Turkmenistan - Politics, government, and taxation

Turkmenistan was the first central Asian republic to create a new constitution, which proclaimed the country a presidential republic. It is dominated by Saparmurat Niyazov, who won election in June 1992. In January 1994 a referendum extended his rule from a 5-year term to a ten-year term; in December 1999 he was made president for life. He is the leader of the state and supreme commander of the armed forces. In accordance with the Turkmenistan constitution, he also appoints all cabinet ministers. Presidential powers extend to all facets of the country's economic and political life, even including the right to issue edicts that have the force of law.

The 1992 Turkmenistan constitution established a national assembly with 50 members elected to 5-year terms. Its primary duties are to enact and approve criminal legislation and ratify presidential decrees. In practice, however, international observers have criticized this body for its failure to limit the expansion of presidential powers over domestic and foreign affairs. In addition, there are the national council and a council of elders, both of which wield little power or influence in political affairs.

In December 1991 the Communist Party of Turkmenistan was renamed the Democratic Party of Turkmenistan (DPT). It controls all political activity in Turkmenistan, though ostensibly allowing political opposition. In 1992, under an initiative proposed by Niyazov, a party called the Peasant Justice Party was formed, consisting of regional secretaries of the DPT. A small opposition party, independent of government sanction, was formed in 1989 but was banned in 1990. The Agzybirlik (Unity) Party operates mostly in exile from Moscow.

Since 1991 Turkmenistan has attempted to establish relations with neighboring countries and potential trading partners in order to exploit its natural resources. Internal reform, however, has hampered economic development. In 1992 and 1993 the government passed laws on foreign investment, banking, property ownership, and intellectual property rights designed to attract foreign investment. The laws allow 100 percent ownership by foreign investors, but in practice the government restricts this right and prefers joint ventures rather than the full purchase of plants, factories, and other facilities by foreigners.

In 1993 the government began an ambitious 10-year plan that was designed to double per capita income, which was less than US$3,000 per year in purchasing power parity terms. The government freed the population from certain fees, such as for heating and electricity, and initiated in December 1992 the Ten Years of Prosperity program, which envisioned a transition to a free market economy, the dismantling of Soviet-style planned management, and extensive social welfare services. Soon thereafter, however, the government changed the slogan to Ten Years of Stability when anticipated investments and profits failed to materialize. Nevertheless, the government took great strides to attract investment for the plan, as Turkmenistan struggled to upgrade its basic infrastructure . The government started a national airline and built a new airport, along with new roads, buildings, and hotels in Ashgabat. Emphasis later shifted to constructing new pipelines, or expanding capacity in old ones, to diversify its markets and avoid further dependency upon Russia to export its natural gas.

In 1994 Turkmenistan was in the midst of a severe economic crisis. The government was forced to ration food, GDP fell more than 20 percent, and inflation was growing at 1,100 percent. In 1995, the government fixed the minimum wage at TMM1,000, which, according to some sources, corresponded to roughly 4 kilograms (8.8 pounds) of meat or potatoes.

Roughly two-thirds of Turkmenistan's revenues come directly from gas exports. The decline in international energy prices forced the government to broaden the tax base to lessen the impact of revenue shortfalls. No information is available on tax compliance, but it has been estimated that it is quite limited. Corporate and income tax rates range from 25 percent to 35 percent, although collection procedures, liability, and individual rates are often complicated, contradictory, subject to abuse, and arbitrarily applied.