Challenges and opportunities in the development of micro, small, and medium-sized enterprises (MSMEs) in Central and West Asia

Abstract

The study aims to analyze the impact of challenges and opportunities related to corruption, regulatory barriers to doing business, innovativeness of the business environment, and development of institutions and policies that ensure economic prosperity on the development of MSMEs in Central-Western Asia countries. The paper chooses seven Central-West Asian countries using Asian Development Bank statistics for 2010–2021. Based on eleven indicators of the Asian Development Bank (the absolute values and dynamics of the number of MSMEs, their employees, their contribution to GDP, financing by banks and non-banking financial institutions) and factor analysis, the composite indicator of MSMEs’ development was calculated. The highest levels of the composite indicator in 2021 were observed for Kazakhstan (1.248), Uzbekistan (1.120), and Azerbaijan (1.043), and the lowest values for the Kyrgyz Republic (0.676). Employing a panel regression analysis with time-fixed effects (for all countries), connections between composite indicators of MSMEs’ development and the Corruption Perceptions Index, Ease of Doing Business Index, Global Competitiveness Index, and Global Innovation Index were explored. The greatest impact was in 2019 – with an increase in the Corruption Perceptions Index by one unit (the higher it is, the less corruption is considered by experts), the MSME development indicator increased by 0.26 units. With an increase in the Ease of Doing Business, Global Competitiveness, and Global Innovation Indices by one unit (growth indicates deterioration of the country’s rating position), the composite indicator of MSMEs’ development decreases by 0.68, 0.69, and 0.67 units, respectively.