Regulatory and Institutional Factors Driving Small Firms’ Growth in Central Asia

Abstract

The purpose of this study is to investigate how the institutional environment and governance affect the growth of small firms, in terms of employment, in Central Asian economies, particularly Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan. For this study, different data sources, including EBRD-EIB-WB Enterprise Surveys, World Development Indicators, and World Governance Indicators, were employed, and to compare and contrast business governance indicators across countries descriptive analyses were performed, and the outcome of regression analysis was provided. Despite the recent improvements in the legal, administrative, and regulatory environment for business, according to the findings of this study, in Central Asian economies, there are obstacles to the growth of firms in the private sector. Small firms perceive tax (14.22% of firms in the sample, 27.78% of firms in Tajikistan), and competition in the informal sector (11.75% of firms in the sample, 21.58% in Kyrgyzstan) as the biggest obstacle to growth. In countries, where control of corruption, and the rule of law are strong, governance and private sector regulations are effective, the political situation is stable, and small firms report growth.