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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Executive Summary

The Republic of Kazakhstan is the world’s largest land-locked country, with a territory of 2 725 thousand square kilometres – larger than Western Europe. Since the country declared its independence in December 1991, it has emerged as a key economy in Central Asia. Since 2000, per capita income doubled,1 the unemployment rate has been halved, and close to USD 30 billion of foreign exchange reserves have been accumulated by the National Bank of Kazakhstan (NBK) and the National Fund. From 2000 to 2008, the economy of the Republic of Kazakhstan (real GDP) grew at an average annual rate of over 9%, among the ten highest rates in the world. Despite a drop in 2009, real GDP was growing at 8% year-on-year, as recorded in the first quarter of 2010. However, despite this strong economic performance, several challenges have emerged.

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