Millions of Turkish Lira. Photograph by Flickr user cwirtanen (CC-usage).

Editor’s note: Foreign businesses are facing an unusual “investment” crisis in Turkmenistan: three major Turkish companies have lodged a legal inquiry with the ICSID, and according to an anonymous source, 22 more may soon follow, reports neweurasia’s Annasoltan. She interviews Turkish businessmen who know the country well and have nothing nice to say about its policies. “Most Turkish construction companies have already left the country,” says one.

Running a business in a closed country such as Turkmenistan can already be a difficult enterprise, but it can be twice as hard when political elites act irresponsibly by failing to fulfil contractual obligations. One Turkish businessmen who has worked in Turkmenistan for over a decade remarked to me, on the condition of anonymity,

“Unfortunately, the leadership that succeeded Niyazov is not taking international laws seriously and has begun to take actions that violate the agreements.”

His claims come as three major Turkish construction companies have recently filed a legal inquiry against the Turkmen authorities over lost profits ranging between 600,000 and 1 billion USD. The inquiry has been registered with the International Center for Settlement of Investment Disputes (ICSID), an international arbitration body that deals with disputes around contracts and foreign investment. A Turkish source has informed me on the basis of anonymity that another 22 firms, who have also had problems with getting their projects complete, are also expected to submit their complaints soon.

All of this puts into question Turkmenistan’s reliability as a business partner, and with it, may dash the president’s plans of turning the capital into the “Eastern Dubai”.

Berdimuhamedov took over Niyazov’s ambition of building Turkmenistan into an investment hotspot. Large-scale projects like the Avaza resort and the never-ending construction frenzy all over the capital have all be rationalized as steps toward this goal. Most of these projects have been carried out by foreign, mainly, Turkish companies. Içkale Insaat, Kiliç Insaat, Erku, Sehil Insaat and Adem Dogan all have sued the Turkmen government, claiming that each of them have lost three to four projects on average and that as a result more than a thousand people have now been left jobless.

There’s already a precedence for bad commercial behavor in my nation. Already in 2006 a few Turkish entrepeneurs made similar complaints. Also, a few months ago MTS, the Russian mobile telecommunications company, was caught off-guard when their contract was suddenly annulled and they were expelled from the country while their property was confiscated. Along these lines, another Turkish businessman remarked to me, whom I shall call “X” in order to protect his identity:

“They [the Turkmen authorities] have imposed restrictions on visas and due payments have not been made. Berdimuhamedov hasn’t taken the same attitude as Niyazov to foreign companies. When Niyazov was in charge, there were no restrictions on when Turkish businessmen could leave the country. Besides, the contracts never implied that in case of a dispute, the Turkish companies would be subjected to Turkmen courts, and there definitely were no cases of imprisonment of foreign investors.

“The global crisis, the new exchange rate of the Turkmen currency [ed: the Manat] and inflation in Turkmenistan have put additional strains upon most Turkish companies. Gasoline prices have increased nine-fold, and the price for cement has gone up, caused by a shortage of supply. Yet, Turkish companies have never been compensated for their losses. Instead, construction due deadlines have been reduced. Companies that could not cope with the shortened time-frames have been taken to court. Some owners of Turkish companies have been imprisoned for up to two years [ed: cf. Hürriyet's article from 24.04.2011], others have not been able to leave Turkmenistan.

“Most Turkish construction companies have already left the country. Their equipment has been confiscated and now they hope to regain their losses with the help of international courts. Turkmenistan is a member of the ICSID and international law allows for both sides whose citizens have been subjected to unfair or illegal treatment to claim back their rights.”

X also adds that the legal action against the Turkmen government can seriously damage the image of the country, drawing away all future foreign investors, since international companies usually avoid investing in countries that have their cases in ICSID. He does not believe that the upcoming visit of a Turkish official delegation led by state minister Zafer Çaglayan to Ashgabat in May will resolve the stalemate:

“Our government does not want to harm bilateral relations with a brotherly nation, and therefore is not likely to object as there are many other projects involved.”

Additionally, X points out that Turkmen citizens are able to travel to Turkey without any visa, while Turkmen visa restrictions make it hard to bring people to work in Turkmenistan, since the application process usually takes three to four weeks.

Other Turkish businessmen complain about the method the Turkmen president applies when canceling contracts: he simply fires the ministers who had signed the agreements with foreign companies. This leaves foreigners with only two options: either to re-negotiate the contracts or to leave the country. Yet, despite these issues, says X, Berdimuhamedov does not seem to be affected: he continues offering new contracts to other Turkish or foreign construction companies. In my eyes, it seems like a kind of treachery on my nation’s part combined with a serious lack of due diligence on the newcomers’ parts.