How Bad are Central Asia’s Business Environments and What Can be Done about Them?

Abstract

Central Asian countries need private investment to promote growth and to meet economic diversification goals. This article starts by looking at what we know about determinants of external and domestic investment, the key driver of private sector growth. Country context matters greatly when judging the importance of business environments in determining investment. Countries that have attracted substantial private investment and the growth that comes with it that exhibited middling to poor business environments all share certain characteristics. They are large in population terms, geographically well located, and none is landlocked. Small countries, and countries less well situated geographically that did well in attracting investment and achieving high growth were all at or near the top of business environment rankings. If Central Asia’s relatively small and poorly situated countries are to compete for domestic and international investment, their business environments cannot just be good. They must rank at the top of business environment indicators.