Knowledge-based Economic Growth in Kazakhstan

Abstract

Mineral resource rich countries are under pressure to diversify their sources of growth and employment in the face uncertain demand and fluctuating prices for their products. Moreover, because the mineral sector generates few jobs and linkages to other subsectors, it is only by building capabilities in other areas that economies such as Kazakhstan can gainfully absorb an expanding and better-educated workforce. Given the small size of its domestic market, its remoteness, and its relatively high wage rates, Kazakhstan cannot compete with Asian countries in the production of standardized manufactures. Hence as this article discusses, Kazakhstan must acquire and enhance technological capabilities in niche manufacturing, agro-industries, and certain high value tradable services. And it needs to exploit the ongoing regional investment in transport and logistics to tap opportunities across Central Asia and in Europe. Kazakhstan’s RD&I system is at an early stage of development; however, it has the resources to scale up the research infrastructure and to rapidly improve the quality of human capital—as China and other East Asian countries have done. The experience of other small—and remote—economies examined in the article indicates that with good policies, perseverance, and some luck, resource-rich countries can nurture an ecosystem of globally competitive firms that in conjunction with the mineral sector can sustain the rates of growth that Kazakhstan is targeting.