Kazakhstan Ranks 50th in Global Competitiveness Rating

ASTANA – Kazakhstan was ranked 50 out of 144 countries in the 2014–2015 Global Competitiveness Report issued by the World Economic Forum, putting it ahead of all BRICS countries except China, a number of European countries, including Belgium and France, and Asian economies like South Korea. It was also in 50th place last year and had risen from 72nd place in 2011–2012.
“We define competitiveness as the set of institutions, policies, and factors that determine the level of productivity of a country,” the report explained in its first chapter. “The level of productivity, in turn, sets the level of prosperity that can be reached by an economy. The productivity level also determines the rates of return obtained by investments in an economy, which in turn are the fundamental drivers of its growth rates. In other words, a more competitive economy is one that is likely to grow faster over time.” Competitiveness, therefore, involves static and dynamic components.

Economies are assessed according to 12 pillars of competitiveness defined by the report: institutions, infrastructure, macroeconomic environment, health and primary education, higher education and training, goods market efficiency, labour market efficiency, financial market development, technological readiness, market size, business sophistication and innovation.

The report categorises them into three economic stages and two transition stages: stage one, factor-driven; stage two, efficiency-driven; and stage three, innovation-driven; plus transitions between stages one and two and between stages two and three. The report classified Kazakhstan as transitioning from stage two to stage three, among 24 other countries including Malaysia, Russia, Turkey, the United Arab Emirates and others.

The report takes the stages of development into account by attributing higher relative weights to pillars that are more relevant for economies in each stage of development, it explained. Efficiency-enhancing pillars like higher education and training, goods market efficiency, labour market efficiency, financial market development, technological readiness and market size were weighted most heavily for Kazakhstan’s stage of development. When ranked on those pillars alone, Kazakhstan rose to 48th place, but falls to 89 when ranked on business sophistication and innovation, the key pillars for third-stage, innovation-driven economies.

Kazakhstan’s ranking, just out of the range of the top third, was buoyed by high marks for its macroeconomic environment – including ranking ninth for government budget balance and 11th for government debt as a percent of gross domestic product – and labour market efficiency, including coming in 16 for pay and productivity, 20 for flexibility of wage determination and 22 for hiring and firing practices. It also fared well on strength of investor protection – 22nd – and on mobile telephone subscriptions among the population – fourth.

Weighing down the country’s ranking were poor scores among the basic requirements in health and primary education (96), in financial market development (98) among the efficiency enhancers, and in both business sophistication (91) and innovation (85) among the innovation factors. Kazakhstan was rated highly for its rail infrastructure but very poorly for its roads and ports (113 and 123, respectively). On the innovation side, Kazakhstan’s highest scores were for willingness to delegate authority (55) and company spending on research and development (68).

The most problematic factors for doing business in the country were identified, in order of severity, as corruption, access to financing, inefficient government bureaucracy and tax regulation. The information is drawn from the 2014 edition of the World Economic Forum’s Executive Opinion Survey.

Kazakhstan’s current Nurly Zhol economic programme, announced in November, focuses heavily on infrastructure development, particularly road and port infrastructure, and envisions trip times between Kazakh cities cut by one third by 2019. Following President Nursultan Nazarbayev’s reelection in April, the government announced the policy would coordinate with China’s New Silk Road Economic Belt expected to boost the development of transit infrastructure dramatically in the short and medium term.

The country is working with marine terminal operator DP World of the UAE as an advisor on two key port development projects: the “dry port” of the Khorgos Special Economic Zone on the border with China and the port of Aktau, Kazakhstan’s main cargo and bulk terminal on the Caspian Sea. Kazakhstan Temir Zholy, the national railway company, has also launched a pilot project on multimodal rail-air transport connections through the country.

Kazakhstan has also taken steps to reduce corruption through its new Plan of the Nation, which outlines steps for creating a more professional civil service and more stringent requirements for law enforcement and judicial personnel, among other reforms. The country also signed a landmark Partnership for Re-Energising the Reform Process in Kazakhstan with the European Bank for Reconstruction and Development in May 2014, expressly aimed at increasing access to financing in the country, which has lead to 80 percent increase in the bank’s domestic lending.

The rankings generated some unexpected groupings, with one example being Kazakhstan, the Philippines, China, Lao PDR, Mongolia, the U.S., Israel, Namibia and Tanzania sharing the same scores as to the extent to which organised crime imposes costs on doing business.

The Global Competitiveness Rankings work with partner institutes around the globe. In Kazakhstan, their partner was the National Analytical Centre.

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