Staying Competitive in a Toughening External Environment

Kazakhstan achieved its goal of entering the top 50 most competitive countries in 2013 and has maintained its position in the 2014-2015 World Economic Forum Global Competitiveness Report. Largely thanks to the sound macroeconomic policy of President Nursultan Nazarbayev and the Kazakh government, the country is ahead of other states in the Commonwealth of Independent States (CIS) in almost all of the report’s pillars of competitiveness, including institutions, infrastructure, macroeconomic environment, higher education and training, goods market efficiency, labour market development, financial market development, technological readiness, market size, business sophistication and innovation, lagging behind only in the category of health and primary education.The Global Competitiveness Index gives a score from 1 to 7 in each of these pillars, and Kazakhstan earned an overall score of 4.4.

The report takes into consideration many factors and defines competitiveness as “the set of institutions, policies, and factors that determine the level of productivity of a country. The level of productivity, in turn, sets the level of prosperity that can be reached by an economy.”

The report is not a retrospective account but rather one that looks forward to a realistic vision of an economy, appreciating that “a more competitive economy is one that is likely to grow faster over time.” Kazakhstan has no reason to be pessimistic about its prospects for growth: the economy is stable and the society is vibrant.

Kazakhstan’s institutions earned a score of 4 out of 7 in the report. The population of Kazakhstan is confident in its leaders and public trust in politicians earned a high mark. President Nazarbayev is popular throughout the country and his leadership is key to the country’s development. As the country goes through its transition from a stage two economy (efficiency driven) to stage three (innovation driven), the stable course of progress must continue to ensure stability. The government earned good marks for transparency of government policy-making as well as for keeping wasteful government spendinglow. The worst score of the institution pillar in Kazakhstan is the reliability of police services, an issue that the government needs to address.

Infrastructureearned an overall score of 4.2, dragged down by low grades in the quality of roadsand ports but receiving very high marks for mobile telephone subscriptionsand fixed telephone lines. The government is upgrading road infrastructure and investing in new highways, including the Western Europe-Western China corridor, to improve the situation, but the construction and maintenance of such massive endeavours takes time and money. In the ninth-largest country in the world, a mobile communication network must be valued as highly as concrete freeways.

Kazakhstan received the highest mark for its macroeconomic environment pillar, an impressive 5.7, almost a whole point more than all of the other CIS countries. In the government budget balance category, the country is ninth out of 144 countries in the index. Having sailed through the global financial crisis, the government fares well in ratings of gross national savings, general government debt and the country’s credit rating.

The pillar of health and primary education is lower than the average CIS score, but still a high 5.4. Kazakhstan’s higher education and training received a score of 4.5. Enrolment in secondary education institutions is high, but the report gives a poor mark for the quality of management schools.

The pillar of good market efficiencyearned a score of 4.5, suggesting healthy market competition. According to the report, having such competition “both domestic and foreign, is important in driving market efficiency, and thus business productivity, by ensuring that the most efficient firms, producing goods demanded by the market, are those that thrive.”

In buyer sophistication, Kazakhstan ranked 28th out of the 144 countries in the index, indicating that customers are very demanding when it comes to purchasing goods and services. This makes companies work harder to become more innovative and customer oriented, creating an important competitive advantage. All categories in the labour market efficiency pillar were ranked highly, including in the sections on cooperation in labour-employer relations, pay and productivityand the ratio of women to men in the labour force. The country’s capacity to attract talentis a notable 37 out of 144, but the capacity to retain talent is lower than in 71 countries.

The report gives a score of 3.7 to Kazakhstan’s financial market developmentpillar. The highest ratings there went to ease of access to loans and venture capital availability. Overall, the country’s improvement in credit ratings gave a boost to the marks in this pillar.

The technological readinesspillar is improved by mobile broadband subscriptions, but the country is lagging behind in the FDI [foreign direct investment] and technology transfercategory.

The pillars of market size, business sophistication and innovation are among the lower-scoring sections for the country, but the Kazakhstan 2050 Strategy is focused on exactly these issues. The President’s strategy for creating a knowledge-based economy is now the main goal of the government.

Given the adverse external economic environment in the immediate future, especially in light of the tit-for-tat sanctions between Russia and the West over Ukraine, it seems that achieving Kazakhstan’s development goals will be tougher than expected. Through several crises in the past, however, Kazakhstan’s economy has shown its resilience, agility and ability to weather economic storms. Having reached the goal of joining the 50 most competitive economies, maintaining and improving Kazakhstan’s global standings, and, more importantly, maintaining the positive trends in the economic development, look to be achievable and realist