by Ata Garlyev
Another type of profitable business has recently fallen under the spotlight of the President’s family. In the short term perspective it will be monopolized since the use of administrative leverage of the President’s family all conditions have been created to “take over” this business.
The pharmaceuticals business (import and trade inside the country rather than pharmaceuticals manufacturing) flourished until late 2015. In revenues it ranked second following the oil and gas sector.
In 2007 large-scale international pharmaceuticals companies, whose reputation and product quality are confirmed by long-term experience of operating in the US and Europe where the industry is closely controlled by the state, emerged in the local pharmaceuticals market.
Some companies managed to register representation offices or subsidiaries in Turkmenistan, whereas others preferred to operate through official distributors (local companies licensed to do business in the pharmaceuticals industry).
At that time state-run and privately-owned pharmacies did not experience a shortage of overseas-made medications at affordable prices.This was due to fair competition between the market participants.
Because of the crisis which has exacerbated since 2014 the sale of pharmaceuticals has reduced several times, primarily due to a drop in the population and a worsened standard of living. Moreover, the conversion of manats into dollars was restricted and was later abolished.
This led to the fact that the products, which were previously paid for in dollars and imported into the country, were sold for manats, which are now a heavy burden on bank accounts of pharmaceuticals companies waiting to be converted.
The situation is being exacerbated by the volatile dollar exchange rate which has skyrocketed to over 25 manats on “the black market”.Over the longer term only an increasing trend can be anticipated.
Fearing unforeseen dollar exchange fluctuations and other force-majeure circumstances, pharmaceuticals companies started curtailing their operations in Turkmenistan. They are holding back merchandise in stock, increasing wholesale and retail prices and decreasing the volume of supplies. In their turn, local distributors are ceasing their operations and closing down pharmacies.
Thus, the country is experiencing a deficit of high quality medications used in cardiology, neurology and pediatrics. Because of this, prices for medications in pharmacies have soared by 150-200% compared to the start of the year.
The main prerequisite for import is free currency conversion. If that is not available, there will be no import and therefore the termination of currency conversion was the first blow for the pharmaceuticals business, which was inflicted incidentally to get rid of the competition.
Introducing more complicated conditions for issuing a pharmaceuticals license and a refusal to extend them can be seen as the second blow. Over the past five years it has been almost impossible to obtain a license. One needs to have close ties with the presidential family or pay a bribe of over $1 million.
It is no less challenging to open a representation office or a subsidiary of an overseas-based company. Bribes of up to 500,000 dollars are charged for this service although the official registration fee is $3,000.
Under these conditions normal business operations or fair competition are out of question.Old and experienced players who fail to withstand such conditions are leaving the scene to be replaced with new ones related to the family and using their administrative leverage.
For them the currency conversion is available and they have no constraints for obtaining a license.
Ousting professional players from the market in this way they seem to forget that pharmaceuticals is a complicated business with some specific features.
In the pre-crisis period, the profit made by pharmaceuticals distributors ranged from 50% to 150% whereas now the distributors which are controlled by (with a share of business) and protected by the family, get a profit of over 500%.
In the very near future this figure will rise owing to increased presence in the market and due to the fact that the players who have no connections with the family leave the market.
Hyperprofit is generated during monopolization but eventually this negatively affects the end user the ordinary people.
In this situation one can believe the words which can be heard from the upper tier that the most favourable conditions to do business are in place in Turkmenistan.
In conclusion it can be highlighted that international law practices have proved that unfair competition and monopoly are forms of civil rights abuse. Regrettably, these rights are currently non-existent in Turkmenistan.