BENEFITS OF MAKING BUSINESS IN TURKMENISTAN W W W. M E R G E R S C O R P. C O M
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BENEFITS OF MAKING BUSINESS IN TURKMENISTAN
W W W. M E R G E R S C O R P. C O M
Country Overview Turkmenistan, an independent state in Central Asia, is bordered by Afghanistan to the southeast, Iran to the southwest, Uzbekistan to the northeast, Kazakhstan to the northwest, and the Caspian Sea to the west. Turkmenistan, which achieved independence in 1991, is divided into five provinces (welayatlar), with a separate capital district for the capital city of Ashgabat. Turkmen is the official language of Turkmenistan, although Russian is still widely spoken in cities as well. The currency is the Turkmen new manat (TMT). Despite its gas wealth, much of Turkmenistan's population is still impoverished. After independence from the Soviet Union in 1991 the country entered a period of isolation that has only recently begun to end. Turkmenistan produces roughly 70 billion cubic metres of natural gas each year and about two-thirds of its exports go to Russia's Gazprom gas monopoly. The government has sought out gas deals with several other countries, including China and neighbouring Iran, however, to reduce its dependency on Russia. Turkmenistan continued to exercise tight control over all print and electronic media. Foreign media outlets have almost no access to the country, and the government often retaliates against people who provide them information.
Executive Summary Turkmenistan possesses the world's fourth-largest reserves of natural gas and substantial oil resources. Known for its autocratic government and large gas reserves, Turkmenistan also has a reputation as an island of stability in restive Central Asia. The most expensive place in the world for expats at least is unlikely to be on your summer vacation destination list. Ashgabat, Turkmenistan is the No. 1 most expensive place for expats, according to ECA International's 2019 Cost of Living survey. The capital of Turkmenistan is Ashgabat. Turkmenistan is largely a desert country with intensive agriculture in irrigated areas, and huge gas and oil resources. Turkmenistan's two largest agricultural crops are cotton, most of which is produced for export, and wheat, which is domestically consumed. The current population of Turkmenistan is 5,995,644 as of Friday, February 7, 2020, based on Worldometer elaboration of the latest United Nations data. Turkmenistan 2020 population is estimated at 6,031,200 people at mid year according to UN data. Turkmenistan, like their kin in Uzbekistan and Afghanistan, are Sunni Muslims. Shia Muslims, the other main branch of Islam, are not numerous in Turkmenistan, and the Shia religious practices of the Azerbaijani and Kurdish minorities are not politicized.
Introduction – Doing business in Turkmenistan Turkmenistan’s vast natural gas and oil resources continue to attract some foreign companies, the Government of Turkmenistan has yet to implement reforms needed to create an inviting business climate where foreign investment and foreign investors are truly welcomed and property rights guaranteed. In addition, the government is centralized and non-transparent, with much information that is readily available in most other countries classified as a “state secret.”
Turkmenistan publishes limited national statistics, but its data collection and evaluation methodologies are often not credible. We support businesses from many industries, such as food and beverages, wholesale and retail distribution and construction and engineering.
Conducting business in Turkmenistan The hydrocarbon sector is the country’s largest industry. Turkmenistan strives to maximize value for its oil and gas and invests in petroleum refining and processing facilities. It has several liquefied petroleum gas (LPG) plants and plans to build more. The government has plans to attract foreign technology and investment to the chemical and petrochemical industries. Opportunities exist for gas-to-liquid (GTL) technology providers, as Turkmenistan is currently building two GTL plants and plans to develop this sector. Development of new gas and oil fields and the rehabilitation of old fields, there is a need for new pipeline networks and related infrastructure, such as compressor stations. The government has ambitious plans to build new transportation infrastructure; however, the ministries involved in such plans are some of the same ministries that are the most indebted to foreign companies. Turkmenistan continues to invest in development of the Caspian Sea resort of Awaza, which may present opportunities for foreign investment in Turkmenistan’s nascent tourism industry.
Taxation in Turkmenistan ​Residents are generally taxed in Turkmenistan on their worldwide income, including in-kind benefits such as meals, housing, relocation, etc. Non-residents are taxed in Turkmenistan only on their income derived from Turkmenistan sources (e.g. from their activities performed in Turkmenistan). Personal income tax (PIT) is generally levied by withholding at source when the payment is made by withholding agents (i.e. resident legal entities, individual entrepreneurs, and permanent establishments [PEs] of non-resident legal entities). This does not apply to business income of individual entrepreneurs, who are required to apply the self-assessment procedure. Personal income tax rates: The general PIT rate is 10%, which applies to employment income, business and professional income, interest, royalties, income from immovable property, and capital gains. The tax is generally withheld at source. In the case of business and professional income, the tax is levied on a selfassessment basis.
Trade Turkmenistan is the 95th largest export economy in the world and the 112th most complex economy according to the Economic Complexity Index (ECI). In 2017, Turkmenistan exported $7.1B and imported $3.35B, resulting in a positive trade balance of $3.75B. In 2017 the GDP of Turkmenistan was $37.9B and its GDP per capita was $18k. The top exports of Turkmenistan are Petroleum Gas ($5.92B), Refined Petroleum ($398M), Non-Retail Pure Cotton Yarn ($156M), Raw Cotton ($150M) and Crude Petroleum ($122M), using the 1992 revision of the HS (Harmonized System) classification. Its top imports are Iron Structures ($119M), Harvesting Machinery($107M), Cranes ($87.7M), Tractors ($83.1M) and Packaged Medicaments ($75.8M).
Banking in Turkmenistan State banks include: The State Bank for Foreign Economic Relations (Vnesheconombank), Dayhanbank, Turkmenbashy, Turkmenistan, and Halk. These state banks have narrow specializations--foreign trade, agriculture, industry, social infrastructure, savings, and mortgages, respectively. Other smaller state banks, such as Senagat Bank, provide general banking services only. There are also five foreign commercial banks in the country: a joint Turkmen-Turkish bank (with Ziraat Bank), a branch of the National Bank of Pakistan, German Deutsche and Commerz banks, and a branch of Saderat Bank of Iran. The two German banks provide European bank guarantees for companies and for the Turkmen government; they do not provide general banking services. Companies increasingly report dealing with vendors only in cash as vendors report difficulties accessing their money in bank accounts. More detailed information on the payment system of Turkmenistan is available in English at the website of the Central Bank of Turkmenistan.
Our M&A Process TARGET APPRAISAL
APPROACH
DUE DILIGENCE
NEGOTIATION & CLOSE
POST MERGER INTEGRATION (PMI)
Revisit indicative valuation & prepare detailed valuation based on due diligence findings; SPA negotiations with the seller; Development of final structure (share/asset deal) and final valuation; Approvals; Signing of SPA & Close.
Consider the extent of integration; Development of 100 Day PMI Plan; Consider short & long term objectives; Estimate requirements to capture synergies; Determine resource needs & optimal allocation.
Company general counsel; Lawyers; Senior management.
Company general counsel; Lawyers; Senior management/HR.
Key Areas Target & market analysis; Initial assessment of synergies & value drivers; Indicative valuation; Go or No-Go decision; Preparation of transaction documents (NDA – Nondisclosure Agreement/LOILetter of Intent); Select Transaction team; Appoint advisors; Consider funding ability.
Initial approach letter; Signing of NDA; Prepare & share initial information requests; Formulation of LOI (Letter of Intent) & possible negotiations; Initial meeting and Q&A; Circulate information on the Target to the Transaction team.
Set scope of due diligence; Set up VDR (virtual data room); Coordinating of due diligence, further meetings and Q&A sessions; Consider points relevant to the Post-Merger (PMI) phase;
Parties Involved CFO; Head of M&A; Accountants; Corporate finance advisors; Consultants.
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