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Central Asia:diversified & competitive economies attractive

Central Asia: More diversified and competitive economies would attract investors

26 January 2011

Central Asia: More diversified and competitive economies would attract investors Economic diversification and increased competitiveness could make Central Asia a new frontier of economic opportunity for global investors, says a new OECD report to be presented tomorrow at the World Economic Forum in Davos, Switzerland.

The OECD Central Asia Competitiveness Outlook recommends that governments of the region implement structural reforms to tackle three key barriers to competitiveness: a mismatch between worker skills and job market needs, limited access to finance for smaller businesses and an over-reliance on the energy sector.

Launching the report at the World Economic Forum, OECD Secretary-General Angel Gurría will highlight the opportunities for Central Asian economies and global investors. “Countries in Central Asia have a great potential. But they need to be able to leverage their comparative advantages, including their geographic location, their abundance of natural resources and a hard-working and young labour force.The combination of structural reforms, innovative policies and social programmes will allow them to reach their full potential.”

"Austrian companies are increasingly investing in this important region," said Austrian Chancellor Werner Faymann. "But I have to emphasize that a further increase of investment depends also on Central Asian policy makers, who need to accelerate their reform efforts in the area of rule of law as well as by fighting corruption. Moreover, fair distribution of incomes in the region will also support the development of stable societies.”

Vast energy reserves, mineral and agricultural resources and almost universal literacy rates spurred Central Asia’s strong economic performance over the decade prior to the crisis: foreign direct investment increased ninefold; gross domestic product grew at a rate of 8% per year and labour productivity grew nearly 5% faster than world average.

However, overdependency on natural resources – with as much as two-thirds of foreign direct investment to the region going to the energy sector – has left Central Asian economies highly exposed to the uncertainties of international markets. The global crisis has temporarily slowed growth levels in the region, further inderlining the need to improve competitiveness.

Central Asian policy makers must work more closely with the private sector, focusing on:

• developing education strategies that reflect the labour market’s needs and strike the right balance between tertiary education and vocational training; • making small and medium-sized enterprise financing a priority by further reforming the financial sector and developing guarantee schemes; and • improving the region’s investment policy and promotion frameworks by implementing a second generation of reforms in land ownership regulations and pro-actively promoting non-energy sectors to investors.

Central Asia labour productivity growth relative to the world, 1993-2008

Central Asia does not include Afghanistan; GDP per employee is calculated as GDP in constant 2000 USD divided by the total people employed over 15 years old Source: World Bank, World Development Indicators / OECD analysis Download the complete Excel file

More than ten heads of state and government, including the Presidents of Switzerland, Azerbaijan and Ukraine, the Prime Minister of Kazakhstan and the Chancellor of Austria, and numerous business leaders will participate in Davos for the launch of this first Competitiveness Outlook for the region.

The new report on Central Asia is the first Competitiveness Outlook prepared under the aegis of the wider OECD Eurasia Competitiveness Programme which includes seven countries from Central Asi (Afghanistan, Kazakhstan, the Kyrgyz Republic, Mongolia, Tajikistan, Turkmenistan, Uzbekistan) and six countries from Eastern Europe and the South Caucasus (Armenia, Azerbaijan, Belarus, Georgia, the Republic of Moldova and Ukraine).

A second Competitiveness Outlook on Eastern Europe and the South Caucasus will follow in June 2011.

ENDS

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