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OECD EURASIA COMPETITIVENESS PROGRAMME

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

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OECD EURASIA COMPETITIVENESS PROGRAMME

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

  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. CIS countries: A relative strong economic performance… GDP Growth 2006-2007

  4. … with wide differences across countries Eurasia: Growth in real GDP 1999-2008 South Caucasus & Ukraine Central Asia

  5. Focused reforms in the financial sector and competition policy Eurasia: Updgrades in reforms per sector

  6. Average FDI growth a third lower than regions like South East Europe Eurasia: FDI Levels 1999-2007 (in US$ million) South Caucasus & Ukraine Central Asia Source: EBRD Transition report 2007 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

  7. Average FDI per capita relatively low with limited diversification Up to 6 times lower than South East Europe or CEE Eurasia: FDI inflows 2006-2007 South Caucasus & Ukraine Central Asia Source: EBRD Transition report 2007 Average FDI per capita in 2006 was US$ 130 in CA and US$ 93 in SCU SEE: US$549 ; CEE: US$354

  8. Competitiveness still constrained by the quality of the business climate Barriers to FDI Competitive Assets 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 • 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. The case for an integrated approach to investment and competitiveness • 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

  10. What can OECD the bring? The Eurasia Competitiveness Program • 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) The OECD Council approved this year a program to enhance the business climate in Central Asia, the South Caucasus and Ukraine

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