Turkmenistan's Economic Bubble

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The government stated that it had raised pensions, allowances, and government wages by 10 percent from 1 January, though these pay increases are well below inflation, estimated by the CIA World Factbook at 18 percent.

In addition, prices for basic staples are rising sharply, up to 30 percent in 2008 for bread, eggs, and beef at outlets not directly controlled by the government. Lines form at state-owned stores for price-controlled $.07 bread, while no lines are found at the many resellers selling at three to four times that price. Reselling or selling at above the "official" price was discouraged in previous years. One Turkmen described the system: "The police would come into the bazaar, ask how much something was, say it was 'too much' and demand that the vendor sell it for less. That was our price control system." These days, the official prices posted at the entrances to bazaars are ignored by everyone, and the authorities only rarely come in demanding that vendors keep prices down.

Confusion and mistrust abounds.

When the government unified the official and "unofficial" exchange rates for the manat early last year, it reduced the price it would pay for dollars by 40 percent. This amounted to government confiscation of hard currency from its citizens, who do not trust the manat.

"There were huge queues to change old manats for dollars near the end of [December]," one professional driver in the capital said.

A redenominated manat was issued uneventfully on 1 January after a lengthy information campaign. Unlike last year, when the government devalued the currency by 19 percent on New Year's Day, there were no surprises to dampen New Year's festivities this year. "The exchange rate is the same as before; they actually did it as they said they would," the driver continued.

"But still, no one knows what will happen in the future," a private currency trader in Ashgabat said.

While the government managed to redenominate the currency without inciting a crippling panic, it has been thus far unwilling or unable to loosen its grip on the private sector, allow foreign banks to operate freely, or allow domestic private business to grow. Even worse, corruption seems to be rising in step with "reforms."

A BLIND EYE, TURNING FROM THE TOP

For the time being, foreign currency continues to pile up thanks to the labor-light and foreigner-dominated petrochemicals industry. These monies are promptly spent, and misappropriated, usually through contracts for imported durable goods like busses and grain elevators, or foreign contracted and constructed buildings. The process has remained the same throughout the transition since the death of former President Saparmurat Niyazov. Domestic firms, oppressed by government corruption and red tape, are able to capture and recirculate little of the country's resource wealth.

Prosperity certainly appears to growing. "You can see it in the villages, new houses, additions. There are more imported cars on the streets. It can only mean one thing – corruption is really rising," one Ashgabat resident speculated.

With government agencies and services employing most of that half of the work force that is fully employed, and with government wages rising far more slowly than inflation and gas revenues, expanding corruption is the most plausible explanation for the increase in personal wealth.

In a country rated by the Heritage Foundation's Index of Economic Freedom as one of the least economically free in the world, a system of government wealth distribution by patronage allows loyal and established officials to siphon off millions. One proprietor in the capital said, "It's hard to have a real business here. You've got to bribe and bribe – it never ends.

"Before, people were afraid when they asked for a bribe, afraid of each other. Now they ask openly," he continued. Niyazov would publicly accuse and arrest those he accused of corruption; Berdymukhammedov has never spoken the word. This apparent indifference has helped encourage still more officials to seek rents for their positions.