Emaar Properties Company's Entry into Turkmenistan | Free Essay Example

Emaar Properties Company’s Entry into Turkmenistan

Words: 1346
Topic: Business & Economics
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Introduction

The companies that wish to expand to the international markets must take additional caution in exploring the opportunities and threats pertinent to each target country. The current paper contains a report for the Emaar Properties, a real estate company from the United Arab Emirates, on its international market entry into Turkmenistan. The report presents key indicators of the country’s economic climate, infrastructure, and product market potential obtained from reputable sources.

SWOT

Strengths

Market size: the current amount of property for sale in Turkmenistan is high enough to offer significant opportunities both for professional investors and individual buyers. In addition, the steadily developing construction industry shows a trend towards expansion, both in quantity and quality of the offers.

Existence of infrastructure: the recent interest towards the country’s real estate segment has created the need for an update of the obsolete infrastructure. As a result, the industry is in the stage of the active development and is compatible with the core standards accepted worldwide.

Skilled workforce: rapid development also led to the creation of demand for competent employees. The influx of international investors also diversified the skills and knowledge of the workers in the segment.

Weaknesses

Highly competitive environment: the surge in interest and the eventual entry of numerous international investors started almost a decade ago. Currently, the market contains several major players with significant material bases, essentially denying them entry to smaller organisations.

Low profitability: despite the expectations of the investors, the growth of the prices is currently insufficient to sustain profitability, and the investments only provide long-term opportunities.

Absence of R&D investment: the state of research and development in the country is based on the large degree on its Soviet heritage, which is obsolete and highly resistant to change.

Opportunities

Global reach: the involvement of investors from around the world opens up the possibility for the Turkmenistan real estate market to eventually enter the international scene.

Market growth: the majority of experts expect the prices in the market to rise significantly in the long run.

Steady growth rate: the interest of the individual and professional investors sustains the influx of the capital that is expected to remain at a present rate.

Growing economy: the country’s overall economic profile displays several areas that are in the stage of active development. It is thus reasonable to expect the overall increase in the paying capacity of the stakeholders.

Threats

Uncertain market: despite the obvious tendency of growth, the real estate market remains highly volatile, leaving the possibility of decline an open question.

Political regulations: the political domain of the country remains unstable, which introduces the risk of unfavourable regulations.

Currency exchange rate: the difference between the official and the black market exchange rate is around 400% by some estimates, which puts professional investors and many individual buyers at a disadvantage.

Scarcity of prospects: despite the ongoing growth, there is no clear understanding of the possible size of the market, so at least some of the predictions of profitability are speculative while the well-recognised ones do not present sufficient opportunity.

International Marketing Environment

State of Economy

As a result of the autocratic stance of the current administration, economic development remains limited in scope. The main asset of the country, as well as a chief source of profit, is its oil and gas resources, with the agricultural sector being the nearest competitor (Heritage Foundation 2017). The high barrier of entry in these segments essentially reserved the operations for the state, whereas small and medium businesses remain underrepresented.

Such lack of diversification has led to the scenario that is considered stagnation by some experts (Heritage Foundation 2017). There are also noticeable concerns regarding the absence of opportunity for the younger generation. The economic sector is reluctant to adopt innovative practices, which repels the youth and prompts them to seek employment outside the country. While it is possible that the economy will develop in the near future, it would be unreasonable to expect significant changes. Such an environment would be highly restrictive to Emaar Properties.

International Trade

It should be noted that the current government is somewhat more open to business interaction on the international scale. However, the said interactions remain relatively modest by the modern standards and are tightly controlled by the government. Large investors need to obtain approval of the government in order to enter the market and the criteria of selection lack transparency. Besides, the financial system, including the currency rate, is also in control of the government, which makes it unavailable to the smaller players as well as those who fail to find approval at the political level. International companies will likely find it challenging to operate under such challenging conditions.

Geopolitical Events

The current government in Turkmenistan becomes increasingly more open to international business partnerships. Nevertheless, in its current state, the political landscape remains largely unfavourable for international cooperation. First, the business norms in the country are mostly incompatible with internationally acceptable standards. There is also a notable lack of a commercial code, which decreases the clarity of the preferred business approach.

The local companies often operate using the local historically established norms and rules and are only superficially familiar with the internationally acceptable standards. The business administration is still highly dependent on informal social connections and political influences. While the country’s president has proclaimed the intention to reform the current system to align it with the modern business practices of the developed economies, little change has been observed in this direction.

While the explanation put forward by the government officials justified the slow pace with the fact that the population is not ready for radical transformations, the actual improvements remained superficial and often irrelevant. Finally, it is worth mentioning that in its current state, the political landscape is highly autocratic with a strong orientation towards family values taken by the current administration (Freedom House 2017). Consequently, the corruption rate, which has long been high in the country, is presented with additional opportunity for growth for international investors.

Legal Developments

The legal system in the country is outmoded and shows a little capacity for improvement. In its current state, it presents a significant challenge not only to the business owners but to any entity dealing with it. The sets of regulations currently in use are opaque, complex, and difficult to use. In addition, numerous legal bodies create a net of bureaucratic rules that open up the possibility of corruption and introduce many informal aspects into play that further discourage small and medium enterprises from development. The country also still employs an outdated and inflexible system of labour regulations (Heritage Foundation 2017).

Finally, the system lacks objectivity, since judges can be appointed without legislative review, and property rights, as well as contracts, are poorly enforced. From the international perspective, business security in Turkmenistan is insufficient, with no certainty regarding the possible improvement.

Technological Developments

The recent shifts in the political landscape opened up opportunities for technological progress in the country. According to the official statement by the government, the twelve priorities were identified in the development of the country’s technological development, including transportation, production automation, innovation in oil and gas industries, upgrading the agricultural practices, and medicine, among others (UNESCO 2015).

However, it should be noted that the scientific and administrative processes behind the identified areas are not transparent. In addition, the funding of all of the aspects of research and development comes from the government. Finally, the reporting mechanisms behind the process are virtually absent. Thus, the entirety of the information available for the analysis is subject to distortion. While there is no reason to suspect major deviations from the outlined path, it is worth pointing out that at least two of the identified directions coincide with the state-owned industries.

Therefore, the possibility remains that while some of the areas will receive better funding, those that promise no revenue (e.g. transportation or environmental studies) would be left underfunded. It should also be mentioned that despite the optimistic picture that contrasts with the previous state of affairs, the country’s technological development is still modest by the international standards.

Reference List

Freedom House 2017, Turkmenistan country profile. Web.

Heritage Foundation 2017, Turkmenistan. Web.

UNESCO 2015, UNESCO science report: towards 2030. Web.