Building Effective Institutions—The Biggest Challenge

Abstract

This article discusses the importance of institutional capital for future well-being, seeks to assess current institutional performance, and identifies drivers of change and areas for priority action. The thesis of this article is that the economic and political institutions must evolve as much over the next 35 years as they have since the breakup of the Soviet Union, if Vision 2050 is to be realized and sustained. Whether these institutions evolve to the desired level or not, and whether the necessary change comes as a swift, continuous adaptation or as disruptive breaks, depends on many things. The long time required for institutional evolution and the vested interests opposed to institutional change make sustained political commitment essential for successful change. Most important will be the foresight of Central Asia’s leaders and the deepened involvement of the people of Central Asia in the political and economic life of their countries. This article examines how institutions, and intangible capital more generally, generate growth and identify the changes required—over a 35-year horizon—in the asset composition of Central Asian countries to realize Vision 2050. It benchmarks the institutions of Central Asian countries against world averages and comparators in East Asia and Central Europe. Additionally, this article identifies drivers of change that could be leveraged to promote the desired institutional evolution. The final section discusses areas requiring concerted attention if Central Asia’s institutions are to deliver the future to which citizens of the countries aspire.