ANALYSIS OF THE SITUATION

The importance of private sector development as the engine of economic growth is well recognizes by the governments of all Central Asia countries. Although some concrete steps have been made towards introducing market mechanisms, mainly through improving export procedures, providing access to finance for SMEs and strengthening the financial sectors, the challenges faced by Central Asia economies remain very serious.

Poor business environment and investment climate characterized by low labor skills, productivity and thus competitiveness, a lack of diversification of the economy, excessive state regulatory systems, a segmented banking system, weak corporate governance, and inadequate legal framework are all adverse to entrepreneurship initiatives. These constraints do not allow Central Asia countries to successfully implement economic reforms in order to attain high levels of productivity and international competitiveness, to attract Foreign Direct Investment (FDI), or to achieve sustainable growth.

In general, the main obstacles/barriers to the development of business initiatives can be summarized as follows:

•  High and questionable government interference;
•  Multiplication of regulatory bodies;
•  High  number of inspections;
•  High cost of market entry due to inadequate registration procedures;
•  Over regulation, contradictory legal provisions  and poor level of law enforcement;
•  Infringement  of  private property rights;
•  High cost of access to finance;

All these constraints contribute to a weakening of market competition, to increasing rent-seeking and to persisting high levels of informal economy.

COOPERATION GOALS

The goal of the Swiss Cooperation in Central Asia in the domain of private sector development is to contribute to increasing investment, income and job opportunities by creating more favorable business conditions and improving key capacities within SMEs. The following strategic choices have been identified:

• Strengthening the business environment through support to business law reforms, law application and simplification of administrative procedures;
•  Facilitating access to finance for SMEs through supporting the emergence of innovative financial instruments;
• Supporting SMEs directly through capacity building and technical assistance to improve their export competitiveness;
•  Assisting regional initiatives facilitating regional trade.

APPROACH

Swiss technical assistance is focusing on the promotion of investment instruments, macroeconomic framework development, capacity building of small and medium enterprises (SMEs),  and the development of business services (BDS) and trade-related services

DEVELOPMENT PROJECTS

Swiss Assistance is mainly conceived in a regional approach, while taking into account the national particularities of each country. Thus, the Swiss – IFC Central Asia Partnership is a regional program consisting of a portfolio of projects, which aim at improving the business climate and lay ground for increased investment in the region. In addition to undertaking some country specific projects, this partnership expands leasing in the region through the Central Asia Leasing Facility (CALF) which provides credits to local financial institutions for on-lending to small and medium enterprises interested in leasing.

Another regional project implemented in Tajikistan and Kyrgyzstan is the Business Advisory Support program (BAS), co-financed with the European Bank for Reconstruction and Development. This project  aims at supporting the development of both the consultancy market and SMEs in Central Asia by directly fortifying SME-consultant services.

The Central Asia Small Enterprise Investment Fund (CASEF) is a joint venture fund of SECO, IFC, USAID and other investors. It aims at promoting the economic development of enterprises in Kazakhstan, Uzbekistan and Kyrgyzstan through equity participation, investment and technical assistance.

In addition, some projects are implemented in one country only:

In Uzbekistan, the Skills Development Project contributes to the reform of the vocational training system by developing models for cooperation between enterprises and professional colleges. In Tajikistan the Trade promotion programme has the objective of  strengthening the sustainable expansion and diversification of SME exports. The Business Enabling Environment SME policy project has 3 key areas of activity:

•   Survey: monitors the business environment and gathers factual information from entrepreneurs across the country;
•   Policy: provides support to the government in pursuing legislative changes, and works hands-on with state agencies to assist in implementing the new procedures;
• Awareness: conducts rights awareness campaigns through mass-media and trainings for entrepreneurs.

CROSSCUTTING ISSUES

An adequate gender analysis is crucial for activities in this domain, especially for programmes dealing with financial services, business development services and vocational training. An assessment of men’s and women’s roles and access to and control over resources, as well as participation in decision-making is taken into consideration while designing projects. Corruption is widespread in the economic environment, both at the level of businesses and at the level of government counterparts. Consistent awareness-raising and main- streaming efforts related to participation, non-discrimination, efficiency, transparency and accountability are undertaken at the project level.

The majority of households, particularly in rural areas, pursues a strategy of subsistence and relies increasingly on local renewable resources. Thus, Swiss projects explore in every possible manner the protection of the environment and aim at  sustainable use of inputs (such as  energy and raw materials).

Page was last updated August, 2008