In early 2021, the OECD published a report assessing the legal environment for business in Central Asia with targeted recommendations for each of the countries of the region based on a set of reform priorities identified in work with Central Asia governments in 2019-2020. This work has been conducted against the backdrop of multiple shocks with widespread effects on the economies and societies of the region, including the COVID-19 pandemic and Russia’s full-scale invasion of Ukraine, reinforcing the need to engage in structural reforms to increase resilience.

Recent economic shocks, including the COVID-19 pandemic and Russia’s large-scale aggression against Ukraine, and their effects, such as closed Chinese borders and the disruptions of global value chains, have affected the economies of Central Asia in a milder way than expected. Despite the region’s large economic dependence on its two large neighbours, the five Central Asian states have so far shown great resilience to the economic headwinds: remittances registered record-high figures in 2022, national currencies quickly rebounded to pre-war levels after an initial drop, trade significantly increased and an influx of skilled workers from Russia boosted demand for services and hospitality. However, as the medium-term effects of the sanctions against Russia, the global cost-of-living crisis, and China’s economic slowdown have started to unfold, Central Asia faces lingering uncertainty. The aftermath of these developments could also further impede income convergence with OECD and EU economies, which had already started to slow in the aftermath of the global financial crisis. Meeting these challenges requires addressing remaining gaps in the business and investment climate, foregrounding the need for long-term reforms to encourage investment and private sector development.

In the recovery path from the COVID-19 pandemic, Central Asia has shown unexpected resilience to the new economic headwinds brought by Russia’s invasion of Ukraine. While governments moved rapidly to respond to the shocks of pandemic and war and improved elements of the business environment, structural reforms in the region are advancing more slowly. More effective implementation, heightened public-private dialogue and increased transparency in policymaking could lay the foundations for a more robust and healthy business environment.

Kazakhstan has worked to diversify its economy in post-pandemic recovery. Progress has been made in reforming the legal and regulatory framework for investment, digitalising administrative procedures and services for SMEs, and levelling the playing field with SOEs. However, gaps remain in investment in the non-oil sector and productivity growth, while the regional context might durably weigh on Kazakhstan’s growth prospects. The COVID-19 pandemic and Russia’s war in Ukraine exacerbated long-standing and structural issues holding back private-sector development, in particular persisting state presence in the economy, inconsistent regulatory enforcement and dispute settlement, and lacking trade facilitation measures. This chapter assesses progress and remaining challenges for Kazakhstan in implementing reforms to improve the operational environment for business, contract enforcement, and trade facilitation, and concludes with six policy recommendations.

This chapter assesses progress in implementing the three priority reforms identified in 2020, namely streamlining legislation, simplifying the tax code and tax administration and ensuring predictable contract enforcement. It takes into account action to support business activity and economic growth during and after the COVID pandemic and in response to Russia’s war in Ukraine. Since 2020, the government has been taking measures to encourage business formalisation, facilitate interactions between the administration and firms through digitalisation, and provide tax incentives in priority sectors, such as tourism, high technologies, and creative industries. The chapter concludes with a series of policy recommendations.

This chapter focuses on Tajikistan’s achievements and remaining challenges in the three areas of reforms identified in 2020, namely the investment framework, the enforcement of contracts and arbitral decisions in domestic courts, and tax administration. Taking into account the impact of the international context on the country’s economy, the chapter offers a series of policy recommendations.

This chapter focuses on Turkmenistan’s progress and challenges in implementing the three priority reforms identified in 2020, namely the implementation of the investment law and access to information for investors; the streamlining of business registration and licensing, and the creation of a one-stop shop; and the simplification of the operational environment for firms. Taking into account the impact of the COVID-19 pandemic and that of Russia’s war in Ukraine, the chapter offers policy recommendations to improve the legal environment for investors and businesses.

This chapter assesses progress made and challenges ahead in the three priority areas for reform identified in 2020, namely the investment climate, the operational environment for businesses, and taxation, considering the impact of the pandemic and Russia’s war on Ukraine. Progress has been made in particular in clarifying the regulatory framework for investment, making the business environment easier to navigate for firms, and digitalising tax services.

Since the pandemic and despite global headwinds, governments of Central Asia have worked to simplify tax systems and business procedures, dynamise public-private dialogue and digitalise public services. This section offers ways forward for the region’s governments to consider to further boost private sector development.

In the framework of the Central Asia Competitiveness IV Project co-financed by the European Union under its Central Asia Invest Initiative, the OECD has been reviewing progress in addressing problems in the business and investment climate, foregrounding the need for long-term reforms to encourage investment and private sector development in Central Asia. The OECD Eurasia Competitiveness Programme, in collaboration with representatives from the governments of Central Asia, private sector representatives, and other development partners, and with contributions from international experts, carried out analysis, data collection and consultations with stakeholders in each Central Asian country to assess progress in business environment reform implementation and developed updated recommendations for institutions and policies to support long-term growth prospects.