Reforming State-Owned Enterprises in Central Asia is Key for Stronger Recovery

Reforming State-Owned Enterprises in Central Asia is Key for Stronger Recovery

As the world economy recovers from the COVID-19 pandemic, the Central Asia region faces an existential question. Will the pandemic usher in a new social contract that would help countries to emerge stronger and generate strong, sustainable, and inclusive growth that facilitates job creation and reduces poverty and inequality? Or will countries waste the opportunity of a century by returning to the era of slow reforms? Given the often-limited room in their budgets, countries in the region cannot delay reforms and revisiting the role of state-owned enterprises (SOEs) should prominently feature in these reforms.

Why do SOEs matter so much in the region?

Historically, SOEs have played a prominent role in the region’s social contract, including as a provider of employment, supplier of goods and services, and guarantor of social stability. They are prevalent in many sectors, including those run by private enterprises in other regions such as the production of carpets, shoes, or dairy products, and hold substantial assets.

However, while the region benefits from a few good performers, often oil, gas, or mining (Saudi Aramco), many SOEs are not profitable, due to inefficient operations or non-market activities undertaken on behalf of the government. They often put a heavy strain on