RCI - HC

1
OECD EURASIA COMPETITIVENESS PROGRAMME Enhancing
Investment, Competitiveness and Private Sector
Development in Central Asia, the South Caucasus
and Ukraine
Rainer Geiger Deputy Director General Directorate
for Enterprise and Financial Affairs
June 2008
OECD Private Sector Development Division OECD
Eurasia Competitiveness Programme
2
Eurasia The need to improve the business climate

• Strong economic performance in both Central Asia
  and South Caucasus/Ukraine regions
• However strong economic growth disparities and
  fluctuations across countries
• FDI levels and growth still relatively low
• Average FDI per capita up to 6 times lower than
  South East Europe or CEE
• Average FDI growth a third lower than regions
  like South East Europe
• Limited FDI diversification in most countries
• Need to improve business climate to attract
  investment and develop the private sector further

3
CIS countries A relative strong economic
performance
GDP Growth 2006-2007
4
with wide differences across countries
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Estimate Projection
Armenia 3.3 5.9 9.6 13.2 13.9 10.1 14.0 13.4 13.7 10.0
Azerbaijan 11.0 11.1 9.9 10.6 11.2 10.2 24.3 30.5 23.4 20.0
Georgia 3.0 1.9 4.7 5.5 11.1 5.9 9.6 9.4 12.0 8.0
Ukraine -0.2 5.9 9.2 5.2 9.6 12.1 2.7 7.3 7.6 5.5
Kazakhstan 2.7 9.8 13.5 9.8 9.3 9.6 9.7 10.6 8.5 5.1
Kyrgyz Republic 3.7 5.4 5.3 0.0 7.0 7.0 -0.2 3.1 8.2 6.8
Mongolia 3.2 1.1 1.0 4.0 5.9 10.1 7.3 8.6 9.9 8.6
Tajikistan 3.7 8.3 10.2 9.1 10.2 10.6 6.7 7.0 7.8 4.1
Turkmenistan 16.5 18.6 20.4 15.8 17.1 17.2 9.6 9.0 11.5 12.0
Uzbekistan 4.3 3.8 4.1 4.0 4.2 7.7 7.0 7.3 9.5 7.5
Eurasia Growth in real GDP 1999-2008
South Caucasus Ukraine
Central Asia
5
Focused reforms in the financial sector and
competition policy
Eurasia Updgrades in reforms per sector
6
Average FDI growth a third lower than regions
like South East Europe
Eurasia FDI Levels 1999-2007 (in US million)
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Estimate Projection
Armenia 122 104 70 111 121 217 252 340 455 482
Azerbaijan 510 149 299 1,048 2,353 2,351 458 -1,301 -5,201 -1,997
Georgia 62 153 80 122 335 420 529 1,115 1,585 1,400
Ukraine 489 594 769 698 1,411 1,711 7,533 5,737 9,218 8,000
Kazakhstan 1,468 1,278 2,861 2,164 2,213 5,436 2,123 6,630 5,100 4,680
Kyrgyz Republic 38 -7 -1 5 46 132 43 182 224 167
Mongolia 34 40 43 78 132 129 258 290 324 688
Tajikistan 21 24 10 36 32 272 55 66 70 80
Turkmenistan 125 131 170 276 226 354 418 731 804 820
Uzbekistan 121 75 83 65 70 187 88 195 262 311
South Caucasus Ukraine
Central Asia
Source EBRD Transition report 2007
FDI increased 4 times for CA and time for
SCU Average annual growth rate of 20 since 1999
(23 for SCU, 18 for CA) SEE 29 for the same
period
7
Eurasia FDI inflows 2006-2007
Average FDI per capita relatively low with
limited diversification Up to 6 times lower than
South East Europe or CEE
FDI inflow per capita (in US) FDI inflow per capita (in US) FDI inflows ( of GDP) FDI inflows ( of GDP)
2006 2007 2006 2007
Armenia 106 141 5.3 5.2
Azerbaijan -155 -619 -6.2 -16.6
Georgia 247 351 14.3 15.5
Ukraine 122 196 5.4 6.6
Kazakhstan 433 331 8.2 4.9
Kyrgyz Republic 35 44 6.4 6.0
Mongolia 107 118 9.2 8.6
Tajikistan 10 10 2.3 2.0
Turkmenistan 112 124 7.2 6.4
Uzbekistan 7 10 1.1 1.2
South Caucasus Ukraine
Central Asia
Source EBRD Transition report 2007
Average FDI per capita in 2006 was US 130 in CA
and US 93 in SCU SEE US549 CEE US354
8
Competitiveness still constrained by the quality
of the business climate
Barriers to FDI
Competitive Assets
High perception of risk for business
transactions Administrative barriers to foreign
direct investment Relatively weak
institutional development, slow pace of economic,
legal and institutional reforms (implementation
gap) Underdeveloped physical infrastructure Weak
regional cooperation, including limited
intra-regional trade
Endowment in natural resources Low cost and
productive labour force Process of internal and
external liberalisation, particularly under the
European Neighbourhood Policy Macroeconomic
stabilisation, high growth rates and good
prospects for the long term sustainable growth
  FDI in energy infrastructure as a catalyst for
FDI in related sectors
9

The case for an integrated approach to investment
and competitiveness

• An integrated program of policy reform
• Strengthening networks of regional cooperation
• National Strategies to develop the business
  climate
• Regional networks to exchange information,
  analyse experience and develop good practices
• Pilot of policy recommendations through sector
  and country specific competitiveness projects

10

What can OECD the bring? The Eurasia
Competitiveness Program

• Transfer of good practices and expertise from the
  30 most industrialised countries in the world.
• Focus on results at the country and sector level
• Capitalisation of the OECD comparative advantages
  in both process (e.g. peer reviews) and content
  (e.g. Policy Framework for Investment, Investment
  Reform Index, Guidelines for Multinational
  Enterprises).
• Strong involvement of participating governments
  and private sector in content and process that
  builds capacity, increases credibility and
  ensures greater sustainability.
• Non prescriptive approach puts governments in the
  driving seat to lead the reform process where
  they believe it will achieve the best results.
• Emphasis on coaching (but not replacing)
  governments to increase capacity building and
  ownership.
• Proven success in working with non OECD countries
  at the regional level (e.g. Investment Compact
  for SEE, MENA OECD Investment Programme)

The OECD Council approved this year a program to
enhance the business climate in Central Asia, the
South Caucasus and Ukraine