In 2020, the gross inflow of foreign direct investment to Central Asian countries amounted to USD 21 billion
In 2021, the World Bank predicts the world economy will expand by 5.6% after falling by 3.5% in 2020. In the countries of Central Asia (CA), growth is also projected – by 3.7% per year. The largest economic growth is forecasted for Uzbekistan (plus 4.8%) and Tajikistan (plus 5.3%). In turn, in Kazakhstan, growth is projected at 3.2%, in Kyrgyzstan – 3.8%.
In general, experts from international institutional companies note that attracting investment is a key factor in economic recovery after the crisis in Central Asia. Thus, investment attractiveness plays a fundamental role in the development of countries.
Today, the countries of Central Asia are generally attractive for foreign investment. The following positive factors can be noted:
In the “pre-crisis” 2019, the inflow of foreign direct investment (FDI) showed positive dynamics in all CA countries, and the growth rates were higher than in the world as a whole. Thus, the total amount of FDI to CA countries increased by almost 10% and amounted to USD 32.2 billion, while global FDI flows in the same period increased by only 3%. In 2020, for obvious reasons, the amount of FDI in Central Asia fell to $ 20.7 billion.
Today the CA countries are actively competing with each other, improving the investment climate, which has a positive effect on the region’s reputation. In recent years, Uzbekistan has shown fairly high results. Thus, in the “pre-coronavirus” 2019, Uzbekistan became the leader in the growth of FDI inflows. Over the year, the amount of external investments increased by 2.3 times at once and amounted to 4.2 billion US dollars. Oil refining, oil production and chemical industries are attracting investors in Uzbekistan. The greatest interest was shown by China, Germany, USA, Russia.
Meanwhile, in Kazakhstan, FDI inflows in 2019 did not change compared to the previous year, although the country remains the leader in terms of attracted investments. In Kyrgyzstan and Tajikistan, growth was 26.4% and 1.4%, respectively.
In Uzbekistan, unprecedented measures are being taken to further form a favorable investment climate and increase investment attractiveness, which contribute to an increase in the inflow of foreign investment. These measures allowed the country to improve its position in the international ranking of ease of doing business Doing business: in 2020, Uzbekistan rose by 7 positions and took 69th place, which is one of the best indicators in the region.
The rating notes that Uzbekistan has made great strides in improving at least four main indicators. Thus, the country has strengthened the protection of minority investors by increasing the rights of shareholders and their role in major corporate decisions, clarifying ownership structures and increasing corporate transparency. They also simplified the payment of taxes by combining the two and encouraged cross-border trade by introducing risk-based checks and simplifying import document requirements.
Meanwhile, Kazakhstan has improved its position in the ranking from 28th to 25th place – this is the best result in the region, although the country is inferior to Uzbekistan in terms of the speed of development and attraction of investments.
Another confirmation of the investment attractiveness of the CA countries is the growth of accumulated investments during the period of the pandemic and crisis. So, as of January 1, 2021, their amount increased by 6.7%. As in the case of gross FDI inflows, the largest increase in accumulated foreign investment is observed in Uzbekistan – plus 29.8%. In Kazakhstan, the growth was only 3.6%, in Tajikistan – 1.6%.