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Turkmenistan: First Positive Growth Expected In Six Years Says EBRD

London, 16 April 1997 (RFE/RL) - A report by the European Bank for Reconstruction and Development (EBRD) says the gross domestic product (GDP) of Turkmenistan is forecast to be ten percent in 1997 -- the first positive growth in the Central Asian country for six years.

Inflation is also on a downward curve, after the hyper-inflation of 1,330 percent in 1994; 1,262 percent in 1995; and 446 percent in 1996.

The report says that Turkmenistan, with the fourth largest natural gas deposits in the world and substantial oil reserves, has "vast economic potential." However, the economic performance of this country of 4.2 million people has been affected by the caution about transforming itself from a centrally-planned to a market-based economy. The report says production and trade remain largely centralised, many goods and services are subject to price controls, and there are limits on the amount of land that can be owned by private individuals.

But, in 1995, the country announced a wide-ranging package of economic reforms, which were welcomed by foreign observers as a sign the country is "at last embracing the transition process."

This year, the Turkmen authorities signed several oil-and-gas deals, signalling their intention of joining the global petroleum industry. They include a memorandum of understanding with an Anglo-U.S. venture about the production of petroleum deposits along the Caspian Sea.

The Government of President Saparmurad Niyazov is also seeking to improve export revenues. But problems in the management of the economy recurred last year, made worse by disappointing wheat and cotton crops.

The report says: "Turkmenistan's natural gas deposits will almost certainly make it one of the key suppliers of energy to Europe and Asia in the 21st century. But to fulfill this potential, the Government faces the challenge of developing a pipeline system easing the flow of natural gas to international markets." It says the "situation may improve once the gas pipeline from Turkmenistan to Teheran has become operational." The pipeline is planned to be completed by the end of this year.

In 1993, a change in regional policy prevented Turkmenistan from using the existing regional network of pipelines to exports it natural gas to markets beyond neighboring CIS countries. This change meant that Turkmenistan lost access to Western petroleum markets. This significantly reduced its hard-currency earnings.

In 1995, Turkmenistan entered a joint venture with Russia's Gazprom and a U.S.-incorporated, Russian-owned company. This joint venture was given the task of collecting payment for deliveries of natural gas in the CIS. But the report says: "Improving the payment record of Turkmenistan's natural gas customers is proving difficult."

Turkmenistan has made only limited progress in privatising and restructuring its economy, and in liberalising its markets and trade.

Although trade and production remains largely centralised, in 1993 the government sold 1,800 catering shops, tailors, hairdressers, laundries and other small business units. Six-hundred were sold to private individuals, and the rest purchased by cooperatives.

Shops for food, including small outlets for fruit and vegetables, remain fully Government-owned. Some agricultural land has been leased to private individuals, and land ownership has been legalised. But the maximum plot size that can be owned privately is 14 hectares.

Over the past two years, the system of price controls has been loosened significantly. The number of goods and services subject to price controls has fallen to about 50 from more than 400. The authorities have allowed some informal price liberalisation. For example, informal markets for food items, technically subject to rationing, have sprung up. As part of the economic reform program, the "massive flow" of state credit available to industry is being reduced.

The EBRD report concludes:"Although still at an early stage of transition from command to free-market economy, the country is expected to carry through reforms over the next few years."