The European Bank for Reconstruction and Development (EBRD) has adopted a new country strategy for Turkmenistan which continues to restrict activities to the private sector because of lack of progress in the implementation of political and economic reforms.

The main reform challenges, formulated in the country strategy two years ago, remain valid as the situation in the country has not significantly changed either politically or economically. Turkmenistan is still a one-party state dominated by President Niyazov, without any independent media or freedom of speech and with a very poor human rights record.

Continued failure to make progress towards multi-party democracy, pluralism and a market economy excludes any funding of public sector projects and focuses its activities on financing small and medium-sized enterprises (SMEs) and micro-finance areas, provided that the proposed investments are not effectively controlled by the state and government officials will not personally benefit from such investments.

The bank does, however, aim to maintain a dialogue with government and civil society on ways to improve the investment climate for private entrepreneurs, thus aiming at encouraging stronger political and economic reform.

As in the past, the bank will continue to employ a number of benchmarks in gauging political and economic progress. These benchmarks are explicitly described in the country strategy and respective operational priorities.

The EBRD strongly urges the authorities of Turkmenistan to implement necessary reforms for the benefit of the Turkmen people. The EBRD requires that its countries of operations apply the principles of multi-party democracy, pluralism and market economics. When Turkmenistan joined the Bank in 1992, it accepted this requirement, as laid down in Article 1 of the agreement establishing the bank.

According to official government data, economic output grew by 17% and 21% in 2004 and 2005 respectively, largely due to hydrocarbon exports and public investment programmes.

Since 1994 the bank has signed eight projects for total commitment of €121.4mn. The bank together with the Swiss government invested €1.2mn in 2003 and provided a further equity funding of €0.75mn in 2006 in a wool scouring plant under its Direct Investment Facility (DIF).