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Slowing Turkmenistan economy threatens dictatorship

ASHGABAT, Turkmenistan -- Turkmenistan's economy has come to a turning point after several years of rapid growth driven by energy exports.

     Falling prices of natural gas, the Central Asian country's main export, have pushed the economy into lower gear, threatening the dictatorship's power base. The former Soviet republic's economic growth fell to a single-digit rate in 2015 for the first time in five years.

Turkmenistan President Gurbanguly Berdymukhamedov, right, meets with Japanese Ambassador Toyohisa Kozuki on March 25 in Ashgabat.

     There are signs that the economic slowdown is beginning to change the nation's social structure, under which the autocratic government guarantees stable livelihoods for people in return for complete support for the regime.

     On Friday, President Gurbanguly Berdymukhamedov expressed his desire to expand the country's economic ties with Japan.

    During his meeting with Japanese Ambassador Toyohisa Kozuki, who serves concurrently as ambassador to Russia, at the presidential palace in Ashgabat, the capital, Berdymukhamedov said he wants to see steady progress in his country's "cooperation with Japan."

Reliance on natural gas

Turkmenistan, with a population of 5 million, has the world's fourth-largest reserves of natural gas.

     The gas-rich country's economy expanded vigorously during the global resources boom in recent years. Its gross domestic product grew by about 50% during the four years starting in 2010.

     The government used revenues from the export of gas and other resources to provide generous social security and other benefits to its citizens. The country's per capita GDP also rose sharply to become the second-largest in Central Asia.

     But the government has failed to carry out structural reforms of the economy, which is excessively dependent on natural gas exports, making it vulnerable to the sharp downturn of energy prices that started in the second half of 2014. Turkmenistan's real economic growth slowed to 6.7% in 2015.

     The country devalued its currency, the manat, by more than 20% against the dollar in just one year. With that, the inflation rate has risen to 7%, up from 4.4% in 2014.

     Since its independence in 1991 following the collapse of the Soviet Union, Turkmenistan has been ruled by an oppressive and autocratic government sometimes compared to the regime of North Korea.

     Dwindling tax revenue could undermine the foundation of the Central Asian dictatorship, which has maintained its firm grip on power mainly through the distribution of income derived from exports among the public. 

     President Berdymukhamedov appears to have become increasingly alarmed by the situation. Since the beginning of the year, he has sacked at least four economic ministers, including the deputy prime minister in charge of economic issues.

Reaching out

The country is also keen to attract foreign investment to help it wiggle out of its current predicament. 

     When Japanese Prime Minister Shinzo Abe visited the country in October last year, the two countries made agreements on bilateral economic cooperation projects worth over $18 billion.

     Turkmenistan's deputy prime minister, Yagshygeldi Kakaev, called for Japanese business investment in the country during his 90-minute meeting with a Japanese economic mission on Friday.

     According to sources, many policymakers within the government are concerned about Turkmenistan's heavy economic dependence on China, which buys about 80% of its gas exports.

     On March 16, Berdymukhamedov met with Pakistani Prime Minister Nawaz Sharif in Pakistan to discuss the expansion of bilateral economic relations. The two leaders agreed to promote the construction of a gas pipeline that runs from Turkmenistan to Pakistan and India via Afghanistan.

     But these efforts are unlikely to produce immediate results.  

Signs of discontent

Under the rule of Saparmurat Niyazov, who was Berdymukhamedov's predecessor, most anti-government forces were driven out of the country. As a result, the political situation in the country remains stable for the moment.

     But there have been signs that the country's economic woes are causing public discontent with the government. In addition to arrears in salary payments and delays in construction projects in provinces, there have been reports of clashes between citizens and security forces.

     While benefits to citizens have been reduced amid shrinking income from gas exports, corruption has remained rampant within government-controlled industries, especially the energy sector. The situation has widened the gap between rich and poor.

     Turkmenistan was ranked 154th among 168 countries and regions in terms of the perceived levels of public sector corruption in 2015 as measured by Transparency International, a nongovernmental corruption watchdog that compiles a Corruption Perceptions Index every year.

     The Berdymukhamedov government has pledged to nurture sophisticated industries to stoke economic growth. But an unemployed 20-something man living in an Ashgabat suburb voiced skepticism about the president's promise. Modernization is unachievable in a society where political connections are all that count, he said.

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