The efficient provision of the economy of Kazakhstan with skilled human resources became the main topic of discussion at the 23rd meeting of the Foreign Investors Council under the President of Kazakhstan, held on June 4 in Almaty. Today, people, representing businesses, and leaders of the state speak about the threat of the lack of highly-skilled human resources in the economy of the country; they are going to solve this problem through active participation of foreign investors.
Also the economy diversification will be accompanied by a change in the demand for the human resources’ structure – the demand for skilled specialists, experts with rare specializations, and operators of special-purpose equipment. These are the employees with specialization in deep drilling, geophysics, start-up and commissioning, weld crack detection, argon-arc welding, and others. The situation is aggravating also in view of the fact that there is the lack of systematic training of such specialists in Kazakhstan.
When referring to the demand for human resources’ structure in the framework of the Accelerated Industrial and Innovative Development Program, 55% are the employees with technical secondary and vocational education (59.4 thousand people), 30% are the workers having simple professions (32.6 thousand), and just 15% are those with the higher education (16 thousand). According to the Minister of Education and Science, Zhanseit Tuimebayev, at the current moment in Kazakhstan 543 technical and vocational schools and 34 institutions of higher education engage in the training of specialists. In the coming five years, they will train 224.6 thousand people with specialization in technical areas and 245 thousand specialists with the higher education. The disproportion between the demand and supply is evident.
When addressing the members of the Foreign Investors Council, President Nazarbayev emphasized that the main problem is the quality of training in domestic educational institutions, which does not yet meet in full both international standards and the requirements of employers. In addition, he said that the state makes considerable efforts to increase the quality of human resources. In the last five years almost 2.5 trillion Tenge was allocated from the state budget for education development. In the framework of the Bolashak program, more than 6 thousand people received an overseas education. 23 educational centers were set up on the basis of large industrial enterprises to provide vocational and technical education services.
The Head of the State announced that in the framework of the Business Road Map – 2020 program the implementation of three important components of it will start next year. These are the training of personnel, raising the level of their skills, and doing practical work with the youth. “There it is a lot that has to be done. My idea of the Intellectual Nation Project implementation shall become the pivot of the State Program of Education Development till 2020 that is under development by the Government now. To implement the program in the field of secondary and higher education we set up model educational facilities. They are the schools of intellect and a new international university. Their positive experience and innovations will apply to the entire system in the future. In particular, our international university in Astana jointly with recognized overseas universities of the world level will be training people with specialization in engineering, natural sciences, medicine, and business. Tomorrow they will join the teams at your enterprises.” In this connection, the President of Kazakhstan called upon the members of the Council to back the new university’s fund and to share their knowledge and experience in the area of human capital with the republic.
The investments in local human resources were always a pet subject of transnational companies, and thus there was no lack of those who wished to “report” on their success in the given area. In the speeches of the members of the Foreign Investors Council, apart from their frankly triumphal statements, there were many valuable recommendations and proposals. In this article we decided to report on the most interesting of them.
By tradition, the first speech from the foreign side was made by the President of the EBRD Thomas Mirow. He announced that the higher level of human resources development leads to innovations, which are the long-term force of growth. The better educated the population is, the better the population is “equipped” to make its contribution in the production of services and goods with a high added value and the quicker the country develops. This is important for successful mastering of new technologies. The studies conducted in 2008 in the framework of the EBRD’s report on the transition period prove a positive correlation between the level of education and the economic growth. “Standard tests and experience showed that if the average mark attained by the students over a period of 20 years increases by 50 points, this results in a 5% growth in the GDP”, – the EBRD’s Head said.
Also, he paid attention to the fact that in periods of high oil prices the countries which are richly endowed with mineral resources reduce, as a rule, the share of expenses for education in the overall expenditure of the state. The states with limited mineral resources act on the contrary; this provides the extra growth of the GDP. “This lesson is for Kazakhstan, and it should monitor the situation.”
In this connection, Mirow distinguished six aspects, which have to be taken into account in the framework of the policy of human resources development:
1. The closer the country stays to the upper technological level, the greater the amounts that have to be invested in the higher education. Therefore the more important it is to invest in primary and secondary education in order to successfully introduce the current technologies (the EBRD’s Head did not mention where on this scale Kazakhstan is, seemingly, providing the chance to the republic to answer this question on its own – Editor).
2. The competitive economy, starting from the lowest level of production, needs skilled, flexible and well educated human resources. The academic environment is important, but it is impossible to carry out major works without welders and technicians.
3. The private sector can and has to make its own contribution through organizing education without interruption of full-day or part time work. Besides, the closer the education and private business are interrelated with each other the more chances there will be to provide the training of those specialists which will be in real demand in the market.
4. In countries such as Kazakhstan it is possible to raise the potential growth by investing in primary and secondary education; however, the post-graduate study must not stand apart (Mirow cited the example of India, which would not be able to succeed so much in the development of its service sector without development of a strong higher education link).
5. Owing to the multiplying effect, it is very important to provide good tutorial staff and training of personnel for the educational facilities.
6. The expenses for education in Kazakhstan remain relatively stable – at the level of 3.5% of the GDP; however, high expenses are just part of the success. It is quite important to make efficient investment in the increase of quality, sound monitoring, and arrangement of the assessment of results. In this regard, the EBRD’s Head assessed quite positively the decision of Kazakhstan to join the OECD's Program for International Student Assessment (PISA) approved in 2009.
National Council on the corporate principles
The greater part of the companies-members of the Foreign Investors Council faces the problem of provision of their businesses with skilled human resources almost every day, knowing all bottlenecks in this area. Thus, they consider that the time has come for the state and business to combine their efforts for harmonization of supply and demand in the labor market. Thus, according to the ENRC’s shareholder Alexander Machkevitch, special attention should be paid to simplification of the procedure for licensing of corporate training centers that provide the on-job training of the personnel. There is the necessity today to expand the classifier of specialties of vocational education. “Today this classifier contains some 15–20% of the professions that are in demand by production. The name of professions in the classifier often differs from the Single Reference Book of Qualification Tariffs. By analogue with world practice we propose that the sectored associations of the employers would be liable for the development of sectored standards in accordance with the legislative procedures”, – Machkevitch said.
Also, he applied with the initiative to set up a National Council for Human Resources Development in the Republic of Kazakhstan, which would use the format and methods of work of the Foreign Investors Council. “Unfortunately, today’s National Council for vocational education development, for its almost two year history, has failed to solve the tasks set before it. I would like to distinguish, in our opinion, two main reasons for this. The first one is that the principle of representation of the state and business community on a parity basis is not met: The ratio is 90% to 10%. The second reason is that the mechanism of the Council’s operational activity is not well provided for.”
In this regard, Alexander Machkevitch believes that the new Council has to unite the representatives of business and the state on a parity basis. The mechanism of operation of the Council has to be based on the corporate management principles. “In our case, we propose the Secretariat as the working agency, while the members of the National Council will be acting as the shareholders, representing the interests of the key stakeholders.” The goal of the Council is seen in the development of the government strategy of human resources management, while the goal of the Secretariat in the planning, coordination and control of the activities of all the sides. “We think such approach will ensure providing the synchronization with the other strategic programs of the country, such as the Accelerated Industrial and Innovative Development Program, the increase in local content and other programs as well,” – the ENRC’s shareholder summarized.
Risks of regional competition
Vadim Benyatov, Credit Suisse’s Managing Director for Investment Banking for the countries of Central Asia and Eastern Europe, CIS countries, Israel and Turkey, devoted his speech to the analysis of long-term prospects of Kazakhstan on the regional human resources map.
According to him, if even to allow the possibility of reducing the annual GDP of Kazakhstan from 8–10% that was reached in the last decade to 5–8% in the coming decade, it becomes obvious that the slower growth of human resources will become a constraining factor of the economic development in general. The increase in domestic human resources at the current moment is, in average, 1% a year, and by predictions, it will be reducing to 0.1% a year by the end of the decade. “This situation can produce a grave effect on the economic development potential until the preventive program of increasing the labor efficiency is approved and accelerated.”
At the same time, the review of the general human resources pool of the Central Asian region has a more reassuring picture, compared to Kazakhstan. By estimate of Credit Suisse, their increase, including all the fours states in Central Asia will be kept at 2.0%–2.8% in 2010–2014 and 1.3%–1.8% in 2015–2020. This will give the possibility of using the human resources in neighboring states, in particular, in Kazakhstan and Russia. Along with that, the availability of the regional human resources pool can favorably affect mainly such fields as construction, agriculture and some other services with a low and mid-level added value. However, the industrial production and mining, which require a higher level of education and training, will be experiencing serious difficulties in the coming decade with meeting their demand for highly-skilled personnel.
In the opinion of Benyatov, the extra obstacle Kazakhstan will face in the coming years will become the demand by Russia for human resources from the Central Asian region.
In this connection, special focus is paid to the long-term accent for education and training of personnel. “The state-run agencies of Kazakhstan choose the right direction, paying attention to the long-term risks of provision of human resources at this earlier stage. The efforts to improve and strengthen the system of higher education in the country, including the payment of scholarship and grants, will lead to the improvement of human resources quality, attracted not only from Kazakhstan, but Central Asian countries, Russia and Ukraine as well. In their turn, the potential future employees-immigrants from these countries will have to have a higher level of training to work in Kazakhstan.”
Philip Erquiaga, Director General, of the Asian Development Bank Private Sector Operations Department, paid attention to the issues of training of manpower from the viewpoint of increasing the competitiveness of agriculture. In our opinion, the fact itself that the problems of this sector of the Kazakhstan economy, which is not spoilt so much by foreign investors’ attention, were raised for the second time at the Foreign Investors Council’s meetings, is quite landmark.
The ADB’s spokesman announced that Kazakhstan has natural competitive advantages in the agricultural sector; however, we should not rely on the sector revenue performance simply due to the periodically record indicators of harvesting. “The knowledge of what to produce and in what amount, how to determine the price and sell products, what the consumer’s demand is, how to pack, promote and supply the products so as to make them meet the consumer’s expectations – all this is an integral part of the entire process. The competition to the export markets will be strengthening with the lapse of time. Thus, the solving of the problems related to the standards of quality and process is an important aspect.”
The ADB is sure that the educational system of the country can play a key role in this regard. Thus, Erquiaga gave the following recommendations.
1. The higher education in agriculture-related specialties has to include training in how run the business and management in marketing and logistics.
2. Professional agricultural associations have to take the leading role in working with the government on the development of sectored standards and requirements to the certification of tutorial staff for the educational facilities specialized in agriculture.
3. If domestic goods are actively promoted on external markets, then training in up-to-date and future world’s standards have to become a key part of the curriculums.
In conclusion, the ADB spokesman told that the above-mentioned aspects are topical in the current conditions of the single Customs Union and will become more important in the framework of the forthcoming accession to the WTO by Kazakhstan.
“Branch” initiative of Baker & McKenzie
The proposal of Koen Vanhaerents, Executive Committee’s member of Baker & McKenzie International, as to the attraction of leading overseas universities to set up their branches in Kazakhstan, aroused great interest with the Head of the State. According to Vanhaerents, this trend is being actively implemented in countries of the Persian Gulf, China and India. The CIS countries are not considering this direction yet; this gives the chance to Kazakhstan to become the regional leader in this given area. “Not only students from Kazakhstan, but other CIS countries as well, could study in the branches of such universities. The attraction of overseas universities to set up their branches will provide huge opportunities. In the first place, this will allow a big number of Kazakhstani students to get education that will meet international standards, to raise the skills of Kazakhstani specialists, and to reduce the demand for the import of expatriate skilled experts. In the second place, this will create an important new sector of the Kazakhstani economy, namely the sector of educational services of an international level that will add to diversification of the economy. In the third place,this will result in new considerable investments in Kazakhstan. In the forth place,it will add to the development of innovative potential and will increase employment on the spot, since large universities often act as the catalyst for development of new businesses related to the fields of the science studied.”
The spokesman of Baker & McKenzie told that the attraction of overseas universities to set up their branches in Kazakhstan is a long-term project, which will require the investment of considerable funds. In this connection, he proposed to set up an interdepartmental working group for consideration of related issues and to work out recommendations for the government. To do this, this will require the amendment of the laws of the Republic of Kazakhstan considerably, in particular, the Tax Code, Law on Investments, Law on Education, rules of licensing of the educational activities, rules of accreditation of post-graduate educational facilities and overseas institutes, rules of issue of the permits for work, and other statutory acts. From his side, Vanhaerents promised full cooperation in the advancement of the given initiative.
Nursultan Nazarbayev thanked the members of the Foreign Investors Council for their contribution in the development of human resources in Kazakhstan and for the recommendations provided, and, in his turn, he set a number of tasks before the council members. These tasks turned out to be quite far-reaching and laconic; thus, we cite them as they are:
“Today I would like to pay attention of the Council and every investor to the practical solving of seven key objectives.
Objective One. It is required for a considerable increase in the number of jobs. The signing of contracts of hire with the Kazakhstani medium rank managers and skilled workers in proportion to the expatriate human resources shall be not less than 90% to 10%, while for the high rank officials – 70% to 30%.
Objective Two. It is necessary in conjunction with the realities of the economy to create and build advanced interregional centers for training and advanced training of personnel. It is necessary also to introduce sectored systems of certification of specialists, expand the list of grant scholarships for rare specialties, covering all sectors of the economy.
Objective Three. The curriculums of the higher and vocational education for the training of specialists should be altered. Now it’s the time to introduce the international standards. Investors can provide assistance to the institutions of higher and vocational education in the development of regulatory frameworks and strengthening of their material and technical resources.
Objective Four. The practice of training specialists for the medium rank technical staff for various sectors of the economy by order of foreign companies operating in Kazakhstan should be expanded.
Objective Five. I would like to expand the possibilities for gaining of experience by managers and specialists working at our enterprises in well-known overseas companies that have advanced experience in technologies.
Objective Six. Also, in partnership it is necessary to arrange efficient re-training and advanced training of scientific brainpower and engineering and technical staff for all sectors of the economy in the framework of the Accelerated Industrial and Innovative Development Program.
Objective Seven. The time has come to create a system of continuous monitoring of the current and prospective demands by the human resources market in Kazakhstan. This system has to take into account international trends of the human resources market development and give necessary stimulus for the domestic human resources migration within the country.
All above-listed requirements I address both to the government and the ministries and state-run institutions. We have to work in coherence. I can hardly recall even a sector in the economy of Kazakhstan which would not experience the lack of new creative and brainy human resources, able to adequately perceive the current policy of the country’s modernization.”
It is unlikely that the objectives set by President caught the representatives of Trans-National Corporations unawares. The greater part of their enterprises in Kazakhstan has already set such requirements to local human resources. They actively sponsor educational facilities and implement their own programs of scholarships and probations.
However, it seems that the conclusive part of the President’s speech turned out to be an “unpleasant surprise” to some members of the Foreign Investors Council. Having emphasized that in the framework of the Accelerated Industrial and Innovative Program of Kazakhstan some 150 plants and enterprises will be set up this year with the total amount of investments of $25 billion, he added that these new productions will be less than 2% of the number of industrial enterprises in the country currently in operation. The greater parts of the latter do not meet up-to-date requirements.
The question arouses “who, in what way and when will be modernizing the remaining lion’s share of the industry of Kazakhstan.” It turned out that this question is not rhetorical for the President. There, at the meeting he entrusted the government with the task in the shortest possible time to carry out a complete audit of the efficiency of renewal of the basic production assets of all large enterprises in the country, and following the result of such audit to take effective measures.
“For this, it is possible, for example, to announce open bids for the best project of accelerated modernization of the assets. To sum up the results, we can set up an independent committee, formed of the world’s best specialists. Projects which will win at these bids will be proposed for practical implementation at each of these enterprises.” The Head of the State made special focus that the matter concerns both domestic enterprises and enterprises owned by foreign investors. If it turns out that the successful bidder is not the owner of the asset, the current owner will have to carry out modernization in co-ownership with the developer of the project or apply another method of remuneration to the innovators, or even to give place to the other owner. “We have no other choice – time pushes us. Get renewed or make way for other people – this slogan is dictated by the present events.”
The Head of the State demanded that the government in cooperation with the investors and entrepreneurs associations work out legal and economic instruments for stimulating enterprises for accelerated renovation. “Today’s challenges are as such that we cannot wait for the times when market laws of competition will start working on their own. Let us recollect our recent history. Soon after Kazakhstan had gained its independence we carried out accelerated privatization of all the assets in Kazakhstan – we made it best and quicker than any other CIS countries. Owing to this, we survived, since the state was not the efficient manager at that time. What is now? If the new owners have not added anything in their productions, so we have to call in other owners which will be more efficient. I hope this is clear to everyone.”
Nursultan Nazarbayev called Trans-National Corporations to pay attention to the quality of technologies, when they import equipment to Kazakhstan. “The recent example is the accident in the Gulf of Mexico. At the cost of the catastrophic losses the world learnt that the cause of it all was a trivial defect in the equipment in operation. Where was the greatly praised quality and safety, earlier declared by the BP Company? We cannot let such things happen here in Kazakhstan, in the inland sea”, – the President said. He added that the toughening of requirements to the work in the Caspian shelf area is unavoidable.
“I suppose that all people present here are interested in the enhancement of management of their property and up-to-date modernization of their assets not less than we are. I sincerely wish successes to everyone. You, the current owners of these industrial assets, have all the chances to win. We are waiting for your proposals and cooperation in modernization of Kazakhstan.”
Exactly the topic of modernization and renovation of enterprises was selected by the Head of the State for the agenda of the next meeting with the investors. It is quite expedient that no objections had come. This means that already on December 3 in Astana at the 24th meeting of the Foreign Investors Council we will learn how the members of the Council are getting ready to solve these objectives, so important for Kazakhstan.