• Business opportunities in Central Asia include a need for energy imports and infrastructure development
• Regional economies are expected to grow by 5.4 percent in 2024 and 5.9 percent in 2025
• Businesses entering the region must have strong market knowledge or a diligent local partner to navigate unique challenges

Development in Central Asia since 1991 has been uneven. Each economy has had its fair share of successes and challenges in the more than 30 years since independence. More focused efforts and strategic reforms have led to impressive growth in recent times. For overseas companies, the region’s reliance on imports and a need for key sector development has created a diverse number of business opportunities. Asian Insiders Managing Partner Jari Hietala offers insights on how these can be unlocked.

Often overlooked, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan are countries that foreign businesses may want to consider. These countries are rich in minerals and hydrocarbons but often lack the refined products and machinery needed for domestic consumption and further development. As a result, they have historically relied on imports to support economic growth.

Despite this, prospects in Central Asia remain optimistic. The Regional Economic Prospects (REP) report published by the European Bank for Reconstruction and Development (EBRD) stated that the regional economies will grow by 5.4 percent in 2024 with the figure predicted to rise to 5.9 percent in 2025. There are several reasons for the positive outlook.

The region has begun to aggressively tap into its geographic potential that links Europe to Asia. A great example of this is the Middle Corridor route. This proposed land and sea transportation corridor will allow products to travel between China and Europe through Central Asian countries and across the Caspian Sea and Black Sea.

Another interesting advancement is the focus of Central Asian countries on sustainable development. Kazakhstan, Uzbekistan, and Turkmenistan intend to reduce methane emissions by 30 percent by the end of the decade.

Other notable sustainability initiatives include Kazakhstan’s Joint Energy Transition Partnership which aims to improve renewable energy contributions and streamline project processes. However, the region is still in the early stages of green transition efforts.

Elsewhere, countries throughout Central Asia have either established or planned to create economic zones catering to foreign investment. Uzbekistan has launched 23 Free Economic Zones (FEZs), Kazakhstan has 14 Special Economic Zones (SEZs), and Kyrgyzstan developed the China-focused Maimak FEZ. Plans for similar zones in Tajikistan and Turkmenistan are in the works.

Oil & Gas leads the way

Central Asia is home to some extremely prolific oil and gas basins with new fields still to be discovered and developed. It is believed nearly 20 percent of global gas reserves and roughly 45 percent of the world’s natural gas reserves are located here.

While the region is now a major producer, its role is likely to grow in the years to come. However, several countries often lack refining capacity for their crude oil, meaning they still rely on significant imports.

Currently, upstream activities have been the primary focus of development. The Uzbekistan government announced a USD 33 billion investment targeting the oil and gas sector’s upstream market by 2025. Kazakhstan has also recorded notable investments in this area as well.

In the downstream sector, there has been investment from China on that front. That being said, more oil refineries and pipelines are required to satisfy demand from both a domestic and regional standpoint. This would also end the reliance on imports while improving export capabilities.

Business opportunities in Central Asia related to oil and gas can be found in the upstream and downstream markets. Given the region’s energy demands and export goals, foreign firms can assist in terms of machinery and knowledge to help the sector scale up.     

Infrastructure crucial to growth targets

Headlines were made when the G7 countries revealed the Partnership on Global Infrastructure Investment programme was willing to commit up to USD 200 billion to Central Asian infrastructure projects.

Additionally, the aforementioned Middle Corridor, also known as the Trans-Caspian Corridor, would see the European Bank for Reconstruction and Development invest an estimated EUR 1.5 billion in the project’s related infrastructure and transport solutions.

The region remains a strategic part of China’s Belt and Road Initiative. The move by Central Asia to work with other partners is not seen as a pivot away from China but an opportunity to diversify interests. This can ensure countries do not become overly reliant on a single partner.

Ultimately, continued infrastructure investment from multiple sources will be a driving force in sustaining economic growth. Many countries in the region lack what is needed to carry out these large-scale projects and will seek help from overseas partners.

This necessitates a large volume of machinery and equipment imports, ranging from construction tools to heavy-duty vehicles. There are ample business opportunities in the sector, and further investment will only serve to create more. However, importing the machinery required remains both expensive and cumbersome.

What’s more, the sector needs to address several trade-related obstacles. Notably, Central Asia still lags in many of Organisation for Economic Co-operation and Development’s Trade Facilitation Indicators. Even with cargo volumes rising, reducing barriers by making procedural improvements and focusing on greater cooperation at the regional level would allow for even greater growth.

Other business opportunities in Central Asia

Other attractive industries in Central Asia include medicine and pharmaceuticals, in addition to manufactured goods. Both are developing sectors that need support to keep up with growing demand.

Starting with the former, many aspects of the region’s pharmaceutical industries are still under development. Imports of medicine and other healthcare products are essential for ensuring public health as this industry continues to be built up.

As for the latter, consumer goods and other manufactured products find a ready market in Central Asia, where wages are on an upward trajectory and a younger population seeks out various items. Everything from household appliances to vehicles can find success with the region’s growing middle class and help contribute to a diversified economy.

Final thoughts

Business opportunities in Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan are plentiful, but unlocking these requires diligence and significant local understanding. Companies entering the region must have strong local knowledge to navigate unique challenges and be able to attest sanction compliance.

In the oil and gas industry, firms with project experience or the ability to supply specialised equipment are in the most demand at present. The case is similar in terms of infrastructure development. Elsewhere, those in manufacturing as well as medicine and pharmaceuticals should explore possibilities in the region given its demographics and consumer habits.

To learn more about the business opportunities in Central Asia and assess your readiness to enter the market, schedule a no-obligation call with Jari Hietala, Managing Partner: jari.Hietala (at)asianinsiders.com or Asian Insiders Partner Allesandro Corbi alessandro.corbi(at)asianinsiders.com