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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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Dairy Sector

Milk consumption has almost doubled in developing countries in the last 45 years and developing economies will become the main sources of growth for the global dairy sector. Kazakhstan’s dairy sector faces a number of challenges: the quantity of dairy cattle has declined, productivity is very low and the quality of raw milk is poor. Kazakhstan’s domestic market currently depends on milk imports for its dairy sector. In order for Kazakhstan to increase domestic production of dairy products, focus should be on access to finance schemes for milk producers, especially supply chain financing, further development of producer organisations and extension services to promote investment and upgrading standards of milk products. Kazakhstan should concentrate on its domestic market but in the longer run could position itself as a producer of higher value-added dairy products like milk powder.

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