TURKMENISTAN - Refining, Chemical & Industrial Base.

The oil refining industry in Turkmenistan is being modernised. Under a set of projects costing over $2.5 bn and launched several years ago, the country's two refineries are being upgraded. Since mid-2002, President Saparmurat Niyazov has been considering a new 100,000 b/d refinery to be built under another project.

The refining and industrial sectors of Turkmenistan, unlike those of other members of the Commonwealth of Independent States (CIS), avoided a serious deterioration after the collapse of the Soviet Union. The two refineries dating from the Soviet era continued to function with some hiccups, while the small-scale chemical industries and the agricultural sector did not face the problems suffered in neighbouring Central Asian countries.

The overall economic situation in Turkmenistan between 1991 and 1993 was regarded as a "model" for the Central Asian region. But things changed rapidly for the worse from 1993 onwards. A combination of problems, worsened by the regime's dictatorial style and lack of transparency, caused a down-turn in the economy.

Things began to improve in 2000 because, thanks to high oil prices and increased gas exports, the country's economy grew at a rapid pace. Since then very high GDP growth rates have been reported every year. But foreign investment, vital if the refining and chemical sectors as well as the industrial base are to be expanded, is not coming into the country at the pace which the government had originally envisaged (see DT No. 12).

A change for the better is not expected until Turkmenistan implements the necessary macro-economic reforms, secures oil and gas export outlets in addition to the Russian pipelines, and collects debts owed by other former Soviet republics. Although there are many young and pragmatic technocrats functioning under President Niyazov, they are all subject to a personality cult developed by the ruler (see who's who in next week's DT).

Compared to other CIS states like Ukraine, Belarus, Kazakhstan or Uzbekistan, the industrial base of Turkmenistan is relatively small. The country's major non-energy exports are cotton, textiles and carpets - mainly to markets in the former Soviet Union and to Turkey and Iran. Private business has not been able to reach its potential due to constant changes in the legal environment as well as restrictive regulations from the Soviet era which remain in force.