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OECD Private Sector Development 1
OECD EURASIA COMPETITIVENESS PROGRAMMEEnhancing Investment, Competitiveness and Private Sector Development in Central Asia,
the South Caucasus and Ukraine
OECD Private Sector Development DivisionOECD Eurasia Competitiveness Programme
June 2008
Rainer GeigerDeputy Director General
Directorate for Enterprise and Financial Affairs
OECD Private Sector Development 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
OECD Private Sector Development 3
CIS countries: A relative strong economic performance…
GDP Growth 2006-2007
OECD Private Sector Development 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
KyrgyzRepublic 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
Sou
th C
auca
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Ukr
aine
Cen
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Asi
a
Eurasia: Growth in real GDP 1999-2008
OECD Private Sector Development 5
Focused reforms in the financial sector and competition policy
Eurasia: Updgrades in reforms per sector
OECD Private Sector Development 6
Average FDI growth a third lower than regions like South East Europe
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
Eurasia: FDI Levels 1999-2007 (in US$ million)
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
Sou
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Source: EBRD Transition report 2007
OECD Private Sector Development 7
Eurasia: FDI inflows 2006-2007
FDI inflow per capita (in US$) FDI inflows (% of GDP)
2006 2007 2006 2007
Armenia 106 141 5.3 5.2
Azerbaijan -155 -619 -6.2 -16.6
Georgia 247 351 14.3 15.5
Ukraine 122 196 5.4 6.6
Kazakhstan 433 331 8.2 4.9
Kyrgyz Republic 35 44 6.4 6.0
Mongolia 107 118 9.2 8.6
Tajikistan 10 10 2.3 2.0
Turkmenistan 112 124 7.2 6.4
Uzbekistan 7 10 1.1 1.2
Sou
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auca
sus
&
Ukr
aine
Cen
tral
Asi
a
Source: EBRD Transition report 2007
Average FDI per capita relatively low with limited diversificationUp to 6 times lower than South East Europe or CEE
Average FDI per capita in 2006 was US$ 130 in CA and US$ 93 in SCU
SEE: US$549 ; CEE: US$354
OECD Private Sector Development 8
Competitiveness still constrained by the quality of the business climate
Barriers to FDI
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
Competitive Assets
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
OECD Private Sector Development 9
9
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
The case for an integrated approach to investment and competitiveness
OECD Private Sector Development 10
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)
What can OECD the bring?The Eurasia Competitiveness Program
The OECD Council approved this year a program to enhance the business climate in Central Asia, the South Caucasus and Ukraine
