How Can Central Asian Countries and Azerbaijan Become Emerging Market Economies?

The conventional way to become a developed "emerging market" has been to rely in large part on investments from high-income countries. This approach has failed, most obviously during the recent global financial crisis, and may not be feasible again for some years. Azerbaijan and five ex-Soviet Central Asian economies have been set back by the world economic crisis. As the recovery continues, these countries will be able to use the proceeds from their staple exports to expand their basic industries (energy, basic chemicals, and metals), but in order to attract diverse foreign investments, they could also make greater efforts to promote a diverse private sector. Besides credits and more predictable taxes, surveys show that private owners want and can benefit from better enforcement of property rights, reduced corruption, and easier access to regional and international markets. All the governments recognize these issues, but effective action has been halting. A possible alternative to promoting private enterprise and thus attracting first-world capital would be to expand the state sector and public infrastructure, as a precursor to privatization, as has occurred elsewhere in Asia.