Innovative Strategy for Industrial Development in Kazakhstan: the First Phase
Adilbek Dzhaksybekov, Industry and Trade Minister of Kazakhstan
The approval of the Strategy for Industrial and Innovation Development of Kazakhstan for 2003-2015 by a presidential decree on 17th May 2003 marked the beginning of a new stage of economic reforms in the country. Manufacturing of competitive and export-oriented goods and effective use of research potential in developing the innovation component of the economy must spur the economy’s diversification and facilitate withdrawal from the mineral commodity orientation.
To ensure the staged implementation of the set tasks, the government approved an action plan for the first phase of the strategy covering 2003-2005. Under this plan, the essential framework will be created in the next three years. Financial and innovative development institutions will be preparing for the coming key reforms which are scheduled for the second (2006-2010) and third (2011-2015) stages of the strategy’s implementation.
In particular, the companies with the best added-value competitive advantages will be selected. Meanwhile, the development of the economy's basic sectors will be reinforced by private sector initiatives.
The country's enterprises have to strive to maximize profits by mastering new technology and innovation. Auxiliary production enterprises need to be spurred on to ensure the development of basic sectors on time. Small- and medium-sized businesses will also receive a great impetus to development.
Information flows are systematized to promote and implement the initiatives of the private sector. A private sector initiatives database is being set up: it will include innovation and investment projects and proposals by home and foreign investors. In addition, there will be a database containing all research developments originating in Kazakhstan and a patent database.
Local executive authorities must play the key role in implementing the Strategy's tasks. In turn, the government will create the necessary legal framework. Every real manufacturer and potential investor will be aware of the policy we conduct.
This is the working pattern the government sticks to when implementing the Strategy's preparation stage:
1. Study of the situation in sectors and marketing research to evaluate sectors' competitiveness.
2. Training and retraining of staff; nurturing managers of a new generation.
3. Ensuring sound operation of the established development institutions.
4. Creating an effective innovation infrastructure and developing a research and production system for the basic sectors of the economy.
We believe that institutional backing is a priority if you want to conduct any reforms.
Close intertwining of science and manufacturing is the fundamental factor of the industrial and innovation development. In addition to the already existing financial institutions for development the Research Fund and the Centre for Engineering and Technology Transfer are to become the instruments facilitating this process. Their activities will help to form conditions favorable for transfer of advanced foreign technology, domestic developments and other innovations, which will then be introduced in the country.
The principle of interaction between the state and development institutions, private sector and research organizations has been defined.
The Design Group, which is being set up currently, will coordinate the process, including negotiations over large ‘backbone’ projects. Prior to this, forming of a portfolio of promising projects and business initiatives has begun. After preliminary studies they will be passed to corresponding financial institutions. So far more than 200 projects are being analyzed. The most complete ones will be selected for state support.
The objectives include encouraging large multinationals specialized in manufacturing to come to the country. 20-25 of the companies will be selected for attraction into the promising sectors such as the petrochemical, engineering sector and information sciences. Today proposals are being drawn for future projects. Co-operation has begun with foreign embassies on the work of attracting foreign capital, advanced technology from international corporations and setting up joint manufacturing enterprises with these corporations.
We understand that no fully-fledged innovation activities are possible in the country without fundamentally new economic entities (technoparks, business incubators, regional innovation funds and venture companies). It is also crucial to change the nature of contacts between the existing economic entities and make amendments to the Tax Code in regard to fostering research and innovation and facilitating the practical implementation of scientific research and developments.
At the same time we need well-qualified assistance in creating and developing innovation infrastructure. This includes staff training, development of technopark management principles and the development of plans for improvement of technoparks. Negotiations have begun with international financial institutions on the three following key tasks: provision of technical assistance, funding of innovative projects and the formation of an innovation infrastructure by the main interests in authorized capital stock.
For the time being 15 technoparks and 16 business incubators operate in Kazakhstan. However, due to weak contacts with research organizations and manufacturing companies, they do not meet the goals and priorities of the industrial and innovation policy, of which high tech manufacturing is one of the most important.
Therefore at the first stage the state will take part in setting up and managing technoparks. This will help broaden and improve the practice of applying market mechanisms in managing economic entities and to set up effective forms of technoparks. The tasks and goals of these latter will be shaped by the specifics of the regions they are formed in and the composition of their founders.
Thus, technoparks and business incubators should form something like an 'innovation belt' around basic industrial sectors such as the oil, gas and mining industries, as well as the construction and agribusiness spheres.
Given that most domestic companies and innovation institutions are not ready to manufacture products to international standards, those with the most effective production and innovations will be selected. For this purpose, polling of industrial enterprises will be conducted to select those best fit for providing the basic industrial sectors with essential production.
Being one of the major sectors, the oil and gas industry can be cited as an example.
Within the implementation of the Kurmangazy project alone, appropriate home companies may now begin producing special and well cement, electrical equipment and electric wires, drilling rigs, Christmas trees, communication and control equipment and sea vessels. There are no manufacturers of the 16 types of production necessary for offshore oil projects in the country, which means we need to establish new enterprises (oil pipes, well equipment, special heating furnaces, heaters, coolers, dehydrators and desalinating units, condensation checking equipment and gas stabilization equipment, compressors, water injection equipment, chemicals and other items).
Moreover, deeper processing of oil and gas will help to produce some 200 types of polymeric products even at the first stage. These products are used in households and throughout the economy.
It was established as a result of an analysis conducted that more than 600 companies of the country's processing sector have the production and staff potential to implement orders by the oil and gas sector. 50 of the largest machinery companies produce equipment for the oil and gas sector, and 29 companies have many opportunities to boost their export reserves.
To fully use the local manufacturing potential for implementing oil and gas projects, especially those related to developing the Kazakh sector of the Caspian, measures will be taken to increase the share of the contracts awarded to local contractors and producers and boost Kazakh participation in projects.
Of course, there are few manufacturers in Kazakhstan who work to the highest quality standards and boast of qualified personnel and advanced technology. The task is not just to foster introduction of international quality standards, but also to help Kazakh companies find strong foreign partners capable of bringing their technology and capital to Kazakhstan and teaching our businessmen high standards of corporate management.
Reforming the national standardization, certification and metrology system are also very important. Therefore, the legal framework must be developed in parallel with large-scale programs for quality improvement and development of the set of standards. Currently the draft On Technical Regulation is being developed which will be based on market economy principles and ensure a transition from obligatory standardization to voluntary.
A specially established Kazakhstan Contract Agency will assist companies in signing contracts and agreements with foreign partners. In addition, it will provide consultancy to local companies aimed at boosting the product quality and efficiency pf production management.
The trade policy will also be reconsidered taking account of the strategy's priorities. It will target the formation of infrastructure for promoting export, expanding sales of local goods in the CIS markets and neighboring developing countries and liberalizing the country's customs and tariff regimen.
The first stage of the Strategy poses the task of activating the negotiations over Kazakhstan's membership in WTO. Kazakhstan's membership of the WTO is crucial for developing a competitive environment in the country and its entry to the global market place as an equal participant.
To make sure local production is competitive on price and quality against foreign-made rivals, we need to increasingly take measures to boost the competitiveness of production and to make it meet international standards of quality.
In order to define possible scenarios of Kazakhstan's economic development in the medium- and long-term perspective, a detailed analysis of Kazakhstan's membership of the WTO is considered. The attention of regions and companies themselves is focused on purposeful work to prepare the economy of each region WTO membership and to adapt the business structures to tough competition, introduce new technology and innovations for production of cutting edge, high tech goods.
The Strategy's effectiveness requires the existence of a potent mechanism of interaction with local executive authorities, business and research institutions. To achieve this, heads of regions and the mayors of Almaty and Astana should approve the regional Plans for Implementing the First Stage of the Strategy. Field seminars, conferences, presentations and meetings will play a critical role in keeping the public aware of the goals and objectives of the Strategy.
These measures will allow joint discussions of the course of implementing the Strategy, to make effective moves to improve the investment appeal of processing enterprises and to develop technology transfer. These topics will be covered by the mass media in the appropriate form.
Small and medium-sized businesses will be stimulated to start up-to-date production facilities and develop promising investment projects, while research institutions will receive a new impetus for invention and developments.
Therefore the first results of the first stage of applying the Strategy to real life are expected to be these: the deeper use of scientific achievements in boosting industry’s competitiveness, establishing methodology bases to monitor the measures for industrial and innovation development, and lowering the risks for foreign investors in the processing sector.
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