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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Chemicals Sector

Focus on Fertilisers

Kazakhstan’s mineral fertilisers sector can boost its competitiveness by building on existing production capabilities, locally available raw materials and low production and transportation costs to supply domestic and regional markets. Poor quality and price competition are the most significant barriers for export of mineral fertilisers. Outdated technologies, low levels of investment, and low quality of products, as well as a lack of know-how on how to use mineral fertilisers are among domestic challenges. Limited financial support from the government to farmers also contributes to lower consumption of mineral fertilisers in the country. Recommendations include leveraging domestic demand and attracting foreign technologies and know-how, as well as a sector-specific promotion and facilitation strategy to spark the inflow of FDI and to introduce modern low-cost production technologies. Growing domestic demand should be considered a priority, as well as increasing know-how and economic power to purchase and use fertilisers.

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