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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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Information Technology and Business Services Sectors

Although there is incomplete statistical data for estimating the impact of information technology (IT), outsourcing and business services have strong potential. Kazakhstan is well positioned to respond to its growing local demand and regional opportunities due to its low labour costs, language skills and proximity to Central Asian countries, which could use Kazakhstan as a platform for their own IT and business services. The skills of its user interface, designers and developers are sufficient but Kazakhstan’s IT sector lacks soft skills and formal qualifications are also a major gap. There is little IT innovation and IT graduates cover only 40% of Kazakhstan’s demand. A lack of public-private dialogue on the competencies required by the market as well as operational constraints such as administrative barriers, slow speed of liberalisation and taxation of foreign training firms are additional challenges. The human capital gap could be addressed through linkage programmes with multinational companies, particularly in the oil and gas sectors, healthcare, media, retail and telecommunications

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