Turkmenistan: Up and Coming Frontier Economy in a Resource-Rich Region

When foreign investors look for opportunity in Turkmenistan, their eyes tend to fixate on one stat: Turkmenistan has the fourth-largest natural gas reserves in the world. With reserves that large, it seems odd that Turkmenistan is not already a major power in the world economy. To figure out why, it is best to take a look at the history of gas in this country located in Central Asia.

The major gas deposits, mostly in the eastern and central areas of Turkmenistan, were first discovered in the 1940s and ’50s. Turkmenistan was a part of the USSR and the Soviets took control of the gas and exported it to other Soviet republics. During this period the Soviets absorbed any revenue from exports as well.

However, once Turkmenistan gained independence and full control over all its natural resources in 1991, exports were still restricted to Soviet-era pipelines, most of which went to Russia and Ukraine.

Since independence, the government of Turkmenistan has been looking to diversify their country’s exports to, but to do this, new pipelines have to be built.

Investments have already been made to tap this resource rich country as part of a project to create a New Silk Road to link Eastern and Western countries through trade.

China’s pipeline, which runs through Turkmenistan as well as Uzbekistan and Kazakhstan, is nearly reaching full capacity, making China the biggest buyer of Turkmenistan’s natural gas. However, investors should not believe that Turkmenistan has reached its limit; in fact, it has not even come close.

A study done in May 2011 found that the South Yoloten Gas Field, covering 4,000 square kilometers in the south-east region of the country, is the second largest deposit of natural gas in the world.

A report from Bloomberg L.P. stated that Turkmenistan plans to invest around $10 billion to tap the massive deposit. The Bloomberg report also said that gas from the field will be exported to China in late 2013, but plans for this gas field are not limited to China. India, Pakistan, Afghanistan and countries all over Europe are being examined as potential areas to export the gas from Yoloten.

Though the economy of Turkmenistan is driven mostly by its natural gas exports, there are other areas of interest to foreign investors. Cotton is a dominant agricultural commodity for the country and in 2011 it produced around 1.1 million tons of it.

Turkmenistan is the ninth-largest cotton producer in the world and it is making sure it stays high on that list. Around half of the nations irrigated land is planted with cotton. Turkmenistan has also made a diligent effort to become entirely self-sufficient in food. This will require more dams and canals being built, which create a need for funds in emerging markets like grain production.

Turkmenistan is at an interesting point in its economy. It is beginning to open up to foreign investors more, and with so much natural gas, this up and coming nation will soon be making a big splash in the world economy.

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