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Competitiveness and Private Sector Development: Kazakhstan 2010

Sector Competitiveness Strategy

image of Competitiveness and Private Sector Development: Kazakhstan 2010

Since 2000, the economy of the Republic of Kazakhstan has been growing at an annual rate of between 8%-9%, making it one of the ten highest performing economies in the world. Kazakhstan alone attracts more foreign direct investment than all other Central Asian countries together. To date, the country’s strong economic performance has been driven largely by its natural resources sector. The oil and gas sectors alone attract three quarters of foreign investment inflows. However, Kazakhstan’s non-energy sectors also have competitive advantages that could be potential new sources for growth.

In 2009 Kazakhstan launched a far-reaching programme to diversify its sources of foreign direct investment. To support this effort, it asked the OECD to undertake a three-year Sector Competitiveness Review. This report represents the first phase of this Review, which is an assessment and strategy to help Kazakhstan enhance the competitiveness of non-energy sectors including agribusiness, fertilizers, logistics, business services and information technology. While it acknowledges that the government has successfully implemented a first generation of business climate reforms, the report recommends that sector-specific policy barriers be further addressed. For example, policy makers could stimulate quality improvements and modernise production in some sectors by facilitating access to finance, attracting modern retailers and addressing skills gaps in the  workforce.

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Agribusiness

Several global trends are impacting the agribusiness value chain including increasing globalisation, increased competition and pressures to increase efficiency, growing co-operation and concentration further down the value chain. Standards and food safety and changing food consumption patterns and preferences are also increasingly important. Among Kazakhstan’s constraints to agribusiness development are its fragmentation, limited financial resources and the need to improve quality. The lack of modern technologies and know-how among farmers are also critical. The initial focus for improving the agribusiness sector in Kazakhstan should be on attracting foreign investors, especially by promoting modern retail development, on improving access to and availability of financing for agribusinesses (through mechanisms such as supply-chain financing), and on enhancing investment policy and promotion.

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