Abstract
This paper analyzes and compares investment climates and trends in the South Caucasus and Central Asia. The analyses and comparisons were conducted in view of the impacts of transitional progress, economic development, and the energy reserves from these regions on the inflow of foreign direct investment. Improvement of the investment climate by accelerating the transition process and reducing investment risks can be seen as the most important determinants of FDI inflows into the countries of these two regions. Structural diversification of South Caucasian and Central Asian natural resource-based economies would be essential in ending dependence on the energy and mining sectors and would have positive long-term effects on economic growth and the investment climate, and attract other, additional types of FDI.