‘Dubai of the Caspian Sea’

Turkmenistan has a colourful past and is hoping that its natural gas wealth will bring it an equally bright future. Although it has attracted the attention of prominent Middle Eastern players and global superpowers, there are still obstacles to overcome before it can achieve its aim of becoming a major economic force in the region.

Avaza, a coastal tourism project by the Caspian Sea in the former Soviet state of Turkmenistan, has been labelled everything from the ‘Costa Del Sol of Central Asia' to the ‘Dubai of the Caspian Sea'.

Both it and Turkmenistan are lately attracting some powerful and influential interest and the country's formidable ruler is determined to make it a success.

In January, Dubai's Al Habtoor Group revealed it is bidding for a $1.5bn airport project in Turkmenistan. Saudi-based Tanmiyat Group is believed, too, to have already met with the Turkmen government and is one of several international developers that have agreed to develop projects in Avaza.

In mid 2009, Tanmiyat began looking for emerging niche markets where they could develop new projects, Dr Rasim Kaan Aytogu, the developer's executive director, tells me when we meet in their offices in Dubai. The group has a close working relationship with the Islamic Development Bank in Jeddah and Turkmenistan was one of the countries identified by both as having strong potential in the future.

"They have a list of countries they are interested in financing. Our investment map matches with their investment and strategy development areas and Turkmenistan is one of those areas," says Aytogu.

In 2009, Tanmiyat was one of a number of international companies that were invited to Turkmenistan to pitch their ideas to Gurbanguly Berdimuhamedov, the president of Turkmenistan. Fifteen companies from Korea, France, Romania, the US and Turkey were also presenting bids at the gathering and Aytogu says that at the end of the meeting the president declared that all of the projects had been approved.

The fifteen projects are part of Berdymukhamedov's plan to transform the Avaza area into a major tourist resort. Already it is hoped that the Avaza International Airport, which is about 80 percent complete and is due to open in October this year, will be used to fly in international tourists from around the world.

Berdimuhamedov has issued a presidential decree creating the Avaza Natural Touristic Zone and this decree is due to become law within two months. In June, he opened the first six hotels in Avaza and his $5bn plan to turn the area into Central Asia's answer to the Costa del Sol includes a $1bn artificial island in the shape of a crab, which represents his sign of the zodiac.

Tanmiyat are planning three developments in Avaza, which is an hour and 45 minutes direct flight from the UAE. The projects include the Avaza Harbour and Town Centre, a PGA-approved eighteen-hole golf course and an equestrian centre and racecourse.

The focal point of the development is the Avaza Harbour and Town Centre and will occupy about a quarter of the 1.5 sq km site. Also included will be 760 waterfront townhouses, 1,050 apartment units, 70,000 sq m of commercial and retail space, a mall, a four-star hotel and a 250 berth marina.

The golf development will be anchored by an eighteen-hole PGA-approved championship course, a golf academy, 635 golf course villas, 125 waterfront villas, a clubhouse and a hotel.

The last phase will be the Akhal Teke Equestrian Centre, which will be used to accommodate 120 thoroughbred horses and also will include a 1,800 metre racecourse a hotel and tennis club. The units cannot be bought outright as there is no freehold option available in Turkmenistan, so foreigners can only buy through a 49-year renewable leasehold agreement.

Aytogu believes the majority of the investors will come from the Russian speaking community. However, Turkmenistan has already attracted some high level interest from the Middle East.

In March 2008, HRH Prince Alwaleed bin Talal bin Abdulaziz Alsaud, chairman of Kingdom Holding Co, was invited to Turkmenistan to meet with Berdimuhamedov. Further meetings have taken place in 2009 between Prince Alwaleed and Turkmen government officials and the Avaza project is one of the main areas that Berdimuhamedov is keen to attract investment into.The main attraction for international investors in Turkmenistan is its massive natural gas reserves. "Turkmenistan is important for the energy corridor. It is the gateway between east and west," says Aytogu.

Turkmenistan has the world's fourth largest supply of natural gas and produces roughly 70bn cubic metres of natural gas each year. Last year, new discoveries of gas meant its proven reserves tripled to nearly eight trillion cubic metres, meaning they now surpass Saudi Arabia's.

There are plans to make the country the hub of a gas network linking Europe in the west and China in the east. Last year, the $6bn TransAsian pipeline opened and began pumping gas from Turkmenistan to China. The opening of the pipeline was attended by China's president Hu Jintao and the 7,000km pipeline is scheduled to boost deliveries to China from thirteen to 30 billion cubic metres a year by 2014.

The pipeline, which also runs through Uzbekistan and Kazakhstan, was funded by the China National Petroleum Corp (CNPC) and KazMunaiGaz National Co, the Kazakh state energy company.

In total, the CNPC is due to invest $15bn in natural gas facilities in Turkmenistan, according to the Turkmen government.

Turkmenistan will be connected directly to the west through the planned Nabucco project. The 3,300km gas pipeline will connect the Caspian Sea region and Europe, via Turkey, Bulgaria, Romania and Hungary to Austria, and further on to the Central and Western European gas markets. It is forecast to begin operating in 2016.

Dubai attempted to get a slice of the Turkmenistan oil market when the government-owned refiner Emirates National Oil Co (ENOC) pursued a $1.8bn takeover of Dragon Oil. Dragon's biggest assets are oil and gas fields in the Caspian Sea, off the coast of Turkmenistan.

While Dragon shareholders rejected ENOC's bid, Abu Dhabi was more successful in securing a foothold in the Turkmenistan gas market when its Petrofac Emirates won $3.98bn worth of contracts to exploit reserves in South Iolotan, potentially one of the biggest natural gas deposits in the world.

Turkmenistan's future may be looking bright, but its past is even more colourful. It lies on the Silk Road, an ancient trade link between Europe and Asia, and was once part of Alexander the Great's and Ghengis Khan's empires.

After winning independence from Soviet rule in 1985, Saparmurat Niyazov took charge and began an absolute and eccentric rule. Niyazov was infamously fond of building large elaborate statues of himself, banned opera, ballet and live music, called himself the ‘Father of All Turkmen' and ordered children and civil servants to study Rukhnama, his two-volume spiritual guide to life.

A visit to the Turkish resort of Antalya motivated Niyazov to spend Turkmenistan's new found gas wealth on creating its own mass market tourist hub on the Caspian Sea. He died in 2006 but Berdimuhamedov, his successor, has taken on the mantle and is hoping that his development of Avaza will realise Niyazov's dream and attract million of tourists from Russia and afar.

While the plans may have the ambitions of the president and major Middle Eastern and international players, it is not without its critics. "They would have to make an enormous effort to attract foreign tourists: advertisements in all major media, low prices and, most importantly, the highest quality of service. But right now they have none of these things. Why should Russians come here? After all, they have Turkey and Thailand, and there everything is already set," a local architect in the region told the AFP newswire.

While Berdimuhamedov has attempted to open up the country to attract investment and tourists it cannot escape its reputation as a closed country and some of its less than glowing economic data.

The US independent watchdog Freedom House's annual survey declared that Turkmenistan was ‘not free' and was one of the most repressive countries in the world, ranking it alongside states such as Burma, Libya, North Korea, Somalia and Sudan.

Until recently, economic data on the country was a state secret but since Berdimuhamedov came to power some statistics have emerged, but not all of them are encouraging. Average exports between 2003 and 2008 were roughly fifteen percent per annum and GDP growth in 2008 has been estimated at ten percent. However, GDP per capita is only $6,200, 30 percent of the population lives below the poverty line and the latest figures from 2004 showed that unemployment was as high as 60 percent.

In the face of such obstacles, why have Tanmiyat decided to target the country for investment? "Imagine this being Dubai twenty years ago," says Aytogu. "Those people who invested in Dubai ten years ago they made 100 or 200 times their investment. The GDP of Turkmenistan is developing and has a future and is based on the natural gas."

"When there is an improvement in the wealth of a country they invest in real estate," he adds.

Not many people have heard of Turkmenistan, but Tanmiyat and a lot of other major investors are prepared to put their faith in it, regardless of the progress and work that is needed to get it ready for the global market. "But then who had heard of Dubai or Abu Dhabi or Ajman ten years ago?" asks Aytogu.