are that it is aimed at the provision of the transparency of financial condition of legal entities and private individuals and at the reflection of real economic situation. The measures in this direction will give the opportunity to take right and well-grounded decisions by the users of financial reporting of the entities. 

Taxation policy is one of the components of the state course. Starting of new productions and development of various entrepreneurship activities in the last few years allowed expanding taxation base and increasing tax and non-tax incomes to the State budget. In this regard, the Head of the State noted the necessity of fundamental reformation of tax system of the country at the session on the issues of further development of the economy in June 2017. 

Special emphasis was laid upon the importance of active implementation of modern methods in work, training of qualified specialists for explanatory work on the provisions of existing legislation in this sphere as well as upon the improvement of related regulatory and legal acts. Decision of President Gurbanguly Berdimuhamedov on transfer of the General State Tax Service under the jurisdiction of the Ministry of Finances of the country from July 2017 was significant step in this direction. 

Foundation of the Ministry of Finances and Economy as a result of merging of the Ministry of Finances and the Ministry of Economy and Development is among key measures for efficient activity of financial and economic complex. The objectives of this structure are the attraction of the investments to the economy, modernization of economic and financial structures and improvement of their competiveness in the world markets. 

Provision of social wealth, protection of rights and interests of the citizens are the priority vectors of the Government policy. In this context, it is worth saying that same as in the last years, stable improvement of the wealth of Turkmen citizens was observed due to the increment of wages, pensions, state allowances and students scholarships, well-thought price policy, support of private initiative as well as the complex of additional social benefits. Comparing with 2016, average salary wages was increased to 8.8 percent. 

Application of intellectual potential of the society, stimulation of the improvement of education level, scientific studies and labour force qualification makes great effect on the rates and quality of economic growth in modern conditions. Highest budgetary allocations, particularly more than 70 percent, are sent to the education, living and utilities sector, health protection and the Pension Fund. The financing of the measures for efficient management of labour resources and creation of the conditions for realization of constitution rights of the citizens for work occupied considerable place in the State budget. 

Continuing the subject, it is necessary to mention that according to the President’s Decree of July 2017, the salaries of personnel of the entities financed form the Budget, self—sustained enterprises and non-governmental organizations as well as pensions and state allowance, students scholarships were increased on 10 percent. In addition, the increment of all types of social benefits in the same volumes is planned for the next seven years. This fact is explained by stable development of the economy and financial and social stability in the country. 

Development of the entrepreneurship, which is important component of national economy, is one of key aspects of the Government course. Owing to comprehensive support and initiatives of Turkmen leader aimed at the stimulation of small and medium business, this sphere received strong impulse to the development recently. 

At the same time, big role is given to the realization of the programme of beneficial crediting of entrepreneurs. At present, Turkmen business representatives together with foreign companies take active part in implementation of the projects in construction sphere and building materials industry, solve the objectives of food provision, invest to production based on use of advanced technologies, operationally respond to market condition and successfully try out in new areas. It allows increasing the volumes of production, improving its quality and making it available by cost as well as creating additional working occupancies. 

We will demonstrate macroeconomic indices by the Union of Industrialists and Entrepreneurs as a visual example. Therefore, for the last year, industrial production was produced to the amount of 903.1 million manats, agricultural and food production to 2 billion 287.2 million manats. The growth rate reached 24.2 and 73.7 percent accordingly comparing with the same period of 2016. Construction and installation works were fulfilled to the amount of 6 billion 585.7 million manats. Trade turnover of the UIET was 11 billion 685 million manats, which comparing with the same period of previous year increased on 8.3 percent and the works to the amount of 995 million manats were performed in service sphere what is 9.2 percent more. 

Speaking of the next important vector of social and economic development of Turkmen state, the investment policy, it is necessary to note that the main objectives in this field are the formation of favourable environment supporting the increment of investment activity of non-governmental sector, the attraction of private domestic and foreign businessmen to modernization of the enterprises as well as the state support of large productions and social sphere. 

Open door policy led by President Gurbanguly Berdimuhamedov is a significant argument to the favour of the establishment of long-term business contacts. The interests of the leading foreign investors are explained by the presence of huge natural resources, export and transit capabilities of our country, its intensive industrialization and developing trade and service market. The willingness to cooperation from business circles of different world countries indicates the trust to Turkmenistan as to reliable, stable and responsible partner with good reputation, high international authority and good future of economic growth. 

Implementing big programmes aimed at the modernization and diversification and at the improvement of competiveness of national economy, Turkmenistan is seeking for long-term, beneficial and fruitful partnership with representatives of foreign business. Our state provides them with substantial support in the form of tax, custom, visa and insurance benefits. The adoption of related legislation and regulatory acts controlling legal basis of investors’ activity in the country as well as the course toward the privatization of the State property and denationalization plays important role in this process. 

As a result of practical measures, the share of foreign investments to Turkmen economy steadily grows every year and number of joint ventures is increased. Development of giant gas deposit Galkynysh, construction of gas processing complex for production of low-pressure linear polyethylene, plants for production of liquid fuel from natural gas, for gas-to-polymers processing, for polyethylene and polypropylene production with ethane cracking unit, complex for production of concentrated phosphorous fertilisers are among large investment projects implemented with the participation of the leading foreign companies. 

Geological survey and development of land and offshore hydrocarbon deposits are carried out in our country together with number of famous international companies on Production Sharing Agreements’ terms. 

Increase of the production of mineral fertilizers in the context of the provision of food abundance in our country and entire world is priority direction of the development of chemical production. Huge perspective are related with the opening of the largest in the Central Asia mining and ore dressing complex for production of potassium fertilizers built in Garlyk together with Belarusian partners. The construction of the plant for carbamide production in Balkan Velayat is also very important. 

Apart for heavy industry, foreign companies collaborate in the realization of the projects in textile industry, agriculture, electronics and construction materials production from local resources, tourist business, transport and communication sphere, modernization of civil aviation, railway and maritime transport infrastructure, construction of highways and use of national space satellite. 

International financial institutions including European Bank for Reconstruction and Development, Islamic Development Bank and other take active part in crediting and financing of number of investment national programmes and projects in Turkmenistan. 

Implementation of the Concept of establishment of free economic zones in Turkmenistan until 2023 developed after the initiative of President Gurbanguly Berdimuhamedov is to play important role in the improvement of investment activity. Speaking at the session of the Government on March 18, 2017, the Leader of the Nation noted that at present, free economic zones are integral part of economic relations on international level. Elaboration of legal foundation – the adoption of the Law of Turkmenistan on Free economic Zones outlining beneficial terms of taxation, custom and currency regime in such zones, was the first practical measure in this direction. 

Foundation of free economic zones in our country in near future will provide rapid development of the regions and expansion of export capabilities. Moreover, successful realization of the Concept will support the saturation of internal consumer market with goods, improvement of the population involvement, formation of modern market infrastructure, increment of foreign currency income to the budget as well as the transfer of technologies and modern management solutions and growth of foreign investments volume. Such activation of economic, especially foreign economic activity will result in the improvement of the competiveness of national economy, prosperity of the country and wealth of Turkmen people. 

Work of joint inter-governmental committees for economic cooperation, bilateral business councils as well as regular business forums and international exhibitions support to the accumulation of the volumes of foreign investments. Agreements and memoranda between Turkmenistan and number of states support the creation of favourable conditions for efficient long-term cooperation with the world community in all spheres and directions. 

It is necessary to note the fact that election of our country to three UN structures – Science and Technologies Committee for Development in 2017 – 2020, Commission on Population and Development in 2016 – 2020 and Social Development Committee in 2017 – 2021 at the session of the United Nations Economic and Social Council, is a bright evidence of international support of the measures taken by the Government of Turkmenistan for stable growth of national economy and adaptation to unfavourable external conditions. 

Adoption of the Programme of social and economic development of the country in 2018 – 2024 developed by the initiative of the Head of the State and based on the analysis of the global events occurring recently was one of remarkable events of 2017. This document stipulates further gradual transition to market economy that allows performing this process avoiding any distress and shocking moments. 

The Programme includes the measures for the improvement of the efficiency of work of economic structures and specifies the objectives for the improvement of the system of government regulation and its modernization, active investment policy, financing of existing projects as well as new ones including of international and regional significance, continuation of the reformation of financial and banking sphere. At the same time, internal resources are defined as the main sources what would serve as a bright evidence of stable character of economic situation in the country. 

Generally, realization of seven-year plan will give the opportunity for the expansion and intensification of the reforms oriented to market principles for stimulation of stable and comprehensive growth in longer prospect. Such approach is the product of well-thought government policy and integral part of the strategy of improvement of competiveness of national economy built on its own model of social and economic development. 

Summing up the outcomes in financial and economic sphere in 2017, it can be confidently stated that resting upon positive experience and big achievements, our country is about to make another important step toward the progress and prosperity. Positive tendencies of the development of Turkmen economy was repeatedly observed by the UN Economic and Social Affairs Department, the UN Conference on Trade and Development, International Monetary Fund, the World Bank and other competent financial structures, which forecast high growth of the GDP in the country in 2018.