OECD Development Pathways

OECD Development Centre

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The OECD Development Pathways series helps developing and emerging economies to identify innovative policy solutions to their specific development challenges. Higher levels of well-being and more equitable and sustainable growth cannot be achieved by merely reproducing the experience of industrialised countries. For each of the countries studied, the series proposes options for action in specific policy areas and at the broader strategic level. It identifies the binding constraints to development across all sectors and proposes whole-of-government solutions.

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Multi-dimensional Review of Kazakhstan

Multi-dimensional Review of Kazakhstan

Volume 2. In-depth Analysis and Recommendations You do not have access to this content

OECD Development Centre

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15 June 2017
9789264269200 (PDF) ; 9789264269217 (EPUB) ;9789264269194(print)

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Kazakhstan has embarked upon an ambitious reform agenda to realise its aspiration of becoming one of the top 30 global economies by 2050. The country’s economy and society have undergone deep transformations since independence. To sustain economic progress, overcome recent difficulties, and drive improvements in well-being to realise its aspirations, Kazakhstan will need to address a number of challenges to ensure its economy becomes more productive and diverse, and is sufficiently flexible and resilient in the face of an ever-shifting external environment. This next stage of economic transformation will require continuing reforms. This report discusses policy actions to address four key obstacles to development in Kazakhstan, identified in Volume 1 of this review. It presents in-depth analysis and recommendations to improve the economy’s resilience through diversification, to mobilise financing for development, to transform the role of the state in the economy, including through privatisation, and to improve the effectiveness of environmental regulations.

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  • Foreword

    Kazakhstan embarked on an OECD Multi-dimensional Country Review (MDCR) in December 2014. The review is implemented as part of the 2015-16 Country Programme signed between Kazakhstan and the OECD. This review aims primarily at supporting public action by the national authorities of Kazakhstan in sustaining inclusive growth and progress in the well-being of its citizens.

  • Acronyms and abbreviations
  • Executive summary

    Kazakhstan has embarked upon an ambitious reform agenda to realise its aspiration of becoming one of the top 30 global economies by 2050. As documented in Volume I of the Multi-dimensional Country Review (MDCR) of Kazakhstan, the country’s economy and society have undergone deep transformations since the country declared independence in 1991. Gross domestic product (GDP) increased 2.8-fold between 2000 and 2014 and living standards improved for most Kazakhstanis, with the proportion of the population living on income below the subsistence minimum falling from 32% to 2.5%.

  • Overview: Overcoming constraints to fulfilling Kazakhstan's development vision

    Kazakhstan has adopted an ambitious vision for the year 2050, aiming to become one of the top 30 global economies. For that to happen, the country’s impressive economic growth of the first decade of the 21st century will need to find new drivers that allow development to be more robust and resilient. This in turn requires a commitment to structural reforms that have the potential deeply to transform the Kazakhstani economy and society. This report is the second output of the Multi-dimensional Country Review (MDCR) of Kazakhstan. The goal of the MDCR of Kazakhstan is to support the country in achieving its development objectives by identifying the key constraints, providing practicable policy recommendations, and supporting the implementation of these recommendations. This second report analyses in depth four key issues for Kazakhstan’s mid-term development success: diversification, financial sector development, the role of the state in the economy, and the effectiveness of environmental regulation. This chapter examines the increasingly challenging external environment, revisits key conclusions of the first volume in its light, and presents the key findings and recommendations of this report.

  • Diversification and resilience in Kazakhstan

    Economic growth in Kazakhstan between 2000 and 2014 was impressive. During this period the economy also grew increasingly dependent on natural resources, and oil in particular, setting up the economy for challenging times when the commodity cycle ended. This chapter examines the role that industrial policy plays in encouraging diversification in Kazakhstan. It examines the pattern of concentration in the economy using trade and industrial production data as well as the product space. While diversification has been prominent in the policy agenda since the mid-1990s, industrial policy has been much more developed since 2010, with the implementation of the first State Programme on Advanced Innovative-Industrial Development (SPAIID). This programme introduced a large number of actors and instruments of industrial policy, with the aim of halting deindustrialisation and creating the basic conditions for the emergence of strong industrial entrepreneurship, although with disappointing success in promoting diversification in the short run. Industrial policy can help the Kazakhstani economy to be more resilient, but to that end it needs to become more flexible and adaptable and mobilise market forces rather than act as a substitute for them.

  • Mobilising financing to transform Kazakhstan's economy

    Kazakhstan’s financial sector is unusually shallow. No comparable country achieves income levels higher than Kazakhstan with a pool of deposits and credit of such little depth. Kazakhstan’s entrepreneurs cite access to finance among their major obstacles to investment, especially newer or smaller firms, while larger firms circumvent the domestic financial system by tapping international sources. Domestic securities markets are anaemic, but this is unlikely to significantly slow economic transformation. This chapter describes how the availability of domestic finance is constrained by the limited pool of domestic investable funds, which can be attributed to both transitory and structural factors that encourage capital outflows. The government’s various financing programmes provided some support during the financial crisis, but without generating lasting gains in the availability of credit, either for the sectors targeted or more generally, and weaker oil revenues make them difficult to sustain. A more sustainable response would support banks’ access to loanable funds, from international sources and by strengthening the institutional infrastructural surrounding the financial sector to encourage domestic savings. The shift to an inflation-targeting monetary policy regime in 2015 and the development of the Astana International Financial Centre will help achieve these objectives if domestic institutions governing the financial sector are also strengthened.

  • Privatisation and the role of the state in the economy of Kazakhstan

    Kazakhstan is in transition from an economy dominated by state-owned enterprises (SOEs) to a full market economy. Since independence from the Soviet Union in 1991 Kazakhstan has made efforts to reduce, through privatisation programmes, the share of the state in the economy. The current goal is 15% by 2020. Most important industries are organised into large groups of companies owned and managed by independent national managing holdings, with politically powerful people on their boards and in top management. Yet the government has published no ownership policy to manage and reduce the number of SOEs currently under dispersed governance by several ministries. This chapter presents the national managing holdings system of state ownership; their legal framework and governance structure; generic OECD recommendations regarding state ownership and measurement methodology; the privatisation programme under way; and recommendations to meet the set state ownership goal and to strengthen the policies of Kazakhstan in governing its state-owned entities.

  • Towards better environmental regulations in Kazakhstan

    Kazakhstan’s impressive economic expansion since the late 1990s relied on high rates of energy use and generated significant pollution. These rates are not sustainable, putting at risk the country’s development ambitions, while new international agreements add urgency to the need to reduce greenhouse gas emissions. This chapter shows how the current structure of Kazakhstan’s system of environmental regulation, permitting and assessment impedes energy efficiency and pollution control. The emphasis on reforming the application of environmental permit fees and penalties as a means of raising revenue rather than on creating incentives to reduce efficiently environmental impact, adds to the cost of investing and doing businesses in Kazakhstan with limited environmental benefit. Better regulation also means designing policies and laws so that they achieve their objectives at minimum cost. These recommended reforms mostly involve bringing the policy into line with the benchmark OECD approach. Kazakhstan’s emissions trading scheme presents a model of how the country can adopt effective mechanisms of environmental regulation to place the economy on a more sustainable development path, but it will be essential that this and other mechanisms are well implemented.

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