Economic Diversification Should Focus on Non-Primary Sectors, Says Kazakh Expert

ASTANA – Kazakhstan needs to develop non-primary sectors of the economy and ensure the growth of export potential in these areas with adequate use of raw material revenues, said Bekzhan Sadykov, the head of Global Economy and Sustainable Development Department of the Kazakhstan Institute for Strategic Studies (KazISS) in an interview with Kazinform. 

Photo credit: Pixabay.

“This includes not only the service sector, which makes up more than 50 percent of the country’s gross domestic product (GDP). It is also important for Kazakhstan to develop structural sub-sectors of the industrial sector,” said Sadykov.

Diversification of the economy has always been a priority for the nation’s sustainable growth. In his address to the first session of the Kazakh Parliament on March 29, President Kassym-Jomart Tokayev emphasized the importance of making full use of the country’s production potential. 

According to Sadykov, in the sphere of mechanical engineering, Kazakhstan should focus on developing machine tool building and producing technological equipment for investment in mechanical engineering and the automotive industry. For now, the country has to import complex items and can only produce metal products and structures.

Kazakhstan also has specific potential in the production of rubber products, the expert noted. Therefore, it is worth developing the rubber industry and aim at achieving the final results of the entire cycle of oil refining.

Sadykov proposes to apply new approaches in the agro-industrial sector, noting that its share has dropped from 12 percent in 1995 to 4–5 percent today. Using less capital-intensive technologies to increase productivity and developing food production for domestic farmers is imperative, he says.  

“The development of these areas will result in a new economic policy. This necessitates combining research and innovation and government funding for technology development programs and advanced development centers. Kazakhstan must develop innovative methods for employing engineering professors at universities and promote educational programs in technical specialties,” said Sadykov.

According to the KazISS expert, developing a knowledge-intensive economy and an economy based on knowledge and creativity is a complex and long process, which requires comprehensive support of all processes by the state. It may be necessary to institutionalize initiatives to develop a complex economy and get out of rent conditions. 

The country’s weak incentives for converting business ideas, constrained by the monopolies in the main areas of the real sector of the economy, complicate economic diversification. 

“President Tokayev outlined that medium-sized companies must form the core of representatives from the new generation. They will be responsible for attaining economic progress and real industrialization,” he said.

Given the rapid development of digitalization, it is essential to focus on the digital economy, which requires new approaches to intersectoral interaction. It is necessary to create an appropriate ecosystem to stimulate research and development programs and attract foreign direct investment.

“Kazakhstan might also benefit from the knowledge of young people who studied abroad, leveraging their abilities for the benefit of the national economy,” he said.

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