Kazakh Human Capital Should Receive Foreign Investment
Rapid economic development demands that Kazakhstan make greater efforts to train its specialists. This issue should be solved not only by the state but private capital too. At the 16th meeting of the Foreign Investors’ Council held on 8 December 2006, Kazakh President Nursultan Nazarbayev said that “business should not limit itself to the passive role of a buyer of educational services, but it also should assume social responsibility in this sphere”.
Kazakhstan defined education as a priority of the socioeconomic development when it obtained independence. That is why its spending on education stands at 3.5% of GDP now, and this figure is expected to grow to 4% within the next two years. As a result, according to the Global Competitiveness Report,Kazakhstan has already joined the world’s 50 most competitive countries in terms of education, occupying 49th place (in terms of the quality of mathematical and scientific education Kazakhstan occupies 46th place, it is in 56th and 57th place in terms of primary and secondary education respectively, and in 51st place in terms of higher and professional education).
The Foreign Investors’ Council meeting discussed creating a flexible, transparent, continuously developing and accessible system of technical and professional education. Based on public-private partnership this system should aim to train Kazakh specialists to enable them to compete in international markets. The government has already taken measures in this direction.
For example, the establishment of a new university in Astana is a major and significant project in the education sphere. This university will comprise four educational structures specialising in IT, the arts and social sciences, engineering and technology, and applied sciences.
A network of Higher Technical Schools (HTS) will be set up from regional retraining centres. These schools will train engineering and technical specialists and enhance their qualification.
The HTS is an educational establishment which offers continuous professional education, maintains the high professional level of qualified technical and service specialists, and retrains and enhances their qualifications. People with basic secondary education will study four years at the HTS, with general secondary education at least two years and people with technical or professional education at least one year. After two years of studying at the HTS students will receive the first level of professional qualification in their specialities; after three years they will receive the medium level of professional qualification in their specialities (mechanical technician, building technician and so on); and after completing the full course they will receive the highest level of professional qualification in technical or service specialities – they will graduate as junior engineers in technical specialists (a BA degree).
In addition, preparations are being made to set up four regional centres for training and retraining specialists. Up to 700 people will be studying at each of these centres. The centre for training specialists for the oil and gas sector will be set up in Atyrau, for the textile and processing sector in Shymkent, for the machine-building sector in Ust-Kamenogorsk and for the fuel and energy sector in Pavlodar. It should be noted that the president told the meeting that he had ordered that an additional centre for the petrochemical industry should be set up in Shymkent.
However, President Nazarbayev noted, this is not enough for the entire Kazakh economy because production potential and the innovative economy can develop further only on a new technological base when there are specialised labour resources and a powerful scientific and technical infrastructure. Only the narrow specialisation offers competitive advantages, that is why training qualified workers and middle-tier specialists is a priority at the moment.
There are 475 colleges (395,000 students) and 312 professional schools (105,000 students) which train technical and service specialists in Kazakhstan now. However, only 107 professional schools (54,000 students) and 122 colleges (109,000 students) train the very technical specialists. This means that only one young Kazakh in four is studying the most needed technical and agricultural specialities.
The president focused attention on the main problems in the professional education sphere. Firstly, this is the poor development of infrastructure, shortages of engineering teachers and the poor infrastructure of professional schools and colleges. The second problem is the absence of impartial forecasts of the economy’s demand for technical and service specialists. As a result, graduates of Kazakh educational establishments do not meet the requirements of the modern labour market, let alone the requirements of an innovative economy the country is trying to build. That is why foreign companies working in the country’s regions are attracting increasingly more expats, citing the low qualification of Kazakh specialists or their absence.
For example, the number of foreign specialists working in Kazakhstan has been steadily growing over the past six to seven years. This figure stood at slightly over 10,000 people in 2000, whereas it exceeded 30,000 in the first nine months of 2006. Moreover, they work mainly as technical and service engineers, whereas our citizens do hard jobs which do not demand high levels of qualification, and thus are low paid. This leads to discrimination in terms of salaries and labour conditions. The president said that this was absolutely unacceptable, and the recent events in Atyrau Region (a brawl between hundreds of Kazakh and Turkish workers) proved this. “This trend is dangerous to companies themselves, and we should solve this issue together showing respect to the local people who regard Kazakhstan’s riches as theirs,” President Nazarbayev said.
In this respect the president believes that investors should concentrate on training local specialists and developing technical education under public-private social partnership. For this the government and the business community should adopt a relevant programme. The country needs a law “making everyone deal with this problem”. Cooperation should include joint projects in the technical and professional education sphere. The setting up of educational centres at major enterprises is also important.
Members of the Foreign Investors’ Council agreed with president that the level of training specialists was very low. For example, the position of financiers was made public by the chief executive officer of the Credit Suisse Group, Oswald Gruebel, who said: “The atmosphere financial companies are currently operating in has changed dramatically. Our attitude to the educational level of specialists also changed dramatically. These changes are so significant and so rapid that requirements set for future professionals are ahead of the technical level of their knowledge”.
Having drawn the president’s attention to Kazakhstan’s growing demand for world-class financiers, foreign investors linked this to the country’s switch to international accounting standards, the forthcoming membership of the WTO and the creation of the Regional Financial Centre in Almaty. However, they believe, attracting as many as possible foreign financial structures to the Kazakh market is perhaps the quickest and the most efficient way of building a local community of highly-qualified financial specialists.
The president of the European Bank for Reconstruction and Development, Jean Lemierre, also talked about shortages of professionals in Kazakhstan. He pointed to “a lack of skills” in the country and a lack of reforms in the scientific sphere, because “something is being done in the Kazakh education sphere, but nothing has been done in the scientific sphere”. Lemierre also agreed with the Kazakh president that business should assume a leading role in supporting education and science. In addition, the state should widely support private initiatives in this sphere, and this is impossible without the adequate level of civil servants, especially at a local level.
The managing partner of Baker & McKenzie-CIS, James T. Hitch III, said that there is an “excess” of law education in Kazakhstan. There are 45 higher educational establishments and about 91,000 law students for 15 million people in the country. Mr Hitch suggested that the number of higher educational establishments should be cut down to 10 and the number of students to 12,000. He believes that “Kazakhstan cannot manage to train so many students at a proper level”. This reduction is possible due to tightening requirements for university hopefuls. As a result, the number of students will fall, but the quality of their education will grow.
President Nursultan Nazarbayev agreed with investors that it was necessary to constantly work on improving the quality level of Kazakh university graduates. In particular, he reminded Education and Science Ministry officials about his order to draft a State Programme to Develop the Technical and Professional Education for 2008-2011. The head of state urged investors to adopt a contract system of training specialists with mandatory employment at their enterprises. This means that employers offer financial assistance to universities where students receive education under state grants, whereas universities ensure that their graduates are sent to these enterprises. This scheme is to be fixed by a trilateral contract.
In addition, President Nazarbayev called on foreign investors to take an active part in retraining and enhancing qualifications of Kazakh citizens who are already working for them. In this situation the conditions for issuing work permits to foreign labour will be observed, and there will be no need to import foreign labour.
The head of the Eurasian Industrial Association, Aleksandr Mashkevich, said that if the law imposes greater responsibility on industrial enterprises over funding education on top of 1% of their operational costs stipulated in mining contracts, then “this will lead to a danger of dependence of universities on the interests of a certain company”. Mr Mashkevich suggested that EU experience in “voucher funding of education”, when vouchers “for buying necessary educational services” distributed among employers, should be applied in Kazakhstan. He also believes that the Education and Science Ministry’s initiative to optimise the mechanism of funding the education system is sensible.
Foreign investors talked at length about the importance of “human capital” as an asset of their businesses and their readiness to invest in developing human resources. Almost every participant gave examples from their companies’ experiences and promised to offer all-round support to the Kazakh side’s initiatives in the education sphere.
For example, the executive vice-president of Chevron Corporation, George L. Kirkland, welcomed education priorities defined by President Nazarbayev. He told the meeting about Chevron’s new, global programme to recruit university graduates under which the company chose Satpayev Kazakh National Technical University for attracting talented young people with universal technical knowledge.
The chief executive officer of the BG Group, Frank Chapman, analysed in detail how foreign companies’ presence in Kazakhstan could help develop local human capital. He believes that it is obvious that training courses and on-site courses offered by BG and other companies have a positive impact on staff members. Local supply companies also benefit from applying international experience.
ExxonMobil Development Company’s President Mark W. Albers said that in order to make the Kazakh education system recognised in the world the state should bring university education programmes in line with international standards and encourage its universities to get international accreditation. He believes investors can contribute to this process and exemplified ExxonMobil’s sponsorship of the KIMEP.
In general, the Foreign Investors’ Council meeting devoted to developing human capital created the impression that foreign companies are ready to either recruit most talented university graduates or complete their education to meet their own requirements, or retrain their own staff members. However, they are not rushing to get involved in implementing the Kazakh leadership’s plans to overhaul the national education system. After listening to the Kazakh side, foreign investors were vying with one another to advertise their own methods of training staff members, which, they claimed, were the best. For example, vice president for Shtokman Russia and Caspian Region of ConocoPhillips, Don Wallette, even suggested that Kazakhstan learn Norway’s experience where higher education is free and state-funded. Moreover, Norway created a system of issuing interest-free education loans to students.
Nevertheless, despite some disagreements on the main issue of the meeting’s agenda, the sides concluded that the dialogue was successful. The president expressed the hope that investors will change their attitudes to Kazakh human capital, and foreign investors, for their part, promised that for this they would do everything possible … and profitable for themselves. We will see what this will produce.
PS. The next sitting of the Foreign Investors’ Council will be held in Ust-Kamenogorsk in June 2007. It will discuss developing Kazakhstan’s transport potential as part of integration processes.
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