The COVID-19 pandemic and its economic consequences served as a stark reminder of the importance of reforms to the legal and policy environment for the private sector’s ability to generate jobs and growth. In Kazakhstan, such reforms are needed to underpin the country’s ambitious digitalisation agenda, as well as the creation of new trade corridors, the construction of new and sustainable infrastructures, and the realisation of decarbonisation commitments. These priorities must now be addressed in the more unpredictable external environment resulting from Russia’s large-scale aggression in Ukraine.

A digitalisation pioneer in the region, Kazakhstan has recognised the potential of digitalisation to support long-term growth and has, since 2018, pursued comprehensive national strategies for digitalisation. The Digital Kazakhstan Strategy, set to end this year, has been successful in developing a comprehensive digital governance system and in starting to create the legal and regulatory conditions for the digital transition of Kazakhstan’s economy. However, unresolved infrastructure and regulatory challenges still limit the effectiveness of policymakers’ efforts, while highly variable absorptive capacities of firms and public sector agencies create demand-side barriers to digital uptake, reducing the effectiveness and inclusivity of the government digitalisation agenda.

In particular, for small firms, while digitalisation has the potential to help them overcome size-related structural disadvantages and increase their growth and innovation performance, their digital transformation still requires further efforts. Addressing remaining gaps in relation to reliable access to broadband services, quality and affordability of networks and services, and digital security can also increase Kazakhstan’s attractiveness at a time where Belarusian, Russian, and Ukrainian IT companies are increasingly considering Central Asia for relocation. Improving the digital framework conditions in the country might not only support the digital transition of Kazakh firms, but also encourage permanent settlement of foreign IT companies which in turn can foster innovation and competitiveness of the Kazakh IT sector and economy.

An OECD-led public-private Working Group, co-chaired by the Ministry of Digital Development, Innovation and Aerospace Industry, has been created at the beginning of 2022 to help support the analytical work of the OECD, and design relevant policy recommendations for the digital transformation of firms in Kazakhstan. It has brought together representatives of government, public and non-governmental institutions, business associations, and think tanks.

This note was developed in consultation with the government, members of the Working Group, the private sector, and development partners, and has benefitted from the contributions of experts from Estonia, Korea, Latvia, and the OECD Secretariat. The note assesses access, quality and affordability of digital networks and services, barriers to private investment in the digital transformation of the private sector, and the digital protection needs of businesses in Kazakhstan, and develops recommendations for further progress. The note will be discussed and peer reviewed in the OECD Eurasia Competitiveness Roundtable. For on overview of the methodology underlying this peer-review note, please refer to the dedicated section p.44.

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