Modernization of Kazakhstan: new priorities and continuity of policy

The annual addresses of the President of Kazakhstan Nursultan Nazarbayev to the people of Kazakhstan have become a traditional instrument of the state strategic planning and of communication between the authorities and the society.

This year’s address was themed "The Third Modernization of Kazakhstan: Global Competitiveness." Thus, this important document’s focus was the economic reforms. Such a statement is well justified, given the increasing global competition, the crisis in the world economy and their impact on Kazakhstan, in particular, due to the decline in raw materials prices. The continued dependence of the country on its exports has particularly exacerbated the economic problems. But even in these difficult conditions, the government managed to achieve the increase of the Gross Domestic Product, which was noted in the text of the document.

The issue of modernization has been repeatedly raised by the head of the country. But this year’s address is relevant due to the fact that it sets specific and detailed tasks and assignments in the context of the search for new models of economic growth. In particular, we are talking about the long-debated issue of the diversification of Kazakhstan's economy, development of the non-oil sector of the country. Therefore, it is vital to step up the pace of economic reforms and improve the efficiency of the financial and natural resources utilization.

In this regard, the document can be viewed as a road map for bringing of the republic's economy to a new level of competitiveness. Moreover, economic modernization will be accompanied by political, given the policy of redistribution of power.

Overall, the Address 2017 refers to a number of key priorities for the country's development: accelerated technological modernization; liberalization of the business environment; macroeconomic stability; improving the quality of human capital assets; institutional reforms, security and the fight against corruption.

We should note the relevance of some of them both for economic and social development. In particular, the development of the information technology in the context of the world's current "Fourth industrial revolution" becomes the basis of the country’s competitiveness.

At the end of 2016 the Sovereign Wealth Fund "Samruk-Kazyna" and The Boston Consulting Group (a leading international company specializing in management consulting) published the study "Macroeconomic prospects of Kazakhstan and new horizons of investment in digitization." It was emphasized that the further growth of Kazakhstan’s economy is impossible without the intensive introduction of advanced information technologies in key sectors of the economy – industry, agriculture, infrastructure and financial sector. In this regard, Kazakhstan’s lag is particularly noticeable in the world ranking. The automation cost of industrial production in the country is 0.07-0.09% of GDP, which is 2.3-3 times less than the world average (0.18% of GDP), and is 4-5 times less than in North and South America. Moreover, about 20% of the companies of the industrial sector do not have computers, 24% have no access to the Internet.

The challenges concerning the large-scale introduction of digital technologies to industries and public services are closely related to the recent personnel appointments. The most competent managers from the IT sphere - Bagdad Musin and Ablayhan Ospanov returned from the quasi-public sector to the public services sector.  New appointments in the government from among successful managers from other quasi-state and private sectors may also be expected. The Kazakhstan leader proposed to discuss the principles of redistribution of power, where the government is given most of the functions in the social and economic sector, which is supposed to accelerate this trend.

Defining the National Bank as a responsible entity for the country's economic growth and extending its powers indicates the strengthening of the monetary policy role. If we add to this the task set before the National Bank to provide cheap credit, the regulator is expected to increase the tenge emission into the economy. And one of the most difficult tasks for the latter would be the curbing of inflation caused by the increase in money supply. In general, the policy of the National Bank meets these requirements and, therefore, serious personnel and structural changes in the financial regulation may hardly be expected.

In another important area – the fiscal policy – the VAT improvement tasks mean that there will be no expected transition to the sales tax as was considered earlier, as well as the increase in tax rates. That is, the increase in tax revenues, as previously expected from the expansion of the tax base.

The agricultural sector has also been named as one of the main drivers of the economy. It was tasked with the further consolidation of small farms and the revision of state subsidies. In principle, the succession is maintained to the strategy of "Agribusiness – 2020" as well as the new state program of development of the AIC (agro-industrial complex).

Investment in infrastructure, as the address emphasizes, are one of the main factors of growth and diversification of the economy, at the same time suggests further liberalization of the business environment and the reduction of state participation in the economy. It is without doubt that the accomplishment of these tasks to improve the efficiency will result in significant optimization of "Samruk-Kazyna," NMH "Baiterek" and other national holdings and development institutions.

Achieving technological modernization goals, of course, must be consistent with the development of social and cultural sphere, which was discussed separately in the president's Address. In particular, one of the important points is to increase the efficiency of the education system in Kazakhstan. This question is closely related to the development of human capital assets.

The implementation of the new economic program, including the issues of industrialization and digital technology development, requires trained professionals. And the improvement of the education sector is a prerequisite. The spread of the English language, on the one hand, as an international language of communication, and on the other – the main language of modern information technologies is gaining particular importance. Its promotion will help a deeper integration of the country into the global digital technology.

In this regard, the primary load is on educational institutions. Accordingly, it is assumed that some subjects in senior school will be conducted in English starting from 2019. At the same time, the President said that this issue requires a more detailed study.

Indeed, there are factors that could potentially complicate the introduction of the English language. First of all, it is, of course, the lack of personnel, especially in rural areas, where the quality and level of education due to objective reasons is somewhat behind that of the city schools. Moreover, even in urban areas there is a shortage of experts who can teach specialized subjects in a foreign language. Hence, the Address contains a thesis of gradual introduction of English in school education. And, of course, much will depend on the strategy and tactics of the government, particularly the Ministry of Education and Science.

In general, the implementation of the third modernization goals and objectives as a strategic interest in the country assumes the importance of routine performance discipline and professionalism, as well as innovative approaches, the ability to take responsibility, both on the part of government departments and the business sector.

Sections:  Kazakhstan