Turkmenistan - Privatization

Privatization

One of the most important reforms of Turkmenistan's economic plan is privatization. Article 9 of the 1992 constitution guarantees citizens the right to own capital, land, and other material or intellectual property, but no law has stipulated the source from which land could be acquired. No fund of land available for private purchase has been established. A law on land ownership allows every citizen the right to own and bequeath to heirs plots smaller than fifty hectares, so long as they are continuously cultivated, and to obtain a long-term lease on up to 500 hectares. Such land may not be bought or sold, however. In 1993 only about 100 peasant farms were privately run, and they were leased rather than owned. Nevertheless, after the government announced the 1993 law allowing fifty-hectare plots, it soon received more than 5,000 applications.

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The privatization process is managed by the Department of State Property and Privatization, which is part of the Ministry of Economy, Finance, and Banking. Short-term plans call for continued state control of the gas, oil, railway, communications, and energy industries and agriculture--sectors that combine to account for 80 percent of the economy. Laws on leasing, joint-stock companies, and entrepreneurship were adopted in the early 1990s. A general privatization law passed in 1992 describes the gradual denationalization of state property through a variety of methods.

In 1992 only 2,600 small enterprises--mostly individual ventures such as trading outlets and home-worker operations--were privately owned. Through the end of 1993, only a few small trade and service enterprises had moved to private ownership, mostly sold to foreign buyers. Plans called for conversion of large manufacturing firms into joint-stock enterprises by the end of 1994, and private ownership of all trade and service-sector enterprises with fewer than 500 employees by the end of 1995. However, the state would maintain a "controlling interest" in businesses that become joint stock companies and would retain control over profitable larger concerns.

A second important component of Turkmenistan's economic development plan is marketization. To promote this process, a decree was issued in March 1993 for the formation of a joint-stock bank, the granting of additional credits to the Agroindustrial Bank for the development of entrepreneurship, and the establishment of seven free economic zones. Agricultural entrepreneurs are to be granted special profits tax and land payment exemptions. Within free economic zones, companies with more than 30 percent foreign ownership are to receive special exemptions from profit tax and rental payments.

In February 1993, a State Committee on Land Reform was established, with a goal of privatizing 10 to 15 percent of all agricultural land. Beginning in May 1993, the state began leasing land on the condition that 35 percent of the state procurement for cotton be surrendered, with no monetary compensation, as payment of rent. Estimates of the irrigated land since leased or under private ownership range from 3 to 12 percent. The state also intends to privatize all unprofitable agricultural enterprises.

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