When the Soviet Union began to fall apart, and new, independent nations were forming in its place, world economists wondered what would become of these new governments. How would they compete in the global economy? Would they be able to develop into prosperous nations?
In the immediate aftermath of the break-up of the Soviet Union, these new nations in Central Asia were disorganised and not ready for the complexities of a world economy that was racing towards the 21st century. There were years of political corruption and seemingly devastating civil wars. However, hope remained that countries such as Georgia, Uzbekistan and Kazakhstan would recover because they had the most important thing necessary to invigorate an economy – natural resources.
Those who held on to the belief that these new nations had what it took to be major players in the world economy have recently been proven correct. A new report by the International Finance Corporation and the World Bank found that since 2005, the Central Asian region, along with Eastern Europe, leads the world in enhancing the business climate for local firms.
The region is now the second most business friendly in the world, ranked higher than East Asia and the Pacific. The question that needs to be asked is how did this happen? How did these countries go from struggling to a state of surging so fast? The answer to that question is through governmental reforms.
Central Asian countries created an environment of business ease by making it easier to register property, pay taxes, enforce contracts and resolve insolvency. Since 2005, European and Central Asian economies have implemented nearly 400 institutional and regulatory reforms. That is more than any other region in the world.
In an article on finchannel.com, director of Global Indicators and Analysis of the World Bank Group Augusto Lopez-Claros said, “Many of these reforms have been implemented in the context of EU accession negotiations. Economic integration and the desire to catch up with more prosperous partners have been a powerful incentives to promote ambitious reform agendas.” Based on this information, it seems that the future will only get brighter for investors looking to invest their funds in Central Asia.
One country that has made exceptional progress in terms of business leaps since 2005 is Georgia. Ranked ninth in the 2013 report, it has made 35 institutional and regulatory reforms since 2005 and improved in six areas in 2012 alone – more than another other economy in the world. Some of these reforms strengthened its secured transactions system, made getting electricity easier by simplifying the process of connecting new customers, and reduced the time to export and import by creating customs clearance zones.
These types of reforms are happening all over the region, and because of it, many see Central Asia as a future hub of the world economy. The abundant natural recourses are getting tapped in each area because the governments understand the potential its nations have as economic powers. It is the investor’s obligation to take advantage of this enormous opportunity.