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TURKMENISTAN - Other Industries.

The Turkmen industrial base was among the least developed during the Soviet era. The main focus was on agriculture, specifically cotton, and the situation has not changed much since the country declared independence in 1991. Turkmenistan has a fairly large textile manufacturing industry, and textiles constitute a major export. Other existing activities include the production of sulfites, and carbonite.

One major venture considered by India is a giant urea plant to be built close to a major gas field in Turkmenistan. It was said in 2000 the size of the proposed venture is such that it would involve 30 freight trains running continuously between Turkmenistan and the Iranian port of Bandar Abbas on the Persian Gulf, with another 10 trains loading or unloading at any time. India, Iran and Turkmenistan have already signed a trilateral agreement to use this trade route.

Also Ashgabat and New Delhi have considered a proposal to supply India with Turkmen gas by pipeline to be built via Afghanistan and Pakistan. The possibility of firm agreements to this effect has become strong in view of improving relations between Pakistan and India, with peace talks held in New York this week between Pakistani President Pervez Musharraf and Indian Prime Minister Manmohan Singh.

Much of the industrial activities in Turkmenistan revolve around basic agriculture. Half of the irrigated land is dedicated to cotton growth and Turkmenistan is the world's tenth largest producer. But the acreage devoted to cotton plantations is declining. Cotton is a major source of hard currency revenue for the country.

Farming until 1999 used to account for nearly half of Turkmenistan's GDP and employed about 45% of its workforce. By contrast, the manufacturing sector employed 20% of the workforce. The country's favourable climate and long growing season makes it suitable for the growth of cotton and a variety of other crops including grains, vegetables, and fruits. Livestock farming is also an important part of the agricultural sector.

Yet Turkmenistan is deficient in the food processing industry. Harvesting is done inefficiently, which has led to a situation where the country now has to import large quantities of grain, milk, dairy products, and various other food staples. As a result, the food processing industry is an area where the government is keen to achieve self-sufficiency.

The government is currently investing in dairy and sugar processing plants and equipment with the goal of achieving self-sufficiency. Observers say, however, that it will take many years for such a target to be achieved.

Free zones have been created in Turkmenistan to attract more foreign investment in industry. A number of incentives are offered. Investors in these zones have the right to transfer, deposit and export hard currency without restrictions.

Enterprises in which foreigners hold more than 30% of the capital have tax privileges on profits for 16 years. Profits re-invested in the zones are excluded from taxation.

For the first five years of operation, there is a 50% discount on property tax. Foreign partners in JVs are exempt from paying tax on the transfer of profits abroad.

There is a strong growth potential for industries linked to Turkmenistan's wide array of mineral resources. The world's third largest deposits of sulphur are in the Kara Kum desert. There are also deposits of potassium, sodium chloride, sodium sulphate and salt to name a few.

Foreign experts warn, however, that industries based on minerals will only become attractive after Turkmenistan begins to generate wealth to the private sector out of the state's oil and gas revenues and put in place a stable tax and legal regime. In the long-term, provided there is a better government and adequate infrastructure, Turkmenistan would have no problem in attracting investment to expand its industrial base.
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Publication:APS Review Downstream Trends
Date:Sep 27, 2004
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