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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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Introduction

Launched in July 2008, the OECD Eurasia Competitiveness Programme is a regional programme that contributes to the economic growth in eleven countries of the former Soviet Union and Afghanistan and Mongolia. The Programme involves close co-operation with public authorities, the private sector and civil society in these countries to support economic policy reforms and improve the business climate. It generates impact through an integrated framework based on two pillars: regional policy dialogue, peer dialogue and capacity building; and country-specific support in implementation at the regional, national and sub-national level. The regional approach allows countries to engage their peers in working to design and implement successful policies and institutions. Both pillars incorporate a sector-specific approach. As part of the Central Asia Initiative of the Eurasia Competitiveness Programme, a sector competitiveness review was initiated for the Republic of Kazakhstan to help diversify its sources of foreign direct investment and strengthen sector competitiveness. This project was designed to follow a three-phased approach over three years (2009-11): first by developing a sector competitiveness strategy (Phase 1), then by implementing specific aspects of the recommended policy reforms (Phase 2) and finally by assist in embedding mechanisms for sustainable reform (Phase 3). The objective of Phase 1 of the project, co-financed by the Republic of Kazakhstan in collaboration with the EU, is to support the country in defining a targeted competitiveness and investment promotion agenda.

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