Growing an international business as a Central Asia and Caucasus region entrepreneur

Introduction

For entrepreneurs in the Commonwealth of Independent States (Central Asia and Caucasus region), expanding your business into new markets offers new and exciting opportunities to grow.

Many companies in the region are actively seeking partnerships and exploring new markets, and 70 percent of businesses say they are already operating across borders.

However, while 62 percent of Central Asia and Caucasus region business leaders view the strategic shift to new markets as challenging but manageable, 33 percent describe it as “extremely difficult.” The main challenges they cite include a lack of market knowledge, adaptation to local consumer needs, language barriers, and understanding the local mentality.

But those are not the only challenges Central Asia and Caucasus region entrepreneurs face. Notably, 43 percent of business owners report difficulties in establishing effective communication with potential foreign partners, while others point to competition and financial constraints as their biggest obstacles.

To address these problems, more education and knowledge about the specifics of working in these new markets is needed, with 74 percent of Central Asia and Caucasus region entrepreneurs recognizing the need for additional education about business culture and specifics in these markets.

This guide aims to address some of these knowledge gaps so that Central Asia and Caucasus region entrepreneurs can successfully grow their international businesses. In it, we’ll cover some of the most popular destinations for Central Asia and Caucasus region business owners and tips for setting up for success — from finding a banking provider to landing new business and hiring for growth.

Choosing a country to register your business

The first step in expanding your business is to decide which country is best suited to your needs. It should have demand for your products or services, a favorable business climate, and a compatible legal and regulatory environment.

In this section, we’ll break down the main benefits and drawbacks of some of the most popular destinations for Central Asia and Caucasus region entrepreneurs:

• Georgia
• Armenia
• Kazakhstan
• Azerbaijan
• Serbia
• Montenegro
• Cyprus
• Estonia
• UK
• United States
• Israel

Georgia

Georgia ranks 7th in the world for ease of doing business, according to the World Bank, making it an attractive destination for entrepreneurs from Central Asia and Caucasus region countries. Georgia ranks at number 41 out of 180 countries on the Corruption Perception Index, and, in 2022, began its application to become an EU member state, which, if successful, will give businesses in Georgia access to the European market.

The country is politically stable, with low business costs and corruption levels, and has implemented a range of policies to simplify business regulations and attract foreign investment. It also has treaties to prevent double taxation with over 50 countries, including China, Germany, Spain, and the UK. Furthermore, there is no customs duty, and 90 percent of goods are exempt from customs tax.

Georgia’s economy is growing fast — World Bank figures show that the GNI per capita increased from $3,048 in 2010 to $5,073 in 2022, and the poverty rate was more than halved over the same period. Additionally, the Georgian economy has shown resilience to external shocks thanks to sound macroeconomic management.

However, despite the favorable business environment, companies in Georgia face some structural challenges, including an aging population, weak productivity growth, and limited high-quality job creation.

A freelance creative director who lived in Georgia for a year before relocating to Thailand told Payoneer that “the small market in Georgia can be limiting for entrepreneurs since there aren’t many big brands to work with.”

However, the rise of alternative international payments solutions like Payoneer — which allows you to receive payments from clients, customers, and marketplaces in 190+ countries — can make the process of relocating to Georgia faster, more secure, and less costly for Central Asia and Caucasus region entrepreneurs.

Armenia

With its strategic position in the Eastern Mediterranean, Armenia offers entrepreneurs access to markets across Europe, the Middle East, and Asia. In 2022, the Armenian economy had the highest growth rate in the East Europe and Central Asia region, at 12.6 percent, demonstrating its resilience to recent shocks such as the 2018 Velvet Revolution, the COVID-19 pandemic, and the 2020 conflict with Azerbaijan, and it ranks in 61st place for corruption.

The country has made significant developmental gains in recent years and has implemented a range of reforms in the judiciary, healthcare, and social protection systems.

In terms of business environment, Armenia has relatively low barriers to registering a business. Registration costs are low, and it only takes one to three days to register a company. Corporate tax rates are also low, and companies can take advantage of tax incentives. Additionally, there are four free economic zones with complete tax exemption.

Other incentives include the ability to open a business without attracting local capital, with capital starting from €1 and shareholders from one person, and an absence of requirements for the creation of new jobs.

However, there are some disadvantages to establishing a business in Armenia. For example, the uncertain geopolitical context means the country struggles to attract foreign investors, and with a population of just 2.9 million, human capital is low.

Additionally, a lack of business regulations and infrastructure can make it difficult to navigate the business environment, leading to uncertainty and potential legal challenges.

Kazakhstan

The Kazakhstan economy is strong and grew at a rate of 5.1 percent in H1 of 2023. Central Asia and Caucasus region entrepreneurs are flocking to the country, with the number of new business registrations growing by 20 percent year-on-year as of June 2023. Both consumer spending and investment are also growing, making Kazakhstan an attractive destination for business owners. However, it ranks 101st on the Corruption Perception Index.

The Kazakhstan government has introduced a number of measures to attract foreign entrepreneurs since 2011, including eliminating registration fees for small and medium-sized businesses, reducing registration timelines, and reducing the minimum capital requirement to 100 tenge ($0.70).

Although landlocked Kazakhstan has no direct access to Western European markets, much attention is currently focused on developing the country’s transport infrastructure to enable its potential as a transit country for cargo flows.

Despite promising growth prospects, Kazakhstan’s economy remains dependent on oil and, therefore, vulnerable to shocks. Ongoing structural reforms around the judicial system, intellectual property, transparency, regulations, and tax aim to create a more transparent and market-regulated business environment, but corruption is still a problem in the country.

We spoke to a software engineer in Kazakhstan who highlighted the difficulties of hiring and paying foreign contractors from the country “since the banks control international currency exchange.” He also notes that most people in the country “prefer to work as employees rather than freelancers due to the red tape and long waiting times that banks impose on any international transfer of over $10,000.”

However, both service-based businesses like his and physical goods businesses in Kazakhstan can save money with Payoneer, which allows them to accept payments from international clients in their local currency with multicurrency accounts.

Azerbaijan

Azerbaijan is the largest country in the South Caucasus in terms of both territory and population and has been ranked 28th in the world for ease of doing business by the World Bank. The Azerbaijan economy experienced a growth rate of 2.2 percent in 2023, but the country scores poorly for corruption, coming in at 157 out of 180 countries.

The Azerbaijan economy is recovering from the COVID-19 pandemic, and the government has implemented a series of measures to incentivize businesses. For instance, there is no paid-in minimum capital requirement, it takes, on average, just three days to register a business, and the business registration fee is approximately $130.

Like Kazakhstan, Azerbaijan’s economy is heavily dependent on oil and gas exports, which account for 79 percent of all capital expenditure. Since 2016, the country has intensified efforts to foster a favorable business climate and attract more foreign investment.

However, challenges in the Azerbaijan market include a large informal economy, widespread corruption, and large holding companies that dominate significant portions of the non-oil economy, according to the US International Trade Administration.

Additionally, competition is fierce — particularly for small and medium-sized businesses, which often find themselves crowded out of the market by a handful of large players who benefit from both economies of scale and privileged access to government decision-makers.

Serbia

The Balkan state of Serbia is also a candidate for European Union membership and has become a popular relocation destination for Western European manufacturing companies.

Despite a recent economic slowdown that reflects the widespread economic crisis in Europe, Serbia’s economy is predicted to recover to a healthy growth rate of around three to four percent in the coming years.

Businesses operating out of Serbia enjoy its free trade agreements with the EU, the USA, and the Eurasian Economic Union, representing a combined market of over one billion people. Geographically, Serbia is ideally positioned to serve all of these markets.

Additionally, low labor costs and ongoing investments in infrastructure make it an attractive option for manufacturing companies, while tech companies will find plenty of talent — engineers account for 33 percent of all university graduates, and IT is taught at 35 higher education institutions.

Another thing to bear in mind for entrepreneurs is the relatively small market size and negative population growth, which means the domestic market is not projected to grow in the coming decades.

Montenegro

Montenegro aspires to become the first of the Western Balkan states to join the European Union. If it achieves this goal, it will make a great base for international businesses — particularly with its healthy growth rate of 6.9 percent and relatively low corruption index, ranking 65th out of 180 countries.

Montenegro has implemented policies that create a favorable business climate, particularly for small and medium-sized businesses. For instance, the corporate tax rate is 15 percent, and the minimum capital requirement for the formation of an LLC is just €1.

Like other countries on this list, a disadvantage of Montenegro is its relatively small population and market size — however, this is not a problem for businesses that work with clients in places like the EU, Eurasian Economic Community, the UK, or the US.

According to the World Bank, the Montenegro economy is vulnerable to external shocks due to its heavy reliance on capital inflows from other countries.

Cyprus

As an EU member state strategically positioned in the Eastern Mediterranean, Cyprus is fast establishing itself as one of Europe’s most dynamic emerging tech hubs.

The Cyprus economy has weathered the economic storms that have battered Europe in recent years, showing its resilience with 5.6 percent growth in 2022. Corruption is also relatively low, with the country ranking in 51st place.

The Cyprus government has implemented numerous policies to attract foreign investors and entrepreneurs. For example, at 12.5 percent, the corporate tax rate is the lowest in the EU, and the country has over 60 treaties to prevent double taxation. Plus, as an EU member, Cyprus offers businesses frictionless access to the European market.

While registering a company in Cyprus can often be completed in just one day, opening a bank account is a more complex and lengthy process. Additionally, anti-money laundering laws prohibit urgent transactions, and banks may freeze accounts or transactions if they suspect fraudulent activity on international payments.

Many business owners in Cyprus already rely on Payoneer to offer their customers frictionless and familiar payment methods, accept payments from international clients, and pay bills and business expenses.

Estonia

Estonia has established itself as the go-to destination for entrepreneurs, contractors, freelancers, and digital nomads through its e-residency program. Progressive legislation and a flexible economy have helped the country transform itself into the most attractive business destination in the EU.

As an EU country, Estonia’s economy has not been immune to the economic woes plaguing the region and is projected to contract by 1.3 percent in 2023. However, the good news is that it’s expected to bounce back in 2024, expanding by 3.2 percent. In terms of corruption, Estonia comes in at 14th on the Corruption Perception Index.

There are plenty of advantages to setting up your company in Estonia: registration fees are low, the registration process is quick and easy, there’s potential for tax-free income, and the tax rate on profits paid to shareholders is a relatively low 20 percent.

As well as providing access to the European market and opening up your business to potential new customers, partners, and suppliers, the Estonia e-residency program allows you to run your business remotely from anywhere in the world. This makes it an ideal option for remote companies that don’t want to relocate.

While there are few disadvantages to opening a business in Estonia, banks in the country take compliance very seriously. This can mean opening a bank account requires a lot of time and documentation. Additionally, many Estonian banks require your business to operate for several months before they’ll open an account for you, which can hinder operations from getting off the ground.

UK

The UK economy has been hit by the triple blow of Brexit, the pandemic, and the cost-of-living crisis in recent years, yet its economy has endured and shows signs of recovery, with a projected growth rate of 0.3 percent in 2023 and 0.8 percent in 2024. Corruption is low, with the island nation ranking 18th on the Corruption Perception Index.

The UK’s exit from the European Union has opened up new opportunities for businesses that want to leverage its new status as an independent country. Plus, it has a large and diverse population and a large, highly-skilled talent pool, which can provide new potential customers, suppliers, and employees.

The UK ranks 8th in the world for ease of doing business, and there are 48 free enterprise zones that offer tax breaks to businesses, with discount rates of up to 100 percent over a five-year period. Additionally, the UK offers access to European markets as well as four regional markets: England, Scotland, Wales, and Northern Ireland.

Some of the obstacles companies face in the UK include a complex tax system, the rising cost of living, and labor shortages caused by an aging population and fewer migrant workers in the wake of Brexit. Another challenge can be the British temperament, which can come across as reserved or aloof, making it difficult to integrate into British society.

US

As the world’s largest economy, the US boasts a large population and potential market of 328 million people. Economic growth has held steady at 2.4 percent in 2023 but is expected to slow to 0.8 percent in 2024. In terms of corruption, the US ranks 24th in the world.

There are many advantages to opening a business in the US. It has low corporate tax rates and tax benefits for non-American entrepreneurs, robust regulatory and judicial systems, a highly skilled workforce, and well-developed infrastructure that facilitates business operations. Plus, for those aspiring to become US citizens, there are immigration programs designed to attract international entrepreneurs and business owners.

However, there are some downsides to operating a US-based business. For instance, the distance from and time difference with your home country can slow down international operations, and non-Americans may face cultural and linguistic barriers.

Additionally, you’ll be entering a highly competitive market with well-established players and competition from both domestic and international companies. Finally, registering a company in the US can be a complex, time-consuming, and expensive process.

Israel

Israel has established itself as a tech hub in recent years thanks to its strong and growing economy (2.9 percent in 2023), highly-skilled workforce, favorable government policies like the Technology Incubator Program, and the over 6,000 start-ups that have earned it the title “Start-Up Nation.” Corruption-wise, Israel scores well, coming in at number 31 on the Corruption Perception Index.

Straddling Europe, Asia, and Africa, Israel provides a base for accessing all three markets. The government welcomes foreign business and investment, offering a relatively low corporate tax rate of 23 percent, and businesses can be 100 percent foreign-owned. In fact, there are tax incentives for foreign business owners to invest in Israel.

Some of the challenges international entrepreneurs face in Israel include cultural and linguistic barriers, a high cost of living, and slow enforcement of contracts. Additionally, sending and receiving money abroad is costly, time-consuming, and subject to freezes and security checks by banks. Israeli banks also charge fees for everything, including withdrawals, account maintenance, transfers, and depositing foreign currencies.

Setting up for international success — registering your company

Local laws and taxation

Every country has its distinct legal framework and tax regulations. These can greatly influence your business operations, from corporate tax rates to employment laws.

For instance, some countries offer tax incentives to attract foreign businesses, while others may have stringent tax regimes. Keeping abreast of these laws is not just about compliance but also about maximizing your business benefits.

Registering as a non-national

Setting up a business in a foreign country often involves more than just filling out forms. You may encounter barriers such as additional documentation requirements, residency stipulations, or restrictions on foreign ownership. Understanding these hurdles beforehand can save you time and frustration.

Finding a good lawyer

Given the complexities of international business laws, hiring a knowledgeable local lawyer is essential in most cases. They can provide invaluable advice on compliance, help navigate the local legal system, and offer insights into cultural nuances that might impact your business dealings.

Finding a banking provider that meets your needs

For Central Asia and Caucasus region entrepreneurs branching out internationally, choosing the right banking provider is crucial. While local banks offer traditional services, they may not always cater to the dynamic needs of a global business.

For instance, setting up a corporate bank account can take a long time for foreign nationals, account freezes on international transfers are common. and local banks may not support multi-currency accounts or have higher fees for international transfers.

All of these factors can represent obstacles for business owners dealing with suppliers and customers across multiple markets. One way to get around them is to use a robust, secure international payment platform like Payoneer, which offers more flexibility, lower fees, user-friendly interfaces, and integrations with local bank accounts.

Payoneer is expertly designed to service high-growth, cross-border businesses, and allows you to:

• Make seamless commercial deals with international partners by offering them frictionless and familiar payment methods.
• Accept payments from international clients in their local currency with your multicurrency account.

Acquiring local knowledge

For Central Asia and Caucasus region entrepreneurs expanding globally, acquiring local knowledge is essential for success. Every market has its unique cultural nuances that can significantly impact business operations — from consumer behavior to business etiquette.

By crafting products and marketing messages that resonate with the local audience’s values, preferences, and customs, you can fit seamlessly into your new market.

However, building relationships with potential local partners, suppliers, and customers is essential to ensure your business flourishes in your chosen market.

Some ways to grow your network include:

• Finding Telegram and WhatsApp groups with other Central Asia and Caucasus region entrepreneurs that have been there for longer and are more integrated.
• Going to conferences and events relevant to your sector.
• Joining company networks.
• Connecting with local entrepreneurs on LinkedIn and asking to grab a virtual or physical coffee.

While other Central Asia and Caucasus region entrepreneurs can be a useful source of information and contacts, make sure you also make local contacts and integrate yourself with the local business community.

Gaining new business

For Central Asia and Caucasus region entrepreneurs aiming to expand into new markets, strategic pivoting and adept networking are essential for landing new business. Here are some key considerations and strategies for finding new clients and customers in your target market:

Researching international markets

Understanding the specific demands and trends of new markets is crucial. For instance, markets like the US and EU that traditionally outsourced software development and advertising services to the Central Asia and Caucasus region are facing uncertain economic conditions.

Potential markets emerging to take their place include India, China, Latin America, and the Middle East, but they may be difficult to access due to language barriers and less history of partnering with Central Asia and Caucasus region businesses.

Choosing a language for marketing and comms

While English often serves as a business language, incorporating local languages in your marketing and communication can significantly boost engagement, as it demonstrates respect for local culture and enhances customer connection.

However, there are some notable exceptions. If you’re targeting French founders, for example, there is a preference for their national language, so marketing messages in French will resonate a lot more.

Deepl is a useful tool for fast translation of shorter marketing messages. For long form content, it’s always worth investing in a professional translator.

Filling skills gaps

In developed tech markets like the EU and US, there’s a demand for talent and capacity that often outstrips the supply of the local job market. For example, every major company is experimenting with AI right now, which is a resource-intensive thing to develop.

Many Central Asia and Caucasus region entrepreneurs have the skills and experience to fill these gaps, so it’s crucial to analyze job markets to see what’s in demand and make sure your chosen destination aligns with your skills.

Establishing your USP

Clearly define your Unique Selling Proposition (USP). What sets your business apart in these highly competitive markets? Your USP should resonate with the local audience and meet a specific need or preference.

One of the most common USPs for Central Asia and Caucasus region companies when going after the EU and US is price. For example, in software development there’s a strong appreciation for the talent of Central Asia and Caucasus region developers, who are typically more affordable than a senior developer from Silicon Valley, who command upwards of $200,000 per year.

Finding clients in the EU and US

To attract clients in these regions, focus on building a strong online presence, leveraging digital marketing, and attending industry events. Showcasing expertise and reliability is key.

Key platforms for accessing EU and US markets include:

• Breef.com for agencies looking for clients in the US
• Upwork and Fiverr for freelancers looking for EU and US clients
• EU Remote Jobs for clients in the EU

Additionally, it’s important to gain brand trust through case studies and reviews on platforms like G2 and Clutch.

Networking for partnerships

Networking is invaluable for growing your business in a new country, as building relationships with local and international partners can provide insights, open doors to new opportunities, and help navigate the complexities of these markets.

Attend industry conferences, join relevant online forums, and participate in trade shows to make new connections — check platforms like EventBrite and MeetUp for local events around relevant topics.

Additionally, look for networks to join where you can meet other founders in your industry, like Agency Collective in the UK for marketing agencies, and set up a referral scheme for partnerships with companies that target the same customers but with different services.

Hiring for growth

As your business grows, you’ll need efficient payment solutions for your partners, contractors, and freelancers, as well as systems for global hiring. Expanding across time zones and borders introduces complexities in compliance with local employment laws, which can be overcome with the help of an employer of record (EOR) organization.

EORs can handle hiring of both contractors and full-time team members in other countries on your behalf. This allows you to quickly fill skills gaps, hire people with valuable local knowledge and expertise, and access a much larger talent pool.

EORs handle the legal and administrative aspects of employment, allowing you to legally and efficiently hire talent from different countries. They manage payroll, taxes, and local employment laws, enabling you to focus on integrating these new team members into your business processes and culture.

Some reputable EOR providers include:

• Remofirst
• Deel
• Remote

Global growth, simplified

Central Asia and Caucasus region entrepreneurs looking to expand into popular destinations like Georgia, Armenia, Kazakhstan, or further afield in the EU and US face unique challenges.

Banking regulations in these countries often lead to delays, restrictions, and hefty fees on international transfers, complicating transactions for businesses dealing with multiple countries.

This is where Payoneer can help. Our global platform is designed to facilitate seamless international payments, offering a more efficient, cost-effective, and reliable alternative to traditional banking methods and making it a key partner in supporting and streamlining your global financial transactions.

Join nearly half a million businesses experiencing boundless growth with Payoneer.