2022 brought many systemic challenges to the countries of Central Asia. Massive unrest and crossborder conflicts, disruption of external trade channels and a general destabilization of the geopolitical climate all reflect considerable risks to the investment climate.

For Kazakhstan, the region’s largest economy, 2023 will be marked by the likely completion of a power transfer from former President Nursultan Nazarbayev to incumbent head of state Kassym-Jomart Tokayev. Following snap presidential elections and a series of constitutional changes, both of which were aimed at eliminating the power of Nazarbayev-linked ruling elites, the power transfer will culminate in snap parliamentary elections in March. The government is also expected to undergo a major restructuring, aimed at constructing a new economic model.

Neighbouring Uzbekistan is entering a period of profound political and administrative reform. At the same time, sweeping economic reforms initiated by President Shavkat Mirziyoyev may be slowed by the chaos in the state administration, caused by the recent reorganization of the executive branch. In addition, the ruling elite is also planning a constitutional referendum to ensure that Mirzyyoyev retains power, possibly until 2036, reducing the predictability of regulatory policies.

For international businesses, Kyrgyzstan remains a rather unstable territory, both in terms of various conflicts between pressure groups provoking popular uprisings, as well as due to border disputes with Tajikistan. The legislative environment is constantly being amended in an attempt to adjust to the changing international circumstances. Another concern is the country’s underdeveloped basic infrastructure, accompanied by energy problems.

Tajikistan's socio-economic situation has not changed significantly since 2021, not even against the backdrop of Russia’s war against Ukraine and its impact for the region. At the same time, the overall region, in light of Russia's high influence, as well as the overlapping interests of China and the West, has a high level of dependence on these global centres of power. Accordingly, Central Asian countries, especially Kazakhstan and Uzbekistan, will continue to maintain a multi-vector approach to foreign policy and international relations.

Below, Aretera provides its outlook on Central Asia for 2023, with key implications for investors.