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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Grains Sector

Focus on Wheat

Grains consist of coarse grains (barley, oats, sorghum, maize and rye), wheat and rice. Wheat is by far the most cultivated grain in Kazakhstan, and was thus chosen as the area of focus for the project. The global wheat trade has grown by 1.5% per year on average over the past 10-15 years and world imports are increasingly dominated by less-developed countries. Growing competition among grain exporters is intensified by competition from non-traditional exporters, among them Kazakhstan. Exporters are exploring non-traditional markets and moving up the value chain to mitigate their fluctuating ocean freight costs. Although Kazakhstan is among the five largest wheat exporters in the world and has a significant advantage in its production costs, it faces a number of challenges. Its main policy barrier is the agricultural sector’s lack of access to finance. Recommendations include supply chain financing and attracting foreign retailers. Kazakhstan has a considerable opportunity to promote its brand of wheat and for greater deep processing of wheat end products.

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