1. OECD Private Sector Development 1 OECD EURASIA COMPETITIVENESS PROGRAMME Enhancing Investment, Competitiveness and Private Sector Development in Central Asia, the South Caucasus and Ukraine OECD Private Sector Development Division OECD Eurasia Competitiveness Programme June 2008 Rainer Geiger Deputy Director General Directorate for Enterprise and Financial Affairs

2. 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

3. OECD Private Sector Development 3 CIS countries: A relative strong economic performance… GDP Growth 2006-2007

4. OECD Private Sector Development 4 … with wide differences across countries 1999200020012002200320042005200620072008 EstimateProjection Armenia 3.35.99.613.213.910.114.013.413.710.0 Azerbaijan 11.011.19.910.611.210.224.330.523.420.0 Georgia 3.01.94.75.511.15.99.69.412.08.0 Ukraine -0.25.99.25.29.612.12.77.37.65.5 Kazakhstan 2.79.813.59.89.39.69.710.68.55.1 Kyrgyz Republic 3.75.45.30.07.0 -0.23.18.26.8 Mongolia 3.21.11.04.05.910.17.38.69.98.6 Tajikistan 3.78.310.29.110.210.66.77.07.84.1 Turkmenistan 16.518.620.415.817.117.29.69.011.512.0 Uzbekistan 4.33.84.14.04.27.77.07.39.57.5 South Caucasus & Ukraine Central Asia Eurasia: Growth in real GDP 1999-2008

5. OECD Private Sector Development 5 Focused reforms in the financial sector and competition policy Eurasia: Updgrades in reforms per sector

6. OECD Private Sector Development 6 Average FDI growth a third lower than regions like South East Europe 1999200020012002200320042005200620072008 EstimateProjection Armenia12210470111121217252340455482 Azerbaijan5101492991,0482,3532,351458-1,301-5,201-1,997 Georgia62153801223354205291,1151,5851,400 Ukraine4895947696981,4111,7117,5335,7379,2188,000 Kazakhstan1,4681,2782,8612,1642,2135,4362,1236,6305,1004,680 Kyrgyz Republic38-754613243182224167 Mongolia34404378132129258290324688 Tajikistan212410363227255667080 Turkmenistan125131170276226354418731804820 Uzbekistan1217583657018788195262311 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 South Caucasus & Ukraine Central Asia Source: EBRD Transition report 2007

7. OECD Private Sector Development 7 Eurasia: FDI inflows 2006-2007 FDI inflow per capita (in US$)FDI inflows (% of GDP) 2006200720062007 Armenia1061415.35.2 Azerbaijan-155-619-6.2-16.6 Georgia24735114.315.5 Ukraine1221965.46.6 Kazakhstan4333318.24.9 Kyrgyz Republic35446.46.0 Mongolia1071189.28.6 Tajikistan10 2.32.0 Turkmenistan1121247.26.4 Uzbekistan7101.11.2 South Caucasus & Ukraine Central Asia Source: EBRD Transition report 2007 Average FDI per capita relatively low with limited diversification Up to 6 times lower than South East Europe or CEE Average FDI per capita in 2006 was US$ 130 in CA and US$ 93 in SCU SEE: US$549 ; CEE: US$354

8. 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

9. 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

10. 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