{"id":49983,"date":"2026-10-27T19:56:03","date_gmt":"2026-10-27T18:56:03","guid":{"rendered":"https:\/\/novastan.org\/en\/?p=49983"},"modified":"2026-10-27T19:56:10","modified_gmt":"2026-10-27T18:56:10","slug":"world-bank-najy-benhassine-central-asia-economic-transformation","status":"publish","type":"post","link":"https:\/\/novastan.org\/en\/economics\/world-bank-najy-benhassine-central-asia-economic-transformation\/","title":{"rendered":"World Bank\u2019s Najy Benhassine on Economic Growth and Transformation in Central Asia"},"content":{"rendered":"\n
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Central Asia is attracting unprecedented international attention, but can new investment and infrastructure translate into more productive economies and better jobs? World Bank Division Director for Central Asia Najy Benhassine discusses reform, private-sector development, regional connectivity and the challenges facing the region through 2035.<\/em><\/em><\/p>\n\n\n\n

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Central Asia has become a focal point for investment, trade and connectivity initiatives involving partners from Europe, Asia and the Gulf. Yet strong growth and major infrastructure projects do not automatically deliver a more diversified economy or higher-quality employment.<\/p>\n\n\n\n

In this interview with Novastan, Najy Benhassine, the World Bank\u2019s Division Director for Central Asia, discusses the opportunities and structural constraints facing the five Central Asian economies, from access to finance and skills development to the Middle Corridor and climate resilience.<\/p>\n\n\n\n

<\/p>\n\n\n\n

Central Asia is receiving unprecedented attention from major economic partners, including the EU, China, the Gulf states, South Korea and others. To what extent is this greater geopolitical and investment interest already translating into deeper economic transformation within the region?<\/h3>\n\n\n\n

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The interest is real and, in some respects, historic. Central Asia has moved from the margins to the centre of multiple strategic agendas simultaneously, and that creates genuine opportunities – more infrastructure financing, greater trade flows along economic corridors, and more diversified economic partnerships than at any point since independence.<\/p>\n\n\n\n

But I would make a distinction between interest and actual transformation. Global attention generates visits, pledges, and headlines, but these are just the start. Translating this interest into actual investments takes more. Economic transformation requires institutional reforms, competitive markets, and an environment where domestic and foreign firms can grow, become more productive, and generate more and better-paid jobs.<\/p>\n\n\n\n

So far, we are seeing expanding trade volumes and transit activity, along with some increase in foreign direct investment (FDI) in extractive industries and connectivity and logistics-related infrastructure. For a landlocked region, that is very welcome, but it does not yet amount to structural transformation in terms of diversified productive capacity, rising total factor productivity, or significant movement up export value chains.<\/p>\n\n\n\n

When I look for genuine reform momentum, I see encouraging signs across Central Asia, although the nature and pace of reform differ. Uzbekistan, for example, has sustained a significant economic transformation since 2017, including exchange rate liberalisation, opening of state-dominated sectors to private participation, significant progress towards WTO accession, improvements in tax and customs administration, and the removal of deep distortions such as mandatory crop placement and the propiska<\/em> system. Together, these reforms have created a more dynamic investment environment, with significant impacts on growth, job creation, and poverty reduction.<\/p>\n\n\n\n

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Read more on Novastan<\/strong>: When reform reaches everyday life: Lessons from Uzbekistan and Mongolia<\/a><\/p>\n\n\n\n

Kazakhstan, as the region\u2019s largest economy and an upper-middle-income country, is at an equally important stage. Its reform agenda focuses on reducing the dominance of state-owned enterprises, deepening capital markets, and advancing the transition to a more knowledge-intensive and private-sector-driven growth model.<\/p>\n\n\n\n

In Tajikistan, recent reforms have advanced greater competition in backbone sectors such as telecommunications and aviation, a stronger legal framework for foreign investment, and a more transparent environment for private investors. On the inclusion side, a new Benefits Sharing Program has been adopted that would direct part of the revenue from electricity sales from the Rogun Hydropower Plant towards pro-poor spending, alongside measures to make basic education services more inclusive.<\/p>\n\n\n\n

In the Kyrgyz Republic, the government is reforming utilities to allow private participation, establishing the framework for public-private partnerships (PPPs) and a more competitive and streamlined business environment, while digitising public services and financial systems to expand access and efficiency. These reforms are laying the foundations for large-scale investments, such as the Kambarata-1 Hydropower Plant and the China-Kyrgyzstan-Uzbekistan railway, to translate into jobs and inclusive growth.<\/p>\n\n\n\n

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Najy Benhassine, World Bank Division Director for Central Asia. Courtesy of the World Bank.<\/figcaption><\/figure>\n\n\n\n

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Growth rates across Central Asia have remained relatively strong, but headline growth does not always translate into productivity gains or better-quality employment. Where do you see the biggest gap between economic growth and structural transformation?<\/h3>\n\n\n\n

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The biggest gap is in productivity and skilled job creation. Growth has been driven primarily by favourable commodity prices, public investment, and remittance inflows. These are real contributions to GDP, but they are not the same as an economy becoming more productive or competitive.<\/p>\n\n\n\n

When you look at firm-level data, labour productivity in manufacturing has stagnated or grown only modestly across most of the five countries. The private sector remains dominated by small firms that struggle to access finance, skilled labour, and markets at scale. State-owned enterprises continue to absorb capital and crowd out private investment in sectors where they should not dominate. The quality of jobs – measured by formality, wages, and skills content – has not improved commensurately with headline growth figures.<\/p>\n\n\n\n

Access to finance remains a major constraint. Banking sectors remain relatively shallow, and credit allocation is often distorted by state-owned banks and directed lending practices. Small and medium-sized enterprises face collateral requirements they cannot meet and interest rates that make investment difficult to justify. The regulatory environment compounds this: compliance burdens, uneven application of rules, weak contract enforcement, and governance deficiencies all raise the cost of doing business and disproportionately disadvantage smaller, domestically oriented firms.<\/p>\n\n\n\n

This is exactly the kind of challenge that our FINGROW, or the Access to Finance for Jobs and Growth Program, is designed to address at scale. It brings together the World Bank, the International Finance Corporation (IFC), and the Multilateral Investment Guarantee Agency (MIGA) in a One World Bank Group approach, with $2 billion in IBRD financing and $1 billion each from IFC and MIGA, aiming to mobilise up to $6 billion in private capital.<\/p>\n\n\n\n

By addressing financing gaps for micro, small, and medium-sized enterprises and scaling digital financial solutions, it has the potential to support up to 18 million more or better jobs across participating countries over time. In Central Asia, Phase 1 is already underway in Uzbekistan, with the programme designed to be flexible enough to address each country\u2019s specific structural and institutional context.<\/p>\n\n\n\n

FINGROW is also a model for how we think about our work more broadly: focusing on outcomes at scale, with the World Bank, IFC, and MIGA defining shared goals from the outset rather than working in parallel.<\/p>\n\n\n\n

The most important structural gap, however, is the disconnect between education systems and labour market needs. All five countries have relatively high school enrolment rates, but graduates\u2019 skills do not always match what a more diversified, productivity-driven economy requires. Closing that gap requires sustained investment in the quality of education, not just its quantity.<\/p>\n\n\n\n

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The five Central Asian economies are often discussed as a single region, yet their economic structures and reform trajectories differ considerably. Which differences matter most when assessing their development prospects?<\/h3>\n\n\n\n

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Central Asia is a genuine region – not simply a geographic label. The five countries share a common history, a cultural heritage shaped by the Silk Road civilisations, and a Soviet institutional legacy that continues to influence how states and public institutions function. That shared foundation matters for how regional cooperation can be built.<\/p>\n\n\n\n

What is striking today is that regional identity is being consciously strengthened. The Consultative Meetings of Central Asian leaders reflect a deliberate collective effort by all five heads of state to build a cooperative regional agenda on key issues affecting the sub-region, including trade, water, energy, and connectivity.<\/p>\n\n\n\n

It is also worth noting that all five countries are, in different ways, resource-rich – though the nature of those resources varies considerably. Kazakhstan has vast land and hydrocarbon reserves. Turkmenistan holds some of the world’s largest natural gas deposits. Uzbekistan has gold, and a large and growing population that is itself a demographic asset.<\/p>\n\n\n\n

Tajikistan and Kyrgyzstan have what the region urgently needs and will need more of: hydropower potential that could be transformative not just nationally but regionally. These differences shape their individual development paths, but also create opportunities for much deeper economic complementarity across the region.<\/p>\n\n\n\n

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Many Central Asian governments want to attract more foreign direct investment. What distinguishes investment that contributes to long-term domestic productive capacity from investment that has relatively limited spillover effects?<\/h3>\n\n\n\n

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This is one of the most important questions for the region, and governments are increasingly asking it themselves rather than simply pursuing FDI volume.<\/p>\n\n\n\n

The constraint in Central Asia is not a global shortage of capital. Banks and institutional investors manage roughly $280 trillion globally. The question is whether capital can reach viable opportunities at an acceptable risk and return, and that is precisely where development institutions like the World Bank Group have a critical role.<\/p>\n\n\n\n

Through our Private Sector Investment Lab, we identified five recurring barriers to quality private investment in developing economies: policy and regulatory uncertainty, gaps in political risk coverage, foreign exchange risk, insufficient junior equity, and limited mechanisms to originate and distribute assets at scale. These five barriers are as relevant in Central Asia as anywhere.<\/p>\n\n\n\n

The World Bank Group\u2019s response has been concrete. We have brought our guarantee instruments under one platform, delivering more than $25 billion in guarantees globally in FY2026. Roughly one-third of IFC\u2019s investments are now in local currency, reducing the foreign exchange risk that deters long-term investors.<\/p>\n\n\n\n

We have launched the Frontier Opportunities Fund to provide junior equity in markets where promising businesses cannot yet reach commercial scale. We are also bringing the World Bank, IFC and MIGA closer together so that policy reform and investment work in tandem.<\/p>\n\n\n\n

Investment in extractive industries has historically generated strong revenues for Central Asian governments but relatively limited spillovers. By contrast, investment in agro-processing, light manufacturing, tourism, or business services is more likely to generate the supply chain linkages, employment, and knowledge spillovers that build domestic productive capacity.<\/p>\n\n\n\n

Attracting more of this investment requires governments to reduce policy uncertainty, strengthen contract enforcement, and address the risks that prevent global capital from entering these markets.<\/p>\n\n\n\n

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Najy Benhassine speaking during a World Bank meeting. Courtesy of the World Bank.<\/figcaption><\/figure>\n\n\n\n

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Regional connectivity has become a central policy priority, particularly around the Middle Corridor and other east-west transport routes. How much economic value can improved connectivity generate if border procedures, logistics, customs and regulatory coordination do not improve at the same pace?<\/h3>\n\n\n\n

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Read more on Novastan<\/strong>: The Middle Corridor is growing, but can it deliver? A logistics operator\u2019s perspective<\/a><\/p>\n\n\n\n

This is exactly the right question to ask. Physical infrastructure is necessary but not sufficient. The bottlenecks on the Trans-Caspian Transport Corridor (TCTC) are not primarily about the absence of roads or railways – they are about border-crossing procedures, transshipment coordination, documentation requirements, and the fragmentation of logistics services across multiple jurisdictions. Since 2022, shifts in regional trade patterns have exposed these constraints more clearly.<\/p>\n\n\n\n

The economic value of connectivity therefore depends critically on the \u201csoft\u201d dimension keeping pace with the \u201chard\u201d infrastructure.<\/p>\n\n\n\n

Our new report, Integration: World-Class Trade Logistics Along the Trans-Caspian Transport Corridor<\/a><\/em>, estimates that strategic investments in the corridor – covering nine countries and nearly 200 million people – could more than triple trade volumes and halve travel times, creating 2 million additional jobs by 2040 by a conservative estimate. Combined with reforms that improve trade and transport efficiency, volumes could quadruple and travel times could fall by two-thirds.<\/p>\n\n\n\n

The report estimates that more than $25 billion in physical infrastructure investment – in rail, ports, and feeder roads – is needed through 2040, alongside potentially significant enabling investments in logistics hubs, digital systems, and rolling stock.<\/p>\n\n\n\n

It identifies four concrete priorities: a single digital corridor system; integrated rail and maritime services; corridor-wide mechanisms to monitor performance and resolve bottlenecks; and governance reforms to help state-owned rail, port, and shipping companies operate more commercially.<\/p>\n\n\n\n

The World Bank Group is contributing through analytical work, customs and trade-facilitation reforms, infrastructure financing, and risk mitigation. MIGA recently issued a $785 million guarantee supporting Kazakhstan\u2019s national road rehabilitation programme, including strategic sections of the corridor, while the World Bank is supporting Kazakhstan\u2019s Transport Resilience and Connectivity Enhancement Project.<\/p>\n\n\n\n

The central point is simple: without sustained progress on the soft dimension, the economic returns to infrastructure investment will be significantly below potential. The gains will be real but incremental rather than transformative.<\/p>\n\n\n\n

Read more on Novastan<\/strong>: Can Afghanistan Become Central Asia\u2019s Bridge to the South?<\/a><\/p>\n\n\n\n

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What kinds of jobs will Central Asia need to create as its young and increasingly urban populations enter the labour market, and which sectors are most likely to generate them?<\/h3>\n\n\n\n

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The demographic situation across Central Asia is notably different from much of the rest of the world. While Eastern Europe and Russia face shrinking working-age populations, Tajikistan, Kyrgyzstan, and Uzbekistan have young and rapidly growing populations.<\/p>\n\n\n\n

To put the global context around this: over the next 10 to 15 years, 1.2 billion young people are expected to reach working age worldwide, while only around 420 million jobs are projected to be created. The private sector creates nine out of ten jobs in developing economies – which means the answer to Central Asia\u2019s employment challenge cannot come from governments alone. It requires an environment where private firms can grow, invest, and hire at scale.<\/p>\n\n\n\n

Several sectors have potential to generate productive employment: agro-processing and food manufacturing; modern services, including tourism, logistics, retail finance, and digital services; and light manufacturing oriented towards regional markets.<\/p>\n\n\n\n

The challenge is both the supply of skills and the quality of opportunities.<\/p>\n\n\n\n

In the Kyrgyz Republic, our analytical work found that roughly half of young people entering the labour market lacked the competencies employers need. In Uzbekistan, more than half of employers cite an inadequately skilled workforce as a binding constraint to growth, even as the country\u2019s working-age population is projected to expand significantly.<\/p>\n\n\n\n

Digital services illustrate the opportunity. Several Central Asian cities have a critical mass of technically educated young people and improving connectivity. There is genuine potential for the region to participate in global markets to generate employment.<\/p>\n\n\n\n

But realising that potential requires education systems to shift from delivering credentials to delivering competencies. That will be one of Central Asia\u2019s central human-capital challenges over the next decade.<\/p>\n\n\n\n

<\/p>\n\n\n\n

Looking ahead to 2035, what would successful economic transformation in Central Asia actually look like? Which indicators would convince you that the region had moved beyond strong growth towards a more resilient and productive economic model?<\/h3>\n\n\n\n

<\/p>\n\n\n\n

The question I always ask is: what is driving growth, and who is participating in it? Strong headline growth can coexist with a very narrow base of beneficiaries and a very narrow range of drivers. Successful transformation by 2035 would look different in several concrete respects.<\/p>\n\n\n\n

On economic structure, one would want to see the share of non-resource tradable sectors – manufacturing, agro-processing, tourism, modern services, etc. – growing as a share of GDP and employment, driven by private firms rather than state-owned enterprises. Export diversification, measured not just by the number of products but by their complexity and value-added content, would be a key signal.<\/p>\n\n\n\n

On productivity, I would look for sustained total factor productivity growth – evidence that the economy is not just accumulating inputs but using them more efficiently.<\/p>\n\n\n\n

On inclusion, one would look at the income of the bottom 40 percent growing faster than the average, declining spatial disparities between capitals and secondary cities, and improving labour force participation rates – particularly for women and youth, where gaps remain large across the region.<\/p>\n\n\n\n

On resilience, a critical indicator would be reduced fiscal and external sensitivity to commodity price cycles. But the climate-related risks are perhaps the most structurally consequential. Central Asia faces the most acute water stress, and glacial retreat in the Tien Shan and Pamir ranges threatens long-term water availability across the region.<\/p>\n\n\n\n

Governments are investing in irrigation efficiency, rural water supply, and renewable energy, and we support these efforts through the Central Asia Water and Energy Program (CAWEP), with generous contributions from the EU, the United Kingdom and Switzerland.<\/p>\n\n\n\n

Launched in 2009 and now in its fourth phase, CAWEP is the only multi-donor programme in the region working simultaneously on water and energy security at the regional level. The fourth phase alone has supported $3.3 billion in World Bank investments and helped mobilise more than $7 billion in private and public investments in Central Asian economies – a signal of how critical this agenda is to our long-term engagement in Central Asia.<\/p>\n\n\n\n

Finally, on governance and institutions – which underpin everything else – one would look for measurable improvements in the rule of law, contract enforcement, and the quality and independence of regulatory institutions. Ultimately, transformation depends on the institutions that govern markets, allocate capital, and enforce rules.<\/p>\n\n\n\n

<\/p>\n\n\n\n

By Mathieu Lemoine, Editor-in-Chief for Novastan English.<\/p>\n","protected":false},"excerpt":{"rendered":"

Central Asia is attracting growing international investment, but strong economic growth has yet to deliver deeper structural transformation. World Bank director Najy Benhassine explains what needs to change.<\/p>\n","protected":false},"author":358,"featured_media":50053,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[4666,4939,4,3,6,7],"tags":[4087,5147,5146,5149,5150,5145],"coauthors":[358],"class_list":["post-49983","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-economics","category-interview","category-kazakhstan","category-kyrgyzstan","category-tajikistan","category-turkmenistan","tag-central-asia","tag-economic-development","tag-najy-benhassine","tag-private-sector","tag-regional-connectivity","tag-world-bank"],"acf":[],"_links":{"self":[{"href":"https:\/\/novastan.org\/en\/wp-json\/wp\/v2\/posts\/49983","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/novastan.org\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/novastan.org\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/novastan.org\/en\/wp-json\/wp\/v2\/users\/358"}],"replies":[{"embeddable":true,"href":"https:\/\/novastan.org\/en\/wp-json\/wp\/v2\/comments?post=49983"}],"version-history":[{"count":5,"href":"https:\/\/novastan.org\/en\/wp-json\/wp\/v2\/posts\/49983\/revisions"}],"predecessor-version":[{"id":50063,"href":"https:\/\/novastan.org\/en\/wp-json\/wp\/v2\/posts\/49983\/revisions\/50063"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/novastan.org\/en\/wp-json\/wp\/v2\/media\/50053"}],"wp:attachment":[{"href":"https:\/\/novastan.org\/en\/wp-json\/wp\/v2\/media?parent=49983"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/novastan.org\/en\/wp-json\/wp\/v2\/categories?post=49983"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/novastan.org\/en\/wp-json\/wp\/v2\/tags?post=49983"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/novastan.org\/en\/wp-json\/wp\/v2\/coauthors?post=49983"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}