Report on CAREC Digital FDI Ecosystem in the CAREC Region

Feb 2023; CAREC Institute, CAREC Institute

In the digital era, corporate digital competitiveness tops the agenda of firms and policymakers globally. Luring foreign direct investment (FDI)—digital FDI—into the digital economy is important as FDI brings knowledge and technology in addition to capital, supporting firms and countries to improve their digital capabilities.

A new report of the CAREC Institute “CAREC Digital FDI Ecosystem in the CAREC Region (Phase II),” authored by Asif Razzaq, Tofig Babayev, Mumtaz Ahmed and Shokhrukh Avazov, looks at different deriving/inhibiting factors of digital FDI in the CAREC region. The authors examined five critical dimensions of digital FDI: (i) new digital activities, (ii) digital adoption, (iii) digital infrastructure, (iv) digital FDI restrictions, and (v) digital promotion tools. Using descriptive methods, the results are scaled between 0 (highest restrictions for digital FDI) and 100 (lowest restrictions for digital FDI). The average score for the CAREC region indicates the lowest score in digital infrastructure (59.6), followed by new digital activities (61.6) and digital adoption (63), while the highest score is observed in digital promotion tools (65). The core lagging areas are digital security and privacy, data regulations, intellectual property rights, validity of e-agreements, higher tariffs and taxes, restrictions in acquiring land for business purposes, lack of regional integration and mutual investment/technology agreements, ineffective consumer laws, governance issues, lack of digital skills, lower connectivity of national and international infrastructure, higher approval turnaround time, lack of venture capital, privatization and competition policies, and sectoral and equity restrictions. Addressing these vulnerabilities would encourage FDI inflows into the CAREC region.

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