• By: OLM Staff

Kazakhstan’s the 2017 New Direction: Taking Global Competitiveness Seriously

The world community is celebrating the achievements of Kazakhstan regarding economic, political, and social development in its 25 years of independence, as well as its leadership in regards to international security. Kazakhstan is the first among the CIS and Central Asia countries to hold EXPO-2017, an important global event which brings business, policy and technology issues, putting moreover people at the heart of sustainable energy debate. At the same time, Kazakhstan has rapidly adapted to the new global reality, becoming a non-permanent member of the United Nations Security Council since this 2017.

The 2017 new direction aims to help Kazakhstan to be part of the 30 developed countries in the world by 2050, which is very relevant taking into account the current global economic instability. Through its economic policies and its National Plan denominated 100 concrete steps, Kazakhstan is increasingly prepared to face the complex global transformation. All of this would not be possible without a correct domestic policy and without a high leadership in the international scenario.

Building on global competitiveness model, Kazakhstan’s third modernization is quite necessary to ensure the country’s place at the international realm. This last wave of modernization is the result of 25 years strengthening the country's economic potential since its first modernization. Needless to say that the first wave opened a space on the world map by creating a new state on the ruins of the Soviet Union and in the midst of a civil war which left more gains than losses.

The second wave of modernization started with the adoption of the Strategy-2030 and the foundation of its new capital Astana. Such a modernization was deeply important as it allowed Kazakhstan to be among the 50 most competitive economies in the world. The two modernizations already made, provide solid bases and invaluable experiences for the third wave of modernization, which goes further and is more ambitious in scope.

The third wave is based on its 100 concrete steps and was less thought to fight the current global problems and concerns than to respond to the future challenges and objectives, just as was expressed in the Strategy-2050. According to the speech given by President Nursultan Nazarbayev in January of this year, such a modernization has five main priorities.

The first priority, the accelerated technological modernization of the economy, seeks to promote new technology-oriented sectors, such as digital services in the healthcare and education systems, 3D-printing, online commerce, or mobile banking. Such objective is largely based on the assumption that innovation in products and services is a key condition for the formation of new companies. At the same time, according to such perspective the development of communications, digital industry or the universal access to a fiber-optic infrastructure, are critical to accelerate technological modernization of the economy in different sectors. 

In fact, EXPO-2017 has become a platform for attracting entrepreneurs and new investors who, around the world, want to invest in Kazakhstan. This scenario represents an opportunity and, at the same time, a challenge for the country. After all, the government needs to think of an appropriate infrastructure, enabling environment, new and simpler requirements for visa processing, as well as more favorable labor conditions.

With the creation of new technologies in traditional industries and the creation and development of new industries, the labor market will be directly and positively affected. Through the program “Digital Kazakhstan” the government wants to develop modern tools to give traditional industries mechanisms to face national and international competitiveness. 

As challenges could also be pointed out, it can be said that the development of the new Euroasian logistics infrastructure is an important priority, as well as the urbanization processes needed for the construction sector’s development. Actually, it could be the driver of the domestic economy and an important factor in attracting foreign investment. Furthermore, it is essential to increase productivity with elements of the fourth industrial revolution such as robotics, artificial intelligence or automation, not to mention that mining, metallurgical and oil sectors must maintain its strategic role in the Kazakhstan's economic growth.

The significant improvement and expansion of the business environment is the second priority to meet the objectives of the Strategy-2050, year in which the government is waiting that the contribution of small and medium-sized business is at least 50% of GDP. Considering this strategic goal, the government launched a program of productive employment, family business and development of mass entrepreneurship, with a budget of up of 16 million tenge in micro-loan for the business, as well as organizational and financial training.

Along with the National Chamber of Entrepreneurs, the government are considering strategies to reduce all kind of costs for business, such as administrative procedures, documents services, energy logistics, or utilities. To do this, it is necessary to modify the existing regulatory burden on business insofar as it goes against of creating a new and modern model of business. In this regard, it is important to improve the conditions of doing business on the basis of the World Bank’s framework, and thus to develop a special system in order to deregulate business for the second half of this year. 

Needless to say, transparency and efficiency of privatization, as well as the role of state holdings according to international standards should be largely guaranteed. The State, therefore, should keep natural monopolies and assure the direction of strategic projects. Likewise, the expansion of public-private partnership provides great potential for business, social, educational and cultural development.

The third priority, the macroeconomic stability, is aimed at promoting the participation of private capital in the national economic panorama and to restore the role of monetary policy. In such a scenario the National Bank has important tasks, mainly to reduce the inflation to 3-4%, to improve the banking sector, to guarantee the national economic growth, to expand the rights of the state banks in the operational control, and to ensure transparency in audits.

The stock market, which needs to create opportunities and options for people to invest their savings in different types of stocks is important as well. There is no other way to achieve this than by providing a safe and stable national outlook for investment. All of these factors would allow arguing that the fiscal policy needs to be readjusted and revised by every Ministry, and program by program, in order to ensure the proper distribution of the national budget.

The macroeconomic stability, as a priority of the Strategy-2050, needs to continue the fiscal decentralization policy. In particular, it is important to avoid the concentration of spending authority for the purpose of give regional and local powers a more room for manoeuvre. Other important points have to do with the control of the external and internal loans and the tax administration mechanisms, which need to be improved in order to expand the tax bases in the non-primary sector of the economy and to encourage business to invest and move the country's economy.

The forth priority, the improvement of the quality of human capital, seeks to change the role of the education system making it the central axis of Kazakhstan’s global competitiveness and new model of economic growth. Academic and business sectors and government must work together to prevent market failures. The goal is to create synergy between what the market is needing and the education that is being given to future entrepreneurs and employees.

On the way to meet such goals, Kazakhstan government recognizes that the gap in the quality of education between urban and rural schools must be reduced. In this sense, special attention should be paid in the trilingual education and in the quality of the professors, which is a typical problem. It is worth noting that the government is working on vocational education strategies in order to bring new specialist to labor market, along with higher educational facilities.

The healthcare and social security systems are two important assets. On the one hand, healthcare system must be provided with equal terms than those provided by private health institutions for the purpose of promoting competition on the equal basis for everyone. A new legislation to regulate prices of drugs would be quite required in such scenario. On the other hand, social security in terms of the basic pension will depend not only on the length of participation in the pension system, but also on the minimum wage, as well as on the social assistance.

The last, but not least important priority, as part of the third modernization is the institutional change, security and the fight against corruption. Kazakhstan not only needs to work on basis of OECD recommendations, but also reviews the legislation, humanize the administrative and criminal law, and works in the judicial system. In terms of corruption, the country is making efforts aimed at identifying and eliminating the causes and premises of corruption, as well as combating the effects of corruption. 

Regarding security, Kazakhstan is working on the prevention of religious extremist propaganda, adopting a zero-tolerance policy and taking additional steps toward spiritual and moral education of the younger generation. At this point, the cybercrime and cyberterrorism is becoming one of the most important issues. For this reason, the government, along with the National Security Committee, are creating the Kazakhstan Cybershield system.

We must not forget that the President Nursultan Nazarbayev has proposed a constitutional reform orientated to strengthen and improve the current democratic system. The main objective of such reform is to create a redistribution of powers. Two options are available in this scenario. On the one hand, the new Parliamentary powers might negotiate the Government’s structure with the President. On the other hand, the Parliament could introduce the principle of the vote of no confidence to control the government decisions in a more strict way. In any case, Ministers would have more power and responsibilities to manage social and economic development, whereas state programs will be transferred to the Government.  In addition, the role of the President will be of a supreme arbiter in relations between the different branches of Government.

As part of this reform, the Government and Parliament would provide effective mechanism of response to modern challenges, one of the most important: Kazakhstan's new direction 2017 aimed at helping Kazakhstan to be part of the 30 developed countries in the world by 2050, taking global competiveness seriously.