New technologies for human development in Kazakhstan National human development report - 2006

Executive Summary for the development of human potential and the current status of technological development in Kazakhstan. Present-day development trends The purpose of create the need for a new approach to Technologies as a tool for social and economy is human defining the purpose of development and human development the economy. The traditional definition development The first chapter looks at human aiming to ensure a states the main purpose of an economy is to meet growing human needs with development as an end, to which human decent life finite resources. Today, recognizing the development factors such as economic important role of human development, growth, education, healthcare and go- this definition should be changed to say: od environment are the means: new “The purpose of an economy is human technologies are regarded as a tool for the development aiming to ensure a decent development of human potential. life”. Human development is understood Thus, innovations improve productivity, to be the continuous expansion of profits and people’s income and ensure human opportunities to enjoy or have access to better quality goods and a choice of political, economic, social, services. New technologies have a positive spiritual and cultural participation. A effect on human and social health by decent life implies broad-based access reducing deaths and increasing births and to high-quality education, healthcare, life expectancy. The introduction of new social schemes, healthy food, extensive technologies in education is vital to the participation in society and other benefits competitiveness of national human capital. contributing to human development Modern technologies promote effective both culturally and financially. resource use and can contribute to public Having committed to the UN-declared participation in society. concept of development from the However, the authors also mention the perspective of opportunities, Kazakhstan potentially mixed human development has made continued efforts to promote implications of new technologies. There its human development level. The most are economic risks that can significantly valuable resource in the long-term affect the overall effect of new development strategy “Kazakhstan-2030”, technologies on economic development, a key national development document, while environmental and manmade is people. The 2030 strategy also identifies risks preclude unconditionally positive national development priorities that help impacts of new technologies on human improve all spheres of life for each and development. At the same time, access every Kazakhstani. to new technologies may contribute to Kazakhstan’s strong economic deve- growing inequality in relation to income, lopment has allowed it to put new items on place of residence, age, sex, etc. the development agenda to facilitate the Therefore, multi-dimensional effects of implementation of the Kazakhstan-2030 new technologies on human development strategy. These new challenges are set forth suggest the need for a selective approach in the President’s Address to the People of to the development, choice and use of Kazakhstan of 1 March 2006 “Strategy for technologies. The chapter recommends Kazakhstan to become one of the world’s the development of criteria for choosing New technologies 50 most competitive countries”. The new technologies to promote increased can become a Strategy emphasizes the need for innovative income levels, improved literacy and tool for enlarging development, which will be the basis for life expectancy and other human people’s choices Kazakhstan’s breakthrough in the context development components, and minimize of globalization. risks. The National Human Development Report “New Technologies for Human Human development as Kazakhstan’s Development in Kazakhstan” recognizes strategic priority the importance of new technologies, As with the previous report, the second which are considered through a human chapter reviews the status of human development prism, and assigns primary development in Kazakhstan through an focus to the government’s work in the overview of the Kazakhstan-2030 Strategy interests of its people. The Report calls for and identification of new challenges to be reflection on the need for an innovative addressed to ensure sustainable human stage of national development, highlighting development. The authors believe that the some of the pitfalls that can hinder principal national concept should now be human development. It acknowledges the transition to sustainable development, the role of technologies in the develop- which is an objective requirement that can ment of human capital and discusses realize the long-held dreams of the Kazakh Kazakhstan’s human development level, people in terms of national welfare, nature, as well as progress towards the Millennium culture and each Kazakhstani’s health Development Goals, use of technologies and well-being. New technologies for human development in Kazakhstan

To ensure sustainable human deve- and low qualifications of the cadre with Multi-dimensional lopment at the current stage, Kazakhstan technical education. effects of new needs to: In the area of funding of research and technologies on - improve life expectancy. Not only development (R&D): limited commitment of human development business and private sectors to participate should Kazakhstan work to increase suggest the need for births, but also take care of those already in R&D programs and projects and lack of correlation between R&D outcomes and a selective approach born. In particular, the excessively large to the development, disparity between female and male life market needs and context. expectancies should be addressed; In order to promote innovative business choice and use of development recommendations are pro- technologies - address the health targets of the vided to ensure links between science and Millennium Declaration relating to production. To this end, attention should reduced child and maternal mortality, be paid to the innovative activity of large halting and reversing the spread of HIV/ and small enterprises, such as the rate of AIDS and other diseases; use of innovation and the responsiveness - ensure that extracting companies of businesses to innovation introduced and the Government join the Extractive by competitors, which can contribute to Industries Transparency Initiative (EITI); competitiveness of such businesses through - achieve a number of targets reduced production costs. related to professional government and In addition, an important factor in decentralization and continue anti- the introduction of new technologies corruption efforts; is the infrastructure facilitating human - improve the quality of education development: ensuring social receptiveness towards Soviet period standards, based towards the introduction of technologies; on the needs of both the economy and equal access of a wide community and human development; all groups of the population to social and technological resources; a high rate and - develop fundamental and applied flexibility of production; extensive use in all sciences. spheres of life. Specifically, the chapter attempts To ensure sustainable human to show the relationship between com- development at the current stage, petitiveness and the development of Kazakhstan needs to: national human capital. The chapter’s message is that, although an important - improve life expectancy. Not only step towards the long-term development should Kazakhstan work to increase strategy Kazakhstan-2030, Kazakhstan’s births, but also take care of those already aim of becoming one of the world’s 50 born. In particular, the excessively large most competitive countries should not disparity between female and male life be considered the ultimate goal of the expectancies should be addressed; country’s development. It serves a higher - address the health targets of the The principal and more complex goal of ensuring broad- Millennium Declaration relating to national concept based opportunities for all people of reduced child and maternal mortality, should now be Kazakhstan in all spheres of life or, in other halting and reversing the spread of HIV/ the transition words, human development. AIDS and other diseases; to sustainable Current and future status of new - ensure that extracting companies development technologies in Kazakhstan and the Government join the Extractive Industries Transparency Initiative (EITI); Developing national capacity in science and technology is instrumental to achieving - achieve a number of targets related a high level of economic productivity to professional government and de- through the use of new technologies to centralization and continue anti- ensure the human development and corruption efforts; economic and social well-being of the - improve the quality of education nation. towards Soviet period standards, based The review of the current status of and on the needs of both the economy and trends in the development of science and human development; technology focuses on the key components of science and technology, including - develop fundamental and applied strengths and weaknesses of the scientific sciences. and research system. The following challenges are identified: Specifically, the chapter attempts In the area of human resources: the to show the relationship between com- ageing of highly qualified cadres (scientists petitiveness and the development of and engineers); deteriorating prestige of national human capital. The chapter’s the scientific profession; limited inflow of message is that, although an important young talent in science and technology step towards the long-term development National human development report - 2006

strategy Kazakhstan-2030, Kazakhstan’s a wide range of economic instruments of aim of becoming one of the world’s 50 scientific, technological and innovation most competitive countries should not policies that can be used to govern the be considered the ultimate goal of the processes of innovation at the micro and country’s development. It serves a higher macro levels. and more complex goal of ensuring broad- Kazakhstan should create an based opportunities for all people of environment conducive to technological Kazakhstan in all spheres of life or, in other development. Based on improved science words, human development. and technology and human, financial, administrative and legal resources, Ka- It is important Current and future status of new zakhstan should address a range of to create an technologies in Kazakhstan social and economic issues to expedite innovative activity and production of infrastructure Developing national capacity in science science-intensive and high-tech products and technology is instrumental to achieving facilitating human and services aiming to directly enhance a high level of economic productivity development, which the welfare of Kazakhstan’s people and through the use of new technologies to will ensure social meet their needs. receptiveness ensure the human development and economic and social well-being of the towards the Promoting an enabling environment nation. for new technologies in Kazakhstan introduction of The review of the current status of and technologies; equal trends in the development of science and The fourth chapter describes the access of a wide technology focuses on the key compo- environment required for the development community and nents of science and technology, including of new technologies. It looks at innovation all groups of the strengths and weaknesses of the scientific as a continuous non-linear process, population to social and research system. which embraces not only research and development but a wide range of actions and technological The following challenges are identified: such as training, design, financial marke- resources; a high In the area of human resources: the ageing of highly qualified cadres (scientists ting, etc. Innovative national development rate and flexibility and engineers); deteriorating prestige of is only possible through successful of production; the scientific profession; limited inflow of implementation of a range of actions. extensive use in all young talent in science and technology Using a systemic approach to the spheres of life and low qualifications of the cadre with environment for new technologies in technical education. Kazakhstan, the chapter studies each In the area of funding of research and component or sub-system of the national development (R&D): limited commitment of innovation system, such as science and business and private sectors to participate research, innovative business develop- in R&D programs and projects and lack of ment, technological infrastructure and correlation between R&D outcomes and financial institutions. The authors draw market needs and context. attention to the services that ensure In order to promote innovative business linkages in the innovation process and development recommendations are define the role and functions of the players provided to ensure links between science in the creation of new technologies. The and production. To this end, attention defined role of the players in the innovation should be paid to the innovative activity of process allows identification of gaps in the large and small enterprises, such as the rate innovation system and additional services of use of innovation and the responsiveness to be provided to innovative enterprises of businesses to innovation introduced that can speed up the development of by competitors, which can contribute to innovation systems and new technologies competitiveness of such businesses through in Kazakhstan. reduced production costs. Furthermore, the fourth chapter analyzes In addition, an important factor in the existing legal framework as the basis the introduction of new technologies for the development of new technologies is the infrastructure facilitating human in Kazakhstan. The authors conclude that development: ensuring social recepti- Kazakhstan’s laws pertaining to different veness towards the introduction of aspects of innovative activity, including technologies; equal access of a wide forms of small business organization, lacks community and all groups of the popu- integrity and should be improved. Not lation to social and technological resou- only should new laws be adopted but rces; a high rate and flexibility of produc- some incomplete documents should be tion; extensive use in all spheres of life. completed, existing instruments amended Also, of special importance for and conflicting provisions removed. technological development is review of Also, there are some legislative gaps international practices and comparative that indirectly affect technological analysis of the status of science and development and these should be technology in Kazakhstan and other addressed, particularly those related to countries. In international practice there is intellectual property. There is a direct New technologies for human development in Kazakhstan relationship between the legal protection production required for hydrorefining, etc. of intellectual property and new products. To address these, existing processes All of the above factors and mecha- should be enhanced and new production nisms are necessary to lay the foundation complexes capable of complete pro- for the development of innovative proces- cessing and refining should be built, while ses that will enable the creation and use of a mechanism to engage all companies new technologies for the benefit of socio- (private, government-owned and mixed) in economic development in Kazakhstan. the process should be developed, so as to interest them in increasing oil recovery and Kazakhstan’s technological capacity improved environmental management. This chapter does not attempt to review Energy-saving technologies and all technologies. The authors focus only on alternative energy sources. the following four technologies: traditional technologies for natural resource In order to ensure the required energy extraction and processing; energy-saving supply, energy resources and fossil fuel The effective technologies and alternative energy should be used and managed effectively. development sources; biotechnologies and social The development, introduction and of science and technologies. use of new technologies should enable The authors believe that the effective more effective energy consumption in technology is development of science and technology all economic sectors, while new, rene- based primarily on is based primarily on justified priorities and wable energy sources and effective justified priorities the subsequent concentration of scientific environmental management will enhance and the subsequent capacity and financial and material sustainable development. More effective concentration of resources on achieving such priorities. To this use of fuel and energy should translate into scientific capacity end, the Government’s support to research a means of environmental management and financial and should concentrate efforts on facilitating and pollution control. material resources the maintenance and development of On a wider scale, to put in place energy on achieving such ‘breakthrough’ innovative projects. saving measures and ensure an effective Let us look at the conclusions and national energy-saving policy, a plan of priorities recommendations for each group of action for organizational, institutional, technologies in more detail: legal, financial, scientific, technical and educational components of energy- Resource-extracting and processing saving policy should be developed. The technologies. plan should be based on awareness of Kazakhstan is a country with rich mineral available energy-saving techniques in resources1. At present, however, mining each economic sector, and selection of and the use of available technologies the most suitable and justified criteria for are not up to the mark, since most of the different categories of energy users and technologies for non-ferrous and less- prioritization. common metal production fail to comply Biotechnologies. with modern environmental standards, economy and efficiency and the complex Biotechnologies have potential use of mineral materials. benefits for human life. Biotechnological In this regard, in order to introduce development can be used in different new technologies for the effective mana- sectors, such as in agriculture to increase gement of the mining and smelting sector, productivity and develop and use new technologies should be used to reduce highly productive varieties of crops, damaging emissions, make processing and breeding of valuable genotypes of cattle, use of raw materials more comprehensive etc; in healthcare to produce important and complete, produce pure metals new medications, biotechnological blood and alloys, products and materials and specimens, genetically engineered drugs, set up flexible, environmentally friendly immunological medicines, biosensors and automated productions, etc. biochips, etc.; in the extracting industry to produce oil and purify environmental Petrochemical and chemical industries. objects from oil pollutants; in power Although rich in reserves, the domestic engineering to add to bioethanol gasoline petrochemical industry faces a number and as fuel (biodiesel) for diesel engines. of challenges, such as the export of However, biotechnology research processed products, although the majority should first consider ethical aspects, with of oil products are imported; incomplete careful research and experiments to processing of oil and gas resulting in huge identify potential risks and the need for waste and lower quality; lack of hydrogen well-equipped laboratories, etc.

1 “Kazakhstan’s industries”, 3 (30) 2005. National human development report - 2006

Social technologies. factors hindering the process of innova- tion. To remove these barriers, the authors Technological This section studies social technologies, suggest a unified approach, under which development their capacities and scope of use. Today the legal framework will be improved, should, primarily, social technologies offer the best solutions national science and technology policy impact on potential to a number of issues and challenges developed, infrastructure improved and productivity faced by each and every person both in public readiness ensured. and effective production and life. However, at this stage, Such a comprehensive set of management of although used in Kazakhstan, the impli- activities and recommendations should resources and build cations of social technologies have not be- be extensively supported by all players en reviewed or researched. In this regard, technological and in the technological process, namely the authors recommend a comprehensive social capacities in government, businesses, the scientific analysis of the capacities and implications community and the public, all of whom Kazakhstan of social technologies and potential risks. should realize the shared goal of achieving Technological development should, sustainable social and economic deve- primarily, impact on potential productivity lopment and ensuring a high quality of life and effective management of resources and empowerment of human capital. and build technological and social The National Human Development capacities in Kazakhstan. Report 2006 throws light on new, previously overlooked challenges related to New technologies for the benefit of technological development in Kazak- Kazakhstan’s people hstan. It is a review of the development and introduction of new technology Ideally, development of new through the prism of human development, technologies and an innovative process The proposed allowing analysis and drawing attention should aim to ensure sustainable econo- comprehensive set to current challenges, and calling for a mic development and meet national of activities and selective and informed approach to the needs, improve quality of life through recommendations use of technologies. new jobs, enhance the educational level, should be Technological development will only address production, environmental and extensively improve the welfare of Kazakhstani society social issues, provide production with supported by all if it is combined with a detailed review of modern equipment, improve the working all current and future developments and players in the environment for support personnel, technological activities, based on recommendations minimize environmental impacts, etc. and conclusions resulting from such a process, namely The underdevelopment of present-day review. Effective implementation of this government, science and technology infrastructure, will enable the creation of a competitive businesses, lack of financial support from government, system of innovation that will guarantee the scientific a deficient legal framework, and lack of both successful human development community and the public receptiveness to the introduction and a knowledge-based economy in public and use of new technologies are the main Kazakhstan.

Chapter 1. Technologies as a social and human development tool

CHAPTER 1. TECHNOLOGIES AS A SOCIAL AND HUMAN DEVELOPMENT TOOL

1.1. Technologies in human life defines all types of new technologies is What defines how well they can improve productivity Balanced and sustainable development all types of new and income, reduce poverty, promote implies an environment and prerequisites for technologies is employment and develop civil society. human development, which is measured how well they The value of new technologies lies solely not only by income levels but also factors can improve in the mechanisms and intensity of human such as the opportunity to live a long and implications and resulting effects on social productivity and healthy life, acquire knowledge, access structure and social relations as a whole3. incomes, reduce resources required for a decent life and Let us look at the types of new poverty, promote participate in society. In a wider sense, the technologies. By nature of application employment and term “human development” embraces all there can be product innovation oriented develop civil society aspects of personal development, ranging from health to economic and political towards production and use of new or liberties. improved production and technological Presently, human development is viewed innovation aimed at creation and use of as a process of expanding both human new or improved technologies. opportunities and capabilities. Therefore, In his book “Innovator’s Dilemma” this concept has itself been developing Clayton Christensen says that the majority as new elements of human development of new technologies are “compatible”, emerge, indicating increasing public i.e. they can improve the quality of existing loyalty. products within the scope of characteristics Society has come to understand important to the main users. Compatible that human development is an end to technologies can be fundamental and which economic growth, education, complex without affecting the core of medicine and a good environment are a product. In contrast to compatible the means. New technologies, in turn, technologies, “disruptive” technologies are a recognized tool for economic, bring only new ideas to the market. Disruptive educational, healthcare, environmental innovation is, for example, transistors versus and democratic development, as well as electronic tubes or personal computers overall human development. versus typewriters. Such innovation can In this regard, there is now a need potentially be a product, which is smaller, for a comprehensive evaluation of new simpler, cheaper and more user-friendly. technologies from the perspective of Depending on the field of development their implications for human capacity and introduction there are medical, infor- development. In addition, it is important mation and communication technologies, to identify an environment where new biotechnologies, nuclear technologies, na- technologies can become an effective tool notechnologies, social and educational for expanding human choices. However, technologies, etc. before the role of new technologies for Social technologies cover several fields social and economic development is of human activity and can be used in explored, the notion of new technologies medicine, education, governance, etc. should first be clearly defined. Social technologies are understood to be New technologies or innovations are technologies used in social relations, i.e. the result of innovative activity presented man-to-man rather than man-to-machine on the market as a new or improved or man-to-nature relations. product (product innovation) or a new or Today social technologies offer opti- improved technological process used in mum solutions to a number of issues any practice (process innovation)2 . The classic person may face in their productive definition was put forward by J. Schumpeter: and personal lives, at an individual “Innovation is commercialization of all new level, in interpersonal communication, combinations based on new materials and in governance, management and bu- components, new technological processes, siness4. For example, in medicine, social new markets or new organizational forms”. technologies can improve the efficiency There is a variety of other definitions. of doctor-patient communication; in The authors, however, believe that what education administration-student/faculty

2 http://www.tppsk.ru 3 М. Delyagin. Globalization– 6, Analytical club of the Information Analysis and Management School. Section “Social crisis, social changes, social revolutions”. Moscow - 2005. 4 www.soctech.narod.ru

15 New technologies for human development in Kazakhstan

Social technologies and faculty-student communication, while and important for human development offer optimum in public administration such technologies include information and communication solutions to a promote public participation in social life technologies, biotechnologies and nano- number of issues and enhance government-public com- technologies. munication. Information and communication tech- any person may face In particular, social management nologies (ICT) are one of the fast devel- in their productive technologies are used in almost all fields oping technologies. ICTs are an increas- and personal lives and affect communication between the ingly important development factor and objects and agents of management. New have a significant impact on the political, management technologies can make economic and social life of many count- work more effective through optimized ries. Although many people associate management schemes and techniques. such technologies primarily with mobile Another type of social technology, and more advanced technologies, a more known as civil technologies, engage accurate definition of ICTs embraces all volunteers and voluntary donations in technologies which process information civic activities. Most civil technologies are and enable communication. The scale of borrowed and have prototypes in political, social development implications of ICTs administrative, legal and business practices, becomes clearer when the definition of ICTs the only difference being that agents, includes both old and new technologies, owners or operators of such technologies ranging from newspapers, radio and are civil actors (non-profit organisations, television to video cameras, computers public initiative groups or public leaders) and cell phones. and the purpose is lobbying, or advocacy Information and communication tech- of public interests. nologies enable better participation in Another technology classification civic activities. ICTs are increasingly used criterion is relative effectiveness, depen- to meet the basic needs of young people ding on which technologies may be around the world, such as access to considered new or old. As noted, new education, employment opportunities and technologies are more effective and public participation in social life. efficient, can better meet customer The links between new mass media needs and have more impact on human and youth ensure young people’s activity development than old technologies. Old at a general level and affect its different technologies are less efficient and science types. New technologies help inform the intensive. New technologies are gradually public directly and facilitate immediate replacing old and inefficient ones. This communication. However, in many coun- ITC enable better results in growing productivity and more tries the Internet as a means of mass media participation in effective use of natural resources, reducing is the least controllable medium and can the energy intensiveness of products and be a powerful tool for radical propaganda civic activities environmental pollution, while exhaustible groups. natural resources are replaced by others If available, ICTs enable access to that facilitate comprehensive human better quality education. Many schools development. The communications sector is and vocational training colleges use ICTs an example of scientific and technological for part-time students and to train teachers progress replacing old technologies. in new teaching methods. ICTs can help Obviously, telegrams have become less update and distribute training courses popular, since most people prefer to use more effectively. ICTs can be utilized in e-mail - a new technology - for information education, depending on how well they are exchange. used, although there are standard methods Indisputably, old technologies are to identify cost-effective and country- inevitably replaced by new ones as specific solutions enabling better access new communications and services to education through ICTs. Technologies develop. Another example is that the old change classroom methods through use educational system was replaced by a of multi-media manuals, Internet-based new one known as credit technology. Two material and information for essays, etc., conflicting processes – globalization and which makes the learning process more competition – make it vital for post-Soviet interactive. states to replace traditional educational ICTs can be particularly effective in technologies with a new one, which is reaching rural communities with no access traditional for European countries. This to large libraries and other educational shows that traditional technologies do not resources. However, it is rural areas that have necessarily mean old technologies. more limited access to new information This report looks at both the positive technologies. Therefore, the rural education and negative effects of new technologies implications of new technologies are still on the development of human potential. unclear. Currently, even at the global level Examples of globally-recognized new there are significant disparities in access to technologies that are fast developing and use of many ICTs.

16 Chapter 1. Technologies as a social and human development tool

To reduce the ‘digital divide’ Kazakhstan chemical biology. Biotechnology has been Nanotechnologies has adopted the “Program for Digital Divide establishing itself over the last twenty years can lead to a new Reduction in the Republic of Kazakhstan and is now at a peak of development. global technological for 2007-2009” aiming to facilitate effective Now the increasing use of bio- revolution and use of the Internet on a routine basis by at technologies in different fields of medicine, least 20% of the population and promote pharmacology, veterinary science and change the human the social and economic importance of agriculture is becoming an integral part of environment information resources in Kazakhstan5. scientific and technological progress. Nanotechnologies are another pro- An important factor distinguishing mising type of technology that can be biotechnology from other fields of science potentially huge in such varied areas as and production is that it initially focuses Biotechnology pharmacy, water disinfection, information on present-day concerns such as food initially focuses and communication technologies, production, primarily proteins, and the production of durable and light materials, maintenance of natural energy balance on present-day etc. through a shift from non-renewable to concerns such as Nanotechnologies are used to make renewable resources and environmental food production, super microscopic elements out of the protection. primarily smallest parts of tissue. The term stems However, the lack of a legal framework proteins, and the from “nanometer” (a millionth of a meter). for biotechnologies and lack of basic maintenance of At the global level, research centers bioethics awareness can have an adverse mainly use nanotechnologies in three natural energy effect, which is human anti-development. balance through areas: production of electronic circuits, The growing threat of bio-terror and the a shift from non- including three-dimensional circuits, with developing production of dangerous active elements, the size of an average chemical and biological material make renewable to molecule; development and production of effective use of biotechnology research renewable resources nanomachines, i.e. nanosize mechanisms and development of utmost importance. and environmental and robots; direct manipulation of atoms Clearly, technologies significantly protection and molecules and making things from affect lifestyles, quality of life and human them. development. Recognizing this, many Nanotechnologies can lead to a countries have come to pursue scientific new global technological revolution and technological development policies. and change the human environment. Scientists say that the most recent At the same time, are their national contexts conducive to technological However, the lack nanotechnological achievements can be of a legal framework somewhat like solutions to cancer. A new development? How effective can such development by Sivida called BrachySil a policy be and what are the success for biotechnologies can deliver anti-cancer medicine to the factors? Answers to these questions vary and lack of basic target, i.e. cancer cells, whereas radio and from country to country depending on their bioethics awareness chemotherapy can have damaging side socio-economic, cultural and historical can have an adverse effects. Theoretically, nanotechnologies development. effect, which One negative implication of new can make people live eternally, because is human anti- technologies is the unequal access that nanomedicine can endlessly regenerate development dead cells. Nanotechnologies may cause developed and developing countries and an agricultural revolution and stabilize the privileged and disadvantaged groups of environmental situation. Nanotechnologies the population have to them. Local customs can be used for absolutely no-waste and traditions can enable or hinder access production. to new technologies, and these should Over the last five or six years dozens be taken into account when developing of countries have treated national a national policy for technological nanotechnology programmes as sup- development. reme national priorities. Recognizing this, Another issue is the adaptation of new A negative economically developed countries such technologies. Something may be unique as the US, the EU, Japan and China pay but if people cannot use it, it can become implication of new special attention to nanotechnological useless. If unused, new technologies may technologies is the research and have special nanotechno- be useless. Therefore, adaptation of new unequal access logy development programmes6. technologies in a society is important and that developed Biotechnologies have developed into should be considered in scientific and and developing the most important technology for human technological policy. countries and The effectiveness of new technologies development resulting from their use in privileged and sectors vital for human development. is determined by factors such as culture, Biotechnological trends in science and mentality, history, government support, disadvantaged production emerged as a result of the rapid staff capacity, etc. This points to the need groups of society progress of different elements of physical- for a selective approach to the introduction have to them

5 RK Governmental Decree #995 “On approval of Programme for Digital Divide Reduction in the Republic of Kazakhstan for 2007-2009” of 13 October 2006 6 S.Capitsa. Review of the Current Status of the Russian Science. Izvestia. May, 2004

17 New technologies for human development in Kazakhstan

Отсутствие and transfer of technologies based on both action and speech7. New technologies правовых основ issues around social adaptation and the are supposed to provide such choices использования different effects of technologies on human and promote social and economic биотехнологий, development. development on the whole and human development in particular. Let us look at незнание основ how new technologies affect the four биоэтики может 1.2. Potential human development main aspects of human development: привести к implications of new technologies income, health, education and public обратному participation. эффекту The last decades of the 20th century saw both rapid development of technological New technologies and economic growth – эффекту innovation and rapid introduction of new человеческого technologies in society. Such innovations National revenue is one of the most антиразвития can be seen in any city of the industrial important factors in determining human world, but particularly in newly industrial welfare. However, economists still focus countries. However, the extent to which more on factors of national economic they will impact the future is difficult to say, development. The most prominent eco- while the implications of technologies in nomists of the last two centuries tried to developing countries, accounting for two explain what is needed to promote national thirds of the world’s population, are most economic development. As the science difficult to predict. If a wave of technological developed, the following factors were innovation results in the second industrial considered: specialization and division revolution forecast by some scientists, of labor, natural resources, investment in developing countries should either be able physical capital, international assistance, to be in it or risk lagging behind. education, technological progress, as well The first UNDP Human Development as economic openness, macroeconomic Report released in 1990 said that more stability, public administration, legal frame- choices determine human development. work, lack of corruption, market orienta- Choice is understood to be a certain tion and many other factors. A review Technologies are a level of access to higher income, better of the impact of such factors shows that factor of national quality education and healthcare, a economic growth is a complex process economic growth good environment, as well as freedom of for which there is no magic recipe. A combination of factors is required for a country to succeed. Box 1.2.1. According to the Global Competi- tiveness Report, technologies are a factor Technologies for growth competitiveness in national economic growth, while one of the main lessons of neoclassical gro- The 2002 Global Economic Forum suggested a Growth wth theory is that long-term economic Competitiveness Index to measure national capacity for development is impossible without techno- economic growth. The index was developed and put forward logical progress8. by economic scientists Jeffrey Sachs and John McArthur as So, how does technology affect part of the Global Competitiveness Report for 2001-2002. national economic growth and The pillars of the Growth Competitiveness Index are efficiency? For example, information and the macroeconomic environment, public institutions and communication technologies help people technologies. For the core innovators, the weightings are as to collect, process, store, retrieve and pass follows: on information. Technologies can help Growth Competitiveness Index for core innovators = improve the situation for companies in 1/2 technology index + 1/4 public institutions index + 1/4 developing and developed countries, and macroeconomic environment index (1) may enable developing countries to be Core innovators are countries with more than 15 US utility more competitive in the global economy. patents registered per million population; non-core innovators Also, effective management technologies are all other countries, for which the Growth Competitiveness can make produce more competitive and Index is based on a different formula: expand market presence. Growth Competitiveness Index for non-core innovators In production, new technologies = 1/3 technology index + 1/3 public institutions index +1/3 increase productivity, allowing companies macroeconomic environment index (2) to increase remuneration without raising prices, thus facilitating real non-inflationary Source: The Growth Competitiveness Index: Analyzing Key increases in income. For example, a Underpinnings of Sustained Economic Growth. Jennifer Blanke, recent study undertaken by the US Ministry Fiona Paua, Хavier Sala-i-Martin. Report to the World Economic of Trade shows that investment in new Forum technologies by US companies over recent years has had an extensive and long-

7 Human Development Report 1990. UNDP. 8 Blanke J., Paua F., Sala-I-Martin X. The Growth Competitiveness Index: Analyzing Key Underpinnings of Sustained Economic Growth // World Economic Forum. – 2004.

18 Chapter 1. Technologies as a social and human development tool term effect on national production. This suggests that effective use of technologies Box 1.2.2. can help organizations to use available resources more effectively and be more Economic risks of new technologies competitive. However, technologies can have ne- The introduction of new technologies in the production gative effects on economic development. and overall development of new technologies can also One such effect is loss of economic have economic implications. autonomy. For a developing country It takes at least three years and continuing funding specializing in production of a certain type to research a new scientific product. If the owner fails to of products, technological innovation of continue research, the invested capital will be wasted. other countries can lead to loss of economic Also, risks can be related to the outcomes of the research. independence. Another risk is that science-intensive production is often Another possible negative effect is highly competitive. All these factors can eventually lead to dependence on supply of labor resources, financial constraints or bankruptcy of the owner. fuel, information and equipment. A recent Developing countries, including Kazakhstan, are affected embargo on Haiti and the isolation of Cuba by other factors including restricted markets, limited supply are examples of difficult situations resulting of raw materials, lack of qualified personnel and under- from a deficit of supply. developed infrastructure. The excessive use of resources directly Technologies always involve risks, while the implications related to economic development leads to of such risks may vary. Some risks can be minor, i.e. can be environmental problems such as pollution averted with little cost and effort. Other risks are more difficult with growing waste. Ruthless use of natural to compensate for but, in any case, allow acceptable profits resources is a tragedy for developing to be made. Finally, risks can be so significant as to cause the countries. collapse of an enterprise. For example, the risk of toxic waste However, the relationship between resulted in the closure of some plants in the United States new technologies and economic growth after the chemical disaster in Bhopal, India. is not one-way: economic prosperity also determines the status of science and Source: United Nations Industrial Development Organization technologies, just as new technologies (UNIDO) determine economic progress.

New technologies and health new medicines for AIDS9 , malaria and Loss of economic tuberculosis, the research for which has autonomy and Technologies play a significant role in only just begun, completely contradicts the dependence on healthcare and medicine. Developing concept of human development. countries are increasingly using new The special status of the health sector external supplies technologies in the provision of medical should be considered when looking at can have services, particularly to those living the health implications of technologies. negative effects in remote areas with lack of medical This status is determined by the fact that on economic specialists. Examples of the use of new many social development products have development technologies include long-distance a unique impact on human and social patient/doctor consultations, diagnosis health. These include economic products, and even treatment; collection of data the level and even distribution of which for research and diagnosis; on-line determines the status of the health sector. cooperation between physicians and Economic products include clean water medical researchers in different parts of the and air, a safe working environment, world; more timely and effective national transport and communication networks and institutional responses to epidemics, as that provide access to medical centers well as overall improvement in the quality of and health centers. medical care. New technologies are also Another determinant of the status of used to deliver health services in remote the health sector is education. Effective rural areas where more traditional medical education provides for staff capacity, services are lacking. not only to handle medical technologies In addition, advanced technologies but also protect and improve human play an important role in responses to health. Education contributes to growing HIV/AIDS, tuberculosis, malaria and other numbers of scientists engaged in medical diseases. New technologies open new research, which help ensure a high level Advanced horizons for physicians and patients and of healthcare. Therefore, healthcare, can shape new healthcare. At the same the economic situation, education and technologies can time, there are significant barriers to the infrastructure are all indirectly linked. play an important use of new technologies. For example, However, healthcare is not a simple role in responses a WTO-proposed monopoly of seven derivative of the development of other to HIV/AIDS, pharmaceutical companies in vital spheres in a society but can itself affect them tuberculosis, malaria and other diseases

9 http://www.inopressa.ru

19 New technologies for human development in Kazakhstan

and the role of educators and educator- learner communication and makes learners more independent. Also, educators have an opportunity to develop professionally and work in cooperation with international counterparts or attend on-line workshops using video conferencing. In addition, educators can experience the advantages of new information technologies by offering learners more complex assignments and encouraging their academic interest and activity. This helps to diversify academic programs versus more traditional forms of learning based on repetition and rote- learning. However, it should be borne in mind that rural areas have limited access to informa- tion technologies due to underdeveloped infrastructure and expensive Internet serv- ices, which is a significant barrier to the use of new technologies and other accompa- nying benefits. By ensuring every school has access to new technologies, digital significantly. Various causes of poor health standards can be widely promoted and can limit human choices of occupation, social inequality mitigated. Tools offered place of residence, socialization and other through modern information and commu- elements integral to the quality of life. It is nication technologies contribute to more unacceptable for poor health to be the interactive learning, which helps learners result of lack of knowledge, neglect or to be confident about their future and untimely access to existing methods of use their intellectual capacity for life-long treatment and prevention. learning. New technologies Extensive and close links between Also, ICTs are an important tool to healthcare and other aspects of human open doors to promote informal education, which life suggest that not only technologies but means “any learning programs that can quality education also the economic situation, environment, and training. be taught outside the formal education education and national staff capacity can system, either in a family or social context, However limited improve healthcare. in groups or individually, using mass access to ICT poses media, long-distance or through informal significant barriers New technologies and education communication”10. In other words, it means to some groups of Globalization has shaped a new knowledge and skills learned through population concept of economy and economic periodicals or the Internet. development. The present notion of an New social technologies used in economy implies “information economy” education seek to enhance educational levels through effective communication based on technological development between such social groups as school that enables rapid high-quality information administration, educators and learners. The exchange between all spheres of life and context for the adoption of a technology all members of society. A new economy should be carefully reviewed to maximize and globalization blur national boundaries benefits, as was the case with the adoption of competitiveness and make national of the western credit-based educational intellectual and educational capacity a system. key resource for economic growth and Therefore, a strategic course for the improved welfare. Therefore, technologies, development of education and science science and innovation form a mechanism lies in technologies employed in research for the development of human resources and learning. Two other important and the building of intellectual and strategic courses are the building of educational capacity. educational capacity to use information New technologies open doors to higher and communication technologies and education and training for students and the development of new academic general population. In particular, wide ac- programs. The first course involves training cess to information technologies enables for educators, while the second requires communication between learners and ed- serious efforts to develop educational ucators of different regions and countries. policy. Both should consider pedagogic This increasingly impacts teaching methods and psychological aspects.

10 National Human Development Report 2004. UNDP Kazakhstan.

20 Chapter 1. Technologies as a social and human development tool

Box 1.2.3.

New educational technologies and national security

In the context of globalization, the introduction of new educational technologies is particularly important when an improved education system is not only a question of domestic policy but also relates to overall national capacity and, consequently, national security. In 1983 the US Government developed a paper “A Nation At Risk” that drew attention to the need to improve the US education system to bring it up to the requirements of the time. In 1996 Richard Riehle, the US Minister of Education, prepared the first national plan for education technologies entitled “Getting American students ready for the 21st century: ensuring technological literacy”. The program provided for computer supply, Internet access, professional training, technical assistance and improved financing of education. This resulted in increased investment in educational technologies on the part of federal government, states, local authorities and individuals, moving the nation forward significantly towards goals related to educational technologies set in the 1996 plan11.

Access to and quality of higher educa- national human capital which, once es- tion are important topics for public debate tablished at a high level, contribute directly globally, because tertiary enrolment and to enhanced competitiveness in the global quality of higher education determine na- economy and are a prerequisite for the tional intellectual capacity, which is, in turn, country joining the group of developed key to successful technological develop- countries. ment. However, the links between new tech- New technologies and the nologies and education are not one-way. environment The intellectual capacity of a society, in Technologies also contribute to particular human capital, is undoubtedly a environmental management. Modern key factor in technological development. technologies are used for environmental Human capital is considered the key monitoring, data collection and review, factor accounting for all sub-systems of in- follow-up responses to environmental novative development (both economic threats and identification of covert sources and social development), while investment of pollution. Also, the government uses in human capital is instrumental to suc- technologies to assess existing threats and cessful development processes. However, develop agricultural and industrial policies, it should be remembered that labor only ensuring environmental friendliness12. becomes human capital in an adequate Many environmental problems in de- institutional and macroeconomic setting. veloping countries are a result of manage- Globally, the focus is on innovative ment’s low awareness of risks and the low products related to the ‘informatization’ of capacity of responsible authorities in as- education, the development and promo- sessing environmental threats in advance. tion of online educational resources, new New technologies enable researchers and educational technologies, communica- environmental authorities in developing tion networks, and learning and develop- countries to use global databases and in- ment-stimulating products. New technolo- formation resources to ensure accurate gies in education are a key to competitive and more informed decisions are made.

Box 1.2.4.

Intellectual capacity and new technologies

New technologies should facilitate knowledge and know-how. In a knowledge-based society education and learning should be continuous. Establishing a system of life-long dialogue education and learning, removing barriers between learning, research and production, promoting creative talents and using all benefits of an information-based society are the integral elements of new technologies and innovation.

Source: Green Paper on Innovation, European Commission

11 The US Government strategy to improve the education system and introduce modern educational technologies as a tool to ensure the US national security (retrospective analysis). M.E. Shaikhutdinov, L.R. Skakovskiy. Kazakhstan- Russian University. 12 Rogozhina N.G Environmental crisis in post-industrial world // Post-industrial world: Centre, provinces, Russia. Vol. 1. - М.: MONF, 1999.

21 New technologies for human development in Kazakhstan

New technologies are effective when New technologies for the setting up environmentally friendly pro- development of civil society duction of goods and services within the respective legal frameworks. However, Perhaps the most striking examples of businesses often avoid using new tech- using the benefits of new technologies to nologies for such purposes because of accelerate social and economic devel- related costs and fear of increasing pro- opment have been projects aimed at en- duction costs and shrinking market share. hanced social inclusion and accord, i.e. projects enabling better participation of Environmental A major source of environmental pollu- tion is traditional non-renewable fossil fuels the most disadvantaged groups in society. management is a such as oil and gas. Replacing these fuels Obviously, many of the challenges that dis- priority area for the with alternative renewable energy sources advantaged groups commonly face result introduction of new resources would be a substantial part of the at least partly from limited access to knowl- technologies solution to pollution and other social de- edge and information. New technologies velopment concerns. In this context, new can help tackle this problem by offering technologies can play a major role in the simplified and less costly data collection development of alternative energy sourc- and review as well as raising awareness es such as wind, sun, biomass, hydrogen, among groups with the most limited access geothermal energy and other renewable to information. methods of energy generation. To promote public participation in social However, new technologies that con- life new civil technologies are needed for the following four purposes: a) technologies Using ICT tribute to the collapse of the ecosystem and cause different environmental disas- facilitating dialogue with government; b) to form an e- technologies facilitating dialogue with the government can ters. Therefore, environmental management public; c) technologies facilitating dialogue play an important is a priority area for the introduction with business; d) technologies facilitating “democratization” of new technologies. The Sustainable intra-sectoral dialogue. role by providing Development Concept13 indicates that The Internet also offers individuals and a new and to ensure balanced economic, social, communities in developing countries almost endless opportunities for knowledge powerful tool for environmental and political development Kazakhstan’s environmental sustainability and information exchange. participation Just like other organizations, government in governance index should grow to 25%, while the effective resource management index authorities increasingly use the benefits and promoting should increase to 53% by 2024. This can of new technologies to streamline and public-government only be achieved through the introduction increase the efficiency of work. For dialogue and use of new technologies. example, many authorities in developed and developing countries are working to make electronic versions of hard copies of Box 1.2.5. documents and records and go as far as to “connect” databases of such documents to make them available to different Environmental problems in Kazakhstan’s regions organizations. Such efforts improve the efficiency of government authorities and Currently, a depressing environmental situation combined ease public access to public documents, with significantly deteriorating health status of the population information and services. is registered in almost all regions of Kazakhstan. The most Using new information and com-muni- affected areas are: the Aral region; areas affected by nuclear cation technologies to form an e-govern- testing at the Semipalatinsk nuclear test site; East Kazakhstan ment can play an important “democratiza- oblast with its peculiar man-made biogeochemical zone with tion” role by providing a new and powerful high concentration of heavy metals resulting from continued tool for participation in governance and heavy metal pollution; the Pavlodar-Ekibastuz industrial and promoting public-government dialogue. fuel and energy complex, with ash from power plants using low However, this can sometimes involve im- grade high ash content Ekibastuz coal being a major source portant aspects of civil , particularly when of pollution; southern regions; South Kazakhstan and Zhambyl personal information is disclosed without oblasts affected by emissions from local phosphor-producing the consent of the individual . Neverthe- plans and the Shymkent lead plant. Zhambyl oblast has a man- less, new information and communication technologies can make governance proc- made fluoric zone resulting from land subsidence of fluoride esses more open and transparent. Moreo- compounds emitted by phosphor-producing factories, while ver, new technologies can help perform since 1985 a number of phlorosis cases have been registered important oversight functions, for example in cattle. by enhancing public understanding of how tax money is spent on government goods Source: F.B.Bismildin, ‘Environment and health in Kazakhstan’ and services.

13 Concept of Transition to Sustainable Development for 2007-2024, RK Presidential Decree #216 of 14 November 2006, Astana.

22 Chapter 1. Technologies as a social and human development tool

Box 1.2.6.

Digital library and enhanced civic participation

In cooperation with the RK Human Rights Commission under the President and with support of UN Volunteers, UNDP and UNESCO have developed a multi-lingual digital library of human rights violations reported to the Commission. Through legislative acts and legal advice on frequently asked questions, the library demonstrates how to protect rights using laws. The National Academic Library with a network of rural and district branches in all 16 oblasts of Kazakhstan hosts the digital library, which can be accessed on the Internet and through verbal consultations with librarians. The library targets the most vulnerable groups of the population, and initial results came quickly. The oblast libraries requested that the content of the digital library be enhanced. Thousands of law students had access to an effective tool to study sources, texts and structures of legal documents pertaining to human rights. The digital library will be a tool for the public to be engaged in the development of a National Human Rights Plan. Raising public awareness of the law drafting process and incorporation into the e-government from the time of drafting to ratification will help build public trust in the government and make the library a powerful mechanism for the support and protection of rights. In this regard, information and communication technologies (ICTs) will be integral to the every-day life of all people by contributing to all areas of development.

Source: United Nations Development Program

Therefore, new technologies can play Figure 1.3.1. Two-way relationship “human development = an important role in enhancing human development of new technologies”. capital. However, there should be a suitable environment for new technologies to become an effective human development tool. Such an environment will be studied later. 1.3. Technologies as a human development tool in Kazakhstan This report treats technologies as a human development tool. At the same time, it has been noted that human development can be regarded as a factor in the development of new technologies. 1. provide creative incentives and new Potential negative The diagram below (see Figure 1.3.1.) shows forms of partnerships. Cooperation effects and barriers the linkages between factors in this system. between academic establishments, to adaptation research institutions and the private The diagram shows that technologies suggest the need are factors of economic growth, social sector should be encouraged through tax exemptions, subsidies, bonuses, for a selective development, environment and public approach to the participation. The ultimate goal of the use grants, etc. development, of new technologies should be human 2. set up trust funds to finance research choice and use of development. This relationship is shown and development. Potential sources two-way, because human development, of funding of science and technology technologies in turn, gives birth to new knowledge and may include official assistance to de- new technologies. veloping countries, a re-distributive bud- However, a review of new technologies get for technological development, as a human development tool suggests write-off of the national foreign debt in the need for a selective approach to exchange for funding of technological the development, choice and use of development, private funds, and technologies. There should be criteria for industry. the choice and use of new technologies in 3. introduce differential pricing to order to promote increased income levels, help promote goods produced using National policy improved literacy and life expectancy and important technologies and sale at determines whether other human development components. different prices to different countries. new technologies In addition, national policy determines whether new technologies can be a 4. ensure commitment to laws rela- can become a human development tool. Such policies ted to the protection of intellectual human development should aim to14 : property and the TRIPS Agreement tool

14 Based on recommendations of the Human Development Report 2001. UNDP.

23 New technologies for human development in Kazakhstan

(Agreement on Trade-Related Aspects The TAI divides countries into four groups: of Intellectual Property Rights, including leaders with national TAI over 0.5, potential trade of forged goods). leaders with national TAI from 0.35 to 0.49, This will help technologies to become dynamic implementers with national TAI an instrument for meeting human needs. between 0.20 and 0.34 and marginal with In order to achieve this, in addition to national TAI below 0.20. For example, in market mechanisms, the government 2003 Azerbaijan’s TAI equaled 0.420, in the should support the development and group of “potential leaders”. The group promotion of new technologies, since the of “leaders” includes 19 of the most de- disadvantaged and low-income groups veloped countries. The Report notes that cannot approach the private sector to in Azerbaijan there are 2,735 people per invest in the development and introduction million engaged in new technologies. Ac- of affordable products. cording to the TAI, Azerbaijan is ahead of The Human Development Report 2001 Central and Eastern Europe and the CIS. suggested a Technological Achievement Kazakhstan’s TAI has, unfortunately, never Index (TAI) as a criterion to assess been calculated. As the absolute leader in technologies’ coverage of all spheres of technological achievement, Finland leads life. The TAI includes such components as: the world in development and use of new 1) development of technologies (mea- technologies. sured by patents per capita and fees National technological achievement paid by other countries); is, however, much more complex than the TAI or any other index can measure. 2) spread of new inventions, in parti- cular, the Internet, as well as the share *** of high and medium level technologies In conclusion, it is evident that new in exports; technologies promote human develop- ment. At the same time, human develop- 3) spread of existing inventions, mea- ment contributes to the generation of new sured by telephone coverage and knowledge and technologies. However, energy consumption per capita; because of potentially negative effects 4) skills of the population, measured by of new technologies and barriers to effec- years in school and the proportion of tive adaptation of such technologies, the tertiary students engaged in natural, choice and use of technologies should be mathematical and applied science. selective.

24 Chapter 2. Human development as Kazakhstan,s strategic priority

CHAPTER 2. HUMAN DEVELOPMENT AS KAZAKHSTAN’S STRATEGIC PRIORITY

2.1 Kazakhstan-2030: new human Table 2.1.1.1. Kazakhstan’s Human Development Index development challenges over 1990-2005

2.1.1 Human development through the 1990 1995 2005 1995-1990 2005-1995 prism of Kazakhstan-2030 Human development trends in Life expectancy (LE) at birth, 68,1 63,5 65,9 -4,6 +2,4 Kazakhstan and the CIS 1990-2006: rapid years 1 drop and slow rise Literacy rate, %11 97,7 98,7 99,5 +1,0 +0,8 According to UNDP’s Global Human De- velopment Report, Kazakhstan and other Enrolment ratio, %1 80,0 73,0 85,0 +7,0 +12,0 CIS countries have gone through two phas- es of human development. The first phase GDP per capita, USD at 6283 4508 8084 -1776 +3576 2 (1990-1995) was characterized by dramatic PPP declines in the main human development indicators, sending Kazakhstan down from Life expectancy index 2 0,718 0,642 0,682 -0,077 +0,040 54th to 93rd in the world HDI ranking. During the second phase (1996-2004) the human Education index 2 0,918 0,901 0,947 -0,017 +0,046 development indicators slowly recovered, raising Kazakhstan to 79th in the world HDI GDP index 2 0,691 0,636 0,733 -0,055 +0,097 rank. This, however, is still lower than its 1990 position. A similar trend can also be ob- HDI 2 0,776 0,726 0,787 -0,050 +0,061 served for other CIS countries (see also the dynamics of HDI components and GDI in Source: Annex 2, Table 5). 1 data provided by the RK Statistics Agency; The trends in absolute HDI figures provid- 2 calculated by the author. ed in Global Human Development Reports cannot be compared because calcula- authors believe that Kazakhstan should tion methodologies have been changing. Demographic factor For the purpose of the National Human De- work to become a country with a high level was instrumental velopment Report 2006, the HDI indicators of human development. To achieve this, in the decrease of for Kazakhstan have been recalculated us- Kazakhstan should specify a set of goals to Kazakhstan’s HDI ing the methodology described in the most ensure a significant increase in all human over 1990-1995, and recent Global Human Development Report development components, including life was insufficiently (see table 2.1.1.1.). expectancy, school enrolment and GDP powerful to This suggests that life expectancy at per capita (see also Annex 2, Tables 7-9, 11). determine a rise in birth, which is a demographic factor, was the HDI in 1996- instrumental in the decrease of Kazakh- Human development and the Strategy stan’s HDI over the initial phase. However, “Kazakhstan-2030”: a long-term program 2004 it was insufficiently powerful to determine for sustainable human development a rise in the HDI over the second phase. Development of human potential stands Standing at 63.4 years, as the Human De- high on Kazakhstan’s agenda. New ground velopment Report 2006 reports, life expec- was broken in 1997 in recognition of the hu- tancy in Kazakhstan is still much lower than man development concept in Kazakhstan. in countries with high HDIs (78 years) and The first two national Human Development most transitional economies (68.2 years). In addition, of note is the great gender dispar- Reports for 1995 and 1996 were a powerful ity in life expectancy in Kazakhstan, totaling spur to the use of the concept as a tool for 11.5 years in 200515 (see also Annex 2, Tables social and economic analysis, resulting in 3 and 4). the adoption of the concept as an underly- Therefore, a decline in human de- ing strategy for a number of national docu- There is a great ments, of which the most important is the velopment at the initial stage of trans- gender disparity in long-term national development strategy ition has resulted in Kazakhstan being in life expectancy in a ‘catch-up’ position subsequently. The “Kazakhstan-2030”. Kazakhstan

15 Demographic Yearbook of Kazakhstan. 2006. Statistical digest / Edited by B. Sultanov. – Almaty, 2006. – 448p. – P.31.

25 New technologies for human development in Kazakhstan

26 Chapter 2. Human development as Kazakhstan,s strategic priority

27 New technologies for human development in Kazakhstan

“Kazakhstan-2030” It is not coincidental that the Strategy is of external and internal social and introduces on a titled “Prosperity, Safety and Welfare of All political security, achieving increased life Kazakhstanis”. It is an attempt to introduce expectancy, which is a major weakness national level a on a national level a new paradigm for in Kazakhstan’s human development, new paradigm for social and economic development, the appears to remain hindered. Thus, over social and economic highest value of which is people. 1987-1995, i.e. 8 years, life expectancy development, the The Strategy identifies the following fell by 7 years from 70.5 to 63.5 years. A highest value of long-term priorities: decade later it only rose by 2.3 years, to which is people 1. National security. 65.8 years. Standing at 65.5 years in 1999, it has remained almost unchanged over the 2. Political stability and social mobil- last seven years. In this context, ensuring ization. an increase in life expectancy should be a 3. Economic development based on an priority human development target. open market economy with high levels The Strategic Development Plan of of foreign investment and domestic Kazakhstan up to 2010 provides for an savings. increase in the population to at least 16 million, with a rise in male and female 4. Health, education and well-being of life expectancies by four and two years Kazakhstan’s people. respectively. The first target can be achieved through an increased birth rate 5. Effective use of energy resources. and net in-migration, while the second 6. Modern infrastructure development. is hampered by a lack of concrete implementation mechanisms. 7. Professional government. Political stability and social mobilization. This shows that the Strategy’s priorities This priority focuses on ensuring social stabil- center on “health, education and well- ity and mobilization. The society is divided being of Kazakhstan’s people”, which into different groups sharing political beliefs are the basic components of human and religious, ethnic and class interests. The development. However, each priority task is to promote national solidarity and contributes to the comprehensive national capacity by encouraging various development of human potential. forms of dialogue and reinforcing interper- National security. National security and sonal links and relations. independence are essential to the sustain- The human development requirements able development of any country. As part are equal rights, freedoms and opportuni- of this priority, special emphasis is placed ties for all, irrespective of ethnic, cultural, on sound demographic and migration religious and class origin and ideological policies. Kazakhstan is working to prevent beliefs. a “demographic crossover” when popu- The achievement of the second long- lation shrinks ‘naturally’ (deaths exceed term priority of the Strategy 2030 has re- births) rather than through (net) external sulted in equality of all religions and inter- migration. confessional accord in Kazakhstan. With Implementation of basic national respect to promotion of Islamic traditions security components, namely external and other world and traditional religions, and internal security, underlies human Kazakhstan is building a secular govern- development. At the same time, some ment as the Constitution specifies. Also, of these have a direct impact on human Kazakhstan works to preserve and develop development and the HDI. For example, the centuries-old customs, language and development of rich natural resources culture of the Kazakhs and ensure ethnic leads to growing per capita GDP and, as and cultural accord and advancement of a result, a growing HDI. Demographically, the Kazakh nation. In this area, the Govern- it is important to ensure a reduction in the ment has cooperated effectively with the death rate and a resulting increase in life Assembly of the Peoples of Kazakhstan for expectancy, which will affect national HDI, more than 10 years. Demographically, which is an integral human development Economic development based on an it is important to indicator (see Annex 2, Table 10). open market economy with high levels of ensure a reduction Adopted in 1999, the National Security foreign investment and domestic savings. in the death rate Strategy for 1999-2005 was an important Although not explicit, human development and a resulting strategic document in relation to the first is part of this priority, which contributes to priority of the Strategy 2030. It identifies increase in life per capita GDP, which is an HDI compo- the resolution of pressing social issues as a nent. Therefore, this goal will remain a prior- expectancy, which tool to ensure social and political security. ity throughout the Strategy implementation will affect national The National Security Strategy gave birth period. HDI to Poverty and Unemployment Alleviation Up to 2010, emphasis will be placed Program for 2000-2002 and the Poverty on labor intensive sectors, such as Reduction Program for 2003-2005. agriculture, timber industry, light and food Of note is the fact that against a industry, tourism, residential building and background of the achieved first target infrastructure provision, the development of

28 Chapter 2. Human development as Kazakhstan,s strategic priority which will help address structural economic which increased nationally from 65.8 cases Economic issues, as well as tackle unemployment and per 100,000 people in 1990 to 147.2 cases in diversification poverty. 2005. Other disease incidence rates, such and mitigation of Economic diversification, mitigation as STIs, as well as alcohol and drug abuse, regional disparities of regional disparities and improved eco- have also been rising. nomic performance through better output Effective use of energy resources. This are important and reduced resource input, including en- priority is linked to sustainable human from the human ergy consumption, are important from the development, where not only the current development human development perspective. This will but also the future generations should perspective increase GDP per capita, provided all re- have access to human development sources are used effectively. opportunities. In this regard, the strategy Health, education and well-being of implies effective use of future income Kazakhstan’s people. This priority has direct generated through the country’s rich human development implications. It aims energy resources. to ensure that the population live healthy Kazakhstan’s economy and policy over lives in a healthy environment. the next 50-80 years will still be determined To accomplish this, the Government has by the oil and gas sector. According been working to improve living standards to the State Program of development and quality of life through modern high- of Kazakhstan’s sector of the Caspian quality healthcare, environmental ma- Sea signed on 16 May 2003, by 2015 nagement, access to clean water, an Kazakhstan’s Caspian oil fields will have an improved epidemiological situation, annual output of at least 100 million tons as well as increased, full and timely of oil, which is two times more than the payments, improved quality of education, national output in 2004. Such output will be employment schemes and targeted so- maintained over the next 25-30 years, while cial assistance. output, and export, of accompanying gas It should be noted that to achieve this for domestic needs will increase up to 63 priority Kazakhstan should achieve four billion m3 by 2015. quite ambitious targets identified in the To ensure proper oversight of these Millennium Declaration adopted by the strategic resources, the extracting UN General Assembly in 2000 in New York, companies and the Government will join which are: the Extractive Industries Transparency 1) between 1990 and 2015 reduce by Initiative (EITI). To ensure effective use of oil two thirds the under-five mortality rate; and gas revenues the National Fund should 2) between 1990 and 2015 reduce ma- be replenished and tapped into. This will ternal mortality by three quarters; ensure sustainable human development Kazakhstan should for future generations. achieve four 3) by 2015 halt and reverse the spread Modern infrastructure development. To of HIV & AIDS; quite ambitious attain this priority Kazakhstan should build targets in health a globally competitive national transport 4) by 2015 halt and reverse the spread of area identified in tuberculosis and other major diseases. and communications complex and pro- mote trade flows via its territory. The strate- the Millennium Despite the Government’s efforts and Declaration growing healthcare expenditure, these gy has a human development implication targets relating to MDGs 4, 5 and 6 are not with regard to free movement, with better on course to be unattained in Kazakhstan. services and potential increases in reve- Difficulties in attaining the first target nues from automobile production, tourism, have been caused by an insufficient services, road and capital construction. downward trend in infant mortality. So far, In attaining the priority ‘Modern infra- the infant mortality rate has fallen two-fold structure development’ Kazakhstan has a from 26.4 per 1,000 live births in 1990 to 15.15 number of accomplishments: the key port in 2005, while the 1-4 year-old death rate of Aktau was reconstructed; in Semipala- has fallen by less than two times, from 2.0 to tinsk a bridge was built over the Irtysh River; 1.1 per thousand live births. the Aksu-Konechnaya railway line was built, Attainment of the second target does while the Druzhba-Aktogai line and Druzh- not seem feasible either, since maternal ba station were reconstructed. mortality has fallen by only around one Efforts are being made to build a quarter, from 55 per 100,000 live births in new transport corridor. The Japanese 1990 to 40.5 in 2005. Government is sponsoring a Special The situation regarding the third target Assistance Program to rehabilitate transit looks more disturbing. Registered HIV infec- highways in Western Kazakhstan. tion cases grew from 10 in 1998 to 964 in In communications, an important 2005. Although these stabilized somewhat accomplishment is the introduction of the 2002-2004, the figure then grew by 38% in GSM cell connection systems. Fiber-optic 2005. communication lines have been built and Achievement of the fourth target is satellite networks introduced to install being hampered by growing TB rates, telephones in rural and remote areas.

29 New technologies for human development in Kazakhstan

Modern Modern infrastructure should be further issues identified and new programs to be infrastructure developed in remote areas and the quality developed. should be further of services improved. This will improve 2.1.2 New human development developed in remote the quality of life for both the people of Kazakhstan and overseas tourists. dimensions dictated by a changed areas and the Professional government. To attain this development context in Kazakhstan quality of services priority Kazakhstan should target an effec- Since 1998 all national programs have improved tive civil service and government that are been aligned with the Strategy “Kazakhstan- optimal for a market economy: the Gov- 2030”. In addition, as a member of the world ernment should be capable of achieving community Kazakhstan has committed its priorities. A professional government itself to the goals identified in the Millennium should guard national interests and pro- mote human development based on stra- Declaration adopted by the UN General tegic plans. Assembly in 2000, the Agenda-21 goals As part of the priority “Professional identified at the 1992 Rio Earth Summit government”, short, medium and long- and the goals resulting from the World term planning concepts have been Sustainable Development Summit held in introduced. Some structural changes were Johannesburg in 2002. made to government and the number of On the global arena, since 1998 government agencies and government Kazakhstan has been an active member staff reduced. To improve decision-making of the UN Sustainable Development a standard methodology of performance Commission, Environment for Europe and review for the government sector was Environment and Sustainable Development developed as part of civil service reform. for Asia initiatives, while in 2003 Kazakhstan The concept of decentralization of gov- joined the regional Eurasian network of ernment responsibilities was developed to the World Council of Entrepreneurs for promote optimal division of responsibilities Sustainable Development. and authority of central and regional gov- At the regional level, Kazakhstan is ernments. This will ensure more effective part of the Regional Environmental Action communication and performance of gov- Plan, is engaged in the elaboration of the ernment authorities to achieve social and Framework Convention on Environment public goals. for Sustainable Development in Central A number of A newly introduced model of civil Asia and supports the development of the targets within service divides civil servants into political Central Asian Sustainable Development the “Professional and administrative categories, makes Strategy (sub-regional Agenda-21). Government” mandatory a competition-based rec- At the national level, the National ruitment process for the administrative Development Strategy 2030 has given birth priority are yet to be civil service and improves social and legal accomplished to the Strategy of Industrial and Innovative protection of administrative civil servants Development to 2015, the Concept of and staffing procedures. Environmental Security of Kazakhstan to A number of targets within this priority 2015, the Gender Equality Strategy for are yet to be accomplished. For example, 2006-2016, the Sustainable Development decentralization of power and delegation Council of Kazakhstan, the Kazyna of authority to lower levels are yet to Sustainable Development Fund and the be completed and local governance Eurasian Development Bank. promoted. Regional competition should The authors believe that the principal be reinforced based on the principle of national concept should now be the concentration of productive forces where The principal the best resources are and the regions transition to sustainable development, which is an objective requirement that can national concept should have more budgetary authority. Anti-corruption efforts should be further realize the long-held dreams of the Kazakh should now be people in terms of national welfare, nature, the transition intensified and avoid personal and official influence - this will further facilitate human culture and each Kazakhstani’s health and to sustainable development. well-being. development, which Therefore, the Long-Term National Kazakhstan’s huge national resources, is an objective Development Strategy “Kazakhstan-2030” diverse natural conditions and unique requirement that is a programmatic document aimed at qualities of its people such as persistence, can realize the long- sustainable human development. In order talent and tolerance, make it possible for held dreams of the to achieve each of the long-term priorities Kazakhstan to not only join world-leading Kazakh people in identified in the Strategy, national and nations but also be the first example of a terms of national sectoral programs have been developed. “future state”, an eco-state retaining and A number of targets have been achieved, increasing natural capital through national welfare, nature, while others are yet to be accomplished. history. culture and each New human development dimensions The primary goal should be the quality of Kazakhstani’s are coming to the forefront resulting life determined by the following three basic health and well- from today’s development context. This components: life expectancy, income and being requires due attention to be paid to the environmental status.

30 Chapter 2. Human development as Kazakhstan,s strategic priority

Kazakhstan’s life expectancy, the first fundamental and applied sciences. Also, The primary goal determinant, is very low, on average 15 there are growing economic and social should be the years lower than in developed countries. disparities between regions. The legal, en- quality of life This reduces the life expectancy index vironmental and economic awareness of by 0.24 and the HDI by 0.0816. A life the public should be raised, based on ex- determined by the expectancy increase by 13 years would tensive historical traditions, patriotism, free- following three place Kazakhstan 43rd in the HDI ranking dom, accountability, respect for property basic components: versus 79th, i.e. Kazakhstan could be among and privacy. life expectancy, top 50 countries with the highest HDI. The annual messages of the President income and Income level, the second component, to the people of Kazakhstan play a course- environmental is largely determined by GDP per capita. setting role and set new targets for the status As the global report suggests, a two times Government in the context of a changing higher GDP per capita would make Ka- environment, needs and challenges. zakhstan’s GDP index and HDI 0.115 and The President’s Address of 1 March 2006 0.038 higher and raise the country 13 plac- further promoted the message of previous es higher in the rank. addresses and set a ‘super target’ of be- New targets should Environmental status, the third compo- coming one of top 50 most competitive be yet addressed nent, is indicated in the HDI implicitly, since countries. In this light, in addition to a mod- in areas where it is determined by a series of human devel- ern competitive and open market econo- Kazakhstan has opment indicators. MDG 7 has three con- my, basic components of a prosperous and great human crete targets, the attainment of which will dynamic society that can be globally com- development require serious effort in Kazakhstan: petitive include a pro-poor, free, open and accomplishments: 1) integrate the principles of sustainable democratic society; a constitutional state based on political limitations, checks and quality of development into country policies and education, programmes and reverse the loss of balances; religious, ethnic and cultural ac- fundamental and natural resources; cord, etc. All priorities to advance Kazakhstan to applied sciences; 2) halve, by 2015, the proportion of become one of the most competitive and growing economic people without sustainable access to dynamically developing countries are, and social safe drinking water; in one way or another, linked to human disparities between 3) by 2020, to have achieved a sig- development. However, the third and regions; legal, fourth priorities, supporting social policy nificant improvement in the lives of at environmental least 100 million slum dwellers. and economic development as well as education and culture, affect human and economic These targets can be reached, taking development directly. awareness of the into account the efforts the Government is public and etc. making. For example forest cover rose from 3.9% in 1995 to 4.5% in 2005, while protect- ed areas increased from 862.8 to 3,463.6 Box 2.1.2.1. hectares. At the same time, however, the situation is worsening: urban air pollution, National development priorities identified in the President’s pollutant emissions from stationary sources Address to the People of Kazakhstan of 1 March 2006 and per capita carbon monoxide emis- sions increasing after some improvement in In order to become one of the 50 most competitive coun- 1998-1999. tries, the following seven priorities should be achieved: Despite a reduction in housing water 1. Kazakhstan’s successful integration into the world supply provision from 61.4% in 1998 to 54.4% economy as a basis for a qualitative breakthrough in the in 2005, the second target can be achieved country’s economic development. through the implementation of the Drinking 2. Further economic development and diversification as a Water Program by 2010. foundation for sustainable economic growth. The third target may be attained through 3. A modern social policy protecting the most vulnerable national and local efforts to improve exist- groups of the population and enabling economic ing houses and provide housing to people development. with no access to housing. 4. Promoting modern education, continuous learning, In addition to these targets, other tar- training and national culture. gets should be addressed in areas where 5. Further democratic development and enhancement of Kazakhstan has great human development the political system. accomplishments. Despite high literacy 6. A National Security Strategy adequately addressing rates and substantial access to education present-day threats and challenges. and information, Kazakhstan has low level 7. Further balanced and responsible foreign policy ba- of public engagement and old-fashioned sed on Kazakhstan’s interests and regional and global mentality and sometimes poor indicators development trends. in vocational and higher education and

16 Each of the three components has an equal share in the HDI. Therefore, the HDI reduction rate is one third of any component reduction rate. In our case: (0.88-0.64)/3=0.24/3=0.08.

31 New technologies for human development in Kazakhstan

All priorities Therefore, the present development goal, which is to provide opportunities for all to advance situation leads to the emergence of people of Kazakhstan in all spheres of life, Kazakhstan to new human development dimensions in or, in other words, human development. become one of the Kazakhstan. The principal idea should be In this regard, it is important to link the Concept of Transition to Sustainable competitiveness to human development, most competitive Development aiming at a balance conduct a comparative review of Ka- and dynamically between social, economic, environmental zakhstan’s capacity to become one of the developing and political aspects of national de- world’s most competitive countries and a countries are, in velopment17. This will allow achievement country with a high human development one way or another, of human development targets for both rank and identify the conditions for linked to human current and future generations. New improving human potential in Kazakhstan. development targets are emerging in those areas where Kazakhstan has great accomplishments. To 2.2.1 Competitiveness as national achieve the target of becoming one of top development priority number one for 50 most competitive countries, as identified today in the President’s Address of 1 March National competitiveness is understood 2006, new technologies are to be used to to be national sustainable development promote human development. capacity based on developing production factors, promoting economic performance 2.2 New national development and introducing innovations. The Global priorities Competitiveness Report published by the Kazakhstan’s strategy to become one World Economic Forum (WEF) measures of top 50 most competitive countries is, competitiveness by two main indexes: no doubt, an important contribution to Growth Competitiveness Index, developed achieving the long-term development by Jeffrey Sachs and John McArthur, and strategy Kazakhstan-2030 and ensuring Michael Porter’s Business Competitiveness further sustainable human development. Index (BCI) that in turn include component Human potential, in turn, plays a key role indexes and are based on a number of in achieving competitiveness. Therefore, indicators. In addition, the WEF’s 2005 report these two notions are interlinked and introduced a new Global Competitiveness somewhat interdependent. Index (GCI) in 2006, which replaced these However, it should be clear that national two indexes. competitiveness is not a development end. The new Global Competitiveness Index, Rather, it serves to attain a more complex combining the two previous indexes, was introduced to measure and compare a variety of factors determining sustainable prosperity, both in the present and medium- Box 2.2.1.1. term. Overall, the WEF’s Global Competit- Components of competitiveness indexes iveness Report uses more than 130 The Growth Competitiveness Index is made up of three indicators, component indexes and inde- component indexes: the technology index, the public institu- xes to measure competitiveness. The major tions index, and the macroeconomic environment index. In index is the GCI, made up of indicators turn, the technology index is based on the following sub-index- measuring development of the following es: innovation, technology transfer and information and com- nine pillars: munication technology sub-indexes. The public institutions 1. Institutions index is based on the law and contracts sub-index and the corruption sub-index. The macroeconomic environment index 2. Infrastructure is calculated using the macroeconomic stability sub-index, the 3. Macro-economy country credit rating and government waste. The Business Competitiveness Index is based on two sub-in- 4. Health and primary education dexes: company operations and strategy and the quality of the national business environment. 5. Higher education and training The national business environment sub-index is constructed 6. Market efficiency on the quality of Porter’s four forces: factors, demand terms, accompanying sectors, company strategy and competitive- 7. Technological readiness ness. The company operations and strategy sub-index de- 8. Business sophistication scribes a variety of company operations such as production process sophistication, the nature of competitive advantage, 9. Innovation staff training, willingness to delegate authority, capacity for in- These indicators are used to calculate novation, etc. three component indexes:

17 Concept of Transition to Sustainable Development for 2007-2024, RK Presidential Decree #216 of 14 November 2006, Astana.

32 Chapter 2. Human development as Kazakhstan,s strategic priority

1) Factors of production (indicators 1-4); Table 2.2.1.1. Proportions of the GCI’s component indexes for 2) Economic efficiency (indicators 5-7); countries at different stages of economic development

3) Innovation (indicators 8-9). Shares of component indexes in the GCI, % Depending on the stage of economic Economic development stage Factors of Economic Innovation development, these component indexes production efficiency make up varying proportions within the GCI (see table 2.2.1.1.): Factors 50 40 10 Countries do not jump from one stage to another. There is a so-called transition Efficiency 40 50 10 period. So far, Kazakhstan has stood at the stage of transition from factors of Innovation 30 40 30 production to economic efficiency. Co- ­­ untries are grouped by development sta- DP’s Global Human Development Report. ge, based on their GDP per capita in USD Kazakhstan has Furthermore, many of these indicators are as exchanged by central banks (see table moved to the second the same. However, in the competitiveness stage of economic 2.2.1.2). As estimated in 2005, Kazakhstan’s review such indicators characterize factors development – the annual GDP per capita is USD3,800, which of production and efficiency, including sends it to the second stage of economic an appraisal of human resources as a stage of economic development. factor of production, while in the review of efficiency The Global Competitiveness Report human development human resources are th In 2006 Kazakhstan 2006 places Kazakhstan 67 in the Growth considered as a development outcome, ranked 67th Competitiveness Index ranking out of rather than as a factor of production. th 125 countries covered, 70 out of 121 in The human development rankings are in Growth th the BCI ranking and 56 out of 125 in the based on a number of integral indexes, Competitiveness GCI ranking – far ahead of all other CIS primarily the Human Development Index Index, 70th in BCI countries in each index. In 2005 Kazakhstan (HDI) which is based on the following four and 56th in the GCI st nd st was placed 61 , 62 and 51 out of 117 indicators: ranking – far ahead countries respectively. - Life expectancy at birth; of all other CIS 2.2.2. Linkages between - Literacy rate (of adult population countries in each competitiveness and human aged 15+); index development - Enrolment ratio18 ; Many indicators characterizing - GDP per capita in USD at Purchasing Competitiveness Index and HDI competitiveness Power Parity of national currency19 . and human A country cannot be competitive The first indicator is contingent on a development are the without developing its human potential. variety of factors, including those dete- This is reinforced by the fact the Global rmining national competitiveness, namely same Competitiveness Index is based, inter alia, development of healthcare and new high- Competitiveness on a country’s achievements in health, tech human and environmentally-friendly regards human- primary education, higher education and technologies. being as a training. The second and third indicators production National competitiveness is character- describe achievements and capacity of ized by over 130 indicators, component the education system to ensure access factor,whereas indexes and indexes, while the key aspects to learning. These indicators depend on human development of human development are character- components of national competitiveness sees human-being ized by over 150 indicators presented in relating to education, including higher and as a primary end of more than 30 tables annexed to the UN- vocational education. development

18 Enrolment ratio is the total of students of all ages to all people aged 5-24. 19 Purchasing Power Parity (PPP) of national currency means the number of units of a country’s currency required to purchase the same representative basket of goods and services that a US dollar would buy in the United States.

33 New technologies for human development in Kazakhstan

Reaching The last indicator varies depending on all Kazakhstan has a relatively low rank competitiveness components of national competitiveness, in institutional development (75th), infra- th should be seen as a i.e. development of institutions, infrastru- structure (68 ), technological readiness cture, health, education, market effic- (66th), business sophistication (72nd) and means, rather than iency, technological readiness, business innovation (70th). However, it is noteworthy an end in itself, to a sophistication and innovation. that the lowest of the above ranks – higher end, which is Therefore, reaching the target of be- institutions – comes second in the CIS, while Kazakhstan joining coming one of the top 50 most competi- the best rank is macro-economy (10th). the countries tive countries is the foundation on which Kazakhstan’s transition from the first to with high human to build to ensure Kazakhstan’s sustainable the second stage of development gives development human development in the future. This more relevance to the first seven indicators target should be seen as a means, rather referring to the second group of indexes than an end in itself, to a higher end, which such as market sophistication (62nd), soun- is Kazakhstan joining those countries with dness of banks (68th), access to loans (57th) the highest human development ranks20. and venture capital availability (45th)21. This will be time-consuming, since other Kazakhstan leads the way in the CIS in countries will be developing at the same a number of indexes describing national time. competitiveness: A comparative review of Kazakhstan’s - 17th in pay and productivity; capacity to become one of the 50 most competitive countries and one of the 57 - 32nd in railroad infrastructure deve- countries with high human development lopment; rank - 44th in availability of scientists and As noted earlier, the Global Com- engineers; petitiveness Report 2006 placed Kaza- khstan 56th out of 125 countries covered in - 48th in production process sop- the GCI ranking – the leader among CIS histication; countries. th Kazakhstan stands 51st in the factor - 49 in quality of the education th system; The most troubling ranking and 56 in the efficiency ranking, situation is i.e. ahead of other CIS countries. However, - 49th in overall infrastructure quality; Kazakhstan, at 74th, comes third in the CIS in observed in health the innovation ranking. - 57th in quality of math and science and primary The table below shows values of the education. education GCI, three component indexes and nine At the same time, Kazakhstan lags pillars for the CIS (see Table 2.2.2.1.): behind in a number of other indexes: The table shows that in Kazakhstan - personal computers (114th); the most troubling situation is observed in health and primary education that refer to - foreign ownership restrictions (102nd); the first group of basic indicators (factors th of production). In three out of the nine CIS - hiring of foreign labor (99 ); countries listed the situation in health is - freedom of the press (99th); better than in Kazakhstan, suggesting that Kazakhstan should pay more attention to - life expectancy (96th); this sphere. - value-chain presence (93rd); Table 2.2.2.1. GCI and its components in the CIS - foreign direct investment (FDI) and technology transfer (89th); - inflation (86th); - efficiency of legal framework (85th); - prevalence of trade barriers (80th). As is apparent, Kazakhstan is ahead in the rankings of some indicators characterizing human development, such as education and training, but lags behind in the rankings of other indicators such as life expectancy and FDI. The Human Development Index (HDI) published in UNDP’s annual reports is, in our opinion, a criterion to be taken into con- sideration when reviewing Kazakhstan’s capacity to be one of 50 most competitive Source: Global Competitiveness Report. WEF, 2006. countries.

20 In 2006 there were 57 such countries. 21 Hereinafter, Global Competitiveness Report 2005.

34 Chapter 2. Human development as Kazakhstan,s strategic priority

According to UNDP’s Global Human move up more than 20 places, unless, of HDI should be a Development Report 2006, Kazakhstan’s course, development rates of around ten criterion to be taken th22 HDI of 0.774 places it 79 out of 177 countries with GDP per capita between into consideration countries in the HDI ranking, while GDP per PPP USD10,000-13,000 slow down. when reviewing capita of PPP USD7,440 in 2004 placed it Despite this, Kazakhstan will, in any in- 74th in the GDP ranking. stance, become a country with a high Kazakhstan’s This makes becoming one of 50 human development rank, since GDP per capacity to join 50 highest HDI countries an ambitious goal capita of at least USD12,000 at PPP will al- most competitive for Kazakhstan. Currently, HDI values in low an HDI value of 0.8, which is considered countries 63 countries are over 0.8, which places the threshold for countries with high human them among countries with high human development ranks, even if life expectan- development ratings and this may soon cy and the enrolment ratio grow insignifi- include another eight countries, including cantly to 67.5 years and 95% respectively in Russia, with current HDIs of over 0.79. 2010, according to our estimates (see Table 2.2.3.1). 2.2.3 Improved human development Thus, by 2010 Kazakhstan can reach the as Kazakhstan’s next strategic priority current levels of countries with the highest In light of the above, Kazakhstan’s human development ratings. However, all strategic priority number two should be to countries will be working to improve their By 2010 Kazakhstan join the group of countries with the highest human development situation aiming can reach the human development level. The estimates to fulfill their Millennium Declaration current levels of below suggest this target can be met as commitments. In this light, we expect countries with the early as 2010. Kazakhstan to move from being 79th to only highest human th In 2005 Kazakhstan’s GDP per capita 65 in the HDI ranking. development was USD8,100 at PPP. With high rates of The present achievements of civilization economic development (over 9%), GDP cannot come true only if desired. There- ratings. However, per capita will grow annually by some USD fore, the following statement made by the its rank will most 1,000 and begin to exceed USD13,500 by President in his Address to the People of Ka- probably increase 2010. This is the level currently registered in zakhstan in 2004 should be reiterated: “We from 79th to only 65th Estonia, which ranks highest in the former would not want to swallow the dust from the USSR as its HDI of 0.858 places it 40th in the departing train of world civilization. To this global HDI ranking. Estonia has a life ex- end, we all need to use all our abilities, and pectancy of 71.6 years and enrolment ra- get all the thoughts, energy and intellectual tio of 92%. Kazakhstan has the capacity to abilities of our people pulling together”. exceed Estonia’s enrolment ratio by 2010. Along with achieving the target of join- However, for the first indicator, given the ing the world’s 50 most competitive coun- very weak upward trend, Kazakhstan may tries, Kazakhstan should ensure further sus- not reach Estonia’s level even by 2020. tainable human development. Taking into account Kazakhstan’s high As noted earlier, low life expectancy at rates of economic development, GDP per birth is a major challenge and hindrance capita may almost double in 2007 versus 23 to human development. Not only should 2000 , with GDP per capita exceeding Kazakhstan work to increase births, but USD10,000 at PPP (see also GDP per also take care of those already born. capita in CIS countries in Annex 2, Table In particular, the excessively large 11.5 23). There are some twenty countries with year disparity between female and male high GDP per capita under USD10,000. life expectancies should be addressed. Therefore, Kazakhstan will not be able to

Table 2.2.3.1. Estimated trends in HDI and its components in Kazakhstan up to 2015

Source: calculated by the author.

22 It should be underlined that in its Global Human Development Report 2005, UNDP significantly reduced estimated life expectancy at birth for the CIS compared to the previous report (by 0.8 – 5.2 years). Internationally compared infant mortality rates are supposed to be much higher in the CIS compared to values registered using the old methodology. Kazakhstan’s estimated life expectancy fell by 3 years. Our estimates suggest that in Kazakhstan infant mortality registered according to the WHO methodology is no more than 1.5-1.7 times higher than that registered using the old methodology, which results in a reduction in life expectancy of approximately one year. 23Our estimates show that with the economic development rate at 9.5% in 2006-7, Kazakhstan’s 2007 GDP will be 196% of the 2000 level.

35 New technologies for human development in Kazakhstan

Indeed, there should probably be a levels are yet to be completed and local national program addressing this issue. governance promoted. Anti-corruption Also, attention should be paid to ad- efforts should be further intensified. dressing the MDG health targets relating In addition to these targets, other tar- to reduced child and maternal mortality gets should be addressed in areas where and halting and reversing the spread of Kazakhstan has great human develop- HIV & AIDS and other diseases. Currently ment accomplishments. Thus, along with it does not seem likely that Kazakhstan will the introduction of 12-year schooling and achieve these targets by 2015. Therefore, a new system of vocational and higher work should be continued in the next 15- education, the quality of education should year period up to 2030. be improved to Soviet period standards It is deemed important that extracting and further enhanced, based on the companies and the Government join the needs both the economy and human Extractive Industries Transparency Initiative development. (EITI). To ensure sustainable human devel- Another issue on the agenda is the de- opment for future generations the Nation- velopment of fundamental and applied al Fund should be replenished and tapped sciences. The policy of adopting foreign into. technologies will not make the country a Kazakhstan’s huge natural resources leader. Areas of fundamental and applied should be used effectively, while non- science that can provide Kazakhstan a renewable resources should be conserved competitive edge by global marketing and human development opportunities of local ideas and technologies should for future generations ensured through be identified and adequate funding of renewable resources. science ensured. The above mentioned Also, there are targets to be addressed issues, as well as other issues related to the to promote professional government development of new technologies will be and decentralization. Decentralization of studied in greater detail in the subsequent power and delegation of authority to lower chapters.

36 Chapter 3. Current and future status of new technologies in Kazakhstan

CHAPTER 3. CURRENT AND FUTURE STATUS OF NEW TECHNOLOGIES IN KAZAKHSTAN

3.1. Kazakhstan’s capacity in science a market approach in science and Kazakhstan’s and technology research institutions; limited inflow of young human resources scientists as a result of low motivation; poor Building national capacity in science in science and investment attractiveness of the science technology are and technology is instrumental to achiev- and technology sphere nationally. Strengths characterized by ing high economic productivity through include Kazakhstan’s high literacy rates new technologies to ensure human deve- and people recognizing the importance of low numbers of lopment combined with promoting eco- education and technologies, as well as the highly qualified nomic and social welfare. To this end, it is remarkable scientific capacity inherited researchers and important to review the current and future from the USSR and currently requiring engineers, the status of science and technology and look substantial attention and support to be deteriorating at the role of science and technology in developed for the benefit of Kazakhstani prestige of light of human development. society. Science and technology implies the the scientific acquisition and transformation of new Human resources and science and profession, and knowledge to address technological, engi- technology a limited inflow neering, economic, social, humanitari- of young talent an and other issues related to science, Personnel is one of the most important in science and technology, production and the market components of scientific and technological technology as a single reproductive system. Activities capacity. Kazakhstan’s human reso- in science and technology mainly fo- urces in science and technology are cus on the continuous upgrade of the characterized by low numbers of highly technological base using the latest qualified researchers and engineers, the scientific findings in all spheres of life. Such deteriorating prestige of the scientific activities are result-and-creation oriented profession, and a limited inflow of young and help achieve socio-economic and talent in science and technology. environmental targets or contribute to The structure and composition of traditional social development goals the scientific profession have changed through new technological capacities and substantially since independence. From tools. Just like any other science-related 1991-2005 staff numbers engaged in activity, science and technology embrace research and development fell by 53.8%, goals, methods, outcomes and process per from 40,900 to 18,900 (Figure 3.1.1). se. The transition period resulted in Scientific and technological capacity noticeable deformation of the employment has many components such as human structure in science and technology. Most resources, scientific infrastructure, funding, affected were participants of the scientific business participation in R&D, imple- process in the governmental sector: from mentation of technological programs by 1991-2005 the number of researchers fell by ministries closely linked to and requiring 56.9%, while support personnel dropped by continuously increasing quality of the 68.4%. However, over the last eight years institutional base, which is understood to be a set of rules, regulations and organizational Figure 3.1.1. Staff of Kazakhstan’s research institutions hierarchy governing the people involved. The determining factor of each component should be productivity (result orientation) and ability to improve and mobilize required resources such as human, material and technological, informational and organizational resources, i.e. everything that can help address national concerns and challenges and have a positive effect on technological and social progress. To assess Kazakhstan’s current capacity in science and technology, the authors identified its strengths and weaknesses. Weaknesses include poor technological capacity of scientific organizations and higher education establishments due to limited funding for equipment and fa- cilities; weak linkages between science and production due to limited use of Source: RK Statistics Agency. Yearbook 2006.

37 New technologies for human development in Kazakhstan

staff in international and international/ talented scientists and researchers are Kazakhstani research organizations almost very typical for the scientific sphere. What doubled. makes this even more complicated is Engineering and According to the RK Statistics Agency, that as older researchers leave or retire, 24 technological in 2005 there were 11,900 researchers , they are not being replaced by young or 0.017% of the economically active scientists due to lack of motivation and spheres are paid population, versus 70,000 researchers or interest. There are a number of reasons for little attention 2% of the working population in Finland. In this: inadequate remuneration; unstable Kazakhstan there are 26 staff engaged in employment, since many scientists are science25 per 10,000 economically active appointed on medium-term contracts at people, of which only 16 are researchers26 . most, forcing them to seek more stable In the OECD countries this figure is 6-7 times employment; lack of adequate equipment higher. and service facilities; lack of independent In addition, Kazakhstan’s science is (from top management) decision making “ageing”. From 2000 to 2005 the average by scientists in scientific organizations or age of doctors of science increased from higher education establishments; conflicts 55.4 to 58.9 years, which means that just of interest relating to ownership of end over a half of all scientists of the highest results of research between organizations qualification (doctors of science) are of and individual scientists and researchers. pension age (see Annex 2, Figures 2 and 3). Recently, Kazakhstan’s scientific com- As reported by the RK Statistics Agency, munity has been extensively criticized for In Kazakhstan, in early 2006 the total number of highly low revenues accruing from investment among scientific qualified researchers was 4,124, of which in national science. It is worth noting that organizations, 1,623 were women. Out of this figure, only the bulk of government investment is in research 23 were young doctors of science (under theoretical (unapplied) research and 40) while there were 734 young candidates development, in particular at research institutions and of science. This represents just 0.56% and institutions. The problem is that the state higher education 18% of all highly qualified staff respectively27 administration system still avoids a result- establishments (Figure 3.1.2). oriented approach. predominate, Against this background, the prestige In addition, the government neglects while there is a of the scientific profession has been engineering and technological spheres. limited number of steadily deteriorating. A survey by BISAM Staff of R&D and engineering centers make design engineering Central Asia conducted in 2005 shows that up only 5% of all R&D workers or 0.1% of centers, which only 4.3% of the population believed the industry-employed personnel. According to hampers the scientific profession to be prestigious. At available data, the current ratio of scientists, the same time, surveys conducted in the engineers and staff of pilot productions in development of USA in 2004 found the scientific profession Kazakhstan is 25:4:1 compared with 1:2:4 in technological to be the most prestigious, with 51% of the the rest of the world. aspects of R&D population finding it extremely prestigious, This ratio indicates a remarkable lack 25% very prestigious and 20% prestigious. of highly qualified engineers. This is an The low prestige of the research important barrier to the development of profession and limited inflow of young the scientific-production sector. In addition,

Figure 3.1.2. Highly qualified specialists (doctors and candidates of science), by age, 2005

Source: RK Statistics Agency, 2006.

24 11,900 researchers include scientific staff without a scientific degree who are called researchers rather than scientists. 25 Scientific staff include researchers, support and other personnel. 26 Researchers are staff directly engaged in research, while they do not necessarily have a scientific degree, such as candidates or doctors of science. 27 The figure also includes young candidates of science not directly engaged in research

38 Chapter 3. Current and future status of new technologies in Kazakhstan most R&D organizations do not have the Figure 3.1.3. Distribution of R&D staff in Kazakhstan required engineering infrastructure, such as engineering and technological services or pilot productions, which would be conducive to the development and implementation of scientific ideas and technologies. In Soviet times research institutions had direct links with production enterprises that conducted applied research and implemented the developments presented by research institutions - so-called “industrial science”. With the collapse of the Soviet Union, however, most of these links were broken, causing an outflow of engineers and scientists to different economic spheres. The majority of scientific workers are still concentrated in scientific and research organizations, which is three times more than in research personnel in higher education establishments (Figure 3.1.3). Source: RK National Center for Scientific and Technical Information, 2006. The main reason for the limited engagement of the higher education and innovation capacity and produc- sector in research is that it tends to focus tion need in advanced technologies, primarily on education28 , which implies less widening the gap between science focus on research, resulting in deterioration and production; of higher education science. This is also linked to reduced government funding for – a lack of competition between Most R&D work higher education, a predominantly fee- scientific schools and individual is poorly oriented based education system, the emergence scientists; towards real of private educational establishments – an outflow of highly qualified staff to market needs and and the conversion of state-run higher the business sector and international requirements education institutions into joint-stock science; facilities against a background of growing competition in the education sector. – an ageing scientific, research and In traditional industries such as extra- education cadre; ction, processing and transportation of mineral resources, mechanical en- – decreasing social status and prestige gineering and some other industries invol- of the scientific profession. ving science-intensive products and tec- This indicates the need for action hnologies such as instrument-making, to improve scientific literacy, promote informatics, biotechnology, etc., there is an opportunities for developing research as acute lack of highly qualified engineering a career for young talented scientists and professionals. researchers, as well as to enhance the Other negative trends such as the quality of higher education, particularly growing proportion of dissertation holders engineering education through the not working in science, an inflexible training integration of science, higher education system, lack of motivation among research and business and the promotion of market- and education graduates and workers oriented research in higher education to follow a career in science due to low establishments. levels of pay and professional support have led to: Material, technical and financial base of scientific organizations – a reduction in publications and pa- tents held by local scientists. Thus, for In Kazakhstan, among scientific orga- example, on average 100 scientists nizations, research institutions and higher produce one article published over- education establishments predominate, seas, while there are only one or while there is a limited number of design two international patents per 15,000 engineering centers, which hampers the scientists; development of technological aspects of R&D. Furthermore, poor material – decreased quality of review of and technical resources, which are an research, leading to a sharp increase in important component of national research the number of degree holders; and technological capacity, also have a – an imbalance between research negative effect.

28 According to a study by the ОЕCD (Draft Examiners Report, December 2006), in 2005 the workload of faculty members in national higher education establishments is up to 900 hours per year, which leaves no time for research. This contrasts with OECD countries where the workload of faculty members is on average 300-450 hours.

39 New technologies for human development in Kazakhstan

According to the RK Statistics Agency, is in state-owned scientific organizations in 2005 Kazakhstan had 390 scientific and reached 7,105.7 million tenge in 2005, organizations, following an increase of which is 48.2% of all fixed assets (see Annex 133 between 2000 and 2005. This was 2, Table 17). Scientific organizations tend mainly a result of an increased number to have a growing average annual value of research organizations and higher of fixed assets, mainly as a result of revised education establishments. The number of book cost of fixed assets. engineering organizations and divisions The proportion of fixed assets for within industrial enterprises engaged in research and development in private R&D grew slightly. In 2005 there were only 22 organizations and enterprises of mixed research and engineering divisions within ownership grew from 2% in 2000 to 17.6% in industrial enterprises producing design 2005. and engineering documentation, pilot Laboratories of research institutions and samples and sets of actions to take to the higher education facilities tend to have production chain. The national research equipment and machinery for R&D that is and technological system lacks design of poor quality, obsolete or worn-out. From and engineering organizations, whereas 1993-2005 Kazakhstan purchased almost on average there is one engineering no new equipment for R&D out of basic organization per 16 research organizations. funding of the Ministry of Education and In 2005 approximately 32.8% or 8.84 Science. Low expenditure on science over billion tenge (versus 53% in 2004) of the the last decade has resulted in only a 4% overall operating budget for scientific increase in equipment assets of scientific organizations engaged in research and organizations during 2000-2005. development was spent on salaries and A report prepared in 2006 as part of the social benefits. The average monthly project “Evaluation of material and tech- salary grew six times from 1998 to 2005, to nological resources of scientific organiza- total 57,590 tenge (around USD425) as of tions in Kazakhstan” by JSC Center of En- Laboratories 1 January 2006. This ensured Kazakhstan’s gineering and Technological Transfer and of research leading position in this category in the commissioned by the National Center for institutions and CIS. For reference, in 200529 the average Scientific and Technical Information30 re- higher education monthly salary was 65,598 tenge in the veals that: facilities tend to mining industry, 69,905 tenge in the hotel – the level of equipment used in univer- have equipment and restaurant sector and 88,420 tenge in sities varies significantly. State-owned and machinery for financial services. However, these average educational institutions still use equip- salaries are still about 10 times lower than in ment that European institutions used 30- R&D that is of poor developed countries. quality, obsolete or 40 or even 50 years ago. This is also true The bulk of costs of laboratory equipment about the technical status of buildings worn-out and machinery purchased as fixed assets and stationary equipment (water sup- ply, sewage system, furniture, basic fa- cilities and utilities such as gas, ventila- tion, air conditioning and management of used air) in laboratories and offices. In most instances, equipment is com- pletely obsolete and only partially op- erational. Such institutions can only be used for archiving, since they lack the exceptional facilities to form and train the brainpower that can promote na- tional science and technology; – the outflow of key scientists overseas is a serious concern that can only be addressed through improved condi- tions and facilities for research such as purpose, premises, equipment, mea- surement technology, as well as rewards and bonuses; – premises accommodating laborato- ries fail to comply with even one of the safety requirements currently manda- tory for laboratories of educational and scientific institutions in Europe.

29 Statistical Yearbook 2006, RK Statistics Agency, 2006. 30 Institutions assessed included universities that provide educational services and are engaged in R&D. This is a common practice that can be found in almost all comparable educational establishments around the world. However, in Kazakhstan there are a number of institutes that only work on R&D, specializing in a defined set of disciplines and related research.

40 Chapter 3. Current and future status of new technologies in Kazakhstan

Even after refurbishment, some of Figure 3.1.4. Priority areas of science and technology, by Kazakhstan’s recently refurbished la- science, in Kazakhstan in 2005 boratories and offices fail to comply with functional and/or safety requirements.

Development trends in science and innovation Science and technology programs determine priorities for science. Funding of such programs and the breakdown of R&D by type of research determine innovation. Priorities in science and technology lie in research in engineering science (49% of all R&D expenditure), while only 3% of all R&D expenditure is spent on humanities (Figure 3.1.4). The proportions of government funding allocations for the above areas have remained unchanged over a long period, which indicates a focus on technology Source: RK Statistics Agency, 2006. to ensure scientific support to traditional industries in Kazakhstan. Unfortunately, European countries due to high entrepre- most R&D work in this and other areas is neurial activity in R&D and more opportu- poorly oriented towards real market needs nities on the domestic market to become and requirements. Therefore, the quality of self-sustainable. R&D remains low and cannot compete with international science-intensive products Figure 3.1.5. Breakdown of R&D by and services. type of research, 1994-2005 Despite the problems, scientists and re- searchers do conduct research and have even made some technological develop- ments for many industries such as mining and smelting, chemistry and petrochemi- cals, biotechnology, nuclear and space technologies for different industries (see Chapter 5). However, only a small proportion of innovative developments and ideas can be used commercially. The issue is that there are almost no pilot bases and engineering institutions left. Plus, there are no effective mechanisms for the Source: RK National Center for Scientific and introduction and development of research Technical Information under the MoES, 2006. findings in the real sector of the economy. Science in Kazakhstan is not sufficiently In Kazakhstan, the proportion spent on There are almost result-oriented and fails to introduce new development is still some 10 times lower no pilot bases products and new commercially profitable than in developed countries. International and engineering technologies into production. Though practice shows that development requires institutions left formally described as scientific, many 10-50 times more funding than research. applied-research organizations conduct It is commonly accepted that research and no effective almost no research and become exclusively is only the beginning of the development of mechanisms for the economic entities. a new technology, which also requires: introduction and The breakdown of R&D by type of • development of the professional development of research, such as fundamental and applied skills required to learn, use and operate research findings in research and development averaged technologies in the context of ever- the real sector of the for the period 1994-2005 is given in Figure increasing scientific complexity, pro- economy 3.1.5. ductivity and quality of products; Between 2002 and 2005, the proportions changed, with decreased fundamental • development of the capacity to research, which averaged 21.7%, and design, engineer and manage multiple increased applied research, which grew dimensions of production when ma- to average 76.5% of the total, while in aging new technologies and make developed countries such as the US and EU, constant improvements. these proportions are stable (Figure 3.1.6). At the same time, there is a belief that The level of applied research and funding of fundamental science should be development in the USA is higher than in growing more in relation to growing funding

41 New technologies for human development in Kazakhstan

Figure 3.1.6. Types of R&D in the USA and EU

Source: RK National Center for Scientific and Technical Information under the Ministry of Science and Education, 2006.

of science as a whole. Developed coun- regional competitiveness is determined tries extensively support fundamental re- not so much by a set of factors as by the search, which is always on the government effectiveness or productivity of the use of agenda. Countries without or neglecting such factors. such research are doomed to lag behind, since present-day innovative development Funding of research and development is a process of constant gaining of ad- In light of the above issues, it seems vanced scientific knowledge, which can important to look at how research and only be obtained through fundamental sci- development, which are the main tools for ence free from the dictates of the market. developing science and technology, are In order to speed up innovative funded. processes and development of science Research and development are and technology Kazakhstan should build funded from the following three sources: a) its scientific and technological capacity government funding b) venture funds and and channel resources into the priority financial institutions c) contributions from areas of science and technology. In pursuit private and business sources. Combined of sustainable national development, R&D expenditure over a certain period Kazakhstan’s main competitive advan- can be expressed in terms of overall R&D tages on the global market should be expenditure as a percentage of GDP highly qualified and mobile human (Figure 3.1.7). capital and on-going introduction of new Over the period 2000-2005 Kazakhstan’s scientific products and services, as well GDP grew by 1.8 times and the volume of as new technologies. In addition, to raise scientific and technological works by 3.1 funds for R&D there should be an enabling times. In 2005 the share of R&D expenditure environment for businesses to be able to in GDP equaled 0.29% (29.2 billion tenge) take informed risks related to science and versus 0.18% in 2000, which means that R&D technology. expenditure grew both in percentage and The major conclusions are firstly that monetary terms. national prosperity can be built rather than Kazakhstan’s annual R&D expenditure inherited and secondly that national and per capita was a little over US$11 or 1,416.26 tenge in 2005 (Figure 3.1.8). Figure 3.1.7. Share of R&D expenditure in GDP (2004) The share of internationally exported products and services resulting from new and advanced technologies can be an indicator of the effectiveness of the development of science and technology. Kazakhstan’s share is 10-15 times lower than that of Russia. The figures presented above indicate an inadequate level of funding of R&D in Kazakhstan. Studies conducted by the RK National Center for Scientific and Technical Information show that if expenditure on science is no higher than 1% of GDP over a 5-7 year period, then it Source: RK National Center for Scientific and Technical is not innovative development and this will Information, 2006. result in a significant reduction in scientific and technological capacity.

42 Chapter 3. Current and future status of new technologies in Kazakhstan

Figure 3.1.8. R&D expenditure per capita

Source: RK National Center for Scientific and Technical Information, 2006.

Figure 3.1.9. Share of products Figure 3.1.10. Sources of funding of resulting from advanced technologies R&D in 2005 exported to the international market

Source: RK Statistics Agency, 2006. Source: RK National Center for Scientific and Technical Information, 2006. is an indication that, due to competition, If expenditure A review of internal expenditure on R&D enterprises tend to invest more in research on science is no by funding sources shows that over the last and development. higher than 1% 5 years Kazakhstan spent almost 3.6 times Government funding allocations for R&D of GDP over a 5-7 more government money on science, year period, then leading to an increase in the proportion of In 2005, the percentage of government it is hard to think government funding in the overall funding funds allocated for fundamental and about innovative of science from 41.4% in 2000 to 51.2% in applied research channeled through the 2005. Funds of clients and customers in the Ministry of Education and Science and development overall funding of science and technology sectoral ministries was 50.7% and 48.6% reached 26.4% in 2005, versus 37.4% in respectively. Between 2000-2005 the 2000, while the percentage of internal volume of completed R&D grew by 4.2 funds allocated by enterprises for research times (including inflation) from 2.086 to 14 and development (20.4%) changed million tenge. insignificantly (Figure 3.1.10). A distinctive feature of Kazakhstan’s As can be seen from Figure 3.1.10, in science is that the bulk of government 2005 98% of all expenditure on science funding, as much as 62.7%, is spent on was from three main sources: the national applied research, 35.9% on fundamental budget, funds of clients and customers and science and only 1.4% on design and internal funds of organizations, with only engineering (Figure 3.1.11). 1.5% from international sources. Perhaps surprisingly, applied research From 2000-2005, a significant increase in accounts for almost 63% of government government funding (by 3.6 times) and in- R&D funding. This immediately raises the ternal (science and production) allocation question of quality and compliance with (by 3.2 times) was seen in Kazakhstan. This market and strategic needs, as well as the

43 New technologies for human development in Kazakhstan

Figure 3.1.11. Government funding and inadequate funding of development allocations for different types of R&D work results in a situation in which many scientists, researchers and research gro- ups in scientific institutions and higher education establishments have very little funding to build on and take forward such developments. The EU, South Korea, the USA and Ja- pan all have a different structure of govern- ment funding for R&D, which can be pre- sented as follows: 15-20% for fundamental research, 25-30% for applied research and 50-60% for design and engineering. Government funding for research and development channeled through different organizations is illustrated in Figure 3.1.12. As the figure shows, most of the Source: Data of the RK National Center for research work is concentrated in scientific Scientific and Technical Information, 2006. organizations and higher education esta- relevance and usefulness of the findings of blishments. The very small proportion the funded research. Do the government allocated to industrial enterprises and and ministries use the findings of such design and development organizations research? This question unfortunately indicates a decline in their R&D resulting remains unanswered, since Kazakhstan from structural changes in the overall does not keep official statistics on the post-Soviet system, as well as poor market actual introduction of applied research orientation of these organizations and a and development into the real production shift to other areas (see Annex 2, Table 22). sector. Meanwhile, lack of attention to Venture funds

Figure 3.1.12. Government allocation, by type of organization As international practice shows, the capital of venture funds or so-called risk investment funds can and should be major sources of funding of development and innovation. National venture funds enable players of the innovative system, i.e. scientists, researchers, institutions and businesses, to share risks through co- funding of R&D programs and projects. As of 1 November 2005 in Kazakhstan there were 8 venture funds with the National Innovation Fund’s share in their chartered capital. Overall, Kazakhstan’s venture funds

Source: RK National Center for Scientific and Technical Information, 2006.

Box 3.1.1

Government funding allocations for science and technology

Law №135–III of 23 March 2006 specifies the procedure for government grants to promote and reduce gaps between science and production. The Law introduces the concept of “innovative grants”, which is a transfer of public money subject to conditions specified in the grantor-grantee agreement. For this purpose, an agent may be involved. Innovative grants can be given for: 1) design and development work; 2) a feasibility study for an innovative project; 3) patenting of industrial property in foreign countries and/or international patent offices. Grant awards for feasibility studies and patenting of industrial property in foreign countries and/or international patent offices are competitive and can be made after a review by the state committee for science and technology and financial review of applications. Grants for feasibility studies for innovative projects are awarded if a justification is prepared by an accredited technological business incubator and/or technology park.

44 Chapter 3. Current and future status of new technologies in Kazakhstan

Box 3.1.2

According to the Memorandum for the Fund’s Investment Policy JSC National Innovation Fund (hereinafter referred to as the Fund) provides grants for applied research and development work in priority areas of industrial innovative development through grant programs with funding thresholds for each project: • pre-project grants to put together a complete set of documentation required for an innovative project (feasibility study, business plan and other documents) – grant awards of up to 650,000 tenge with an implementation period of up to 6 months; • small and large grants to complete a research project or make a utility model or invention ready to be put in production – grant awards of up to 7.2 and 3.3 million tenge respectively with an implementation period of up to 18 months; • patent grants to patent findings of applied R&D overseas – up to 13.2 million tenge with an implementation period of up to 36 months. own around US$20 million. The National The business sector, including large National venture Innovation Fund, funded from the national national and transnational corporations, funds enable players budget, is a leading venture fund engaged is a major source of non-governmental of the innovative R&D funding. Historically, in developed in applied R&D and innovative projects in system to share risks Kazakhstan. countries business corporations have In order to ensure financial sustainability become the most important structures through co-funding and a balanced investment portfolio, supporting national innovation systems. of R&D programs the Fund has determined thresholds for By funding research and turning research and projects different investment areas, including findings and inventions into real products applied R&D, of up to 5% of its own capital. and technologies, they take on economic In addition, considering the declining responsibility for the key areas of scientific lifecycle of science-intensive products, and technological progress and provide the implementation period for applied more funding for science than others in the R&D is limited to no more than 18 months. private sector. The business sector is and The selection of applied R&D is based on will remain a leading R&D implementer, comprehensive scientific, technological both in terms of expenditure and engaged and economic review and evaluation of scientists and engineers. the commercial use of R&D results. Meanwhile, Kazakhstan lags behind The scientific community has widely in terms of the private sector’s share of criticized the Fund’s incompetence in funding of R&D, which stood at 29% in 2004. scientific and technological review and Moreover, 50% of government funding for rejection of R&D projects. However, not R&D does not include incentives for private all product developers have adequate investment in R&D. In addition, there is no knowledge to manage and plan the mechanism for government allocation implementation of innovative projects. for funding research on topics with the Grants are awarded to legal entities potential to stimulate the interest of the subject to conditions which ensure the private sector. property rights of the Fund for R&D results. Within Kazakhstan’s private sector large Kazakhstan lags However, despite funding applied research enterprises engaged in the extractive behind in terms of projects, the Fund may prefer not to be sector or traditional production have the the private sector’s involved in the implementation of such highest levels of innovative activity. This is share of funding of projects due to high technological risks, because large enterprises can afford to R&D while even if successfully completed, the fund R&D due to substantial capitalization end result of such projects would be patents, of funds, ease of withdrawing funds from reports, dissertations, or recommendations circulation and managing high risks to that cannot be measured in financial terms achieve intended outcomes required to or be put in production. improve overall production. The majority of small enterprises only have fixed amounts Private sector as a funder of R&D of funds, which are mainly spent on In the majority of developed countries production and services. there is more non-governmental than However, the innovative activity of governmental funding of research and Kazakhstan’s large enterprises has a development. On average, R&D funding number of specific characteristics. from non-governmental sources in OECD Firstly, Kazakhstan’s large enterprises countries grew from 55% in 1981 to 65% in are not really interested in cooperating the early 1990s31 . with national scientific organizations to

31 Program for Development of National Innovation System in Kazakhstan.

45 New technologies for human development in Kazakhstan

Developed implement R&D. For this purpose, mostly requires huge investment and involves industrial international developers with international great risks, forcing private companies to countries pay patents and experience in project share such risks with the state. Developed special attention management are contracted. Being in- industrial countries pay special attention to ternal divisions of large enterprises, local promoting research and development. A to promoting R&D organizations are at most involved in the variety of methods are used to raise funds through raising development of project documentation from the private sector, and cooperation funds from the and budget. Such an approach may af- is encouraged between governmental private sector fect the future of national science and institutions, universities and the private and encouraging create a situation in which: sector. cooperation • enterprises are temporarily mana- As the experience of developed coun- between ged by international owners who are tries in raising private sector R&D funding governmental not interested in improving perfor- suggests, Kazakhstan should focus on the institutions, mance indicators and enhancing the following direct and indirect incentives: universities and the com-petitiveness of national products. 1) encourage partnerships between the private sector They may be satisfied with the quality private and business sectors to produ- of such products (raw materials) and, ce science-intensive products under therefore, think it unnecessary to spend the following terms: the government extra money to improve it for a relatively invests in R&D, while private investment short term of use; goes to business development with busi- ness corporations entitled to intellectu- • Kazakhstan’s science is poorly inno- al property rights; vation-oriented. The undeveloped mar- ket for innovations is explained by both 2) improve fiscal policy to provide tax the crisis in production during the 1990s incentives to the private and business and the inadequacy of research topics, sectors. institutional setting and mechanisms to If the private sector is involved in a facilitate the responsive of science to project for 3-5 years and the resulting the needs of the economy. This is indicat- products are commercialized, then the ed by the fact that growing investment following should be ensured: over the last 3 years has not caused a 1) possible amortization of investment significant inflow of private sector en- and exemption from investment reve- terprises’ own funds into science, since nue tax (investment in applied re- R&D was not widely supported by the search); government. Government’s support is effective in creating an enabling en- 2) deferral of tax on revenues from capi- vironment for the private and business tal re-invested in applied research. sectors and co-funding of risky, cutting In order to develop effective schemes of edge R&D projects; government funding of applied research, • The quality of development by scien- with the gradual introduction of cost- tific institutions and individual scientists is sharing by the private sector, the following low and issues of funding and material measures should be taken: and technological resources for inno- 1) institutional reform of applied science vative projects are unresolved. through: Secondly, primarily international ven- – optimization of organizational and dors and companies have supplied legal patterns and a number of applied technological equipment to the above research organizations and retention enterprises. This can be viewed as normal of a limited number of advanced only if there are no local machine-building organizations to work in priority and or other plants producing the required breakthrough areas of science and equipment. Although Kazakhstan’s ma- technology; chine-building industry is not very deve- loped, this indicates some lack of con- – promotion of the integration of sci- fidence in the quality of services and ence, education and the real sector of products produced by local, versus inter- the economy and a gradual shift from national enterprises. funding of applied research undertaken At the same time, in Kazakhstan large by state-run research institutions to more enterprises dominate in the respective direct and indirect support for research sectors of the economy and industry that tailored to the needs of producing com- influence the development of innovation. panies and users of science-intensive Large enterprises shape a certain core products; of innovative development of different 2) improvement of the legal frame- sectors and, correspondingly, impact the work, primarily to ensure rights to intel- innovative transformation of such sectors. lectual property created with govern- A review of international funding prac- ment funding. tices in applied research shows that R&D

46 Chapter 3. Current and future status of new technologies in Kazakhstan

• Allocated resources are distributed Kazakhstan *** to many small scientific and tech- should ensure a This review of Kazakhstan’s capacity nological programs and projects with moderate increase in science and technology leads to the very little revenue. The number of in expenditure on conclusion that capacity is not yet sufficient patents registered in USPTO is very low, science (R&D) to to implement national industrial and on a par with the poorest countries; innovation policy effectively. However, the 2.5-4% of GDP limited export of Kazakhstan’s science and • A limited number of publications and develop technology intensive products and services in citable journals: in some years no human resources and the limited scale of the economy do publications at all; accordingly not mean that the nation cannot take • Poor command of English language, an industrial and innovative course of which is an obstacle to international development and make an innovative cooperation. breakthrough. The issues lie in the funding In order to address the above and of research and development and tailoring other systemic issues related to science, of science to economic innovation. In international practice suggests the order to ensure that investment in social following solutions: and technological innovation results in broad-based innovative breakthrough in 1. Poor focus on priorities in science and various sectors of the economy and the technology: there is a need to determine social sphere, Kazakhstan should ensure priorities and introduce grants for R&D a moderate increase in expenditure alongside targeted funding. on science (R&D) to 2.5-4% of GDP and 2. Use in the private sector: periodically develop human resources accordingly. review the needs of the private sector At the same time, government funding for R&D funding, R&D cost-sharing by the for applied technological research sho- government and private businesses. uld be minimized and only focus on the most relevant areas of scientific and 3. Improving the quality of science: technological progress from the perspective introduce indicators for revenues from of economic and social development. investment and set up a system of This should be complemented by flexible independent evaluation. mechanisms of cost-sharing of research 4. Promoting links with production: set and development by the government and up an information network and tech- businesses and active measures of indirect nological transfer centers to identify incentives for science and innovation. targeted users of available technolo- Therefore, the government should gies in national and international support not only long-term breakthrough industries. programs and projects but also areas of science and technology that will have 5. Ensuring transparent and effective more short term benefits for human selection and funding of R&D projects: and social development and national introduce a system of independent competitiveness. At the same time, selection of projects to be funded resources allocated for applied research through the national budget with open should pursue concrete outcomes. and public disclosure of plans and Based on the above, the following items outcomes. have been identified as concerns in the Direct government area of science in Kazakhstan: 6. Result-oriented focus: plan and coor- funding for applied dinate programs and projects, from • Inadequate material, financial and technological research to product commercialization. technological resources available for research should be research. As reported by Metrology 7. International integration of science minimized Institute of Kazakhstan, there are only and technology: engage international 26 pieces of internationally produced scientists in project reviews, conduct analytical equipment registered in collaborative scientific and techno- Kazakhstan; logical research and projects and promote the mobility of scientists and • Limited human resources: the ave- researchers. rage age of Kazakhstan’s scientists is more than 56 years, according to the 8. Lack of modern scientific equipment: World Bank; set up open laboratories and design and development bases; wellequipped stu- • Almost zero contact with leading dent development bureaus in leading scientists from industrially developed universities and institutes. countries. There is a vicious circle of ‘scientific tourism’ in which scientists This list only includes a small number attend conferences and workshops as of measures addressing the main existing guests rather than participants; problems and is not exhaustive.

47 New technologies for human development in Kazakhstan

48 Chapter 3. Current and future status of new technologies in Kazakhstan

49 New technologies for human development in Kazakhstan

3.2. Innovative business development scientific and technological development shows that the proportions of new scientific Out of 8,000 R&D development is not the only products and the production of science- prerequisite for new technologies. It is enterprises only 184 intensive products in GDP have not been equally important to ensure linkages were qualified as more than 1.1% and 2.3% in recent years. between science and production, with innovatively active It should be noted that international (5%) large enterprises, small and medium-sized and private (3.7%) enterprises produce businesses and innovative businesses be- more science-intensive products than ing important links. We will go on to look at government-owned enterprises (0.6%). each link in the innovative process after re- Kazakhstan has the following cha- viewing the current status of innovative ac- racteristics of innovative activity: tivity of enterprises. а) innovations mostly materialize in the Innovative activity of enterprises form of purchase of new machinery and equipment overseas in most cases, The proportions Continuous modernization of produc- which was reported by 50% of businesses. of new scientific tion based on technological innovation is a R&D undertaken by Kazakhstani bu- products and the source of sustainable competitive advan- sinesses themselves accounts for only a production of tage not only for business structures and small proportion of innovations (14% of science-intensive sectors but also for countries that have en- businesses); products in GDP sured the dynamically sustainable repro- duction of innovative business. Interruption b) Kazakhstan’s enterprises are not have not been this process of constant upgrading of pro- sufficiently active to gain knowledge more than 1.1% duction leads to loss of competitive advan- from international sources through and 2.3% in recent tage for enterprises, sectors and countries. licensed technologies or purchase of patents outside the country that can years The rate of use of innovations and the re- only be used domestically (only 4% of sponse of businesses to innovations created businesses); by their competitors feed into their com- petitiveness. In developed countries over c) out of 7,212 of surveyed enterprises, 70% of enterprises create innovations in or- only 355 had joint R&D projects, of which der to expand their range of products to 136 were with international partners. capture a segment of the market. Reduced In Kazakhstan the main instigators of production costs are a goal pursued by al- innovative activity are large industrial most a half of all innovatively active enter- enterprises. This is because unlike small prises. enterprises, large corporations and bu- Currently in Kazakhstan there are a sinesses have financial resources to limited number of enterprises that extensively introduce basic technological innova- use innovations and new technologies. tions. By using the multiplier effect and In 2005 the RK Statistics Agency published having good resources, large corporations 32 a bulletin with results of a 2004 survey of can afford to introduce new technologies 8,000 enterprises using innovation in some that are important for national economic 33 way (Table 3.2.1) . development. According to global pra- Out of 8,000 respondents (enterprises) ctice, government cooperates with large only 184, or 2.3%, were qualified as businesses to set up combined private- innovatively active. Most such enterprises public companies to implement certain are in Aktobe, East Kazakhstan, Karagandy business projects and programs. and Kostanai oblasts and Almaty city. Engagement of small businesses in The overall cost of innovative products innovation is a primary and most dynamic totaled 74.7 billion tenge, of which 64% structural component of a national mar- were exported. The highest proportions ket’s innovative capacity. Small businesses of completed innovative products are act as technological leaders in emerging registered in Karagandy (50.2%), Aktobe economic sectors and can better promote (10.8%) and Pavlodar (10.3%) oblasts. These new market segments, develop new pro- regions also lead in terms of volumes of ducts, improve science and knowledge exported innovative products. intensity and competitiveness of producti- Kazakhstan’s level of innovative activity In Kazakhstan the on and therefore facilitate new technologi- of enterprises is much lower than in the EU or cal structures. In addition, small businesses main instigators of even such transitional economies as Estonia are important in creating and promoting innovative activity (36%) and Hungary (47%). According to the social technologies at the public level. are large industrial National Center for Scientific and Technical The high level of effectiveness of small enterprises Information, the review of Kazakhstan’s innovative enterprises is explained by their

32 On innovative activities of enterprises in the Republic of Kazakhstan. RK Statistics Agency. – Almaty, 2005. 33 The 2004 statistical survey covered all industrial enterprises, scientific organizations and higher education establishments as well as agricultural and building enterprises and computer service organizations with at least 50 staff on payroll.

50 Chapter 3. Current and future status of new technologies in Kazakhstan

Table 3.2.1. Main indicators of innovative activity of Kazakhstan’s enterprises in 200435

rapid response to new scientific ideas and Later we will explore the barriers to solutions to concrete problems related to innovation faced by large, medium and the outcome of innovative products. small enterprises. By contrast, large innovative enterprises tend to be more conservative and slower Technological capacity of large to respond to new social needs and the enterprises profitable transformation of new ideas The majority of local and international into marketable products. Despite this, developments are introduced in the oil large innovative businesses contribute and gas industry, mechanical engineering, to the development of science-intensive metal-processing and light industries35. production and the transfer of technologies Kazakhstani scientists have developed a important for the national economy. number of scientific and technological

34 According to the methodology note by the RK Statistics Agency, the survey used such terms as technological innovation understood to be activities related to the development and introduction of innovations, productive innovations embracing the development and introduction of technologically new and technologically improved products, and process innovations embracing the development and introduction of technologically new or significantly technologically improved production methods, including methods of product transfer. Kazakhstan’s industry, www.mit.kz 35 Kazakhstan’s industry, www.mit.kz

51 New technologies for human development in Kazakhstan

Kazakhstan’s projects that are at least as effective as a long and costly process that requires national industry similar international projects. In particular, significant financial and logistical support is characterized by between 1997-2002 JSC Kazakhmys from the government. implemented 56, JSC Ispat Karmet 31, Studies by the RK Ministry of Industry excessively worn- JSC Kazzinc 21 (1997-2000) and NOC and Trade indicate limited introduction of out technological Kazmunaigas 17 innovative projects. Re- new production technologies due to lack equipment garding new technologies, it is worth no- of financial resources, high economic risks, and obsolete ting the introduction of a technology for lack of responsiveness to innovation and technological fine precious metals at the Balkhash Mining lack of information on new technologies processes Factory and construction and operation and markets. Industries produce almost no of the copper wire rod division at JSC Ka- high-tech and science-intensive products zakhmys which improved the company’s in- and there is a lack of reliable information ternational competitiveness. Ispat Karmet on innovation. Today local producers have introduced a coated sheet technology in no choice but to look to expensive new for- conventional galvanizing and aluminizing, eign technologies and equipment in order allowing production of new products and to modernize domestic production to meet ensuring competitiveness of the company. the needs of users. In this regard, the gov- An example of effective business co- ernment recognizes the need for prompt operation between enterprises of different intensification of progress in science and sectors in the production of import-substi- technology in different production sectors tuting mechanical engineering production through local scientific and technological and the merger of enterprises through capacity and use of licensed technolo- vertical integration can be seen by the gies. To this end, the Ministry of Industry and fact that a number of local mechanical Trade has undertaken a number of studies engineering plants, lead by Kazmunaigas, and elaborated programs of cluster devel- have started production of new products opment (over 20 clusters) in different sectors for the oil sector such as beam units, deep- of production. The programs aim to set up well pumps, hoist units PAP-40, PAP-50, etc. high-tech production in key sectors such as This is by no means an exhaustive list mining, oil-processing, chemical and light of scientific and technological projects industries and power engineering at the re- developed by Kazakhstani scientists for the gional level. non-ferrous metal industry alone is a good A cluster-based approach to the devel- indication of the potential national science opment of the national innovation system has. can be more effective in those sectors with However, Kazakhstan’s national industry large and medium-sized economically ac- is characterized by excessively worn-out tive enterprises that influence demand on technological equipment and obsolete the market and in the sectors as a whole. technological processes. This results in In Kazakhstan great cluster capacity exists low competitiveness of products in terms in mining, oil and gas, building and agro-in- of quality and realizable value. The re- dustrial sectors, as well as transport and nu- equipment of technological resources is clear technology industries, with such lead-

Box 3.2.1

Some of Kazakhstan’s achievements

The hydrometallurgical method of gold recovery through ion exchange gum developed by the Scientific- Production Association of Industrial Ecology Kazmehanobr has been more effective than international alternatives. Using it in production saves millions of dollars. As part of the project developed by the Association a gold recovering plant, described as one of the best in the world, was built in the town of Asif in Xinjiang-Uygur Autonomous Region, China. The National Center for Complex Processing of Mineral Resources developed an unprecedented technology to recover ferroalluminium silicon, which is used at the Ekibastuz Ferroalloy Miniplant, with a production capacity of 3,000 tons per year. The Non-ferrous Metal Research Institute developed a technology for the separate termination of molten and gas products resulting from the melting of sulphide concentrates of non-ferrous metals. The technology allows significant reduction of losses of non-ferrous metals with sludge. In addition to Kazakhstan, the technology has been introduced in lead plants in Canada and Italy. The Irtysh copper plant pioneered a technology to process copper and zinc, which was developed by the Institute and patented in many foreign countries. China plans to buy Kazakhstan’s technology to process sulphide lead concentrate. This technology was patented in 14 countries and is used in Germany, Italy, Canada and Bolivia.

52 Chapter 3. Current and future status of new technologies in Kazakhstan ing enterprises as JSC Ispat Karmet, JSC Kazzinc, JSC Kazmunaigas, JC Tengizchev- Box 3.2.2 roil, JSC Prodcorporation, JSC Kazakhstan temir zholy, JSC Kazatomprom, etc. Against Development of the national innovation system this background, a cluster-based approach to the development of biotechnology, in- The Program for development of a national innovation formation technology and the tourism sec- system in the Republic of Kazakhstan for 2005-2015 approved tor, with no economically influential enter- by the Governmental Decree #387 of 25 April 2005 identified prises will involve much risk and significant the following major problems that, if unaddressed, may hinder government costs. the development of national innovative capacity: Kazakhstan has the required capa-city – most scientific developments of technologies and to expand domestic production of prod- products are incomplete and cannot be marketed. This ucts and services by creating an environ- greatly diminishes the value of such technologies and ment which enables diversification of pro- products for potential partners duction, creation of infrastructure and use – lack of relevant mechanisms for the introduction and of modern technologies and equipment marketing of technological innovation. In the market to reduce imports and increase export of context, introduction of innovation is closely linked to domestic output. However, this requires small innovative business, which is characterized by high that a number of challenging targets be risks and large revenues in case of success. Developed achieved after a careful review of the barri- economies have a special economic sector ensuring the ers in each sector: required environment (infrastructure) for the development • identify priority areas of develop- of small innovative businesses; ment of industrial sectors, sources of raw – lack of developed infrastructural elements to facilitate materials and markets; innovative projects such as technology parks and special • saturate the domestic market with business incubators; a network of risk-financing funds competitive local produce; (venture funds); special financial mechanisms to support businesses at the stage of rapid development; certified • develop new technologies and equ- evaluators of businesses and intellectual property, etc. ipment to enable greater production output; Source: Review of current status and issues related to innovative • improve the quality and widen the development of the Republic of Kazakhstan, www.mit.kz range of produce;

• increase export capacity of local based economy dominated by extrac- Overcoming of produce through integration in inter- tive industries conducting mainly initial technological national markets and productions; processing actually hampers scientific and lag is impossible • identify the professional training ne- technological innovation, as is the case in without priority- Kazakhstan now. eds for different industrial sectors; based development In the current context, macroeconomic • take action to enable complete pro- stabilization is a necessary but not suffic- of processing cessing of mineral resources in order to ient condition for economic development. industries, growing increase production of high-tech im- The current status of scientific and production of end port-substituting produce and alleviate techno-logical capacity will not, without products rather environmental impacts; government’s support, be enough to than raw materials, compete with foreign producers, even on development • put in place mechanisms for coopera- the domestic market. of mechanical tion and support between government, Therefore, reduced production ca- engineering and scientific and project organizations, cor- pacity should be compensated by establishment of porations, private and government busi- the introduction of effective modern the fourth and the nesses. technologies and equipment, for which fifth technological more government funding and an Structural changes and the overco- structures ming of technological lag are impossible enabling environment for more local and without priority-based development of foreign investment are required. Otherwise, processing industries, growing production the gap between Kazakhstan and more of end products rather than raw materials, industrially developed countries will grow development of mechanical engineering each year. and establishment of the fourth and the The role of small and medium-sized fifth technological structures. enterprise in Kazakhstan’s innovative International practice indicates that development high-tech sectors are more responsive to innovation. Therefore, the more science- Small and medium-sized enterprise intensive sectors an economy has, the (SME) mostly operating in services, trade greater the level of innovation. However, and construction should play an important there is a reverse effect when a sector- role in the Industrial and Innovative Devel-

53 New technologies for human development in Kazakhstan

The role of SMEs opment Strategy and economic diversifi- with early age education in special in Kazakhstan’s cation. SMEs are particularly important in schools and colleges. innovative creating new jobs, generating new business Today Kazakhstan has universities of- ideas and promoting innovation as well development fering business and management courses. as social and local integration. However, However, such courses should encourage has so far been the role of SMEs in Kazakhstan’s innovative underestimated and support young people, while special development and the introduction of new training courses should be developed for technologies has so far been underestimat- SME managers. ed, which may be because the SME sector Consulting and support services is still under-developed, which limits its tech- targeting potential entrepreneurs wanting nolo-gical capacity. to implement their business ideas are a Today, Kazakhstan has at least 213,300 present-day need for Kazakhstan. Such 36 small and 11,500 medium-sized enterprises services should provide advice, training, (99% of all registered legal entities in 2006) mentoring and other services required employing over 800,000 staff (or 11% of all to effectively run a business. There is jobs). The ratio of staff employed in small currently a relatively limited range of enterprises to large corporations is much training opportunities for SME managers lower in Kazakhstan than in the EU, the US and staff. For example, in Finland there are and Japan. affordable training programs for women, Many provisions of national SME policy while the South Korean government are supervised by the government thro- awards scholarships for potential entrep- ugh legislation and open coordination and reneurs from poor regions and runs then through intermediacy of such struc- projects integrating training and practical tural funds as the National Innovation Fund, workshops. EU countries take measures to the Investment Fund, the SME Development develop the perception of business as an Fund, the Kazakhstan Development Bank academic discipline. and other financial instruments37 under the Sustainable Development Fund Kazyna, 2. Prompt and cheaper procedures for whose divisions can provide direct support setting up a business. to SMEs. The cost should be the most competitive Over the last decade, the government in the world, while procedures should be has paid much attention to the develop- swift and free from bureaucracy. There ment of small businesses by creating a sta- should be an option of online registration. ble macroeconomic environment, devel- In order to simplify registration proce- oping the domestic market and enabling dures for start-up businesses, a unified safer and more transparent cross-border registration form should be used and com- trade, which is of particular importance for munication with government authorities SMEs. improved, in particular on taxation issues. In some areas, progress has been im- Much information should be available pressive: online. There should be special emphasis on Consulting and • sole proprietorship businesses can be simplifying the legal framework, equalizing support services set up within two weeks at very little cost, while private partnerships can be chartered capital within the group of en- targeting potential set up within two and a half weeks for tities and improving information support. entrepreneurs US$300; 3. Opportunities for professional lea- wanting to rning. implement their • SMEs have better access to credit resources. Also, in recent years access to A system should be put in place to business ideas are start-up capital from private and public oversee provision of training tailored to the a present-day need sources has become much better due needs of SMEs by training organizations. for Kazakhstan to the improved economic situation Further, enterprises sho-uld develop internal and reorganized banking. learning and training schemes, while having The Program for Development of access to on-going training opportunities Kazakhstan’s Innovation System envisages and advisory services. that by 2015 a dynamically developing A major problem that SMEs face is lack and competitive economy will be built of qualified human resources. Kazakhstan with innovative businesses playing a key lacks a qualified labor force in such vital role. However, based on international sectors as information technologies, en- good practice the authors believe that the gineering, etc. following should be the key elements: In order to promote training for SMEs a 1. Kazakhstani citizens should learn set of measures should be undertaken. For business and innovation skills starting example, the EU, Japan and South Korea

36 Statistical Yearbook 2006, RK Statistics Agency, 2006. 37 These can include, for example, support instruments under multi-year support programs for corporate and individual businesses.

54 Chapter 3. Current and future status of new technologies in Kazakhstan allow tax exemption to stimulate training wing considerations in mind. In order to of internal personnel and/or hiring of promote SME development to the next sta- qualified workers; offer unique specially ge of development and acceleration of developed courses for SME managers; innovative processes and facilitate transfer initiate projects to review skills of SME staff of technology from scientific organizations and training needs; identify skill-building to small businesses, initiatives promoting structures in the fast growing SME sector technological cooperation between diffe- and replicate such structures; develop tools rent sized companies should be imple- to analyze the skills required for SMEs and mented, and programs developed to establish a two-way professional training commercialize knowledge and technology system. and systems of certification and quality To stimulate the setting-up of innovative assurance put in place. new companies, the following mecha- Cooperation between small businesses, nisms, that currently none of Kazakhstan’s as well as cooperation between businesses, programs for innovation system deve- educational establishments and research lopment provide for, can be used: 1) crea- institutions should be encouraged at the ting a unified structure for government local, national and international levels. funding tools, ensuring access to long-term The government should encourage risk capital and guarantees; 2) setting up small businesses to apply best practice and special investment companies to provide best business models. On the other hand, innovative businesses with start-up capital, there is a need for coordination to create which may be too risky for existing venture systems of information and business support companies (a so-called Fund of Funds to SMEs and set up easy-to-access-and-use similar to the Finnish Fund Sitra); 3) setting up networks and services tailored to the needs a venture fund for new technologies and a of businesses. fund for high-tech companies; 4) putting in Kazakhstan should have a website as The government place financial structures providing start- a single point of access to information on should initiate up funding for new businesses and instru- business start-up and operation, offering special programs ments of start-up funding for technology on-line consultations on business operation to raise public parks and business incubators; 5) providing and providing information on available awareness of technologies and developments that can risk loans at low interest rates for start-up innovative innovative businesses; 6) developing two- be introduced in production. In addition, standards for business service quality should processes and way guarantee schemes enabling access promote dialogue of SMEs to credit resources; 7) creating loan be developed, including consultations for between production guarantee funds to provide the guaran- female entrepreneurs. Similar services are tees required by financial organizations to now under development in Russia but have engineers, economic stimulate SME credit. not yet become part of business support agents and their Good information systems should services. In European countries, Israel, communities be put in place to provide start-up bu- Japan, the US and South Korea, however, sinesses with information on funding such services are in place and tailored to sources. This will help businesses to plan the needs of domestic and global markets. development stages effectively, have ac- Global practices indicate the need to cess to innovation funding and training identify and remove official barriers to e- opportunities and promote cooperation commerce and to promote e-business. with their counterparts. Despite a great number of local businesses Using loan schemes alongside two-way using the Internet, in reality it is difficult for companies to do business in e-space. At guarantee schemes will help shorten the this stage, many companies would think gap in funding compared to traditional of e-commerce as unsuitable for their sectors of the economy. Although run in operations. In order to demonstrate the many countries, the role of such schemes advantages of e-commerce, the legal may vary greatly from country to country. framework for e-commerce should be Due to the lack of access to risk capital, enhanced, infrastructure built, awareness high-tech companies should have easier raised and ICT skills developed. access to loans and guarantee schemes. In addition, the fast growing and The best of such schemes should be successful business sector should have replicated as best practice. top-class business support services, with Building the technological capacity of the daily practice of thousands of business small businesses advisors working mostly on the local level throughout Kazakhstan and the CIS. There The technological capacity of small are many examples of really top-class businesses should be built with the follo- business support services globally38 .

38 Creating Top-class Business Support Services, SEC (2001), 28.11.2001.

55 New technologies for human development in Kazakhstan

The action plan for the Program for In order to promote cooperation bet- Development of the Innovation System ween research organizations (particularly should include measures to provide com- universities) and industries and facilitate petition-based funding to SMEs and remo- sharing of knowledge and technology, ve unnecessary administrative and legal the government should initiate programs bar-riers to international fundraising. Spe- helping industrial workers and intellectual cial attention should be paid to methods property rights specialists to share and means of stimulating the development knowledge. of new companies, including establishing In practice this can be in the form contacts with scientific organizations. The of expert groups conducting studies to situation will be improved if long-term ef- identify and promote best practice in forts are made to promote and simplify the order to facilitate transnational research use of technological innovation in SMEs cooperation and sharing of technology and inter-business cooperation and asso- between universities and businesses. ciation, i.e. the cluster-based production of Other mechanisms to support small goods and services. innovative businesses through government Authorized government agencies sho- funding allocations can include: uld conduct systematic research and Ensuring participation of small innova- implement specific projects and activities tive businesses in governmentrun procure- to promote cooperation between banks/ ment. Studies show that only few small financial organizations and SMEs in order businesses participate in governmentled to develop best practice. The action R&D procurement as well as procurement plan for the Program for Development of other services related to innovative ac- of the Innovation System should include tivity. In addition, a set of measures should measures enabling access to start-up be developed and put in place to prohibit, capital and provide financial support to without careful expert review, purchase of innovative businesses with the capacity foreign equipment for government needs if to grow and create new jobs, including there are local alternatives. The relevance those in the traditional economy, through of this measure can be debated but at the start-up capital funds, incubators and current stage when the national budget or other structures. This should aim to attract resources of governmentowned enterprises investors in the long-term to develop a and companies are used to complete a venture capital industry investing in start-up development or import commodities for capital. national needs, this measure appears justi- Also, it makes sense to consider the fied. following aspects for the promotion of Support to local companies participat- regional development: ing in tenders to supply high-tech equip- ment. Such measures should include pro- • create regional economies based cure-ment for national needs as well as on knowledge and technological inno- for large local clients. Local and foreign vation to support the least developed producers should have equal opportunities regions to put in place competitive for terms of payment. Government guar- instruments and promote partnerships antees may be provided if such measures and collaborative projects between are applied to large projects, for example the government, businesses, research in the oil and gas sector. organizations and universities; Innovative business development • information community and regio- nal development – support projects on In addition to the above, innovative bu- digital technologies in order to reduce siness development should be promoted the digital divide between regions; to stimulate the innovative activity of large, medium and small enterprises. Innovative • accentuate the individual charac- business entities include businesses and teristics of different regions in order to organizations engaged in innovative acti- stimulate them to benefit from their vities. Not all businesses are classified as competitive advantages. innovative. Rather, these are businesses The government should initiate special making profits from the development, programs to raise public awareness of in- Innovative business production, use or distribution of innovative novative processes and promote dialogue products that may be science or techno- development between production engineers, economic should be promoted logy intensive products and/or services. agents and their communities. Special at- Innovative business operation allows to stimulate tention should be paid to the mobility of minimization of some expenditure and the innovative human resources and researchers. This production costs, i.e. innovative businesses activity of large, is particularly important in order to share are an institutional pattern ensuring medium and small knowledge between sectors, for example, effective cooperation between scientific enterprises research institutes and industries. and technological institutions and private

56 Chapter 3. Current and future status of new technologies in Kazakhstan entities on the market and offering Figure 3.2.1. Sources of innovative ideas for new knowledge-intensive business services. In- technologies novative businesses become self-sustai- nable entities if they can reduce costs incurred by scientific and technological institutions and other entities to create an innovative product or commercialize a new technology. Any innovative activity can take the form of a business and is based on: • search for and assessment of new ideas ranging from a new product to a new structure; • search for required resources; • business operation; • monetary profit and personal satis- faction with the outcome; Source: Finnish Foundation for Invention, 2003. The sources of new ideas for innovative businesses are given below (Figure 3.2.2). of funding, legislative shortcomings, lack of As the figure shows, the leading category qualified cadre, etc. standing in the way of is ‘Gap in the market’, indicating that economic and social well-being based on with the knowledge, time and adequate the introduction and use of technological resources to reach market and occupy a commodities. certain niche, potentially huge profits can This section will look at the social readi- be made. ness and receptivity of society, im-plying In a market economy the development government support to ensure the readi- of innovative businesses depends on ness of society in relation to the develop- demand on the part of users of innovation, ment, introduction and use of new technol- good scientific and technological capacity ogies. In our opinion, such support should of the national economy, operation of focus on overcoming the innovation divide, venture companies and investors funding i.e. ensuring equal access of all population risky innovative activities. groups to technologies and teaching them In Kazakhstan the pioneers of innova- how to use them; ensuring highquality ed- tive business have been youth centers for ucational opportunities for all, which will scientific and technological creation, sci- create a domestic market with a qualified entific and technological societies and co- labor force. Attention should also be paid operatives. Such businesses have used the to shaping a unified perception and social material and technological resources, sci- recognition of the need for technological entific developments and human resources development, i.e. developing a new men- of scientific institutions and design and en- tality. gineering bureaus. Let us look at each of these components Through the promotion of innovative of social readiness. business in Kazakhstan, links between sci- ence and technology and production can Innovation divide be established with innovative businesses An important enabling factor for One of the acting as intermediaries. This ensures almost the introduction of new technologies is implications of the automatic economic exchange between infrastructure aimed primarily at human introduction of new these two spheres. In addition to making development. One of the implications technologies should products usable in production through dif- of the introduction of new technologies ferent components of this innovative prod- be the access of a should be the access of a wide communi- uct, innovative businesses will seek partners wide community ty to technological resources, high rates capable of meeting a new or latent need to technological and flexibility of production and extensive within society. resources, high use in all spheres of life. rates and flexibility 3.3. Bridging the innovation divide and In reality, access to and use of tech- nological commodities is, paradoxically, a of production and social readiness dividing line between different strata. extensive use in all The above analysis of Kazakhstan’s The gap between developed countries spheres of life capacity in science and technology has and the rest of the world in terms of the identified a number of serious barriers to the development and use of information tech- effective introduction of new technologies nologies is growing. for the benefit of human development. In modern literature, a divide between Such factors include deterioration of different countries by which more advan- material and technological resources, lack ced countries with rapidly deveoping

57 New technologies for human development in Kazakhstan

created in countries home to up to only Box 3.3.1 15% of the global population, meaning that new technologies reach no more than half Technological isolation of the global population. In Kazakhstan the innovation divide Many technologically isolated regions, particularly in South lies in unequal regional development, Eastern Asia and Africa, are poor. The major challenges they leading to unequal opportunities in the face are tropical diseases, low level of agricultural production use of information and communication and environmental degradation. To address these, modern technologies among regions, large, technologies should be used. However, difficult economic medium and small settlements and urban situations prevent these countries from using technologies: no and rural areas. money to buy technologies, conduct research and introduce The technological capacity of Astana technologies with. For poor countries, especially in Africa, and Almaty cities is almost on a par with the diseases and tropical infections are a nation-wide disaster average level of European countries, but and a serious hindrance to national development. From the capacity in the regions remains of much perspective of foreign investors, regions with high disease rates concern. have a pernicious influence on the global economy, in particular Computer provision in regional primary on technologically isolated countries. and vocational education facilities de-

pends on the financial resources that these Source: http://www.ibci.ru/konferencia/page/statya06.htm educational sectors have (Figure 3.3.1), except for Kostanai and East Kazakhstan “Innovation divide” information technologies leave other oblasts and Almaty city, where expenditure is about unequal countries behind, or between different per student is minimal, while computer provision is the best. access to social groups of population in terms of access to the Internet, other information products Apart from the skills required to and technological and services, is called a ‘digital divide’ . use technologies, an important factor commodities that This Report looks at this divide in a wider limiting regional access to technological different groups sense, as an “innovation divide” going innovations is income. Typically, the duration of population may beyond a digital divide and including of education depends on a family’s income have unequal access to social and technological and occupation (Table 3.3.1). commodities that different groups of Looking regionally, incomes are highest population - rich and poor, young and old in Astana and Almaty cities and oblasts and people with and without disabilities - with high levels of employment in the oil, may have. In some countries such groups chemical and metallurgic industries, while may also include different ethnic groups in other regions people have much lower and women. incomes. New technologies, first of all, seek to Comparison of incomes and tertiary bridge such a divide between different enrolment for 2004 shows that Almaty city groups and should contribute to improved is the center of tertiary education, with a living standards. 100% tertiary enrolment rate, because the However, technological changes can number of students is higher than that of cause a situation in which some groups officially registered people of student age. without access to modern facilities and In other regions tertiary enrolment rates commodities of civilization are separated are: Astana city – 40.4%, Karagandy oblast In Kazakhstan from the elite even further. The proportion – 38.2%, Atyrau oblast – 35% and West the innovation of such groups is growing in most countries, Kazakhstan oblast (34.5%) (Figure 3.3.2). divide lies in including the OECD. In addition, to bridge the divide, unequal regional Furthermore, statisticians have found including that between different age development out that almost all new technologies are groups, training programs should be put

Box 3.3.2

Computers as a tool to reduce the divide

Different developments and research are undertaken to find a solution to the digital divide. In 2005 the Massachusetts Institute of Technology (MIT) started a program that will develop laptop computers costing less than 100 dollars. An OLPC is the cheapest computer with free software and low energy consumption. The battery can be charged by turning the handle of a built-in power generator. Users of such laptops can connect with each other using wireless interface and connect to a single access point to share and exchange data. In Davos at the annual World Economic Forum, Kemal Dervis, UNDP Administrator, and Nicholas Negroponte, a professor at MIT who leads the laptop program, signed a Memorandum of Understanding, according to which UNDP, in cooperation with national and international partners, will develop programs to use such laptops and training resources for schools in developing countries.

58 Chapter 3. Current and future status of new technologies in Kazakhstan

Figure 3.3.1. Primary and vocational students per one computer and financial resources

Source: National Report on the Status and Development of Education. 2005. National Center for Assessment of Quality of Education.

Table 3.3.1. Income, by region, in March 2006 (estimated), %

Source: RK Statistics Agency

59 New technologies for human development in Kazakhstan

Figure 3.3.2. Tertiary enrolment, %

Source: National Report on the Status and Development of Education. 2005. National Center for Assessment of Quality of Education under the RK Ministry of Education and Science.

The need for in place to train specialists of industrial In order to prevent long-term technological re- enterprises, businesses and farms, to give unemployment in older people, a number training of older them the skills to use new technologies in of measures are recommended. These people becomes production and everyday life. include re-training or advanced training Maintaining and developing the intel- evident of pre-pension age staff (aged 45-55) with lectual capacity and re-training of older obsolete qualifications and skills, in order to people will help to bridge the digital divide update them with skills matching present- and prevent long-term unemployment in day needs; flexible working arrangements people of older age. for older people such as part-time or home- Growing productivity and techno- logical revolution are causing the steady based jobs or short-term contracts, to widen deterioration and ageing of once pro- the range of working options and enhance fessional skills. In this context, the need for their well-being (see also unemployment technological re-training of older people dynamics by regions in 1999-2005 in Annex becomes evident. 2, Table 13).

Table 3.3.2. Qualification and age breakdown of staff engaged in research and development, people

Source: RK Statistics Agency.

60 Chapter 3. Current and future status of new technologies in Kazakhstan

Table 3.3.3. Breakdown of researchers by areas of science in 2005, people.

Source: RK Statistics Agency.

Gender is an important factor to con- In November 2003 Kazakhstan adop- sider when working to ensure public ac- ted the Gender Policy Concept to pro- cess to training services and technologi- mote gender equality and achieve the cal achievements. Gender disparities are Millennium Development Goals. The Con- obvious in the scientific and technological cept outlines national gender equality sphere (research and areas of science), policies in the medium-term, up to 2010. clearly seen in tables below (Tables 3.3.2, Also, the National Commission approved 3.3.3). the Strategy of Gender Equality in the RK Career development for women for 2005-2015, which addresses gender engaged in the development and use equality through legislation, social policy, of new techniques and technologies social and political life, economy, health, is difficult due to the “technological” counteraction of violence against women Mainstreaming nature of research, which is traditionally and children, trafficking, information policy, gender in national viewed as a “male” area. Science culture, science and education. science and involves a great deal of manual work It is our sincere belief that mainstrea- technology policy such as making, modernizing and fixing ming gender in national science and tech- can build a basis experimental techniques. This requires nology policy can build a basis for greater for greater scientific skills to use machines, install, assemble, scientific and technological achievements. weld, etc. Women do not have the skills This requires multigoal policies that will pro- and technological of metalworkers, turners, or electricians, mote equality between men and women. achievements which puts them behind men. However, women with good theoretical education Training of qualified personnel and intellect use this to cooperate with men on a mutually beneficial basis when Being competitive on the modern labor one party is responsible for all technology- market is largely dependent on how well related aspects in creating and adjusting workers can acquire and develop skills the experimental complex, while the other that can be used in or adjusted to various deals with a program of experiments, re- situations. Today, success in a professional Today, success in view of findings, mathematical modeling and social career is impossible without and writing of scientific articles and reports. readiness to use new technologies that a professional and Good results of R&D require, first of all, change approximately once every five social career is deep multi-dimensional knowledge and years, and adjust to the changing working impossible without good intellectual capacity, which women environment and address new professional readiness to use do as well as men and sometimes exceed challenges (see also Annex 2, Table 16). new technologies men in terms of persistence, diligence and It is important that national policy is that change interpersonal skills, for example. Therefore, conducive to human development and approximately once based on justice. Unemployment and to ensure equal rights and opportunities every five years for both genders, cooperation should be unequal access to technologies bring based on partnership and mutual benefit. huge costs to society, both at national

61 New technologies for human development in Kazakhstan

Table 3.3.4. Unemployed people by education However, alongside unemployment in 2005, % (see Table 3.3.4) demand for highly qualified personnel is growing and qualification requirements intensifying, resulting in more job openings. Higher qualification requirements are caused by changing production techniques and technologies and growing quality standards for new products, particularly those exported to the global market. Currently, Kazakhstan’s capacity to increase production and develop services through increased employment and use of new natural resources is becoming more and more limited. Therefore, intensive factors become more important for economic development: better qualified personnel, improved productivity and efficiency of materials and equipment Source: RK Ministry of Labor and Social Protection. are determined by the use scientific and technological achievements in different level (lack of support to production, lack of economic sectors. qualified cadre, idle production, reduced On the domestic market there is a great tax revenues due to under use of labor need for specialists with knowledge of resources, etc.) and at the personal level international standards, foreign languages, (personal challenges, loss of income, overseas work experience, experience with loss of qualifications over the period of international companies and new oil and unemployment, discomfort and a reduced gas technologies, as well as construction sense of usefulness). and industrial workers. Today’s situation on the labor market As a rule, the training courses and is characterized by a steady downward equipment offered by today’s higher trend in the unemployment rate through a education establishments and colleges growing number of new jobs and growing are obsolete and cannot serve as the economic activity of the population based basis for training of personnel for modern A more educated on economic development. According to technology-intensive industries. population is more estimates of the RK Statistics Agency, the Also, Kazakhstan should work on a adapted to using unemployment rate for the third quarter of training system for qualified trainers and new technologies in 2006 reached 7.5% versus 7.8% in the third consultants for educational establishments production quarter of 2005. specializing in training and consultation of innovation specialists. This should target the creation of regional teams of professionals capable of providing high-quality edu- cation and effective consultation for the introduction of new technologies and innovative management. The most important resources for new technologies include intellectual capacity, scientific knowledge, management te- chniques and methods, business capacity, innovative qualities, and the professionalism of personnel of all levels and occupations. What is important for Kazakhstan’s transition to innovative development is a corps of qualified specialists in science and technology, industry and business who are capable of promoting the outcomes of research and development to reach the market of science-intensive products and also apply these outcomes in industrial and business innovations. Special attention should be paid to bringing higher education up to global standards and addressing staffing issues, including engaging young people in science.

62 Chapter 3. Current and future status of new technologies in Kazakhstan

A more educated population is more adapted to using new technologies in Box 3.3.3 production. Of principal importance is the step-by-step education of young people Supporting science and research through which the most talented young There are a number of organizations supporting science and people are selected to work in science and research in the FSU . These include, INTAC, CRDF, ISTC, etc. generate new ideas. INTAC stands for an independent International association This means education of young cadre, a established by the EU and some non-EU countries to support the so-called creative group of the population much-valued scientific capacity of the CIS countries through that has the capacity to develop and cooperation with Western Europe. INTAC’s mission is to support introduce new technologies. This group advanced CIS scientists through funding of scientific projects. includes scientists, highly qualified IT CRDF stands for American Civil Research and Development specialists and managers aware of and Foundations, which is a non-profit organization supporting receptive to the use of new technologies. science and technology cooperation between the United This group is important for two reasons. States and the FSU. Firstly, they are people with the creative ISTC stands for International Science and Technology capacity to innovate, make discoveries, Center that works to give scientists and researchers specializing act as experts and promote an innovation- in armaments, particularly those with knowledge and skills in the based approach to technological and production of weapons of mass destruction and rocket systems, other challenges. Secondly, this group an opportunity to re-orient to civic activities. serves as a basis for the re-production of society’s creative potential, acting as role models and directly ensuring re-production of the cadre through education40 . The country should encourage and Box 3.3.4 reward talented young researchers, develop them professionally and promote Almaty City Akimat holds a student competition for best their creative and professional initiative and innovative developments engage them in research through different grant programs, international scholarships, The Almaty City Akimat initiated an open student competition and competition-based selection of for best innovative developments. To compete, a project should projects. be aimed at commercial use of research findings relating to the All of these measures should aim technological development of Almaty, production of science- to develop intellectual capacity and intensive import-substitution and export-oriented produce. The promote the prestige of research and competition is open to students submitting projects that can be development. completed within two years, with preference given to projects In addition to deep knowledge of the to be completed within a year. The total amount to be granted research topic and the required material, is USD100,000 divided into 5 grants. financial and information resources, young specialist need to know innovative Panorama, 29 December 2006 management. This requires training of the managers and staff of small businesses, managers of innovative projects, specialists of technological companies and innovative structures such as technology parks, Box 3.3.5 innovation and technology centers and technological advance centers, specialists Vocational education policy on legal protection and commercial use of R&D outcomes, marketing of high- Each country has specific approaches to addressing tech products, strategic development vocational education issues in national policy. German policies of science-intensive companies, tech- are largely based on social concerns. The German government nological assessment of innovative com- supports higher education programs that teach skills required to panies and scientific establishments and set up innovative businesses. assessment of innovative activities. The Netherlands and Belgium (Flanders) ensure high quality Currently, it is impossible to disregard education that will enable graduates to participate equally in the negative implications of the market international science and technology related programs. evolution of education. Great Britain (Wales) focuses on promoting the prestige of Factors hampering the capacity of engineering professions, which results from policies attracting Kazakhstan’s educational system to train advanced international companies working in mechanical students in innovative practices include engineering and electronics to the country. lower quality of education, violation of

40 Social factors of innovative development of the Russian economy. http://www.hse.ru/temp/2006/files/20060404-06/20060406_chernysh.doc

63 New technologies for human development in Kazakhstan

Kazakhstan’s higher institutional selection criteria and evalua- and underlying behavior, lifestyles and the and vocational tion of students, growing corruption in the perception of certain phenomena. In other admission process, etc. Another hindrance education systems words, mentality is an integral characteristic is the crisis in the vocational education sys- of people living in a certain culture that fail to meet present- tem. allows them to describe the original vision day requirements In summary, it can be stated that of the world and explain people’s reactions to train qualified Kazakhstan’s higher and vocational edu- to it. specialists with cation systems fail to meet presentday One of the components of mentality research and requirements to train qualified specialists is social response. This is a response by a innovation skills with research and innovation skills and collective or individual to a policy, action, and promote the promote the development of science and etc. undertaken by government. Although development technology. innovative activity does not require the Within the next few years Kazakhstan of science and involvement of the entire population, it may face problems of reduced oil and technology is impossible without public support. The mineral resource extraction and declining experience of many countries shows that importance of hydrocarbon materials for underestimation of the importance of technologies of the new development mentality and public attitude to national cycle. To avoid such a scenario the country policies may be destructive. should form an innovation reserve and Henri Bergson, a French philosopher, Mentality and train highly qualified personnel capable wrote: “History shows that technological of shifting the emphasis from raw materials attitudes should development of a society does not ensure to innovation and technology based be shaped in moral and ethical development of people industries. living in it. Better material commodities relation to national The system of general and further may even be harmful if not accompanied technological education should address staffing issues by respective spiritual efforts”. According development as as well as develop a variety of human to this statement, the notion of mentality capabilities. Not only will the transition to part of work on the should accompany societal recognition of new technologies determine the structure receptiveness of the inevitability of technological progress for of Kazakhstan’s economy in the future but society, extensive social benefit as well as recognition of the also the overall future of the country. involvement and need for an informed approached to the Therefore, one of the most important recognition of the introduction and use of technologies and innovation development targets from comprehensive analysis of the implications need for this process the point of view of training of qualified personnel is to ensure that specialists and risks. engaged in innovation and making sci- 3.4. International practice of entific discoveries, qualified trainers, ma- introducing new technologies in the nagers and consultants create, introduce context of globalization and use new technologies and that the general public has the skills to use such Let us look at some international technologies. practices that demonstrate solutions to the issues examined in the previous Shaping the mentality sections. The development of national The needs for education, skills and in- science has become a major factor formation should be viewed as needs re- impacting countries’ social and economic quired to achieve orientation in the envi- development and their niche in the ronment, see the whole picture, identify the global economy. Studies shows that it is model of behavior and methods to handle the level of scientific development and challenges, achieve internal balance and correlated technological innovation that adjust to the social environment. If unmet, have become the foundation of present- these needs will make intelligent and ratio- day welfare and good living standards in nal human behavior impossible. Picturing developed countries. Therefore, studying the environment and identifying models national science and technology systems and stereotypes of human attitude to a and their levels of development is an process precede the formation of a com- important topic of research. mon mentality. Risks to human life are determined Mentality and attitudes should be by economic and social development. Risks to human life shaped in relation to national technological Statistics show that the higher the level are determined by development as part of work on the of socio-economic development and, economic and social receptiveness of society, extensive invol- as a result, the better the system of socio- development vement and recognition of the need for economic safety ensuring protection from this process. harmful environmental effects, the higher Collective and individual mentality the life expectancy. embrace sustainable spiritual values, deep Today, the development of high- axiological directives, skills, reflexes, latent tech industries that use science- habits and long-term stereotypes studied intensive technologies determines the within certain special and time boundaries overall situation on the global market of

64 Chapter 3. Current and future status of new technologies in Kazakhstan

Box 3.4.1

Science in the US

The American R&D system is traditionally multi-level, relatively decentralized and multi-sector. Official American statistics distinguish between five main sectors engaged in R&D: 1) the Federal Government owns or oversees research institutions, centers and national laboratories; 2) academic research centers funded by Federal Government but accounting to private bodies; 3) universities and colleges; 4) industry (research centers and divisions of American corporations and companies); 5) so-called “non-profit” organization and institutions. In the early 21st century US expenditure on R&D in absolute terms reached a record-breaking level of USD312.068 billion (at 2003 prices) reaching 2.66% of GDP. In 2004 the Federal budget funded 29.9% of all national R&D. However, the major source of R&D funding was the internal budgets of American corporations and companies, which accounted for 63.8% of all R&D expenditure. Thus, the two major sources of R&D funding were Federal Government and industries. These two combined accounted for 93.7% of overall US expenditure on R&D, while internal R&D budgets of American universities and colleges accounted for 3.6%. An important characteristic of US industrial R&D is that it is based on self-funding. Industries deliver 63.8% of the national R&D budget. However, only 4.8% of the industrial R&D budget is spent on fundamental research. At least 90% of all industrial R&D is short-term applied research to improve products. The most important and enduring characteristics of academic R&D in the US are the relatively stable list of leading American universities and colleges engaged in R&D and the relatively high concentration of financial resources, including Federal Government money, distributed within the US academic system. Thus, in 2001 96% of the academic R&D budget was delivered by 200 leading American universities and colleges that accounted for 6% of all academic centers in the US (around 3,600 institutions), while 80% of the academic R&D budget was delivered by the first 100 academic centers, 17% by the first 10, and 14% by the second 10. technologies and national niches in the Countries striving to be leaders in sci- global economy. The annual volume of the ence apply a scheme by which govern- global market of science-intensive products ment-funded R&D findings are transferred totals approximately USD2.5-3 trillion, which to a local producer free of charge or for is more than the market for energy and a token amount, in exchange for an obli- In such countries raw materials. Modern development of gation to invest in production or create a as the USA and the global economy displays a steady certain number of new jobs. In these coun- Japan, science and trend of accelerating growth of proces- tries there is no center to regulate innova- technology account sing industries producing science-intensive tion, while coordination mechanisms are in for a 65-80% place, as well as a legal framework stimu- products. In such countries as the USA and increase in national lating more resources from the private and Japan, science and technology account revenues for a 65-80% increase in national revenues. business sectors and reduced government The total value of global technologies funding. This is a “leading” innovation poli- is estimated at around 60% of overall Gross cy or “growth” policy by which innovation is Global Product, while the growth rate for based on domestic fundamental and ap- sales of technologies exceeds that of other plied research in almost all leading areas of goods. Thus, in the 1990s the total value of high technology. global sales of technologies was estimated Globally, there are two main approach- at between 20 and 50 billion US dollars, but es to funding science: had risen to USD500 billion by 2000. Sales of 1. Direct government involvement in technologies are very profitable, with ope- knowledge creation through organiza- rational costs only accounting for10-25%. tion of large laboratories funded from New technologies and high-tech go- the national budget and distributing ods and services are, as a rule, a result of findings free of charge to a wide range systematic investment in R&D, which is of potential users. Typically, such labo- the case in almost all high-income OECD ratories are responsible for research in countries and a few Asian and Latin Ame- health, defence, energy and agricul- rican countries. OECD countries, home ture. to 14% of the global population, account 2. Grant programs for fundamental for 86% of patent applications registered research open to scientists working globally. The OECD countries allocate more outside national laboratories. Grant to R&D both in absolute and percentage conditions include full accountability terms – an average of 2.4% of GDP, and reporting and public disclosure of compared to 0.29% of GDP in Kazakhstan. findings.

65 New technologies for human development in Kazakhstan

Box 3.4.2

Science in Finland

The national structure of scientific and innovative development is based on the Ministry of Education (MoE) and Ministry of Trade and Industry (MoTI) who implement the national policy in science and innovation, coordinate all parties involved and oversee leading national R&D organizations. In 2006, R&D expenditure totaled: Tekec (MoTI) – National Technological Agency – 478.2 million Euros; 20 universities and 30 higher education establishments (MoE) – 427.5 million Euros; research institutes (MoTI) – 272.6 million Euros; the Academy of Finland (MoE) – 257.4 million Euros. The Science and Technology Policy Council under the Finnish Government headed by the Prime Minister is responsible for national policy for research and technological development. The ministers of education, trade and industry are deputies to the Council’s head. The Council includes ministers of finance, foreign trade, defence and culture, the director general of the National Technological Agency (TEKEC) and the Finnish Center for Technological Research, heads of the Finnish Academy, trade unions and universities of Helsinki, Turku and Jyvaskyla, as well as Nokia and Premix companies. Once every 3 years the Council develops a national innovative development program defining priority areas of science and technology. The program is implemented by government organizations under the different ministries. In 2006 the Ministry of Education, responsible for fundamental research, humanitarian research and education delivered 42.6% of the total R&D budget, or 715.4 million Euros. The Ministry of Trade and Industry, responsible for applied research and high technologies, delivered 34.9%, or 586.9 million Euros, while the Ministry of Health delivered 7.5% or 125.6 million Euros, the Ministry of Agriculture and Forestry – 5.9% or 99.3 million Euros and other ministries 9.1%. The main funding sources for science are the private sector (69.8%) and the government (30.2%). Expenditure on science, research and technology accounted for 4.4% of the national budget in 2006 or 1.680 billion Euros. 0.99% of GDP, which is what the Finnish government spends on R&D, is one of the highest indicators in Europe (average 0.77%). Finnish R&D employs over 70,000 specialists. Annually, 1,200 doctorate degrees are awarded, of which 45% are women. In Western Europe expenditure on fundamental research is higher than in the USA and Japan. Western European countries recognize the importance of fundamental research as a source of new scientific knowledge.

Government-funded Under the first scheme, government • deduction from taxable income of R&D findings are funds between 20 and 50% of R&D costs. contributions to charitable organizations transferred to a Government funding covers the R&D cost funding innovation. local producer free of fundamental science in universities, Compared to the above schemes, of charge or for a defence-related research in national Kazakhstan uses the following tax token amount, in laboratories and contracts with the private privileges: sector. exchange for an – property tax reduced by 10 times for obligation to invest According to global practice, the following tax benefits are used to promote scientific organizations versus profit- in production or science and innovation: making entities; create a certain number of new jobs • including of the costs of innovative – exemption from VAT on research processes in the net cost of products; funded by government; • research and investment tax credit, – exemption from income tax for i.e. deferring tax payment on revenues government-run scientific orga- for innovative purposes; nizations. • tax ‘holidays’ of several years for In our opinion, such tax privileges only revenue from innovative projects; apply to government-funded research and research conducted by government-run • targeted tax benefits aimed at a organizations. This is therefore insufficient continuous increase in R&D expenditure to attract business and private sectors and by different organizations; foreign investment to science and technol- • reduced taxation on dividends ogy in Kazakhstan. Government support is accrued from shares in innovative much needed through financial, tax and enterprises; legal mechanisms required to develop sci- ence and technology intensive products • reduced taxation of revenues in and services in Kazakhstan. the amount of the costs of devices Compared to the above schemes, and equipment transferred to higher Kazakhstan uses the following tax education establishments, research privileges: and other organizations;

66 Chapter 3. Current and future status of new technologies in Kazakhstan

Table 3.3.5. Tax incentives in R&D and innovative activity in other countries 41

– property tax reduced by 10 times for countries shows, effective government sup- scientific organizations versus profit- port to innovative business can be positive making entities; for the national economy. In developed Current tax countries science and innovation policy – exemption from VAT on research privileges are pursues the goals of increased contribution funded by government; insufficient to of science and technology to economic attract business and – exemption from income tax for gover- development, better global competitive- nment-run scientific organizations. ness of national products, improved na- private sectors and tional security and defense capacity and foreign investment In our opinion, such tax privileges only an improved environmental situation. to science and apply to government-funded research and Secondly, without interfering in the research conducted by government-run technology private and business sectors, the go- organizations. This is therefore insufficient vernment can create an enabling to attract business and private sectors economic and socio-political climate for and foreign investment to science and innovation through direct and indirect technology in Kazakhstan. Government influence. Such an economic and socio- support is much needed through financial, political climate includes innovative tax and legal mechanisms required to relations between government and in- develop science and technology intensive novative entities of different ownership products and services in Kazakhstan. type. A review of international practice Thirdly, small and medium innovative in innovative development, regulation business is a sphere for government of innovative processes and models of support. Hindrances to the development innovation policies leads to the following of small innovative business include risk, conclusions. lack of financial resources, competition Firstly, international practice offers with large corporations, inflexible tax and a wide range of economic instruments amortization policies. Government supports of science, technology and innovation small innovative businesses through the policies that can be used to regulate legal and legislative framework, privileged innovative processes at the micro and credit, reduced taxation, direct budget macro levels. Such instruments are costly, funding, information, advice, marketing and even the rich countries cannot afford and human resources. Business incubators them. and technology parks are an effective The appropriateness of government form of support for innovation. ‘interference’ in the private sector of a Fourthly, present-day innovative deve- market economy is debatable. Nevert- lopment trends in developed countries heless, as experience of developed show that innovative development is well

67 New technologies for human development in Kazakhstan

supported in a framework of national inno- economic development. Information on vative systems, with a combination of inter- the development and implementation linked institutions and mechanisms focus- of national scientific and technology ing on the production and commercial use programs should be made public and of scientific knowledge and technology supported by the public sector. within national borders. 3. Developing human resources. Young Experience of developed countries scientists and researchers should be shows that the rate of social and economic more mobile, while creative work and development depends on: technological innovation should be • the effectiveness of research based stimulated for the benefit of human on national interests and having both capital. practical and human development 4. Bridging the innovation divide. Ac- values; cess to education and technological • the effectiveness of a system of commodities should be ensured for dif- obtaining, processing and transferring ferent groups of the population, while science and technology information to the digital divide between rich and economy and science; poor, young and old, men and women should be bridged. Inequalities and dis- • a range of innovative establish- parities should be borne in mind when ments with the capacity to implement developing and implementing science the achievements of national and and technology policies, which should international science; be the foundation for great achieve- ments in science and technology. This • a legal and legislative framework requires multi-goal strategies based on enabling economic entities speed justice and equal rights. up the production of new goods and services. 5. The quality of research should be im- *** proved through provision of good equip- ment, access to information, material The major conclusions of this chapter rewards and attracting highly-qualified are as follows: specialists and experts to Kazakhstan. 1. Technologies play a significant role 6. Action should be taken to promote in improving the quality of human demand for scientific and technologi- life and living standards. By using its cal products and services produced by scientific and technological base, local scientific and research organiza- Kazakhstan can improve its capacity tions. It is important to ensure a market- in technology. Substantial government based approach to stimulate domestic support is required through effective demand for domestic scientific prod- legal, regulatory and fiscal mechanisms ucts and technologies. to facilitate innovative activity and the production of science-intensive and 7. Best practice should be adapted high-tech products and services that and used in Kazakhstan alongside will eventually contribute to improved transfer of new knowledge and tech- national welfare. nologies. The innovation policy implica- tions and implementation mechanisms 2. Recognition of technological and used in the most competitive countries social innovation at the levels of should be carefully reviewed - in partic- government, business and private ular, their fiscal, tax, regulatory and legal communities is important for socio- instruments.

68 Chapter 4. Promoting an enabling environment for new technologies in Kazakhstan

CHAPTER 4. PROMOTING AN ENABLING ENVIRONMENT FOR NEW TECHNOLOGIES IN KAZAKHSTAN

This chapter attempts to outline the Box 4.1.1 main concepts, conditions and mecha- nisms required to develop an environment According to the Program for Development of a National Innovation conducive to new technologies in Ka-zakh- System for the Republic of Kazakhstan for 2005-2015 the national stan, look at the importance of innovative innovation system is divided into the following major subsystems, each of infrastructure and legislative protection of which includes such elements as: intellectual property and provide a brief 1. Scientific capacity is an important factor influencing innovative overview of the tech-nological develop- development. It is formed through the development of applied research that brings fundamental development into commercial ment implications of Kazakhstan’s WTO ac- use. Scientific capacity includes: cession. а) government-run scientific organizations such as national scientific centers, research institutions, higher education establishments, 4.1. Fundamentals of an innovation design institutions; system b) scientific organizations under national companies and laboratories under large enterprises; An innovation system is a combination of economic entities interacting together in c) private research and design institutions; the process of development and introduc- d) small and medium-sized enterprises engaged in research; tion of innovative products and services and e) scientific cadre and individual inventors; engaged in innovation within the relevant f) material and technological resources. legal framework based on national policy. 2. Innovative business is a link between science and technology An effective national innovation system and production, while the ultimate purpose is to develop enterprises in Kazakhstan should promote new ideas capable of efficiently responding to current market conditions and setting up production of competitive, high-demand, new generation and knowledge and transform them into science-intensive products complying with international standards. ready-made products and services that Innovative business includes: are demanded directly by Kazakhstan’s а) business angels; consumers and society. In other words, as b) enterprises; a dynamic system the national innovation c) innovative managers. system should operate in an environment 3. Multi-level innovative infrastructure is a system of interlinked enabling development and transformation production, consulting, educational and information structures of knowledge into a material product when supporting innovation. Innovative infrastructure consists of the the outcomes of the innovation process following elements: are new technologies. Kazakhstan has an а) national technology parks; ambitious target of making management, b) regional technology parks; financial and organizational decisions to c) technological business incubators, etc. set up basic structures for innovation, which 4. Financial infrastructure is a key link for complex funding of science, requires continuous overview and detailed production and educational processes related to innovative and attention. What fuels this ambition is that technological development. It is based on a combination of different developed countries keep developing dy- mechanisms of direct and indirect government support to innovative namically and setting up comprehensive business and infrastructure. Financial infrastructure includes: knowledge-based innovation systems. а) government-run development institutions; This section describes the first attempts b) venture funds; to create the fundamentals of a national in- c) enterprises; novation system as set forth in the Program d) individual entrepreneurs; for Development of a National Innovation e) second-tier banks, etc. System for the Republic of Kazakhstan for 2005-2015. Also, the section discusses some concepts that are important in setting up but through cooperation with scientific An effective the basic structures required for innovative institutions, technological centers, consult- national innovation development. ing companies and even competitors. A system in Innovation is viewed as a product of a holistic approach should be taken when Kazakhstan should non-linear continuous process, i.e. innova- looking at this process, since any commu- tion is not a direct end product of scientific nication is based on the capacity of all the promote new ideas or technological discovery. In addition to parties involved. and knowledge R&D, the non-linear process includes such In order to expedite the innovation pro- and transform measures as training, design, financial mar- cesses, the national government works to them into ready- keting, etc., while effective combination of set up and strengthen constituent sub-sys- made products and such measures promotes innovation. More- tems and infrastructure of the national in- services over, innovation is also seen as communi- novation system (Box 4.1.1). This includes cation between enterprises (economic establishment of scientific centers, financial agents) and the external environment. En- institutions, technology parks and incuba- terprises alone cannot create innovation, tors at the regional level, revision of the

69 New technologies for human development in Kazakhstan

MoES should legislative framework in the area of patents out of the national budget and improve undertake and intellectual property, identification the quality and relevance of planned and institutional of priorities for the development of current R&D. Projects are underway to an institutional basis for science and reforms for better improve science and information through technology. the creation of a science web-site and coordination To assess the effectiveness of such e-access to databases of scientific and of science and measures each constituent component technological institutions and libraries. technology (sub-system) of the national innovation In order to strengthen the material and processes system should be reviewed. technological base the MoES is considering Science and research the possibility of setting up a system of national science laboratories and In 2003, after Kazakhstan’s National technology centers based within leading Academy of Science lost the status of scientific institutions and universities. This a government-run agency, scientific should contribute to the development of institutions and schools overseen by the R&D and science and technology priorities. Academy of Science were placed under Laboratories will run according to new the authority of the Ministry of Education standards of R&D quality management, and Science (MoES). This means that which are called good scientific practice the MoES is in charge of many scientific, and good laboratory practice. research and production institutions, while The targets and measures described this organizational system can be viewed above require careful research and as an active knowledge structure within the understanding of the real needs of the national innovation system. Considering scientific community and the business the fact that this system cannot be the only and public sectors. In order to increase element to create and distribute relevant the efficiency of science and technology, knowledge, firstly, for the national economy, related projects based on priorities the the MoES should undertake institutional Ministry of Education and Science should reforms and coordinate them with other closely cooperate with key sectoral key national ministries. The ministry should ministries, in particular the Ministry of systematically review the capacity to Industry and Trade through funding and promote science and research in order to implementation of joint medium-term improve the quality and relevancy of R&D. projects. Kazakhstan Recently, the MoES has opened Human resources are a determining should pay special national centers for biotechnology, land factor for the development of science and attention to the studies and astrophysical research, which research. Kazakhstan should pay special development of bring together a number of scientific attention to the development of qualified qualified scientific organizations and establishments. Such scientific and engineering cadres. With centers will accumulate essential resources current manpower policy the science and engineering required to work on priorities in science cadres and research system is likely to face a such as staffing, technology, equipment, lack of qualified staff, as mentioned in experience and knowledge. Chapter 3, due to an insufficient inflow of Agencies under the MoES work to talented young scientists and researchers enhance principles of scientific and to science and technology. The scale of technological assessment of R&D funded science and research is largely dependent on adequate human resources. With an increase in government expenditure on R&D in the future (by 25 times by 2015), the government’s ambitious plans may lead to fast-growing demand for scientific and engineering personnel. Considering the highly elastic research labor supply, increased expenditure on science will result in increased remuneration of scientists and engineers, until market balance is restored through additional supply of new researchers and scientists. This will promote competition on the scientific labor market, thus improving the quality of R&D for national economic and social development. However, the problem is that it may take until the medium-term attract and train talented young researchers and engineers, which means that a well- considered approach should be taken to ensure a steady and regular increase in expenditure on science (see Annex 2, Tables 19, 20).

70 Chapter 4. Promoting an enabling environment for new technologies in Kazakhstan

Many countries such as Sweden, Finland investment outcome, rather than lack of Innovative business and Ireland have succeeded in increasing information about costs to be incurred. plays a key role the efficiency of their national innovation For example, the development of a new in promoting systems through a regular increase in original medication made of locally grown the introduction the corps of scientific and engineering plants may take between 3 and 20 years personnel (candidates and doctors of and require extensive financial resources, and use of new science) and creation of an enabling from synthesis of a new compound to mass technologies in the research environment for scientists and production. There are no investors who production sector engineers that retains them in this sphere could invest in such expensive and long- and improving the and promotes science and research. payback projects. employment rate On the other hand, generation of new Innovative business knowledge from R&D to be used for the development of a new product may be As discussed in the previous chapter, dependent on past activities related to the innovative business plays a key role in pro- generation of such knowledge. Knowledge moting the introduction and use of new may be codified or undisclosed, which technologies in the production sector and will be a barrier to its access and transfer. improving the employment rate. Currently, Distribution of funding shares and property Kazakhstan has an unbalanced innovation rights on R&D products may be key. The Due to great system, in particular, between science and government can play an important role in commercial technological development and transfer engaging the private and business sectors of technologies. This is because the out- uncertainty in risky projects by providing initial funding. comes of R&D fail to meet the needs of the enterprises tends to Development of new technologies is an supporting system, national security and refrain from funding uncertain, complex and multi-dimensional the growing demand for innovation on the projects related to process. The initial obstacle enterprises part of a number of segments of the busi- face is to identify internal technological new technologies ness and social sectors. capacity through market research. This will Given that the bulk of research is help identify a niche in which to create and applied research, accounting for 76.5% use new technologies. of all national R&D, attempts have been However, such action can also be taken made to transform the selected outcomes based on existing technological skills and of applied research to development. The knowledge. Enterprises will only undertake initiators of these attempts, however, faced research to define new technological the lack of interest on the part of industrial solutions if there is a problem that cannot enterprises to be involved in the process. be solved using existing knowledge of the The reason is that enterprises prefer to enterprise. In other words, in Kazakhstan specialize in active industries, due to limited R&D is not necessarily primary to generate technological capacity and awareness. new ideas and technologies. Rather, R&D This is explained by a phenomenon, which should be viewed as activities aimed Martin Fransman42 defined as “bounded at identifying solutions in the context of vision”: “…vision of corporate profit sour- innovation. ces is based, primarily, on active (raw material) markets, production and R&D Innovative infrastructure and respective short and mid term needs for satisfactory profit. The reason behind Innovative infrastructure is the neces- bounded vision is that it takes some time for sary organizational and institutional basis new technologies employed in neighboring determining the role of each participant spheres and not related to the operations of the innovation process. According to of such enterprises to get into corporate the Program for Development of National vision…” Innovation systems, one part of innovative Thus, the need to gain satisfactory infrastructure is technology parks and in- profit in the short and medium terms limits cubators, although these might be better the vision of enterprises and makes for identified as technological infrastructure. only short-term forecasts. Consequently, Technology parks and incubators are re- due to great commercial uncertainty quired to facilitate transformation of knowl- enterprises sometimes refrain from fun- edge and technologies into new products ding projects related to new technologies. and services that will occupy new market Furthermore, research involves risk and niches. In Kazakhstan, existing technology large initial investment. In order to invest in parks and incubators look for new invest- such projects, enterprises should be able ment projects to be funded through different to set prices for planned new products sources such as investment and innovation higher than the total costs incurred through funds, second-tier banks and the business production. However, this is difficult to and private sectors. However, technology do because of uncertainty about the parks should also use and concentrate

42 Martin Fransman, Phenomenon «Bounded Vision»(1990:3).

71 New technologies for human development in Kazakhstan

Technology parks such intensive factors as knowledge- projects can be limited due to high should also use and intensive and high-tech resources that technological risks. However, the public concentrate such can be obtained from different sources policy of financial institutions funded intensive factors such as scientific insti-tutions, universities, through the government should focus on industrial associations and enterprises and financial and expert support to innovative as knowledge- marketing centers. Such resources will help seed and start-up projects, for example, in intensive and to generate knowledge, which can then the form of funding of R&D through grants high-tech resources be used in practice. and loans. Such financial institutions should that can be Scientist Kenneth Arrow (1962) upposed take on the risk of non-payback of initial obtained from that a technology can be viewed as a investment, which the private or business different sources form of knowledge and the know-how of sector cannot afford or is not interested in such as scientific material transformation43. Nevertheless, it is doing. institutions, very difficult to evaluate the economic cost Of the above institutions, the only of knowledge without its transformation active financial participant of innovative universities, into new technologies and products. This projects is the National Innovation Fund, industrial is where technology parks should come in holding approximately 5% of the overall associations and and handle, first of all, commercialization portfolio to fund applied industrial rese- enterprises and of knowledge and transfer of technology. arch and development through grants marketing centers Incubators, in turn, are entities that provide and soft loans.. However, there is currently services to manage the factors of producti- no registration of the Fund’s involvement in on cost-effectively, i.e. knowledge-inten- such projects or it may only be starting. sive services that allow reduced production Therefore, the role of the above- costs. Technology parks and incubators are mentioned financial institutions is of ma- Kazakhstan’s an undeveloped link in the basic innovation terial importance to activate innovative financial institutions infrastructure, since what is required is processes in Kazakhstan, since such should consider the recognition of the changed relation financial services and mechanisms help re- the development between economic agents and a new move gaps in the innovative process and of a number structure within the innovation process. improve the efficiency of the innovation of interlinked system. Financial infrastructure activities and Based on the above, it is necessary to look at infrastructural support to innova- Over the last decade, Kazakhstan has programs to tion. Attention should be paid to important set up such financial institutions as the- In support innovative services that promote communication vestment Fund, the Kazakhstan Develop- enterprises that and cooperation within the innovative ment Bank, the Fund for SME Development work to develop process as a whole and define the roles and the National Innovation Fund. Such fi- and functions of the players in the process new products and nancial institutions and mi-nistries are the of development of new technologies. Such services based on main agencies executing national innova- functions may include financial support, local R&D tion policy. Major purpose of financial infra- information, marketing and consulting structure is to provide financial services to services, training, assistance with reaching active and new enterprises, expert services markets through trade centers, etc. for project management, coordination International experience of the deve- and administration of projects to be fund- lopment of national innovation systems ed. Keeping in mind the importance of glo- indicates three main stages of de- bal integration, such institutions actively velopment: encourage investment projects aimed at the import of new technologies to Kaza- 1) setting up the basic structure defi- khstan. ning the main political principles and It is noteworthy that technologies concepts of science and technology that the world has been using for a long policy and establishing certain insti- time are imported to Kazakhstan as new tutions for science and technology. or advanced technologies. This helps 2) technological orientation, i.e. de- to modernize the technological base of velopment and implementation of national industries, while the investment and technological policy pursuing certain legislative framework provides enabling goals, and development of mecha- customs and tax mechanisms. However, nisms to transfer, distribute and com- in order to speed up innovation processes, mercialize technologies. Kazakhstan’s financial institutions should consider the development of a number 3) creation and development of a so- of interlinked activities and programs to ciety and national innovation system support innovative enterprises that work based on knowledge and the follo- to develop new products and services wing four principles: generating and based on local R&D. It is apparent that the em-ploying knowledge and know-how; commercial success of such innovative important R&D and education systems;

43 Evaluation of the Finnish Innovation Support System, Ministry of Industry and Trade, Finland. Edition 5/2003.

72 Chapter 4. Promoting an enabling environment for new technologies in Kazakhstan

Figure 4.1.1. Innovation system development model

Source: RK National Center for Scientific and Technical Information, 2006.

ensuring an environment to enable system, since the development of new In order to activate the development of new technologies technologies includes continuous review innovative and cooperation at the national and and interaction of different innovation processes, international levels. system stakeholders. coordination is Thus, in order to activate innovative Thus, the development model for needed to support processes, coordination is needed to innovative processes can be graphically different areas pictured as follows (Figure 4.1.1). support different areas of technological of technological This model shows the linear linkage progress. Such actions should be pro-active between participants of the innovation and respond to innovative opportunities progress process, which conflicts with the existing that can be long-term, unexpected or practice of development of a system or a destructive. Obviously, such actions will systematic approach to innovation. The have unpredictable outcomes. Therefore, linear model can be used if the real needs the innovation system needs some of customers are identified, production processes to identify, adjust and develop planning is flawless and (raw materials) new technologies. This includes foresight markets non-elastic. Due to inconsistency monitoring, assessment of the systems and between the linear model and reality, an subsystems, as well as scientific and research alternative approach to the innovative process was taken (Figure 4.1.2). Figure 4.1.2. Support to innovation process What distinguishes this model is that services provided throughout the inno- vation process are needed at the same time rather than one after another, i.e. the process is not only interactive but also an integrated and continuous interaction of different components of the innovation system. In other words, fundamental and applied research involves elements required in the process of development and/or commercialization of products. For example, the development of new materials can simultaneously involve interdisciplinary scientists and researchers, as well as engineers and specialists of industrial corporations working in allied spheres. This approach sees knowledge generation and transfer of technology as a whole system, rather than part-by-part, as was the case in the linear model of linkages between different subsystems. In addition, this approach allows consideration of parallel or simultaneous operation of the three development stages of the innovation Source: www.research.fi

73 New technologies for human development in Kazakhstan

programs that prepare the innovation reconstructed enterprises using envi- system for long-term changes. In other ronmentally friendly technology, a more words, there is a great need to combine flexible fining scheme should be ap- foresight and strategic measures, including plied in case of environmental pollu- foresight, economic analysis, monitoring, tion. On the other hand, fines for over- coordination and long-term science and quota emissions are much less than the technology programs. This means that resources required to re-equip pro- there should be an active “change agent” duction and, therefore, fail to stimulate in the national innovation system, while a reduced level of environmental the existing components of the innovation pollution. Some changes in the system should be brought together and underlying principles of the environ- implemented as pro-active measures for mental legislation would facilitate the the benefit of human security. introduction of new technologies in production; 4.2. Legal framework for innovative development 4) various gaps in patent laws and practices. The most notable gaps In addition to the above, the current are lack of legislative incentives for There are still some development context in Kazakhstan creative labor and real mechanisms legal gaps that requires an adequate approach to the of brain drain control, etc. Currently, directly or indirectly development and revision of the legal this very developing and specific affect innovative framework for science, technology and area of legislation is being formed innovation and special programs for these under pressure and involves the clash development processes. There are still some legal gaps of many departmental interests. This that directly or indirectly affect these report did not attempt to look at this processes. A review shows that the existing sphere of legislation in detail so we can legal framework pertaining to different only emphasize the importance of a aspects of innovative activity, including specialist review and recommenda- forms of small business organization, lacks tions for improvement; integrity and should be improved. Not 5) ineffective system of technical only should new laws be adopted but regulation. Currently, there are over some incomplete documents should be 70,000 mandatory technical norms and completed, existing instruments amended standards, including normative acts and conflicting provisions removed. To written during Soviet times. This creates this end, the following issues should be more barriers to the introduction of new addressed: technologies by the business sector. 1) outstanding issues related to busi- The new Law “On technical regulation” ness development, including small seeks to change this situation. At enterprises engaged in science and the same time, the transition to a technology. Although the new Law new two-level system of technical “On private business” has legislatively regulation and development of sub- identified national priorities to support legislation are being delayed as some business, at the sub-legislative and ad- sectoral government agencies do ministrative levels major barriers remain, not understand and counteract the including licensing, inspection, limited introduction of the policy; access to information, nontransparent government procurement, certification, 6) despite the efforts made, it seems sanitary standards and other measures difficult to take an adequate approach of government regulation; to depreciation policy. As a result, businesses do not have incentives to 2) weak anti-monopoly laws. As a upgrade key assets and introduce new result, the overall system of anti-mo- means of production; nopoly regulation is not conducive to comprehensive development of 7) laws on venture funds should be competition on the domestic market. In developed, as well as on trade secrets, practice, this trend has been emerging secret inventions, transfer of technology in large holdings, with abuse of domi- of double purpose, intellectual products nant market positions and poor develop- funded through the national budget, ment of outsourcing; government procurement of innovation development services, etc. 3) innovation should not be promo- In conclusion, the authors note that the ted at the cost of the environment or legal framework governing technology conflict with environmental laws. In and innovation is in line with the develop- Kazakhstan, normative documents tend ment rate of this sphere as set out in major to focus on parties when regulating policy papers and facilitates public involve- social relations (payment for environ- ment in the innovative process. This should, mental use and pollution). In relation to it is hoped, have a positive effect on the so-

74 Chapter 4. Promoting an enabling environment for new technologies in Kazakhstan cioeconomic development performance of Kazakhstan. Given that the legal frame- work is relatively recent, its efficiency will de- pend on the implementation of norms and provisions, cooperation between different government agencies and ade-quate re- sponse to global changes. There remain some legislative gaps indirectly affecting technological development and requir- ing systemic solutions.

Intellectual property In the context of globalization, intel- lectual property is a powerful tool for eco- nomic development and can be equally employed by developed and developing countries, transnational companies and small enterprises. As an outcome of any sci- entific activity, intellectual property can be an economic category in the form of only patent rights that can be used as a man- ageable capacity of industrial property for the emerging innovative economy. Intellectual property becomes even more important when all aspects related to its commercialization are considered. registered, which is 40% more than in 2005. The efficiency of The international system of protection of Also, 744 licensing agreements between legal framework intellectual property allows market entities users and rights holders were officially governing new to make their produce more competitive. registered, which is 3 times more than the technologies and In relation to the protection of intellectu- same period in 2005 (214). innovation will al property rights, the Strategy for Industrial At Kazakhstan’s current stage of depend on the and Innovative Development of Kazakh- development, protection of intellectual implementation stan aims to: 1) bring the legal protection property is a key priority. The need for a of norms and of intellectual property rights up to interna- modern system of intellectual property provisions, tional standards; 2) develop mechanisms to protection is becoming ever more obvious cooperation ensure practical application of the legal re- in light of Kazakhstan’s WTO accession, between different gime to protect intellectual property rights; which requires bringing national legislation government 3) train highly qualified specialists in the pro- into line with the Agreement on Trade- agencies and tection of intellectual property rights. Related Aspects of Intellectual Property adequate response Presently, Kazakhstan is a signatory to Rights. to global changes major pacts, agreements and conventions As part of Kazakhstan’s accession to concerning the protection of intellectual WTO, the National Plan of Action for 2004- property with national legislation made 2006 was adopted to harmonize national fully compliant with international standards laws related to intellectual property rights and practices. and the WTO Agreement on Trade-Related The international Until recently, many people in Aspects of Intellectual Property Rights (TRIPS system of protection Kazakhstan treated intellectual property Agreement). of intellectual as a vague legal concept without much As a result of WTO accession negotia- practical significance for everyday life. tions, Kazakhstan committed to implement property allows Today, however, businesses and enterprises the TRIPS Agreement without a transitional market entities to are coming to understand that the exclusive period and to continue improving law en- make their produce right to intellectual property is a special forcement practices. more competitive type of competitive advantage. At the same time, Kazakhstan’s intel- There are a growing number of lectual property legislation fails to affect applications from citizens who wish to science and technology due to the lack register their copyright and concluded of provisions stimulating broad-based and license agreements between market rapid use of intellectual property and regu- entities. lating competitive relations. Thus, the Committee for Intellectual Improved intellectual property laws Property Rights under the RK Ministry of should be based on the following princi- Justice reports that over the first 6 months ples: of 2006 some 232 author’s works were

75 New technologies for human development in Kazakhstan

Box 4.2.1

International agreements

Kazakhstan is an equal party in a number of major pacts, agreements and conventions, including the Convention founding the World Intellectual Property Organization (WIPO), the Paris Convention for the Protection of Industrial Property, the Madrid Agreement Concerning the International Registration of Marks, the Patent Cooperation Treaty (PCT), the Berne Convention for the Protection of Literary and Artistic Works, the Nice Agreement concerning the International Classification of Goods and Services for the purpose of the Registration of Trademarks, the Strasbourg Agreement concerning the International Patent Classification, the Budapest Treaty on the International Recognition of the Deposit of Microorganisms for the Purposes of Patent Procedure, the Global Copyright Convention, the Locarno Agreement for International Classification of Industrial Designs, the Trademark Law Treaty, the Eurasian Patent Convention and the Convention for the Protection of Producers of Phonograms against Unauthorized Duplication of their Phonograms. Kazakhstan has concluded bilateral agreements on intellectual property cooperation with Azerbaijan, Kyrgyzstan, Georgia, the USA, Russia and Uzbekistan. According to the cooperation agreement with the Russian Federation, Russian applicants will be granted a national legal regime in relation to protection documents and payment of fees and dues. Kazakhstan’s active legislation ensuring protection of intellectual property rights consists of the Civil Code (general provisions) of 27 December 1994, the Civil Code (special provisions) of 1 July 1999, the Criminal Code, the Administrative Code, the Laws “On copyright and related rights” of 10 June 1996, “On trade marks, service marks and origin marks” of 26 July 1999, the Patent Law of 16 July 1999, “On protection of selected achievements” of 13 July 1999, the Customs Code of 5 April 2003 and “On legal protection of layouts of integral microchips” of 29 June 2001. Today, Kazakhstan has almost finished harmonizing national intellectual property rights legislation with the TRIPS Agreements.

Kazakhstan’s • wider use of legal norms permitting of intellectual property and intangible intellectual direct application; assets; property legislation • government regulation of the use • promote public access to informati- fails to duly affect of intellectual property funded from on and prevent over-commercialization science and the national budget for the benefit of of access to information on industrial technology society; property; • reducing unfair competition in rela- • facilitate an increase in the corps of tion to investors; patent engineers and patent attorneys through attestation in a legislatively • economic incentives for the use of specified order; intellectual property on a licensed basis. • ministries and departments fun- Considering the above principles for ding science and research should the creation and protection of intellectual budget costs of registration of rights property, it is recommended to: to intellectual property funded from the national budget, as well as costs • coordinate research on the econo- of legal action, including that to keep my of intellectual property, including protection documents valid and pay review of books, scientific articles and the author’s fee. dissertations, and establish contact with international research centers working In order to improve taxation of action in the same field; to ensure legal protection of intellectual property, it is worth considering exemption • review the current national intel- for enterprises engaged in patent and lectual property policy and prepare license operations in relation to industrial recommendations on the most pressing property from value-added tax and from economic issues concerning inventory, assessment and use of intellectual intangible asset property tax for 3-5 years. property; Ministries and departments should pro- vide patent and legal support to scientific • prepare subject glossaries and evi- and technological projects funded by for- dence-based recommendations for eign and international organizations and more accurate vocabulary to be used tighten supervision of imports and exports in normative documents related to of technologies to serve national econom- the assessment, inventory and use of ic interests and security. intellectual property and intangible The use of protected industrial property assets; should be promoted through reduced • assess training courses, standards and taxation schemes, which should be methodology notes on the assessment applied to income from such use in internal

76 Chapter 4. Promoting an enabling environment for new technologies in Kazakhstan production and income from the sale of specific good as industrial property and It is vital for the operating license. technologies that Kazakhstan’s capacity in Kazakhstan to have To effectively handle disputes abo- science and technology can be retained a presence on the ut violation of the exclusive rights of and strengthened and industrial innova- global high-tech patent holders, there should be judicial tive processes intensified. departments within the existing judicial Many local enterprises buy foreign market, both as system specializing in legal action against equipment in order to modernize pro- provider of new violation of the exclusive rights of industrial duction and produce competitive pro- scientific and property owners. ducts. The cost of foreign equipment is twi- technological ideas In conclusion, it should be noted ce that of locally produced equivalents. and solutions and that national wealth and competitive However, the real cost is competitiveness as a user of effective both on the domestic and foreign mar- advantages are largely generated th- technologies to rough new knowledge and making kets. Foreign equipment has more com- produce science- it valuable through transformation to petitive advantages compared to locally intellectual property. Considering global alternatives. Therefore, the real exchange intensive products trends, Kazakhstan should accelerate the rate of the tenge can be undervalued, development of high-class competitive tax dues increased and a protectionism advantages, which are largely dependent policy pursued, but due to integration into on the quality and quantity of innovation, the global economy and Kazakhstan’s the protection of such innovation and prospective WTO accession these me- its rate of introduction into economic chanisms will become obsolete. The circulation and effective management. national high-tech complex should be Science-intensive commodity market developed, development of science and sectors are controlled mainly through ex- technology facilitated and breakthrough clusive rights arising from patent legislation. technologies forecast. These measures Therefore, it is vital that the national patent will stimulate the replacement of foreign system can absorb the best international products with local alternatives. An achievements and meet the needs of the aggravating factor is the rapid deteriora- global economy. tion of the scientific component of R&D funding. A reduction in government fun- 4.3. Effect of WTO accession on ding for science and development has technologies in Kazakhstan resulted in many active development works, including such important areas as Kazakhstan’s WTO accession is deter- biotechnology, alternative energy, and mined by national economic interests and high-strength materials, being wrapped will have a number of positive and nega- up. tive effects on overall human development Linkages in the purchase and transfer and technological development in par- of scientific and technological achieve- ticular. The WTO system promotes a trade- ment often fail to go beyond technologies enabling environment including a stable, materialized in ready-made technological transparent and predictable market and equipment. At the same time, the emerg- safe investment. ing market of advanced technologies and Thus, WTO membership and liberaliza- scientific and technological achievement tion of the domestic market of goods and related to marketing of intellectual prop- services will both facilitate foreign invest- erty, licenses to use inventions, industrial de- ment in new technologies, production of signs and utility models or know-how and high value-added products and market technology transfer agreements all greatly saturation with diverse produce and en- affect innovation. able local products to reach foreign mar- Today, many high-tech developments, kets, intensifying competition on the do- including those funded fully or partly from mestic market. the national budget, are transferred WTO membership will promote the overseas, which is detrimental to the introduction of modern technologies and national economy. On the other hand, industrial engineering techniques, intensify sometimes agreements are made to competition on the domestic market and purchase foreign technologies of low make local produce more competitive specification and effectiveness. These on foreign markets. It will also attract more often fail to comply with environmental WTO accession will foreign investment, which will be very timely standards, involve unjustified costs and for the processing industry, particularly provide foreign licensors privileges that not immediately innovative enterprises. may conflict with anti-monopoly laws. result in a rapid It is vital that Kazakhstan has a presen- Moreover, uncontrolled imports cause increase in the ce on the global high-tech market, both as technological dependence of the national production and provider of new scientific and technologi- economy on foreign countries and export of new cal ideas and solutions and as a user of ef- reduced demand for locally produced and advanced fec-tive technologies to produce science- technologies. technologies intensive products. It is only by integrating WTO accession will not immediately into global technological exchange and result in a rapid increase in the production learning how to effectively market such a and export of new and advanced

77 New technologies for human development in Kazakhstan

technologies. The WTO promotes, primarily, Information support to local businesses marketing of ready-made and science- is a pressing issue at the current stage of intensive products, while approximately development. It is a multi-dimensional two-thirds of Kazakhstan’s exports are issue in terms of content, reliability and raw materials and fuels, which can, in any access. Irrespective of ownership patterns, case, be marketed abroad without much commodity producers have to be pro- limitation. active to introduce innovation. Pro-activity Another approach is taken towards should include awareness of what science imported goods and services, which, if in and advanced practices have to offer a great variety, can intensify competition, in terms of production and processing of which local industries may not be able pro-ducts in different industries. Conseque- to bear at this stage. This is particularly ntly, state-of-the-art awareness-raising true for food, pharmaceutical, chemical, and information provided to commodity mechanical engineering, light and ele- producers by authorized information age- ctronic industries and such sectors as ncies is an important aspect contributing to insurance, financial services, retail, small innovative activities of local enterprises. and medium-sized enterprise. Equally important is setting up a WTO accession will affect almost all special consulting service. Experience of sectors, while commitments or reforms will advanced enterprises shows that in order State-of-the-art include import tariffs for manufactured to promote innovative activity continuous communication between producers and awareness-raising products, business rights of foreign investors, science and innovation groups is essential. and information agricultural policy and investment measures in trade. However, direct communication is some- provided to According to a study by the World Bank’s times impossible. Therefore, innovation commodity expert group (J. Jensen, D. Tarr, 2006), after involves a service that seeks to promote the producers by joining the WTO Kazakhstan’s consumption introduction of scientific achievement and authorized will increase by approximately 6.7% (3.7% best practice in production. Our opinion is information of GDP) in the medium-term and can that area-based chambers of commerce agencies is an reach 17.5% (9.7% of GDP) in the long-term and industry should be advisory and act as coordination centers advocating the important aspect based on positive effects on the investment climate. As for the cost of regulation, we interests of producers of exported products. contributing to A system of such chambers has great and innovative activities estimate that about 2.3% of the local labor force will have to find other jobs. In most untapped potential to deliver a variety of of local enterprises countries the standard turnover rate goes business information. over this figure after a year. The authors believe that liberalized An overall reduction in local tariffs will services, a resulting increase in investment improve the distribution of internal resourc- and a more competitive market of services es, since the reduction will enable a shift to will lead to transfer of the most advanced the sectors whose output is most valued in technologies, involving fewer costs and terms of global market prices. In addition, it the development of a domestic market for will be easier for Kazakhstan’s businesses to scientific and technological products. import new technologies, which will have a positive effect on productivity. However, *** under the most-favored-nation treatment, In conclusion, it should be reiterated local tariffs for goods are already low, while that infrastructural support to innovation in the CIS trade is in most cases duty-free. should be studied in detail. This will allow to definition of the roles of the players, identify Therefore, this intervention is unlikely to gaps in the innovation system and additional have a significant effect. services to be provided to innovative No doubt, one of the positive implica- enterprises to speed up the development tions of Kazakhstan’s accession to WTO is of innovation systems in Kazakhstan. liberalization of services and a resulting in- The role of the players in the innovative crease in foreign investment. Kazakhstan’s process includes functions such as financial obligations to transnational service provid- support, information, marketing and ers will encourage more foreign direct in- consulting services, training and assistance vestment in the national market. Local busi- with reaching markets through trade nesses will therefore have better access to centers. The legal protection of intellectual services provided by transnational provid- property may facilitate innovative activity. ers in areas such as telecommunications, Practice shows that there is a direct banking, insurance, transport and other relationship between the legal protection business services. This will lead to reduced of intellectual property and new products. business operation costs and increased All of the above factors and mechanisms productivity of local businesses using such are necessary to lay the foundations for services. the development of innovative processes Today, enterprises involved in foreign that will enable the creation and use of economic activity are in need of reliable new technologies for the benefit of socio- information. economic development in Kazakhstan.

78 Chapter 5. Kazakhstan,s technological capacity

CHAPTER 5. KAZAKHSTAN’S TECHNOLOGICAL CAPACITY

It will be impossible to ensure social space launch facility. The experience of The effective and economic development and Ka- recent years shows that Kazakhstan has zakhstan’s global competitiveness based competitive advantages in this area. It is development on local technologies without national clear that a fully-fledged space system will of science and technological development policy and not only enable the development of new technology is priorities. Priorities in science and tech- technologies but also help meet growing based primarily on nology are based on joint analysis and national needs and generate good profits. justified priorities forecasts of science and technology and This allows us to conclude that the and the subsequent related markets. practical application of scientific outcomes concentration of The effective development of science will be a powerful catalyst, enabling scientific capacity and technology is based primarily on the development of new technologies, and financial and justified priorities and the subsequent products and materials, while retaining concentration of scientific capacity and and modernizing existing technologies and material resources financial and material resources on markets of science-intensive products. on achieving those achieving those priorities. This chapter does not attempt to review priorities To this end, the government’s support all technologies. It focuses only on the for research should concentrate on following four technologies: facilitating the maintenance and de- i. traditional technologies for natural velopment of ‘breakthrough’ innovative resource extraction and processing; projects, creating space and information technologies, nanotechnologies, biotech- ii. energy-saving technologies and al- nologies and energy technologies. ternative energy sources; The effective implementation of such iii. biotechnologies; projects will enable the creation of new products, the use of previously untapped iv. social technologies, the use of resources and materials and will also which in the real economy will not only create new national scientific schools and advance national economic capacity new jobs. but also ensure comprehensive and Today, Kazakhstan has a number of profound development of these areas scientific groups undertaking research in promoting strategic priorities for the nanotechnology and related disciplines44. benefit of Kazakhstan’s people. These include synthesis of nanoclusters and nanostructures of semi-conducting 5.1. Traditional technologies for natural and metal systems and development resource extraction and processing and designs of nano-size catalysts, sensor nanostructure materials and carbonic Kazakhstan is a country with rich mineral 45 nanostructures. and natural resources . Of the 105 elements Kazakhstan also has great capacity in in the periodic table, the country is home to biotechnology. In particular, biotechnology 99 of them, with proven deposits of 70, while methods have been used to develop it uses 60 chemical elements in production. highly productive crops that are stress Kazakhstan accounts for 250 million out of and disease resistant. Effective methods 11 billion tons of globally extracted minerals, of immunological and molecular-genetic which places the country 11th in the world. detection and prevention of particularly In the ranking of extraction of 37 different dangerous animal diseases have been elements, Kazakhstan is placed within a developed and introduced. New micro- range of 1st and 19th. organism strains were obtained for the Kazakhstan is expanding its presence needs of the microbiology, pharmaceu- on the market of energy producers. It tical and food industries and environmen- is placed 19th in terms of oil extraction tal management. A collection of cultures globally, 13th in gas production, 10th in coal of microorganisms for the production of production, 1st in tungsten and vanadium microbiological medicines and biologically ore reserves, 2nd (23% of world total) in active substances has also been created. chrome ore reserves and 3rd in manganese The country also has capacity in ore reserves. Kazakhstan accounts for 25% the space industry, firstly, in material, of global reserves of uranium, 19% of lead, technological and human resources. In 13% of zinc and 10% of copper and iron. particular, Kazakhstan has the Baikonur However, most technologies currently space center, which is a world-leading used to produce non-ferrous and less

44 N. Bekturganov “Nanotechnologies: Kazakhstan can be a world leader”/ http://www.liter.kz/site.php?lan=russia n&id=147&newsdate=2006-1-01. 45 The Industrial Kazakhstan, 3 (30) 2005.

79 New technologies for human development in Kazakhstan

Most technologies common metals fail to fully comply with Over recent decades, Kazakhstan’s currently used modern environmental, cost-effective- processing industry has extensively used to produce non- ness and efficient mineral resource ma- complex ores, resulting in a situation where ferrous and less nagement requirements. Its well known mining accounts for 15-20% of losses, common metals pyro-metallurgical processes using active the concentrating cycle for 60-70% and technologies of metallurgic plants emit metallurgic processing for 15-20%. fail to fully comply too many gaseous pollutants. Furthermore, In this regard, the priorities related to with modern middlings such as slag, mud, etc. ac- processing of manmade materials lie in: environmental, cumulates at metallurgic plants taking up - development of new technologies cost-effectiveness huge amounts of space. to process manmade second-hand and efficient In this regard, it is important to look materials, allowing valuable com- mineral resource at Kazakhstan’s capacity to use natural ponents to be turned into marketable management resource extraction and processing products; technologies more effectively. requirements - research and development of new Mining and smelting complex technologies for integrated processing of tin, nickel, tungsten and molybde The metallurgy industry is a large sector num and establishing production of 46 of Kazakhstan’s economy . The major these metals; national mining companies, primarily the Eurasian Industrial Association, Mittal Steel - research and development of priority Temirtau, JSC Corporation Kazakhmys and technologies to make powdered metal JSC Kazzinc, constitute a single industrial and processing of non-ferrous metals; and economic complex embracing ext- - development of technologies to ma- raction, concentration and processing ke lead and calcium, lead and nickel plants, energy and heat producing facto- and other alloys; ries, and a developed infrastructure enabling financial, marketing and sales, as - production of stainless steel to produ- well as external economic, research and ce high-quality rolled metal. scientific works. One of the indicators of a country’s One of the Kazakhstan’s metallurgy has the com- development is a wider range of use of less indicators of petitive advantage of having good access common metals, allowing conservation of a country’s to domestic mineral resources and raw natural resources, improved quality of development is a materials. Domestically produced ores produce and reduced energy and bearing non-ferrous metals have a complex wider range of use material costs. In developed countries, structural and mineralogical composition, of less common consumption of fossil fuels and a number including a broad range of less common of traditional raw materials has been redu- metals, allowing and trace elements. ced by 20-25%, while consumption of less conservation of In this regard, the priorities in metallurgic common metals has grown several times. natural resources, science and technology lie in: There are a number of factors hindering improved quality - development of new technologies to the production of less common and rare- of produce and allow sharp reductions in capital costs earth metals in Kazakhstan. Firstly, reduced energy and and emissions of harmful substances; Kazakhstan was not present on the market material costs use in production of collective concen- during the economic reform period and trates, low-quality raw materials and has no processing industries using less middlings in order to use materials more common and rare-earth metal produce. effectively and expand the raw material Also, inter-sector bonds between related base; enterprises were broken, while active enterprises pay little attention to recovering - introduction of effective technologies all valuable components from raw and modules to make pure metals, alloys materials. and composite materials; development Extraction and processing can only and use in production of a wide range expand through the development of new of alloys bearing titanium, manganese, fields, integrated processing of not yet tungsten, molybdenum, zirconium, nio- explored ores, terraces and tails and re- bium, etc.; processing of blocks. To-date, Kazakhstan - setting-up mini-productions based has accumulated over 20 billion tons of on modular technologies to meet industrial waste, of which 10.1 and 8.7 billion domestic demand for metal products, tons are manmade waste, such as not yet including production of color coatings explored ores, terraces and tails of non- and aluminum; setting-up flexible auto- ferrous and ferrous metallurgy respectively. mated production of low-alloy stainless For example, the development of ore steel. deposits in Rudny Altai alone has left 360

46 The Industrial Kazakhstan, 3 (30) 2005.

80 Chapter 5. Kazakhstan,s technological capacity

Box 5.1.1.

Mineral reserves

Kazakhstan has rich mineral reserves of less common metals, which, if managed effectively, can last for years and help build modern areas of national science and technology. Such complex ore fields as Kundybai, Akchatau, Verhne-Kairaktinsk, Svyatogorsk, Losev, Shokash, Satpaev and Obuhov have significant reserves of such rare-earth metals as cadmium, indium, thallium, selenium, tellurium, beryllium, tantalum, niobium, vanadium, gallium, scandium, rhenium, osmium, tungsten, molybdenum, zirconium and hafnium. These reserves are more than enough to meet domestic needs for less-common metals and can position Kazakhstan favorably on the global metal market, provided that local production is made competitive. million tons of solid waste from mining - very limited commercial production production, containing some 2 million tons of science-intensive, high-tech and of copper, lead and zinc and some 120-130 special materials and alloys which tons of gold. would enable the development of The limited use of solid waste is explained modern production; by a lack of: - limited range of rolled metal and me- - equipment to process different tal ware products for use in mechani- wastes or make such wastes ready for cal engineering, oil and gas, mining, processing in other industries; light, food and other industries and construction, heavy engineering and - cost-effective techniques to assess shipbuilding sectors; the effectiveness of environmentally friendly waste processing and provide - lack of commercial production of economic incentives to enterprises; materials and metal ware based on new technologies, such as powdered metals, - access to updated information electrometallurgy, electroplating, new on volumes of waste, physical and foundry and chemical technologies, chemical characteristics and methods etc.; of use. - ineffective use of recycled metal In order to ensure sustainable de- resources that may not be registered on velopment of the mining complex, Ka- the balance sheet or may be exported zakhstan adopted the Program for De- without control. velopment of Raw Material Base for the Another aggravating factor is that Domestic Mineral Complex for 2003-2010. exports account for almost 100% of profits in The Program aims to set up and develop metallurgy. an effective system of geological research One other characteristic is the almost to identify new mineral reserves and ensure total concentration and monopolization of effective management of mineral production and control stock owned by resources. foreign investors. This results in the bulk of The main objectives of the Program foreign investment being channeled into are: production that the investor can control. - geological and mineral mapping of The dynamics of global metallurgy and ore areas; increasing prices should drive the development of the domestic metal and - monitoring of mineral materials and steel market. The country’s rich raw mineral resource use; materials base, infrastructure and labor - information support to geological resources determine the importance of research and mineral resource use; building national capacity to generate products with high added value. - scientific and technological support Overall, consolidation in Kazakhstan’s for priority areas of geological research; metallurgy is a need. A way forward is - geophysical research to study deep consolidation of large enterprises, po- structure of the subsurface, etc. tentially metal processing and mechanical engineering enterprises, particularly in the The Program will facilitate productive oil and gas and energy sectors, that have use of low-grade materials, waste and better capacity to intensify development. terraces and attract highly qualified At the same time, the government should personnel and post-graduates to the encourage consolidation but prevent mining industry. monopolization, since monopolists are not Currently, the following negative trends interested in promoting competitiveness can be observed in Kazakhstan’s me- through better internal efficiency. tallurgic complex:

81 New technologies for human development in Kazakhstan

Petrochemical and chemical industries Constructed since independence, the most advanced installation – Karachaganak Oil and gas extraction is a national gas condensate plant – exports nearly all economic priority. Kazakhstan has rich gas condensate required for high-octane proven hydrocarbon reserves including 2.1 petrol. At the same time, other local plants billion tons of oil, 0.7 billion tons of gas import the bulk of their required oil condensate and 1.7 trillion m3 of gas and huge estimated reserves of 12 billion tons of products. oil, 1.6 billion tons of gas condensate and Another concern is technology. Active 5.9 trillion m3 of gas. These sectors currently oil processing plants process oil to 50-59% account for 30% of GDP, some 80% of depth, not going beyond atmospheric industrial production and over 80% of distillation, while Russian plants have exports. achieved 83% depth. Globally, the most Kazakhstan has three oil processing advanced refineries can process oil and plants using a primitive scheme of only gas almost completely, without any waste. atmospheric distillation of oil47. As for Achieving oil processing depth of 85- secondary oil processing, only catalytic 90% as in European countries is a burning reforming of once-run benzene and economic and technological issue for Ka- hydrofining of diesel fuel are carried out. zakhstan’s oil sector (Figure 5.1.1.). The only Other processes such as vacuum distilla- way to expand production of high quality tion of atmospheric residue (reduced light-oil products is to build new facilities crude), catalytic and thermal cracking of and modernize active production, with ca- heavy gas oil, hydro-cracking, alkalization pacity for advanced and complete pro- of butane-butylene combination, isolation cessing of reduced crude and tar oil. Kazakhstan has great scientific capacity Kazakhstan has of aromatic compounds from reformed benzenes, processing of gaseous waste in chemical studies, while national scientific three oil processing and many other processes are not in pla- schools occupy a certain niche in global plants using a ce. This leads to high cost of domestic oil science. Scientific achievements in diffe- primitive scheme of and gas products that cannot compete rent areas of chemistry mean that local only atmospheric with Russian, let alone international scientists are capable of finding solutions to distillation of oi equivalents. not only fundamental targets but also Active enterprises of the chemical applied industrial targets enabling pro- industry, such as the Atyrau polyethylene active development of active and newly and polypropylene plant and Aktau est-ablished chemical enterprises. Howe- polystyrene plant use imported materials ver, the purely academic formulation of such as ethylene, propylene and styrene fundamental targets and their solutions and these plants are not profitable. make them unsuited to the needs of privatized industries in Kazakhstan. Foreign corporations managing industrial enter- Box 5.1.2. prises have no need for local scientific establishments, since they would better Oil products purchase new technologies from overseas. In order to develop petrochemical and In 2005 Kazakhstan produced 3,280,000 tons of diesel fuel, chemical industries, production should which is 118% of the 2004 figure and 146.7% of the 2001 figure. avoid focus on mono products. In Similar trends can be observed in the production of reduced petrochemistry and oil processing there is crude and condensed gas. no industrial waste, since waste of from one Local oil processing plants produced increasing quantities production process is input material for of oil products over the period 2001-2005. Thus, in 2003 11.2 another. Active oil processing plants only million tons of oil were processed, which is 118.7% of the 2004 focus on production of fuel. For example, level. Doesn’t seem to make sense. Wasn’t the trend to increase at the Shymkent petroleum refinery re- production year-on-year? Perhaps it should be 2005, not 2003? formed gases containing up to 30% gaseous (AN) – I guess he is right and this should be 2005. Could you hydrogen and 10% light olefins С3-С4 are please check and make respective corrections in Russian and flared off. Currently, Kazakhstan does not Kazakh texts. Also I have changed the order of sentences in the produce hydrogen, which is required for box to avoid contradiction. operational hydrofining processes and In 2005 2,356,100 tons of benzene were produced, which is hydrocracking, alkalization and other 122.5% and 149.1% of the 2004 and 2001 figures respectively. processes that will operate in future. Olefins However, despite growing volumes of processed oil and such as ethylene, propylene, butylenes and oil products, imports are still high. For example, in 2005 31% of isobutylene can be used as monomeric benzene was imported, 7% of diesel fuel, and over 50% of aircraft input materials for the Aktau and Atyrau kerosene. plants.

47 The Industrial Kazakhstan, 3 (30) 2005.

82 Chapter 5. Kazakhstan,s technological capacity

Figure 5.1.1. Depth of oil processing in different countries

Source: Reference of modern petrochemical processes, 2001 – Oil and gas technologies, issue 3, May-June, 2001, p. 94-137 in Gimaev R.N, Kurochkin А.К. “Technology of cardinally advanced oil processing”// http://termakat.ru/science

Local industry still uses reduced crude as natural resources. This is a very cost-effec- Sulfur and gas fuel at heat stations, although it is reduced tive technique. recovery is one crude that is used to isolate the most ex- International experience shows that of the most pensive oil products, in particular, lubricat- petrochemical production is most effective important issues ing oils, which are not produced in Kazakh- in vertically integrated oil and gas compa- stan. It is also used to recover tar oil, which is in Kazakhstan’s nies consolidating oil companies produc- petrochemical an input material for the production of bitu- ing hydrocarbon materials and chemical industry men, extensively used in road construction. technologies and ensuring R&D. In addition, reduced crude is a cost-inef- Sulfur and gas recovery is one of the fective fuel, since 30% of the heat energy most important issues in Kazakhstan’s pet- goes to heat up the reduced crude itself so rochemical industry. that it can be placed in burners. When In this regard, hydrogen sulfide should burning, reduced crude completely loses be used more extensively in the petrochem- metals such as vanadium, nickel and co- ical industry. The difficulty is that petrochem- balt contained in local oil and concentrat- ical production is underde-veloped in Ka- ed in heavy fractions. Oil and gas materials can be used not zakhstan, since accom-panying the gas is only for fuel and energy purposes. Through traditionally flared off. A sharp increase in petrochemical synthesis and extensive oil recovery and flaring may further worsen processing, a wide range of products can the already serious environmental situation be produced that can substitute for other in western Kazakhstan.

Box 5.1.3.

Advanced technology

In order to reduce the environmental impact of sulfides, the Karachaganak oil refinery tested an advanced technology, which allowed pumping of gas containing up to 19% of hydrogen sulfide back into the layer. This enables better seismic safety, since layers are not empty, and increased oil recovery through increased pressure in layers, which reduces the huge costs required for construction of oil processing productions. In the long-term, Karachaganak-tested technology will be used in Tengiz and the marine fields of Kashagan. However, this is not a perfect solution, since only up to 75% of accompanying gas can be pumped back into the layer.

83 New technologies for human development in Kazakhstan

In order to Therefore, active processing produc- In order to become one of the world’s effectively tion should be modernized, while new pro- 50 most competitive countries, Kazakhstan introduce advanced duction complexes should be built capa- should introduce new technologies more hydrocarbon ble of processing gas and isolating sulfur. extensively for the extraction and processing of hydrocarbon materials. extraction and Environmentally friendly production Such technologies include new te- processing Petrochemical and chemical industries chniques enabling more recoverable oil technologies, using non-traditional heat sources, are basic segments of Kazakhstan’s econo- a mechanism utlilization of waste of the nuclear power my, laying the foundation for its long-term to engage all industry, new techniques for identification and sustainable development. To this end, and development of fields in the Caspian companies (private, the Program for Development of the Chem- Sea without impacting on the marine government-owned ical Industry of the Republic of Kazakhstan environment, new storage methods for and mixed) in the for 2006-2011 was developed. The Program produced sulfur and management of process should be aims to promote the competitiveness of the produced gas, etc. developed sector on domestic and international mar- New technologies will enable a 20-30% kets through en-hanced national scientific increase in recoverable oil, effective and tech-nological capacity. nuclear waste management and improved To achieve this, based on the Medium- an environmental situation in hydrocarbon Term Plan for Social and Economic Devel- extraction areas and contribute to the opment of the Republic of Kazakhstan for development of advanced technologies, 2007-2009 (second phase) approved by in particular underground primary oil Governmental Decree #822 of 25 August recovery (underground cracking), isolation 2006, the following should be ensured: satu- of benzene and other fractions. ration with competitive produce; building In order to effectively introduce export capacity and developing import- advanced hydrocarbon extraction and substituting production (primarily through processing technologies, a mechanism to more advanced and complete processing engage all companies (private, gove- of hydrocarbon materials); use of innova- rnment-owned and mixed) in the process tive technologies and devices and the pro- should be developed, so as to interest them duction of a wide range of competitive in increasing oil recovery and improved petrochemical products with high added environmental management. In doing so, value using science-intensive and resource- international practices should be consi- saving environmentally fri-endly technolo- dered, in particular those from the USA, gies complying with inter-national stand- where such a mechanism exists at the ards ISO 9000 and 14000. To this end, major national level and involves all stakeholders. targets include: 1. development of new environmen- 5.2. Energy-saving technologies and tally friendly chemicals for alimentation alternative energy sources and protection of plants, plant gro- Energy-saving technologies wth and development regulation, bio- preparation, protectants, herbicides Kazakhstan has rich energy resources, and defoliants: both traditional and alternative, while the • ammoniated calcium phosphate, energy sector is one of the most developed fluorine-free ammophos and ammo- sectors of the economy. Energy reserves phosphate, etc.; are substantial to meet both domestic and export demand. • biological, microbiological, organic Effective use and management of fossil mineral and micro-fertilizers through fuel (coal, oil and gas), increased the use of off-balance materials (brown effectiveness of energy consumption in all coal) and secondary waste (phospho- sectors and development of renewable rite fines, lime slurry, etc.) and recovery energy sources (biomass, hydroelectric of organic mineral fertilizers of multiple power, solar and wind energy, geothermal use with good nutritious components. energy and other sources) can all combine to help meet human energy needs and, as 2. setting up of environmentally frien- a result, ensure sustainable human dly production of synthetic detergents development on the global scale. complying with international standar- Energy management or improved ds, i.e. phosphate-free: energy management can be viewed as • production of zeolites at the Pavlo- identification and implementation of dar Aluminium Plant; measures and instruments to meet needs for goods and services with the minimum • production of active basis (alkyl economic and social costs of required benzene sulfonic acid and alkyl energy and minimum cost required for benzene sulfonate) at the Pavlodar environmental management, thereby Petrochemical Plant. enhancing sustainable development on

84 Chapter 5. Kazakhstan,s technological capacity the local, national, regional and global levels. Box 5.2.1. Industrially developed countries, pri- marily those with ineffective energy Heat saving in rural areas of Almaty oblast management, can significantly reduce energy consumption without implications Research has shown that actual heat consumption is 25- for living standards or their economies. 30% more than estimated use of heat in rural households and Developing countries can enhance welfare sometimes the figure is even higher. This is caused by poor heat- through a reduction in energy consumption saving characteristics of materials and misuse of basic building that is higher than developed countries specifications and technologies. At the same time, limited had in the past. In both cases, energy financial resources prevent the use of heat-saving technologies saving becomes an important factor in and modern building materials in rural areas. This necessitates improving both economic performance the development and introduction of inexpensive technologies and environmental quality. using traditional materials. Energy saving is an economic Under the GEF/SGP project “Heat saving in rural areas of development factor that has proved that Almaty oblast”, training workshops have been conducted, while in many instances it is more cost-effective heat-saving projects have been piloted in Ryskulov and Almalyk to save energy or not use it at all than to villages of Talgar rayon and Amanbokter village of Sarkand increase energy production. This means rayon, Almaty oblast. Also, energy assessment and energy that the financial resources allocated to saving actions were taken, while some heating facilities were enhance energy production or increase improved. The project financed thermal protection of 10 houses energy imports could be channeled into owned by low-income families in three villages. other areas, for example improving living All experiences were documented in a manual “Heat saving standards, comfort, transport and con- in rural houses” describing the heat saving technologies which struction of hospitals. used locally produced construction materials. Assessment of the thermally protected houses showed that In addition to the freeing up of financial they all consumed much less fuel such as firewood, coal or resources, effective energy management compressed dung. Rural residents noted reduced fuel costs, also promotes production through impro- which helped save the family budget. Therefore, the project ved productivity and more competitive helped to both reduce energy consumption and improve the industry. It should be remembered that welfare of rural people. The thermal protection of houses involved domestic production of advanced energy- affordable and accessible materials, allowing replication of this effective equipment will enable integration approach in other villages. into foreign markets. The environmental benefits of better energy management are obvious, since However, mere recognition or indica- energy with less environmental impact is tion of a willingness to take energy-saving energy that does not need to be consumed action to promote a national energy-sav- or produced. In all cases, reduced energy ing policy is not enough. At the level of end consumption for different purposes (through user this requires, first of all, skills as to how better thermal protection of housing, to do it and identify required technologi- improved efficiency of engines, etc.) will cal, financial and organizational resources. automatically enable a proportional re- On a wider scale, as experience of devel- duction in emissions of pollutants. oped countries with more energy-efficient Improving fuel and energy manage- eco-nomies shows, a plan of action for or- ment is the most cost-effective way to ganizational, institutional, legal, financial, protect the environment. In addition, scientific, technological and educational components of energy-saving policy sho- environmental benefits are like cost-free uld be developed. The plan should be awards compared to, for example, the based on awareness of available energy- costs of special en-vironmental mana- saving techniques in each economic sec- gement and pollution control measures. tor, and selection of the most appropriate Therefore, energy-saving action should be criteria for different categories of energy a top priority in national environmental users, and prioritization. policy. Energy policy based on alternatives and Mere recognition Over the last decade, Kazakhstan with a structurally changed economy does not its rich but highly ineffectively managed or indication of necessarily imply that new fields should not fuel and energy resources has, finally, come a willingness to be developed or new electric power take energy-saving to recognize the need for more efforts to stations not be built. If there is a need and action to promote introduce large-scale energy-saving sche- the potential for energy saving is limited, mes in all sectors of the economy. The high they should be put in place. Some fields are a national energy- level of intensity of energy use in the national exhausted, which requires new sources of saving policy is not economy - on average 3 times higher than energy to prevent a sharp reduction in enough in leading industrial countries - is a heavy energy production. It should be noted that burden on national and local budgets, it takes time to change the economy reduces the competitiveness of domestic structurally and set up energy-saving produce and adds to environmental stress. systems. In this context, it is necessary to Today, this is recognized widely. explore and develop new fields and build

85 New technologies for human development in Kazakhstan

energy capacity, which is a matter of the Such specialists should be able to both scale of and priorities in resource distribu- provide professional advice to clients tion. From an economic standpoint, it is ob- selecting equipment and maintain such vious that it is impossible to effectively com- equipment at all stages of operation, bine extensive growth of energy production ensuring that clients have the required and energy-saving policy and reconstruc- operating information and support to tion. Even now, the bulk of investment goes modernize and upgrade the equipment. to the heat and energy complex, while an Given that energy and resource saving increase in such investment will have very issues are interlinked and growing more negative implications for other economic important each year, such issues should be complexes and sectors. included in the training programs of It is necessary to identify energy priorities enterprises and engineering courses of- and channel the bulk of investment there, fered by higher education establishments. either to further promote high finance-con- suming energy production based on newly Alternative energy constructed power stations and increas- ingly expensive development of fields with Currently, from an energy perspective great environmental, economic and social Kazakhstan can be divided into three costs, or to encourage end results based on regions: energy saving. All international practice northern and central region embracing shows that energy-saving economic devel- Akmola, East Kazakhstan, Karagandy, opment is much more effective from eco- Kostanai and Pavlodar oblasts with shared nomic, en-vironmental and social perspec- economic networks and links with Russia; tives. southern region including Almaty, Internationally, the following measures Zhambyl, Kyzylorda and South Kazakhstan are taken to save energy: oblasts with shared electric network and • economic and legal incentives for links with Kyrgyzstan and Uzbekistan. In 1998 energy saving; the southern region was linked to the northern region; • differentiated peak/off peak tariffs western region including Aktobe, for electricity to be paid by municipal Atyrau, West Kazakhstan and Manghistau enterprises; oblast, which are linked to Russia, while • introduction of automated meters for Manghistau, Atyrau and West Kazakhstan heat, water and gas; oblasts share an electric energy network with the energy sector of Aktobe oblast • introduction of heat management working independently. systems in different buildings; Kazakhstan’s electrical power industry is • introduction of local electric heat based on coal (using cheap Ekibastuz stations and heat reservoirs working coal). The coal and energy industries under privileged regimes; enjoyed large investment in the past, ensuring their long-term development. • reconstruction and technological Currently, Kazakhstan’s electric power upgrade of energy generating stations have a certain capacity to meet sources, heat, energy and water supply domestic needs and provide for imports to networks; the southern and western regions due to • electronic starting controllers for gas- the previously established network. discharge lamps and automated street One of the indicators of performance light management systems; of capital equipment of heat power stations, which account for around 85% of • variable-frequency drives for engines Kazakhstan’s power industry, is fuel used in municipal utility services; consumption to generate 1 K.W.H of electric The introduction energy. This indicator in Kazakhstan • central control over municipal energy of modern exceeds international standards by 10- carriers; science-intensive 15%, which is largely associated with the technologies • introduction of highly efficient energy use of low-quality coal and the need to requires qualified sources; upgrade and modernize equipment, especially at local heat power plants. specialists to • differentiated peak/off peak energy Kazakhstan’s energy capacity should be involved at tariffs for municipal utility services. the stages of be built, new heat power stations The introduction of modern science- constructed, equipment upgraded and development, intensive technologies to automate te- active electric power stations expanded introduction and chnological processes and save energy through the use of the latest achievements operation both in housing and industries requires in science and technology. Effective qualified specialists to be involved at the energy use is a requirement for economic stages of development, introduction and and social development and improved operation. environmental situation.

86 Chapter 5. Kazakhstan,s technological capacity

Box 5.2.2.

Using wind energy in remote pastures

Under the GEF/SGP project “Using wind energy in remote pastures” shepherd families living in two settlements engaged in pasture-based cattle breeding were provided with autonomous energy supply systems through the installation of wind energy devices. This significantly improved their living standards and helped them to access water and process cattle produce. This project is a demonstration of the potential for electrification of remote rural settlements through alternative energy sources.

The sun serving rural people

The climate of Southern Kazakhstan allows use of solar energy 300 days a year to process fruits, vegetables and medicinal herbs. The GEF/SGP project “The sun serving rural people” brought into operation the canning and drying of fruits and vegetables, kitchen and medicinal herbs through the use of solar energy. To date, the suggested approach has proved cost-effective, while monitoring of rural awareness shows that most rural residents are sure that the technology is an important and much-needed tool for poverty reduction.

Therefore, Kazakhstan has prioritized alternative energy sources such as water, wind and solar energy, biomass, etc., for which Kazakhstan has great potential, in order to develop the electric power industry and address current environmental issues. Just like the rest of the world, today and in the future Kazakhstan should use renewable energy sources to help save traditional energy reserves. Renewable energy resources or al- ternative energy sources are effective in generating electrical energy at the local level and meeting the needs of remote rural areas. Today, the following energy sources are under development in many countries: • Hydroelectric power stations; • Wind energy; • Photoenergy; • Biomass; • Solar heat; • Solar energy; • Geothermal energy; • Marine energy generated through tides and waves. hindering progress in this area such as Kazakhstan has The table 5.2.1 shows contributions of centralized energy supply by large electric significant resources renewable energy sources to the global power stations and low energy tariffs that of renewable energy 48 energy balance . fail to capture the long-term costs of in the form of water, upgrading equipment and environmental Kazakhstan has significant resources of wind and solar renewable energy in the form of water, costs. These factors hamper the de- wind and solar energy. Hydroelectric power velopment of renewable energy sources. energy capacity is estimated at 27 billion kWh per Development of alternative energy co- year and wind energy at 1,820 billion kWh uld have positive effects on Kazakhstan’s per year. However, although limited, water social development. The use of renewable energy is not used to the full, while rich energy would be cost-effective in many re- renewable energy resources could be used gions currently lacking adequate ca-paci- to supply energy to adjoining regions. From ty. The use of renewable energy sources geographic and meteorological per- looks particularly attractive in regions with a spectives, Kazakhstan has great capa-city decentralized energy supply and those for wind energy. However, there are factors with relatively high cost of fossil fuel.

48 Е.S. Pantshava, V.А. Pozharnov “Russia as the potentially largest provider of biofuel to the global market”// http://www.courier.com.ru/energy/en0605pantskhava.htm.

87 New technologies for human development in Kazakhstan

Table 5.2.1. Estimated contributions of renewable energy the basis of the hydrographic network of sources to the global energy balance (%) Eastern Kazakhstan. Major hydroelectric power stations are located on these rivers. These are Bukhtarminskaya (675 mW), Shulbinskaya (702 mW) and Semipa- latinskaya (312 mW). Such rivers as the Ili, the Charyn, the Chilik, the Karatal, the Koksu, the Tentek, the Hergos, the Tekes, the Talgar, the Bolshaya and Malaya Almatinkas, the Usek, the Aksu and the Lepsy all have potential for hydroelectric power generation. The construction of the Mainak hydro- electric power station with a capacity of 300 mW on the Charyn, as well as the Kerbulak hydroelectric power station on the Ili as a counter-regulator for the Kapchagai station, envisage further de- velopment. These stations will enable re- duced energy deficit in South Kazakhstan Source: А.Zervos, Ch. Lewis, О.Shave, Tomorrow’s world, “Global by 900 million kWh. The construction of new renewable energy”, 2004, part.7, paragraph 4 energy facilities in energy-scarce regions using water resources will enable better However, renewable energy is not used energy supply and reduced dependency widely in Kazakhstan, primarily due to lack on energy transported from energy- of information, lack of commercial pro- abundant regions. It is expected that by posals for renewable energy sources and 2010 new and old hydroelectric power back-up services, lack of economic and stations will together produce 10 billion Renewable energy financial incentives and lack of engineers kWh. Kazakhstani scientists have deve- loped over 480 designs of small hydroe- is not used widely and scientists capable of dealing with organizational, technological and envi- lectric power stations with a total capacity in Kazakhstan, ronmental issues resulting from such use in of 1,868 mW and average annual energy primarily due to different sectors. output of 8,510 gWh. lack of information, Below we examine the capacity for and lack of commercial challenges in using renewable energy Wind energy proposals for sources in Kazakhstan. renewable energy Kazakhstan’s fairly rich wind energy sources and back- Water energy resources remain almost untapped in terms of electricity generation. up services, lack Kazakhstan’s water energy capacity is Geographically and meteorologically, of economic and estimated at some 170 TW per annum, of Kazakhstan is a country with great capacity financial incentives which current output only reaches 23.5 gW for wind energy use. The country’s annual and lack of per annum (30 %). wind energy capacity is estimated at 1,820 specialists in the The bulk of national water energy billion kWh. field resources are concentrated in Eastern and In Kazakhstan wind energy facilities are South-Eastern regions. The Irtysh river, with of particular importance for rural areas its full-flowing right-bank feeders, including where electrical energy is scarce. Howe- the Bukhtarma, the Uba and the Ulba, form ver, an informed approach should be taken to purchasing and using wind energy generators, looking at both cost and Table 5.2.2. Status of wind energy around the globe efficiency, since cheap technologies may be environmentally unfriendly. Globally, the average cost of large wind energy generators is USD1,000 per 1 kW of output, while generators made in China can produce energy at a lower cost of USD600-700, but this may affect their quality, efficiency and reliability. These sites were selected by a review undertaken within the UNDP-Government of Kazakhstan project “Kazakhstan Wind Power Market Development Initiative”. One of the major selection criteria was average annual wind speed at the height Source: Bulletin of the RK National Engineering Academy, issue 2 (20) of 50 meters. To detect the speed, special 2006. meteorological surveys were conducted for at least one year using 50 meter high meteorological masts.

88 Chapter 5. Kazakhstan,s technological capacity

UNDP supported such surveys for only Table 5.2.3. Potential sites for construction of wind energy two sites in Kazakhstan - the Djungarskiye stations (WES) Vorota and the Shelekskiy Corridor that can now be classified as potential sites for wind power stations. Currently, the UNDP wind power project supports surveys to be held at another eight sites, which will help to determine whether they can be potential sites for wind power stations. The RK Governmental Decree #857 “On Wind Energy Development” of 25 August 2003 was the first step towards internatio- nal commitments Kazakhstan undertook as part of the UND Framework Convention on Climate Change ratified by RK Presidential Decree #2260 of 4 May 1995. The Decree initiated the construction of a pilot wind power station with a capacity for 5 mW in the area of the Djungarskiye Vorota, as part of the UNDP/GEF project. Wind energy development will not only help to tackle the energy deficiency of some regions, including remote rural areas, but also improve the socio-economic status of the population. Access to energy will enable better water supply and agricultural productivity, new production, say, primary processing of raw materials and foods, and local crafts. Thus, wind energy, alongside other ongoing measures, can contribute to Kazakhstan’s sustainable development.

Solar energy

Solar energy can be used primarily for hot water supply through solar collectors. Expert estimates say that by using solar energy for hot water supply needs, some 13 Source: data of “Kazakhstan Wind Power Market Development million Gcal of heat can be generated, Initiative”, joint project of UNDP and the Government of Kazakhstan allowing a saving of over 1 million tons of oil- equivalent fuel. Presently, solar collectors are not widely The main factors hampering the devel- used to heat water due to high cost (USD200 opment of solar energy are lack of semi- conducting silicon, global output of which per 1 м 2 for imported collectors) 49. If pro- is only a few percent of metallurgical silicon duced domestically, they can be chea- output, and the high cost of solar silicon. per, allowing much wider use. A combination of solar panels and wind Also, solar energy can be used to power stations to drive water pumps can generate energy through photoelectric improve water supply. converters. Photoelectric panels can be The scientific basis for silicon production used to generate small volumes of electricity was built within the Physics and Technology for lighting and TV broadcasting needs in Institute of the Scientific Center for Chemi- small rural farms and shepherd settlements cal and Technological Research. In this re- without access to power lines. Solar gard, the production of semi-conducting photoelectric battery-based panels used silicon is noteworthy. The technology has no for lighting needs can be more efficient equivalents and completely skips the car- than oil lamps. It is estimated that there may bothermal and chlorsilane process stages, be a market for some 20,000 20-watt solar which, in the long run, will help develop so- panels in Kazakhstan. lar energy in Kazakhstan.

49 TERRA-Zher-Ana. Solar energy in Kazakhstan/ http://www.solar-ct.com/articles/17.

89 New technologies for human development in Kazakhstan

conventional fuel or 12.4 million tons of Box 5.2.3. reduced crude or over a half of oil output. It is important to process already ac- Advantages of biogas cumulated cattle breeding waste, which can generate about 2 million tons of As of early 2000, 300 cars in Stockholm use biogas with conventional fuel per year (biogas). another 3,000 cars to start using biogas in the future. In 1990 *** in Linschoping, Sweden, 64 buses and two taxi parks (Volvo, All energy sources non-traditional for Mercedes, Neoplan/Cummins) were converted to biogas. In Kazakhstan have similar strengths and Gavle, biogas is used to generate heat and electricity and as weaknesses. fuel for buses. In Trollhattan, buses run on biogas generated On the one hand, serious expert groups through meat and fish industry waste. 1 cubic meter of purified have conceptualized and justified their biogas is Euro1.11 cheaper than petrol. extensive use based on international Biogas has the following advantages over other energy practices. Also, they bring great economic, sources: environmental and even social benefits by • renewability; creating new jobs, triggering the development of domestic mechanical • uses local sources of raw materials to produce fuel; engineering and science to meet the • reduced greenhouse effect; needs in these areas, reducing health problems caused by emissions from power • reduced dependency on foreign suppliers of oil and gas; stations, etc. • less environmental impact through organic waste The positive factors include traditional collection; skills people use when using alternative energy sources such as sun, wind and • an environmentally closed energy system. water. In southern regions people use solar energy to heat water, dry, prepare adobes, Biogas as well as dung. In western regions, people use water engines to pump and lift water from the ground and water wheels to lift The use of Biogas is a gaseous product recovered through anaerobic, airtight, fermentation water in river-based regions. Also, rural traditional energy people still extensively use woody plants as sources in rural of organic substances of various origins. It fuel for heating and cooking. Although areas is hampered mainly consists of methane (55-70%) and dung is extensively used in rural areas, it is by lack of materials, carbonic acid (28-43%), as well as small medically unsafe due to the risk of high costs, lack proportions of some other gases. helminthiasis and other diseases, which of effective credit Cattle breeding waste is a stable source mechanisms, great have high incidence rates in rural areas. of biomass for energy production in On the other hand, certain factors risks and lack of Kazakhstan. Annual output of dry cattle services hamper the development of these energy and poultry breeding waste totals 22.1 sources. Such a common issue as lack of million tons or 8.6 billion m3 of gas (13 million funding also affects traditional energy tons from cattle, 6.2 million tons from sheep, sources. Another issue specific to non- 1 million tons from horses), plant residues – traditional energy sources is lack of public 17.7 million tons (12 million tons from wheat, awareness. 6 million tons from barley or 8.9 billion m3), These issues are being addressed which is equivalent to 14-15 million tons of through pilot projects and promotional campaigns. However, there are certain barriers that can only be removed by Box 5.2.4. government. In particular, lack of economic incentives, deficient or lacking legal The staff of the Karagandy Ecomuseum developed several framework and energy tariff policy. The technologies to construct biogas facilities for rural people and current situation fails to encourage farmers50. monopolistic energy companies to find This environmentally friendly project is also cost-effective. ways to reduce costs. The use of traditional Waste from three cows (or six pigs or 25 chickens) can be energy sources in rural areas is hampered enough to meet a family’s domestic gas needs. by lack of materials, high costs, lack of The Karagandy experience shows that a facility with capacity effective credit mechanisms, great risks for 8 cubic meters running on pig dung can completely replace and lack of services. propane consumed to cook a meal for a family of five. A facility with capacity for 60 cubic meters can be used to heat a living 5.3. Biotechnologies space of 200 square meters or a working area of 400 square The Strategy for Industrial and Innova- meters. tive Development of the Republic of Ka-

50 TERRA-Zher-Аnа. What is a biogas plant and how it works./ http://www.solar-ct.com/articles/17

90 Chapter 5. Kazakhstan,s technological capacity zakhstan for 2003-2015 identifies biotech- nology as a priority. Under the Strategy, the Concept of Development of the National Biotechnology Center of the Republic of Kazakhstan for 2006-2008 and science and technology program “Development of Modern Tech-nologies to Shape a Biotech- nology Cluster in the Republic of Kazakh- stan for 2006-2008” were approved by Gov- ernmental Decree. Biotechnology means a type of technology using biological systems, living organisms or their derivatives to produce or modify products or processes to then be applied in practice. Biotechnology refers to the science and practice of studying methods of adjusting the environment to human needs, i.e. making products useful for human beings through biological agents. It is not coincidental that experts believe than biotechnology will determine the However, there are remarkable regional future development of different spheres of disparities. In 2005 significant areas under human life. crops and grains of Kazakhstan selection Below are some of the possible areas of were registered in South Kazakhstan (95%), application. Almaty (95%), Zhambyl (93%) and Kzylorda (83%) oblasts. Biotechnology and agriculture It should be noted that as a branch of Today over 40% of Kazakhstan’s biotechnology veterinary biotechnology population live in rural areas. In 2004 one makes a great contribution to biotechnol- third of all employed people were ogy as a whole in Kazakhstan. In cattle employed in agriculture, which indicates breeding, production of vaccines and vet- that even small-scale introduction of erinary medicines is growing. In addition, biotechnologies may result in large-scale Kazakh-stani scientists are undertaking re- implications for human life and deve- search related to avian flu and vaccines. In lopment. 2004 Kazakhstan purchased some 40 vac- Agricultural biotechnology includes cines and veterinary medicines. Domestic plant protectors, veterinary biotechno- output of veterinary drugs cannot meet na- logy, transgenic plants and animals. tional needs, while imports of veterinary Kazakhstan exports some crops, such as medicines are growing annually. Given that wheat. At the same time, some regions are veterinary vaccine production technology short of fresh vegetables. For example, in is simple and well-known, this has the po- spring 2006 allocation was made from the tential to be a competitive area requiring Karagandy oblast budget to buy 100,000 little input. tons of Uzbek vegetables. As for biotechnological plant protec- Agricultural revenue varies from year to tors, biopesticides are an alternative to year depending on yield, which is currently lower than in developed countries. For chemical pesticides and are more environ- example, in 2004 wheat yield was only 8 mentally friendly. Agricultural In light of WTO accession the country will hwt per hectare versus 29 hwt in the US. biotechnology aims have to intensify development and use of Losses of up to 30% in crop yield occur to increase crop local crops, first of all, wheat, since now Ka- through pests, diseases and weeds. productivity both Agricultural biotechnology aims to incre- zakhstan uses mainly Russian varieties of ase crop productivity both in quantitative wheat, which local producers will have to in quantitative and and qualitative terms, to develop and use pay for after the accession. Traditional se- qualitative terms, new sorts of crops, introduce special lection takes a long time to cross and de- to develop and use crops, etc. velop a new variety (at least 8-10 years). Bi- new sorts of crops, National scientists have developed new otechnology reduces this period by several introduce special and highly productive crops, high-value times and allows development of new vari- crops, etc genotypes of cattle based on bio- eties of plants with specified characteristics technology. However, analysis shows that such as high-yield, drought resistance and such new developments are not widely content of certain nutrients. applied. In 2004, areas under crops of Kazakhstan selection totaled 3.4 million Biotechnology and healthcare hectares (27.8%) versus 4.6million hectares (35.0%) in 2005. This indicates an upward Medical biotechnology has significant trend in areas assigned to local crops. implications for human life and deve-

91 New technologies for human development in Kazakhstan

Despite the fact lopment. The global market for phar- Biotechnology-based industrial gold that Kazakhstan maceutical products accounts for about mining facilities are used in metallurgy. Such has some capacity half of the overall biotechnology market. facilities have enabled approximately 60% to produce Kazakhstan has some capacity to more gold recovery. In addition, they are produce pharmaceutical products. Ho- cost-effective through reduced capital pharmaceutical wever, most medicines are currently and operational cost and make recovery products, most imported. more environmentally friendly. medicines are Production of biotechnological blood currently imported specimens, genetically engineered drugs, Biotechnology and energy: biofuel immunological medicines, biosensors and biochips, etc. can, in the long run, improve In this area, biotechnological de- national healthcare and ensure wide velopments can be used to add to access to effective and affordable bioethanol gasoline and as fuel (biodiesel) medicines. for diesel engines. Such qualities as high The cloning of the sheep Dolly and de- explosive stability, low toxicity and use of coding of the human genome open unique renewable sources for production make windows for progress in science and tech- bioethanol and biodiesel important ma- nology that can have a huge effect on hu- terials in today’s context. Bioethanol is a man life. For example, medical scientists liquid alcohol fuel with fumes heavier than are now working to determine which genes air. It can be made of agricultural products are in charge of disease incidence and containing starch or sugar, for example, what can be done to prevent and treat corn, crops or sugar cane, through bio- such diseases. technology-based fermentation of plant Biotechnological At the same time, each particular case mass. Biodiesel refers to methyl ethers of methods are of expensive universal medical techniques fatty acids recovered from vegetable oils most extensively and technologies, which will, no doubt, be such as rapeseed, palm and other oils. used to produce socially important, can involve risk. For Another advantage of these energy oil and purify example, it is ethically impossible to have a sources is that they are almost inexhaustible, environmental morally justified unambiguous attitude to which is not the case with fossil fuels such as objects from oil cloning, transplantation, gene engineering, oil and gas. etc. In this regard, issues arising from the pollutants With its vast territory, Kazakhstan could introduction of new medical technologies allocate the large areas required to should be carefully studied and a legal cultivate the required cultures and produce framework for bioethics developed to biofuel for both domestic needs and protect health as a public benefit and to exports to neighboring countries. ensure survival. Burning ethanol from plant fiber emits 10 times less carbon dioxide, a greenhouse Biotechnology and extracting industry gas, than burning petrol. In the USA, Sweden and Brazil ethanol has been used to add to Currently, international practice shows petrol in order to reduce carbon emissions. that biotechnology based on different It would appear to be profitable for micro-organisms is increasingly used in the Kazakhstan to recover bioethanol as a by- extracting industry. Biotechnological met- product of deep wheat processing. Ka- hods are most extensively used to produce zakhstan’s solid varieties of wheat contain oil and purify environmental objects from much gluten, making it a competitive oil pollutants. material to produce gluten, for which Existing oil field development techno- global demand is high. The leftover starch logies only allow extraction of up to 50% of biomass serves as a nutrient medium for a oil reserves. In simple terms, biotechnology wide range of biotechnological products, can be used in oil extraction as follows. one of which is bioethanol. Micro-organisms capable of growing under Basko Company has built a bioethanol a wide range of temperatures, pressure factory called Production Complex Biokhim and salinity, aerobic and anaerobic in North Kazakhstan oblast. The town of conditions are introduced in a layer and Stepnogorsk has both the production base use oil as a nutrition source. Such micro- and infrastructure, as well as a sound organisms can generate different me- scientific and technological infrastructure tabolites such as gases, acids and surface- to make bioethanol. This brings not only active substances through microbiological economic benefits to the country in terms synthesis occurring in the layer, which of bioethanol as a biotechnology but also ensures purity and improves oil recovery up the strategic potential of biotechnology to 40%. However, the most topical theme is development as a whole. mitigation of oil recovery effects both on the water surface and adjoining coasts. Biotechnology and the environment Recently, more attention has been paid to microbiological methods and use of For Kazakhstan, environmental pro- energy-producing bacteria. tection is of great i mportance.

92 Chapter 5. Kazakhstan,s technological capacity

The bulk of all investment goes to the oil and gas industry. Despite this, major oil ex- traction and processing regions such as Atyrau and Manghistau oblasts use old technologies and equipment, which cause environmental accidents and oil dumping. Biotechnology can be used to address these issues. Phyto and bioremediation can be employed to remove heavy metals and other elements from the soil, through absorption of metals by plants, which is a cost-effective alternative to soil recovery methods such as excavation and rinsing. Bioremediation has the following ad- vantages: environmentally non-des-truc- tive, targeted use in the right place in the right time, high rate of microorganism de- composition of pollutants to environ-men- tally safe bacteria, environmental and hy- gienic safety. In terms of bioremediation developments in Kazakhstan, the National Biotechnology Center of the Republic of Kazakhstan is piloting field projects in Isatai rayon of Atyrau oblast to remove oil and oil products The Council of Europe’s “Convention on Kazakhstan is from the soil using microorganisms. the Protection of Human Rights and Dignity in a beneficial with Regard to the Application of Biology Production of biologically active position because it and Medicine: Convention on Human is not pioneering supplements Rights and Biomedicine” (1996) defines a biotechnological The world faces the challenge of malnu- provision which is reflected in the respective research and trition characterized by lack of essential nu- laws of most European countries. The trients, which cannot be obtained by sim- Convention’s Article 28 runs: “Parties to this production. ply eating more. One of the solutions is to Convention shall see to it that the Rather, it follows produce biologically active supplements fundamental questions raised by the developed enriched with polyvitamins, minerals and developments of biology and medicine countries, allowing other important nutrients. are the subject of appropriate public it to learn from Reducing the proportion of people discussion in the light, in particular, of existing legal suffering from hunger and malnutrition is a relevant medical, social, economic, ethical institutions serious challenge and is one of the and legal implications, and that their possible application is made the subject of required to manage Millennium Development Goals set forth at potential risks the Millennium Summit in September 2000. appropriate consultation; similar arran- gements should apply to the application of Potential risks of biotechnological biomedicine”. It is supposed that public developments accord attained through public debate and consultation will contribute to new New technologies, including bio- developments in medicine. On this basis, technology, have potential benefits for the law grants or denies right to conduct human life, sometimes much more sig- medical R&D to scientists. nificant than initially envisaged. At the Also, there are such challenges as the same time, it should be remembered that creation and proliferation of biological such benefits may involve risks. weapons and human cloning. In this regard, Ethical implications of biological and an adequate and up-to-date legal biomedical research have emerged and framework should be carefully developed, developed alongside the emergence and adopted and implemented. Overall, bio- development of biology and medicine. technological risks can be managed, for Actually, two groups of ethical issues example, by ensuring complete biological became apparent as soon as medical safety in scientific and research laboratories practitioners and biologists started to see working with disease-producing germs. their activity as an evidence-based Currently, Kazakhstan is in a beneficial intervention affecting natural human body position because it is not pioneering in order to control, normalize and improve biotechnological research and production. it. The first group relates to the right to Rather, it follows developed countries, conduct research on the (dead or living) allowing it to learn from existing legal human body, while the second relates to institutions required to manage potential determining the morally acceptable limits risks. Recently, the National Biotechnology for such interventions. Center of the Republic of Kazakhstan has

93 New technologies for human development in Kazakhstan

Detailed research developed a draft intersectoral Concept oversee and monitor the use of foreign and and comparison of for biological and chemical safety of the domestic biotechnology products. expected benefits Republic of Kazakhstan, which is currently under peer review with line ministries and The current biotechnology context in and potential risks Kazakhstan are required, while departments. Transgenesis, referring to the creation of well-equipped Currently, the development and transgenic plants and animals through laboratories need to production of biotechnology products in genetic engineering, is another important Kazakhstan is inadequate. The range of be set up and high- area. This is further evidenced by the fact biotechnology products is limited, while caliber specialists that in 10 years the area under commercial most of them cater for domestic needs engaged to assure cultivation of genetically modified crops because they cannot compete on the quality of products has grown by more than 50 times from 1.7 international market. on the domestic million hectares in 1996 to 90 million hectares Unfortunately, over the last 15 years the market in 2005. The number of countries extensi- range of research has narrowed, bio- vely cultivating genetically modified crops technological research has shrunk and increased from 6 in 1996 to 21 in 2005. Over technologies have become obsolete. the decade, genetically modified crops Today, biotechnology in Kazakhstan has were cultivated on a total of 475 million an obsolete scientific and industrial base hectares, which equals territory of such (of Soviet caliber) and a limited corps of states as China or the USA and 20 times specialists. The latter causes lack of more than Great Britain51 . competition resulting in low quality of At the same time, there is a concern scientific research. In turn, low quality of In order to that genetically modified organisms may research does not encourage funding. This avoid negative have new qualities harmful for human negative effect is aggravated by such consequences and beings, such as allergy, new toxic proteins factors as poor command of English prevent the country and previously unknown protein com- language and lack of information and from becoming binations. In agriculture, new genes may international cooperation. a dumping or be transplanted to other relative plants, Kazakhstan inherited the Soviet model experimental thus changing their qualities. New varieties of scientific progress and production ground, high quality of plants may also have implications for characterized by slow response to the fast changing needs of innovative sectors and services should be animals. poor links between the needs and priorities Present day realities show that there is a in place to oversee of science and technology policy. need for research in genetic engineering. and monitor the Unfortunately, there have been few However, detailed research and com- use of foreign developments that have been able to be parison of expected benefits and potential and domestic really competitive on domestic or risks are required, while well-equipped biotechnology international markets. Another hindrance is laboratories need to be set up and high- products the lack of biotechnology innovation caliber specialists engaged to assure companies. In this context, it should be quality of products on the domestic remembered that private businesses are market. interested in fast profits, while, in contrast It should be remembered that in the with returns in the extractive industry, context of growing global population, biotechnology developments involve high particularly in developing countries, pro- economic risks. duction of foods with such qualities as high Biotechnology in Of many new developments, only a few yield, drought and salinity resistance, etc. are finally introduced, with even fewer Kazakhstan has an can become very important to ensure obsolete scientific being successful. The wide audience of adequate food supply. consumers and businessmen remain and industrial base Analysis of current and estimated needs unaware of products of the bioindustry and (of Soviet caliber), allows identification of the most important prospects for biotechnology development, a limited corps of niches in which to apply genetic which are, on the whole, only discussed in specialists, and engineering in agriculture. For example, scientific and government circles. lacks biotechnology genetically modified cotton seeds have Kazakhstan does not yet have the innovation been produced in climatic conditions infrastructure and science capable of companies similar to Kazakhstan. In the context of providing a basis for new biotechnology globalization Kazakhstan will be part of the businesses. Where markets are small and it global bioproduct market. is difficult to raise funds from the private In order to avoid negative consequences sector and international organizations, and prevent the country from becoming a even with guaranteed protection of dumping or experimental ground, high intellectual property rights, then the lead quality services should be in place to should be taken by government.

51 Detailed research and comparison of expected benefits and potential risks are required, while well-equipped laboratories need to be set up and high-caliber specialists engaged to assure quality of products on the domestic market

94 Chapter 5. Kazakhstan,s technological capacity

Strategies to address the challenges and scientists and specialists, as well as bio- The building of promote development of biotechnology in technology companies to transfer modern human capacity Kazakhstan knowledge and technologies. The deve- and technological lopment and introduction of new scientific Biotechnology allows transformation of progress are products requires a developed science new knowledge generated through fun- and research base and local cadre to two mutually damental research, into capital, triggering ensure the creation of competitive industrial supportive and the development of different economic products. The building of human capacity inter-dependent sectors. Biotechnology-based approaches and technological progress are therefore processes to setting up new or modernizing current two mutually supportive and interde- production processes allows significant pendent processes. Without adequate increases in returns on financial and other knowledge, scientists will not be able to investment. It is through the latest develop and implement ideas, and without biotechnology achievements that eco- adequate equipment even qualified nomic performance can become out- scientists will not be able to develop a standing. In many cases biotechnology is competitive product. more efficient and effective than traditio- In addition to engaging internationally nal technologies. Priorities in biotechno- recognized biotechnology experts, Ka- logy development in Kazakhstan should zakhstan should provide opportunities for take into account the specifics and overseas study for its specialists. Today, prospects of economic development, such biotechnology training is provided for as the great share of the agroindustrial and Bolashak bursary recipients to study at mining complexes and rich natural international educational establishments. resources. In addition, the National Biotechnology Also, it should be noted that in addition Center has a number of international to the challenges described in the previous scientific projects underway with leading chapter, there are some positive aspects of universities of the US, Japan and France. the Soviet legacy in this field. The Soviet This includes laboratories with Kazakhstani Union the second most significant player in employees, including former Kazakhstani the global microbiology industry and citizens, who assist greatly with contact accounted for 3-5% of world biotechnology making, so that Kazakhstani biotechnologists output. At that time, Kazakhstan was the can learn best practice overseas. production basis for the USSR’s bio- All of these measures are needed technology, so that now, despite obsolete because biotechnology is a science- equipment and limited scope and quality intensive sector, while rapid development of research, Kazakhstan still has basic and modernization requires continuous capacity in the area. learning. Otherwise, both research and Research can be of top quality only if production organizations can lose their local scientists integrate into the global competitive advantages. scientific community. Integration should go Technological progress has a cumulative alongside improving the quality of science effect, i.e. the gap between developed and research, publications and infra- and developing countries is growing due to structures, as well as the provision of modern their differing levels of knowledge and laboratory equipment. Quality and obje- technologies. Therefore, Kazakhstan should ctive assessment of research are only make every effort to not lag behind. possible if research complies with globally Below is a list of concrete recom- recognized standards. mendations to develop biotechnology in In turn, such standards are determined Kazakhstan: by the standards of good laboratory practice. International standards of re- • create an environment enabling search should be introduced in Kazakh- the development of biotechnology stan so that local scientists can promptly companies and encourage investment integrate into the common scientific space, while local research products will be Box 5.3.1. understood and recognized on the global arena. The recognition of local research In 2006 Kazakhstan allocated some 3.5 million US dollars and development will allow publication of to biotechnology programs, which is 3 times more than in findings in leading scientific publications 2005. Currently, preparations are being made to build a new and will be an important step towards complex for a National Biotechnology Center of the Republic cooperation with international universities of Kazakhstan with an overall budget of USD50 million, to and research institutions that may be be completed by 2009. The Center will strive to become a attracted to Kazakhstan alongside the competitive institution, complying with the highest international international business sector. science and research standards and applying a new method of The reality is that the goal of becoming science and research management based on self-governance one of the world’s 50 most competitive and self-sustainability, which are characteristics of the world’s countries cannot be achieved without the leading research institutions. engagement of leading international

95 New technologies for human development in Kazakhstan

through an improved legal framework At the level of communication and provision of benefits and guarantees • Describing characteristics of personal on the part of government; communication in production (a busi- • transfer of advanced technolo- ness involving other people); optimizing gies through leading biotechnology interpersonal relations and develo- companies; ping a protocol for communication to • create real links between research achieve an expected result. and development and their practical • Developing recommendations to application through biotechnology optimize relations as well as regulations divisions within technology parks; and protocols to harmonize interpersonal • pursue integration in the common relations. scientific space and improve the quality In management and business of research through introduction of international standards; • Optimizing personal performance of professional duties. • gradually introduce international standards of research through support • Matching a person’s management to and building of technological style to professional tasks. capacity of organizations which are • Optimizing management styles for making efforts to introduce internati- managers (business or human resource onal standards; create an enabling management). environment for international accredi- tation as an integral part of research • Developing negotiation scenarios projects undertaken by local scientific considering the specific characteristics of institutions and laboratories. negotiators; developing a presentation style and form which considers the 5.4. Social technologies characteristics of the audience. Based on the modes “person-to- • Selecting and training coordinators, machine” and “person-to-person”, which i.e. people capable of producing new were mentioned in section 1.1., technologies information that can help develop can be divided into industrial and social. a business or optimize an existing Industrial technologies are chains of business. precisely matching processes and ope- rations, while social technologies refer to a • Building hierarchical systems of busi- specifically organized set of measures ness management. which contribute to one and the same goal In society and management of social and are used in different sequences and to processes different extents. Therefore, when talking about tech- • Building hierarchical systems for self- nologies, both types should be equally governance at the community, city, employed. regional or national levels. Social technologies are of a higher level of organization, since they allow solutions • Optimizing strategies for election to be found to major human challenges campaigns. and concerns. Such technologies have a • Optimizing the legal framework wide range of capabilities and can be for human rights and economic cross-cutting, contributing to intersectoral development, as well as the structure links. Today social technologies allow and operation of the government optimum solutions to a number of system. challenges faced by each individual in production and private life. • Developing programs and scena- The cross-cutting nature of social rios to find optimal solutions to social, technologies can be seen at various levels economic and political challenges at such as: the community, city, regional or national At the personal level levels. • Describing personal management • Developing a program to promote a styles (a management style determined country’s industrial development. by characteristics of a person) • Developing an optimal strategy to • Describing a style a person uses to govern both a native country and other carry out a task, etc. countries to achieve goals52.

52 Shiyan А.А. Social technology manual./ http://www.i-u.ru/biblio/archive/shijan_rukovodstvo/default.aspx

96 Chapter 5. Kazakhstan,s technological capacity

In a modern society, social technologies *** Social technologies are an important factor allowing inten- It is particularly important for Kazakhstan are an important sification of social processes in the economy to ensure the innovation of technological factor allowing development, since this is the only way to and politics, education and culture and intensification of addressing issues related to social security set up a modern technological base, social processes in and protection, employment, etc. produce competitive products and, Presently, Kazakhstan uses social eventually, to achieve sustainable social the economy and technologies but fails to review their and economic development. politics, education implications and impacts. In this regard, Social and economic development is and culture one of the priority tasks is to look at the impossible without a national strategy for and addressing scope of social technologies and their technological development. In this regard, issues related to resulting impacts, as well as potential risks. government support for research should be social security A modern market economy needs harmonized with the priorities of technolog- and protection, ical development. management technologies in order to employment, etc rationalize communication and establish One of the main implementation tools effective business contact, identify and should be a comprehensive system to stim- realize business potential according to ulate transfer of advanced foreign tech- business development goals, social norms nologies, including direct financial support and standards. There is a need for new through grants, reduced credit, leasing, etc. and indirect support through tax and technologies in human resource investment privileges. At the same time, the management, national and municipal transfer of advanced technologies should governance, environmental operations, be based on the needs of the economy property development, elaboration and and available resources and should con- implementation of programs targeting sider technological constraints and ensure better quality of life and to help alleviate further development of scientific and tech- social tensions, as well as social technologies nological capacity. for businesses, etc.

97 New technologies for human development in Kazakhstan

98 Chapter 6. New technologies for the benefit of Kazakhstan,s people

CHAPTER 6. NEW TECHNOLOGIES FOR THE BENEFIT OF KAZAKHSTAN’S PEOPLE

In the context of economic globaliza- existing and future needs and wants of tion, developed countries ensure eco- people and society. The development of nomic growth by improving existing tech- The development of new technologies new technologies nologies and equipment and using new should, firstly, meet the needs of the should, firstly, scientific achievement to ensure decent population, help address environmental meet the needs of living standards. issues and contribute to the development the population, As the national economy develops and of medicine, pharmacy, mechanical en- help address gineering and instrument engineering, regular income of the population grows, environmental including environmental and scientific people have better access to the benefits issues and of technological progress. instruments, food industry, agriculture, infor- contribute to the Today, Kazakhstan should develop a mation science, construction, etc. beneficial dialogue between science and Lack of financial support on the part of development the public. the government, a deficient legal frame- of medicine, If this issue is effectively addressed, work and underdeveloped innovation in- pharmacy, scientific developments and new frastructure are the main factors currently mechanical technologies will have better returns. hindering the process of innovation and engineering relating, to a greater or lesser extent, to the In particular, this will create not only government’s activity. and instrument economic benefits but also enable the To achieve the above goals, meet engineering, development of modern, highly efficient needs and remove barriers based on the including and competitive technologies meeting human development implications of new environmental the needs of the people and building their technologies, the authors suggest a unified and scientific social and political capacity. approach, which will promote long-term The development of new technologies instruments, national development goals. With this food industry, should lead to sustainable economic approach, effective infrastructure will be agriculture, development and improved living created, technological development pro- standards through: moted, national science and technology information science, • job creation in science, production policy developed, and public readiness construction, etc and services; ensured. • improved educational level of the 6.1. Infrastructure development population and an increased proportion of people engaged in more qualified Without developed science and work (in different sectors) with better technology contributing to an innovative remuneration; economy, no country can make economic progress, since human development and • tackling of production, environmen- development of the human civilization tal and social issues through new determines science as a “primary develop- technologies; ment factor”. Fundamental achievements in science and technology have been • more research related to the produc- officially recognized as the basis for social tion of consumer goods, medicine, etc., development and welfare, because one which helps to develop and introduce monetary unit invested in R&D brings 9 units new products, medications, etc. In this of GDP increase, in particular through the way, the domestic market will have introduction of new technologies. modern, efficient, competitive and, This indicates that new technologies Technological more importantly, affordable goods; allow old and new challenges to be infrastructure • more revenues to budgets of diffe- tackled through new solutions, knowledge should be rent levels through an increased volu- and technologies at lower cost. New developed and technologies open up access to a wider me of production of science-intensive improved with circle of users and have a multiplier effect, products and increased income of the a systematically population; which creates a positive environment for society. operating • provision of new equipment, allow- Therefore, technological infrastructure subsystem to solve ing improvements in the production should be developed and improved with structural internal process through a better working a systematically operating subsystem to issues environment for service personnel and solve structural internal issues. This means less environmental impact. that each constituent subsystem should be The relationship between technologies open to learning and improvement. In this or new technologies and human deve- context, the development and distribution of new technologies should target social lopment is obvious if such technologies development and protection from external are developed and used directly to meet factors.

99 New technologies for human development in Kazakhstan

To this end, the following measures fering knowledge-intensive services and should be undertaken: ensures development and transfer of on the part of scientific and academic new knowledge and set up technology community transfer centers within research in- • develop world-class R&D and new stitutions and higher education esta- technologies in sectors essential for the blishments through provision of start-up national economy, social development capital and reduced taxation and legal and national welfare; and information support; • educational institutions should be - create infrastructure for transfer of more internationally competitive by technologies: regional and international investing in better quality of education networks of technology transfer, and research, more interdisciplinary technology transfer offices based within research and engaging international universities and research institutions, level researchers; exhibitions and fairs of innovative technologies and projects; • introduce new technologies in education in order to promote the - train business personnel, firstly, for small scientific literacy of the population, technological businesses and innovative from primary and secondary schools to structures such as technology parks, higher education, etc. innovation and technology centers and technology development centers in on the part of the government order to ensure effective management • develop and introduce a system throughout the process of innovation; of monitoring and analysis of factors - provide creative incentives and new currently hampering innovative activity, forms of partnership, encourage co- including assessment of the status and operation between higher education trends in small innovative business at the establishments, scientific institutions and national, oblast, city and rayon levels, the private sector through tax benefits, and of efficiency of the innovation subsidies, awards, grants, etc. process; - set up venture funds, which will enab- • create a common information spa- le participants of the innovation system, ce where connection, monitoring, i.e. scientists, researchers, institutions navigation, transfer and processing of and representatives of the business information, notification and mana- sector to share risks through cost-sharing gement signals will be continuous, of R&D projects and programs. global, timely and accessible to ordinary users, in particular, to secondary, higher Partnership between government, and vocational education, scientific businesses and scientific community and engineering organizations and businesses. Governmental and public research organizations and financial institutions All parties involved in the innovation should cooperate more, both with each system and governmental agencies other and with private, government and should recognize the need for new foreign funds to develop, promote and cooperative programs and projects to then expand initiatives and clusters of top improve infrastructure and cooperation standard. through cost-sharing, in order to develop Cooperation between government, The development and promote social and technological science, civil society and business can and improvement innovation based on universal research. be improved at each stage through of technological well-informed decisions and information *** infrastructure obtained through science-oriented rese- The development and improvement should accompany arch and use of new and old technologies of technological infrastructure should harmonization as a tool to achieve short and long accompany harmonization of interests of interests of term targets of social and economic of government, business, the scientific development. government, community and regular people, all of To promote regional development, it is business, whom should realize a shared goal, which recommended to set up a number of the scientific is to achieve sustainable socio-economic innovative organizations in regions such as development and ensure good living community and technology parks, innovation and standards and human development. regular people technology centers, innovation and To satisfy the interests of each group industrial complexes, science towns and and establish partnership, national scientific centers. The status of national and governmental organizations the government should will promote international prestige and thus - create an environment that facilita-tes attract more foreign investors. Such centers the emergence of small businesses of- and technological innovation, including

100 Chapter 6. New technologies for the benefit of Kazakhstan,s people information and communication tech- through a system of government science nologies, will help overcome physical and technology programs of different distance, helping to gradually remove the levels and through special funds. gap between the center and regions and Lack of R&D funding and equipment redistributing cultural life towards the during the transition period resulted in the regions through intensified information discontinuation of research in a number of exchange. areas where Kazakhstani scientists had a competitive advantage. 6.2. Promoting technological The national budget, through special development programs, should fund: National science and technology - socially important R&D (for example, policy created through active research the bulk of medical R&D); and development and use of top-class - priority goals of national deve- new technologies should help address the lopment; issues raised in this report. In particular, the creation of a national innovation system - development of new technologies and enhancement of human develop- that are important for social deve- ment. To this end, there is a question of lopment and the state, but unattractive how well the existing legal framework for other market entities; can facilitate the development and - development of socially important implementation of measures to improve infrastructure (creation of a network of living standards and quality of life through small business incubators, innovation new technologies. Up to now, national and technology centers); technological development has not been considered through the prism of human - grant programs to fund commercial development, which explains why policy projects in order to stimulate the documents cannot fully address existing development of small high-tech busi- problems. nesses (as a rule, involving co-funding In terms of legislative measures, it would from the private sector). be advisable to develop legal control of In turn, out of “forward-looking” pro- the creation, transfer and protection of grams, funding should be provided intellectual property and to create an according to global trends. For example, enabling environment for those involved funding should be channeled into such in the production and commercial use of areas as national security and national scientific knowledge and technologies economic entities, considering the risks such as industries, small businesses, scien- associated with the introduction of new tific and technological organizations, technologies. universities, incubators, technology parks In addition to government funding, In addition to and other organizations. there should be other sources, both nation- Such measures should contribute to: government al and international, and a system of off- funding, there • beneficial credit of the most promising budget sectoral and inter-sectoral funds to should be other scientific and technological works; finance R&D through innovative programs and projects. sources, both • insurance of investments in high risk The tax system is a key component of national and science and technology; indirect control. Taxation should be neutral international • reduced taxation or tax holidays for or stimulatory to encourage businesses to individual science and technology gain and, more importantly, not hide profit, projects; which investors see as a key performance criterion. Strategic investors see such char- • improved customs legislation per- acteristics of the tax system as the tax base taining to science and intellectual and tax rates rather than a variety of tax property; privileges and benefits as key. • national infrastructure for the transfer In the context of economic reforms, of intellectual products. national scientific capacity has shrunk. This hampers national competitiveness We now look in more detail at different on global markets of science-intensive mechanisms of government contribution products and services and prevents the to an enabling innovation climate in introduction of technologies. the economy. Tentatively, there can be In order to change and improve three components of government work the situation the following should be in this sphere: creating special financial considered: mechanisms of government support for From the perspective of government innovation; developing innovation in- control frastructure; indirect control methods. There are two key financial mechanisms - continue active negotiation on WTO by which government can contribution to accession, harmonize national legislation an enabling innovation climate: funding with WTO rules and regulations and

101 New technologies for human development in Kazakhstan

other related international structures - develop effective methods to over- and standards (ISO, WIPO, ILO, etc.); come major risks arising from the use of new technologies. National scientific - the government should pay more at- and technological assessment should tention to internationalization of edu- be intensified, while all science and cation, research and innovation as a technology programs developed and primary goal of overall development of implemented in Kazakhstan, includ- the science, research and innovation ing imported technologies, should be system. International relations should be reviewed by a group of local and in- improved, while there should be legisla- ternational experts in order to minimize tive measures to promote internationali- risks. The assessment should embrace zation in order to attract the best inter- qualitative characteristics, compliance national researchers and experts; with national standards, environmental, - stimulate investment in science and technological and social safety. To im- technology through an enabling envi- prove assessment procedures, the as- ronment both for national and interna- sessment methodology and principles tional investors; should be continuously reviewed; - set up a system of government and - technologies should be introduced private insurance (at least partial), in- on a pilot basis to identify test models. vestment in innovation, provide support With any uncertainty and lack of evi- to insurance companies taking credit dence that new technologies do not risks arising from the use of innovative involve social or environmental risks, products; precautionary measures should be tak- en as not to use such technologies. In - support and encourage investors in addition, if a technology affects project science-intensive high-tech production or institutional management style or and organizations of different owner- methods, additional information should ship types when they are in the process be provided before it is introduced to of innovation. This may be through guar- ensure efficiency and manageability. anteed collateral reserves under real This might include additional measures assets such as highly liquid and financial of quality of products and processes, assets of the government, for example project performance indicators and share holding, and through subsidizing methods of risk alleviation; a part of interest rates for commercial banks’ credits; Partnership between the private busi- - put in place economic incentives for ness and scientific communities businesses to contribute to the imple- mentation of the Strategy of Industrial It is important to bear in mind that inno- and Innovative Development of the Re- vation is a complex non-linear process em- public of Kazakhstan for 2003-2015 as bracing a set of actions to create the end well as national, regional and sectoral product through cooperation between programs and government procure- government, the general public, scientific ment; community, institutions, technological cent- ers, consulting companies, enterprises, etc. - stimulate the establishment of small Each partnership and product effective- businesses engaged in development ness is based, first of all, on the capacities of and transfer of new technologies and all parties involved. Thus, in order to stimu- technology transfer centers in research late innovation processes, coherent actions institutions and higher education estab- should be taken to support all parties of the lishments through, for example, provision process and active areas of technological of startup capital and reduced taxation progress. Also, action should be taken to and legal and information support; identify, monitor and analyze the needs of - develop a comprehensive system civil society to take pro-active measures for of legal protection, including exercise the public benefit and to meet all current and distribution of rights to intellectual needs. property; In order to ensure links between R&D and production, the needs of the popu- On the part of ministries and the scien- lation and industrial enterprises should tific community be identified in terms of fundamental re- search, technological and engineering - national programs for the develop- development and production of machin- ment of all sectors of science and ery and equipment, so that these needs technology should include human de- can be met by the mechanical engineer- velopment elements such as training, ing sector and national science and re- prevention of technological risks and search organizations, through bidding. alleviating innovation and age divides Also, a system of monitoring and review of and regional and gender disparities;

102 Chapter 6. New technologies for the benefit of Kazakhstan,s people factors hampering innovation should be people through new technologies. Poorly When developing developed and introduced. This should justified new technologies based on R&D new technologies, include an assessment of the current and can have detrimental human implications the government future status of small innovative businesses such as manmade disasters, ineffective should focus at the national and regional levels and use and exhaustion of non-renewable nat- on creating an performance of the innovation process. ural resources and environmental impacts, environment as well as damage to everything that is vital 6.3. Developing integrated national for the future generations. enabling the policy In this regard, significant contributions complementary existence of two Government has a complex responsi- should be made to: bility for developing and implementing in- - enhance the role of science, technol- processes – human tegrated national science and technology ogy and innovation policy; development and policy within the framework of identified pri- technological orities and breakthrough areas in the inter- - reform the national sector of science progress est of social and economic development, and technology to enhance the com- as well as coordination of the interests of petitiveness of national science and government, private businesses and man- technology and promote its role in na- agement and staff of scientific organiza- tional economic development through tions. breakthroughs in priority areas of sci- Today, government support for science ence, technology and equipment; and technology in Kazakhstan is of central - regional and global institutional sup- importance. Reforming and enhancing the port, to ensure equal and fair rules and role of national science and technology in strategies building technological ca- national economic development through pacity; breakthroughs in priority areas should be prioritized. - in cooperation with national and in- When developing new technologies, ternational scientific communities, iden- the government should focus on creating tify an optimal policy balance between an environment enabling the complemen- two fundamentally differing systems tary existence of two processes – human of innovative development: transfer of development and technological progress. new foreign technologies and support It is also necessary to facilitate sustainable to science-intensive technologies de- economic development based on effec- veloped by national scientists through tive use of intellectual capacity, employ- development institutions. ment of highly qualified personnel and the generation, transfer and application of 6.4. Ensuring social readiness new knowledge. When developing integrated policy, An important factor in social develop- government action should promote human ment is access to all technological com- development through new technologies modities and advocating the interests of An important contributing to: a wide range of groups. The government factor in social - improved health of the population; should provide every support for people to acquire knowledge, have access to tech- development - better environmental management; nological innovation and learn how to use is access to all - better access to and quality of it. Such support should facilitate materi- technological healthcare; alization of ambitious wants, opportunities commodities and and needs of each person, in particular, life advocating the - improved access to high quality expectancy, highquality healthcare, good education for all groups of the interests of a wide education and employment and high in- population; range of groups come. - meeting the needs of the economy When ensuring public receptiveness, in for professional cadres with special addition to the above criteria, the social qualifications; and cultural environment should be pre- pared and made receptive to the devel- - an environment enabling social and personal development, etc. opment, introduction and use of technolo- gies. For innovations involving not only Kazakhstan’s long-term goals should be advanced consumption forms but also sustainable and balanced social and eco- generation of new ideas, in order for them nomic development, including such key to develop further, Kazakhstan should pro- factors as good employment, productivity mote a positive public attitude to the proc- and competitiveness. ess, i.e. shape mentality. As a rule, innova- It is important that Kazakhstani society comes to realize that science gives birth to tion does not involve the entire population. knowledge and information that can be However, innovation is impossible if the used to effectively manage resources such population views it as an unaffordable luxu- as natural, production and human resourc- ry, a hostile intrusion or an impingement on es to create an enabling environment for traditional values.

103 New technologies for human development in Kazakhstan

To this end, it is recommended to pro- - training and professional learning for mote public: central and regional authorities and - recognition of the importance of municipalities responsible for innovati- education and continuous learning; on, commercialization of technologies and management of related markets; - understanding of the inevitability and importance of technological progress - development of a concrete and tar- for the benefit of human development; geted program for advanced learning, training and staff attestation and certifi- - recognition of the importance of cation at all levels of education, sci- comprehensive reviewing of the ence, technology and innovation, en- implications and risks of introduction gaging national and international and use of technologies; experts; - confidence and belief in the impor- - IT training for older staff and advan- tance of national R&D; ced professional training for experien- It will be impossible - readiness to take well thought-thro- ced staff to alleviate the technology di- to promote public ugh risks to make profit. vide and prevent unemployment among the older generation; receptiveness It will be impossible to promote public and readiness receptiveness and readiness without a - development of a social package to without a system system of high-quality training of high-tech promote the prestige of the scientific, of high-quality specialists and education. engineering and pedagogic professions training of high- A multi-level system of training requires and improve their social status and in- the following: tech specialists and come level. education - funding of staff training using inter- *** nal development resources, such as All of these issues are relevant for Kaza- government funding; funds of regional khstan, since there is growing interest in the authorities interested in staff training of use of new technologies in different areas. corporations and innovation centers; Targeted work of the government, the gen- performance of research works and eral public and the private sector to stimu- tuition fees; and resources provided by late the development and introduction of international organizations, funds and technologies will be a mechanism to en- technical assistance programs; sure the widest possible access to techno- - introduction of new educational tech- logical commodities. nologies promoting better rural literacy Comprehensive activities and prog- through organization and control over rams will help address most of the issues all elements of schooling, such as out- raised in this Report and set up a national of-class work, scientific activity by teach- innovation system enabling the develop- ers and students, introduction of new ment of new technologies and making Ka- technologies in the learning process zakhstan one of the leading competitive and competitive selection of teaching countries in the world. For this to happen, all staff; responsible ministries and related agencies should work together and realize that each - training of qualified trainers and con- program, first of all, should complement all sultants for educational establishments previous programs and should then set new specializing in staff training and consult- targets. As a result, technologies will also ing services for innovative enterprises; enable Kazakhstan’s integration in global - training of scientists, primarily authors cultural processes. In addition, new tech- and designers, specialists of scientific di- nologies have a growing creative capacity visions and managers of scientific estab- to enable a variety of effective forms and lishments in principles of technology methods of individual creation, self-fulfill- commercialization and use of research ment and group work in order to solve and science outcomes as an innovative shared problems and advance cultural and resource; social development.

104 Conclusion

CONCLUSION

The National Report “New Technologies education towards Soviet period for Human Development in Kazakhstan” standards, based on the needs of seeks to draw public attention to the goals both the economy and human and challenges of technological develop- development; ment, which is viewed as a factor promot- 9. identify areas of fundamental and ing economic growth in Kazakhstan. This is applied science capable of providing due to the fact current economic growth Kazakhstan a competitive advantage is attributed largely to the development through the global marketing of local of the extractive industries with low value ideas and technologies, and ensure added. adequate funding of science; Not only is Kazakhstan rich in natural re- sources but also in highly qualified human 10. increase state expenditure on re- resources, which can be the basis for tech- search and development in these nological development as a human de- areas and encourage increased cost- velopment tool. However, not all technolo- sharing from the private sector, which gies can be used as human development should result in growing global exports instruments because of culture, mentality, of products and services of new and existing infrastructure, etc. Therefore, the advanced technologies; authors put forward a selective approach 11. promote the acquisition of know- to using technologies. ledge translating into new technologies To balance technological and human for human development; development, Kazakhstan needs to: 1. have a selective approach to the 12. ensure that technological develop- selection and use of new technologies ment is innovation-based, since this from a human development per- is the only way a new and modern spective; technological base can be establi- shed, allowing competitive production 2. elaborate, in the framework of the and the achievement of sustainable long-term development strategy Ka- social and economic development. zakhstan 2030, new programs taking An enabling context for the above has account of the current context and already been partially created in Kaza- new aspects of human development in khstan. For example, the following policy Kazakhstan; documents have been adopted: Strategy 3. incorporate sustainable human de- for Industrial and Innovative Development velopment targets into the goal of of Kazakhstan for 2003-2015 (in 2003), the becoming one of the world’s 50 most Program for Development of the National competitive nations; Innovation System of the Republic of Kaza- khstan for 2005-2015 (in 2005), the State Pro- 4. ensure continuous national compet- gram for Development of Science up to itiveness and sustainable human 2012 (2006) and the State Program for De- development through Kazakhstan’s in- velopment of Education up to 2010 (in tegration in the global economy; 2005). These documents aim to establish an 5. address the health targets of the innovative economy. Millennium Declaration relating to All the recommendations listed above reduced child and maternal mortality, emphasize the links between the work of halting the spread of HIV/AIDS and government, the scientific community and other diseases; business and Science and Technology, since such cooperation can be rationalized 6. effectively manage its huge natu- at each stage through informed decisions, ral resources by conserving non- findings of scientific research and outco- renewable resources and enabling mes of the use of (new) technologies as a sustainable human development of tool to achieve the social and economic future generations through renewable development targets. resources; Therefore, this National Human Devel- 7. achieve a number of targets rela- opment Report seeks to draw public atten- ted to professional government and tion to the challenges related to the devel- decentralization and continue anti- opment, adaptation and introduction of corruption efforts; new technologies. To maximize the benefit, all stakeholders, namely government, the 8. along with the introduction of a general public, scientific community and new system of vocational and higher businesses, should be extensively involved education, improve the quality of in the process.

105 New technologies for human development in Kazakhstan

Through the Report, the authors have use technologies to make human life more attempted to show that although indirect, comfortable and improve human wel- there is a link between technologies and fare, rather than to simply promote overall human development and that the devel- economic development. And, secondly, opment of new technologies will not nec- from the human development perspec- essarily lead to an increased level of human tive, technologies that are critical for Ka- development. zakhstan’s human, economic and sustain- The major conclusion is that the ultimate able development should be identified. goal of technological development is to

106 GLOSSARY

Glossary

Applied research Original research undertaken to acquire knowledge and obtain concrete practical results. Bioethics The Systemic study of moral values and principles in human activities related to biology and medicine. Biotechnology Application of the principles of engineering and technology to the application of biological agents such as microorganisms, cell cultures, cell or organism parts on materials. Bretton Woods Institutions (BWIs) were established at Bretton Woods, New Hampshire, in July 1944 when delegates from 45 nations gathered to set up a new international financial system to finance the reconstruction of war-torn Europe and Asia andthe prevention of economic decline. The mission of the BWIs was formulated as support to global development, democracy and peace. Today the Bretton Woods Institutions, also known as the World Bank Group, are five inter-connected organizations, which are the International Monetary Fund (IMF), the International Bank for Reconstruction and Development (IBRD), the International Development Association (IDA), the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA), and the International Centre for Settlement of Investment Disputes (ICSID). The World Bank Group provides expert and financial support to improve living standards and reduce poverty in developing countries. Business angel A private investor investing some of his/her own financial assets, as well as time and expertise, in ventures at seed and start-up stages or when additional investment can help prompt business expansion. Business angels are primarily former/current business people or hired managers with capital and expertise sufficient for informed investment and resulting venture management. Business angel community An organization whose mission is to support entrepreneurs in need of private risk capital and business angels in search of one another. Communities tend to stay neutral on the evaluation of projects, except for formal initial selection, and stay aside from decision making, focusing on securing a spot for and providing professional support to both players of the investment process. Circulation of innovation The process of market circulation of a new product. Once introduced, an innovation is circulated for an uncertain period of time, impacting the sales of this product. Cluster A special network of companies (enterprises), academic institutions (universities, research institutes), support organizations (consulting companies) and users linked to a single chain for the sake of mutual benefit. Competitiveness Refers to national capacity to expand presence on domestic and global markets. Determined by industrial capacity for on-going development, innovation and competitiveness. Digital divide (rarely “digital inequality”) “digital gap”, “social digital inequality”, “digital lag” A divide between countries or groups of population in their access to the Internet, other information products and communications. In particular, countries and groups have different access to high-quality information products and different opportunities to use them because of different levels of education and development of technical skills. This issue is often analyzed in an international context because some countries are better equipped, have greater opportunities to use information and communication technologies and have greater benefits from such technologies than developing countries. Overall, a digital divide is considered both as an effect and cause of economic underdevelopment. Economic growth An increase in actual national output of goods and services over a certain period. To capture the improvement in the living standard, it is measured by growth rate of the Gross Domestic Product (GDP) over a specified period or in per capita terms in order to reflect its impact on living standards. Evaluation of research Appraisal of effectiveness of research and development funded from the national budget or other sources, to improve the distribution, structure and funding of research, etc. Innovation Refers to new ideas, methods and devices as well as production of new products and technologies including management and marketing strategies. Most commonly used to describe a change in technologies, individual processes, management or finance and means of facilitating such change. Intellectual capital Intangible assets; the totality of intellectual assets including intellectual property, natural or acquired skills and knowledge. Intellectual capital integrates human capital, intellectual property, infrastructural and market assets. Intellectual property Conventional collective terms. Includes rights to literary, artistic and scientific works, performances, recordings, radio and TV programmes (including copyright), discoveries, inventions and other rights related to different types of industrial property and protection from unfair competition.

107 New technologies for human development in Kazakhstan

Introduction Adaptation of innovation to the current environment, practical use of advanced ideas, inventions and research findings (innovation). Introduction of innovation requires the re-construction of production, re-training of staff and investment, and involves the risk of failure and loss. Investment preference Granting of the right to additional deduction from total annual revenue of taxpayers investing in fixed assets to set up new or expand and develop current productions and exempt such taxpayers from property tax on fixed assets, set in operation through an investment scheme to set up new or expand current production. Leasing (financial rent) A form of credit when the lessor must purchase property specified by the lessee from a specified seller and give it to the lessor for temporary possession and use for an income-generating purpose, in return for payment. Management stages Monitoring, information management, financial management, human resource management, resource planning and allocation. Nanotechnology A field of applied science and technology studying characteristics of objects and developing devices of nanometer size, which is 10-9 of a meter according, to the SI System. Nanotechnologies differ significantly from traditional engineering disciplines, since on such a small scale traditional macroscopic technologies of material handling are often useless, while microscopic phenomenon, weak on traditional scales, become more significant (qualities and links between individual atoms and molecules, quantum effect). Because of its use of advanced research findings, nanotechnology is a high technology. National innovation system The complex of economic entities communicating to create and introduce innovative products and services, whose innovative activities are guided by a respective legal framework based on national policy. A national innovation system is developed to make qualitative changes to socially oriented areas such as industry, health, education, housing and construction, information and communication. Pilot development Systemic activity based on knowledge obtained through research and/or empirically to create new materials, products, processes, devices, services, systems or techniques and further improve them. Pilot research An integral part of “fundamental research”, i.e. pilot projects to obtain new knowledge (see “Fundamental research”). Product innovation Innovation related to production and use of new or improved products. Production stages Product development, consumer relations, consumer needs identification, production, maintenance, account management, after-sales service. Risk In a wider sense means the potential emergence of circumstances determining: - uncertainty or inability to achieve expected outcomes; - material damage; - currency loss, etc. In a narrow sense, risk is measurable potential of loss or forgone benefits. Social capital Refers to interpersonal relations through which resources or information about such resources is channeled. A network determines access to goods and information through appropriate channels. Social technologies Technologies used in social relations, i.e. man-to-man rather than man-to-machine or man-to-nature relations. State innovation policy Development and improvement of a legal framework facilitating economic introduction of intellectual products; economic policy in relation to innovative players; creation of innovative infrastructure to develop and enhance innovative business; governmental support for the commercialization of intellectual products, preparation of production and marketing of innovative products and services. Technological commercialization Commercialization of research and development describes more extensive commercial use of products of completed research and development activity. Technological innovation Innovation related to the creation and application of new or improved technologies. Technology (derived from the Greek word “téchnē” meaning art, technique, skill). In a wide sense, technology means knowledge that can be used to produce goods and services out of economic resources. In a narrow sense, technology means a substance, energy or information conversion technique in the process of production, material (re)processing, installation of products, quality control and management. Technology includes methods, techniques, regime, consequence of operations and procedures. It is closely linked to the tools, equipment, instruments and materials used. Venture capital (risk capital) Long-term investment in securities or enterprises with high or relatively high risk of loss, in which the potential for profit may be considerable. Venture enterprise (venture firm; risk firm)A relatively small business enterprise carrying out research and development, planning and design, and technological innovation of uncertain profit. There can be internal ventures, which are small innovation firms segre gated from corporations to create and introduce innovations, and external ventures, referring to small independent innovation firms aggregating to large corporations through provision of funding, consultation, pilots, etc. 108 Annex 1. Technical notes

ANNEXES ANNEX 1. TECHNICAL NOTES

1. Integral human development indicators

In 1987 the UN Development Planning Committee decided to review the human cost of structural changes as a topic for its report for 1988. The findings of surveys conducted as part of a report by a group of experts headed by Mahbub ul Haq were part of a draft report “Human development: the forgotten measurement of development strategy” by Kate Griffin. Later, Griffin, in cooperation with John Knight published their works in a special edition of the Journal of Development Planning53 in 1989 and re-published them as a book in 199054 . This served as the foundation for a conceptual approach to human development. Theories by Amartya Sen, the Nobel prize winner in economics, who published his “Development as Capability Expansion”55 in 1989 had a powerful impact on the contemporary concept of human development. Sen did not consider development as improving financial or economic welfare, but rather as expansion of human “capabilities”, i.e. ability to live a long and healthy life, have access to knowledge, be able to be more active, etc. At the same time, increased capability was associated with greater choices. Thus, the human development concept identified human development and greater choices rather than greater GNP as an economic development target. The conceptual approach to human development (also translated as development of human potential) elaborated by a group of UNDP experts was first published in the first Global Human Development Report 199056 where human development was defined as “expansion of human choices and achieved welfare”. Income is only one of such choices. Equally important are health, education, environment and freedom of action and speech. The report provided a new tool to measure socio-economic progress: the human development index (HDI) which combines life expectancy, adult level of education and income. This definition of human development pre-determines a wide and complex setof statistical indicators allowing assessment and review of human development. All statistical indicators capturing human development may be grouped as follows: 1. Integral indicators of general assessment of human development. 2. Basic indicators capturing the main components of integral assessment of human development. 3. Other indicators capturing other dimensions of human development.

2. Basic and integral human development indicators

Basic human development indicators capture three main dimensions of human development, which are longevity, education and living standards. Each of these human development dimensions captures a number of important human capabilities. Thus, longevity means capability to live a long and healthy life, education – to acquire knowledge, communicate and participate in public life, living standards – to have access to resources required for a decent living, live a healthy life, be territorially and socially mobile, participate in public life, etc. A set of indicators calculated on a regular basis and comparable across nearly all countries of the world is used to measure these three human development components. An increase in the value of basic indicators suggests better capabilities in the respective human development dimension. Indicators capturing longevity. Live expectancy at birth is used to measure longevity. A shorter term is often used – life expectancy. It is one of the most common indicators in international statistics, which is calculated based on so-called “mortality rates”. Life expectancy at birth – the number of years a newborn would live, provided death rates for each age remain the same as in the birth year throughout the entire life of the newborn.

53 Griffin K. and Knight J. (eds). 1989. “Human Development in the 1980s and Beyond.” In: Journal of Development Planning. No. 19 (Special edition). 54 Griffin K. and Knight J. (eds). 1990. “Human Development and the International Development Strategy for the 1990s”. London: Macmillan. 55 Sen A. 1989. “Development as Capability Expansion.” In: Journal of Development Planning. No.19. 56 UNDP. 1990. Human Development Report 1990. New York: Oxford University Press.

109 New technologies for human development in Kazakhstan

These indicators can be both gender-aggregated and gender-disaggregated. In addition, proportions of the population not surviving to a certain age are used to calculate the human poverty indices and to capture deprivation in the ability to live a long and healthy life. The under-five mortality rate and maternal mortality rate are additionally used for developing and developed countries respectively. Indicators capturing education Education is measured by the literacy rate among the 15+ population and the enrolment ratio. Literacy is the ability to both read and write, with understanding, a short statement related to the person’s everyday life. For developing countries, literacy is the most significant indicator of education. Therefore, it is given twice the weighting as the enrolment ratio when calculating the HDI. Global Human Development Reports before 1995 used, instead of the enrolment ratio, average duration of learning calculated for the population aged 25 and more. Since the 1995 Report, however, this indicator was replaced by the enrolment ratio. The enrolment ratio is the number of students enrolled in primary, secondary and tertiary levels of education, as a percentage of the population aged 5-24. It should be remembered that different levels of education impact human capabilities differently. Therefore, Anand and Sen suggested complementing the common education indicators with those specific for individual levels of education, so as to use enrolment in secondary and tertiary education for developing and developed countries respectively. Indicators capturing living standards Unlike the previous two dimensions, this human development dimension only identifies human capabilities rather than determining their use. This means that it is only a means of enlarging the capability to choose but not the choice as such. The high-quality assessment of the living standards should include many factors determining development and fulfillment of human capabilities, such as personal income, income distribution between different population groups, accrued property, access to land and credit resources, infrastructure and access to public commodities such as healthcare, education, transport, utilities, etc., individual lifestyles, family size and composition, commodities produced by households, environmental and climatic conditions etc. Since it is difficult to select a direct indicator, an indirect indicator - Gross Domestic Product (GDP) per capita – is used to assess financial welfare. For inter-country comparisons, GDP per capita should be converted into real GDP per capita in USD using purchasing parity power (PPP) of national currency relative to US dollars. PPP is understood to be the number of national currency units required to purchase an identical basket of goods and services that can be bought for US$1 in the USA. Countries comprising different groups depending on their level of economic development can be compared using complementary indicators, allowing to more objectively differentiate countries within one group depending on their financial welfare. Thus, for the least developed countries real GDP per capita is a relatively adequate tool to capture access to resources required for a decent living. For developing countries, it makes sense to complement it with the proportion of people with income below the poverty line, which captures poverty incidence, which is more common for the less developed countries. For developed countries, these two indicators should be complemented with income inequality indicator57 :

Y = (1 – G) x Y r,

where G Gini coefficient; Yr real GDP per capita. When countries have the same real GDP per capita, the Gini coefficient allows differentiation of countries by living standards.

3. The Human Development Index (HDI) The Human Development Index is calculated as an arithmetic average value of three other indices: life expectancy, education and GDP. The education index is calculated using the indices of literacy (two thirds weighting) and access to education (one third). Four indicators are used to calculate these indices. The accepted ranges of these indicators lie within the following limits:

110 Annex 1. Technical notes

Based on these indicators, the following formula is used to calculate all indices apart from the GDP index: actual value of х – minimum value of х I = i i maximum value of хi - minimum value of хi

When building the GDP index, a different formula is used. The formula uses a decimal logarithm of GDP per capita in numerator and denominator:

log10 (actual value of хi) - log10 (minimum value of хi) I = log10 (maximum value of хi) - log10 (minimum value of хi) Kazakhstan, which had the following main indicators in 2005, can be used to illustrate the calculation of the human development index:

Hence, according to the above formula, the life expectancy index will be 0.682:

(65.9 - 25) / (85 - 25) = 40.9 / 60 = 0.682.

The adult literacy index will be 0.995:

(99.5 - 0) / (100 - 0) = 0.995.

The overall education index will be 0.943, when the enrolment ratio is used worth 85%:

(0.995 * 2 + 0.850) / 3 = 0.947.

If calculated by the above formula the GDP index will be:

(log(8068)-log(100)) / (log(40000) – log(100)) = = (8.996-4.605) / (10.597-4.605) = 4.391/5.991 = 0.733

The human development index based on these three indices will be 0.787:

(0.682 + 0.947 + 0.733) / 3 = 0.787. 4. The Gender-related Development Index (GDI)

The gender-related development index uses the same indicators as the HDI. They differ in that for GDI average values of each country’s indices (life expectancy, education and GDP) are adjusted by the gap between male and female attainment. In order to make this adjustment, a weighting formula is used. This formula is based on the quality of the average power function to depend on the exponent of the mean (majority median rule). S. Anand and A. Sen suggested the following formula to calculate gender-adjusted indices 58:

58 Anand S., Sen A. Human Development Index: Methodology and Measurement // Background Paper for Human Development Report 1993. - New York: UNDP, 1992.

111 New technologies for human development in Kazakhstan

х 1-ε х 1-ε 1/(1-ε) I = [d f I f + d m I m ] ,

where df and dm are, respectively, proportions of women and men in the overall population; are indices relative for women and men; If and Im (1-ε) is the exponent of the average. When different values of ε (exponent of the 1-ε mean) are used, different types of median emerge: ε = 0 – arithmetic median; ε = 1 – geometric median; ε = 2 – harmonic median, etc. The more the accepted exponent differs from the exponent of arithmetic median, the more significantly this affects the reduction of the average indicator. All Global Human Development Reports use the parameter of weighting ε fixed at 2 (“moderate deviation toward inequality”). The result is a harmonious middling of indicators of female and male attainment. The GDI is also corrected in terms of maximum and minimum life expectancies considering that women generally live longer than men. Thus, maximum female life expectancy is fixed at 87.5 years and minimum at 27.5 years, for males 82.5 and 22.5 years respectively. The equally-distributed life expectancy index (using the parameter of weighting ε = 2) is calculated by the formula:

where df and dm are, respectively, proportions of women and men in the overall population;

Ifle and Imle are female and male life expectancy indices. The equally-distributed education and income indices are calculated similarly. The summary human development index adjusted for gender is an arithmetic mean of the three equally distributed indices. Calculation of an income index adjusted for gender is more complicated. It is expected that incomes generated in the country are distributed between men and women in proportion to their wages. Two types of data are used when the proportion of women and men with earned income are calculated: ratio of average wages of women to average wages of men and percentages of women and men in the economically active population aged 15 and older. When data about the ratio of average wages of women and men are not available, a weighted mean ratio of 75% for all countries that have data on wages is used.

The proportion of wages for females (Sf) is calculated by the formula:

х х Sf = deaf Iisf /(deaf Iisf + deam).

where deaf and deam are the proportions of women and men in the total economically active population;

Iisf is the index of the average female wages relative to average male wages. Taking into account the age and gender composition of the population we can calculate incomes (GDP) per one woman and one man:

х GDPf = GDP Sf / df , х GDPm = GDP (1-Sf) / dm,

where GDP, GDPf, GDPm are GDP per capita, per one woman and one man. 5. The Gender Empowerment Measure (GEM) The gender empowerment measure (GEM) is built on indicators calculated specifically to measure the relative political and economic participation of women and men. The first two indicators are used to capture economic participation and decision- making power through women’s and men’s percentages of positions as senior officials and managers and women’s and men’s percentages of professional and technical positions. Since the proportions of positions of each of these categories are different in the overall population, indices are calculated individually for each category and then summed.

112 Annex 1. Technical notes

The third indicator, which is women’s and men’s percentages of parliamentary seats, has been selected to capture political participation and decision-making power. For each of these three dimensions, an equally distributed equivalent percentage (EDEP) is calculated, as a population-weighted average, according to the following general formula:

where df and dm are, respectively, female and male population shares;

dfi and dmi are, respectively, earned incomes of women and men by each of the three indicators. Then these indicators are indexed by dividing the EDEP by 50 %. The income index is used as an indicator capturing the ability to manage economic resources. This index is calculated using the GDI methodology. The income index can be PPP US$40,000 maximum and PPP US$10,000. Finally, equally weighted indices for each of these dimensions - economic participation and decision-making power, political participation and decision-making power and the ability to manage economic resources – give the combined GEM.

6. The Human Poverty Index (HPI) Depending on the socio-economic conditions of individual countries, different indicators can be included in the Human Poverty Index (HPI). In the Global Human Development Report for 1997 the Human Poverty Index suggested for developing countries (HPI-1) reflects all three dimensions of human life that are included in the HDI – namely a long and healthy life, knowledge and a decent standard of living:

3 3 3 1/3 HPI-1 = [1/3(P1 + P2 + P3 )]

where P1 - percentage of population not surviving to age 40,

P2 - adult literacy rate,

P3 - average of population without sustainable access to safe water and healthcare and under-five children underweight for their age. Considering the completely different social and economic conditions in developed industrial countries, UNDP in its Global Human Development Report 1999, suggested a different formula to measure poverty (HPI-2) of the populations in these countries:

3 3 3 3 1/3 HPI-2 = [1/4(P1 + P2 + P3 + P4 )] ,

where P1 - percentage of population not surviving to age 60,

P2 - percentage of adults lacking functional literacy skills,

P3 - percentage of population with income below 50% of median adjusted income in the country, i.e. income in the middle of the income distribution line,

P4 - percentage of the economically active population unemployed for 12 months or more. The following formula for calculation of HPI has been adopted (as of National Human Development Report 1999) for Kazakhstan:

3 3 3 3 1/3 HPI = [1/4(P1 + P2 + P3 + P4 )] ,

where P1 - percentage of population not surviving to age 60,

P2 - percentage of young people aged 16 not enrolled in schooling,

P3 - percentage of population with income below the subsistence minimum,

P4 - unemployment rate.

Illustrating using calculation of Kazakhstan’s HPI for 2005. The baseline data are P1 =

30.7%, P2 = 1.1%, P3 = 9.8%, P4 = 8.1%. Using the above formula, Kazakhstan’s HPI for 2005 will be 19.7%, which suggests that about one fifth of the country’s population is disadvantaged (deprived in terms of human development) by the selected four indicators. ЫThe human development index can be improved if disaggregated. The overall index of a country can mask the fact that different groups of the country’s population may have different levels of human development whether by region, gender or settlement (urban or rural). When calculating regional HDI, the main problem is the choice of an indicator most adequately reflecting access of the population to resources. At the country level, GDP per

113 New technologies for human development in Kazakhstan

capita serves this purpose according to the UNDP methodology. Gross Regional Product (GRP) calculated by the manufacturing method is used instead of GDP for regional HDIs. Use of this indicator when computing the HDI is the most vulnerable point in regional HDI measurement methodology since high proportions of export-oriented sectors in GDP may produce a picture of token economic welfare of the region’s population. Taking into account critiques about using per capita GRP as an indicator describing the population’s access to resources for decent living standards, the GDP index has also been used when gathering data and calculating regional HDIs for national human development reports. It should be noted that per capita GRP and the national level of monetary incomes differed by 2.9 – 3.5 times in 1993-2003 for three main reasons. Firstly, monetary incomes of the surveyed households contain a systemic mistake connected to their underestimation: macro level underestimation ranged from one fourth to one third of declared monetary incomes. Secondly, GRP contains in-kind incomes of the population accounting for up to a quarter of monetary incomes and cost estimates of individual commodities that households already own. These include, for example, the relative cost of living in owned housing. Thirdly, in terms of consumptive use, GRP includes incomes used both for consumption and savings. In addition, it is worth noting that summary GYP by oblasts (GRP) does not equal GDP relative to GYP when not distributed by regions. Exchange of per capita monetary incomes into USD at PPP will lead to underestimation of access to resources. Therefore, to ensure that the results are the same at the national level per capita, monetary incomes exchanged into USD through PPP are multiplied by a coefficient equal to the ratio of per capita GDP to per capita monetary incomes. This coefficient is used to correct regional per capita monetary incomes, which results in regional monetary incomes of the population coinciding with the national average.

8. Kazakhstan’s HDI by settlement (urban/rural) Baseline indicators broken down by urban/rural area should be available in order to calculate the HDI by settlement. Despite some difficulties, all indicators, apart from GDP per capita, are now calculated with an urban/rural breakdown. In order to differentiate between rural and urban GDP, national human development reports have employed the methodology used to calculate gender-disaggregated GDP. Therefore, earned income is distributed between men and women in proportion to their respective wages in order to calculate gender-related GDP, while urban/rural income per capita is used to calculate urban/rural GDP.

114 Annex 2. Statistical annexes

ANNEX 2. STATISTICAL ANNEXES

Table 1. Regional HDI rankings, Kazakhstan, 2005

Sources: 1) calculated by the author using data of the RK Statistics Agency. 2) UNDP Human Development Report 2006.

Table 2. Basic human development indicators and related indexes, by region, 2005

Source: calculated by the author using data of the RK Statistics Agency and regional values of per capita income spent on consumption. Note: The highest value in each year is highlighted in bold, while the lowest is in bold italics. 115 New technologies for human development in Kazakhstan

Table 3. Individual human development indicators adjusted by gender, Kazakhstan, 1999-2005

Sources: 1) Data provided by the RK Statistics Agency. 2) Calculated by the author.

Table 4. Kazakhstan’s gender-adjusted indexes of human development components and HDI, 1999-2005

Note: numerator – women; denominator – men.

Table 5. Kazakhstan’s gender (un) adjusted indexes of human development components and HDI using UNDP methodology, 1999-2005

Note: : numerator – gender-adjusted; denominator – not gender-adjusted.

116 Annex 2. Statistical annexes

Table 6. National and regional HDIs in Kazakhstan based on GRP per capita, 1990-2005

Table 6 continued

Source: calculated by the author using data of the RK Statistics Agency and GRP per capita at the regional level. Note: The highest value in each year is highlighted in bold, while the lowest is in bold italics.

117 New technologies for human development in Kazakhstan

Table 7. National and regional GDP (GRP) in Kazakhstan, 1990-2005 USD at PPP

Table 7 continued

Source: calculated by the author using data of the RK Statistics Agency and GRP per capita at the regional level. Note: The highest value in each year is highlighted in bold, while the lowest is in bold italics.

118 Annex 2. Statistical annexes

Table 8. National and regional HDIs based on income spent on consumption, per capita, Kazakhstan, 1993-2005

Table 8 continued

Source: calculated by the author using data of the RK Statistics Agency and GRP per capita at the regional level. Note: The highest value in each year is highlighted in bold, while the lowest is in bold italics.

119 New technologies for human development in Kazakhstan

Table 9. National and regional income spent on consumption, per capita, Kazakhstan, 1993-2005 USD at PPP

Table 9 continued

Source: calculated by the author using data of the RK Statistics Agency and regional values of per capita income spent on consumption. Note: The highest value in each year is highlighted in bold, while the lowest is in bold italics.

120 Annex 2. Statistical annexes

Table 10. Proportion of population not surviving to age 60, by oblast, 1998-2005

Source: calculated by the author using data of the RK Statistics Agency. Note: The highest value in each year is highlighted in bold, while the lowest is in bold italics.

Table 11. Proportion of 16-year-olds not enrolled in education, 1998-2005

Source: calculated by the author using data of the RK Statistics Agency. Note: The highest value in each year is highlighted in bold, while the lowest is in bold italics.

121 New technologies for human development in Kazakhstan

Table 11. Proportion of 16-year-olds not enrolled in education, 1998-2005

Source: calculated by the author using data of the RK Statistics Agency. Note: The highest value in each year is highlighted in bold, while the lowest is in bold italics.

Table 12. Proportion of population with income spent on consumption below the subsistence minimum, 1999-2005

Source: calculated by the author using data of the RK Statistics Agency. Note: The highest value in each year is highlighted in bold, while the lowest is in bold italics.

122 Annex 2. Statistical annexes

Table 13. Unemployment rate (%, at year end), 1999-2005

Source: calculated by the author using data of the RK Statistics Agency. Note: The highest value in each year is highlighted in bold, while the lowest is in bold italics.

Table 14. Human Poverty Index, 1999-2005

Source: calculated by the author using data of the RK Statistics Agency. Note: The highest value in each year is highlighted in bold, while the lowest is in bold italics.

123 New technologies for human development in Kazakhstan

Table 15. Staff engaged in research and development, by type of organization * (staff)

* - Not including faculty engaged in R&D along with educational work Source: data provided by the RK National Center for Scientific and Technical Information

Table 16. Highly qualified professionals out of all researchers (people)

Source: data provided by the RK National Center for Scientific and Technical Information

Table 17. Average annual fixed assets spent on R&D, 2000-2005

(Source: data provided by the RK National Center for Scientific and Technical Information for 2006)

124 Annex 2. Statistical annexes

Table 18. GDP and expenditure on R&D in Kazakhstan, 2000-2005 (bln. tenge)

(Source: data provided by the RK National Center for Scientific and Technical Information, for 2006)

Table 19. R&D costs, per capita

(Source: data provided by the RK National Center for Scientific and Technical Information, for 2006)

Table 20. R&D costs, by sources of funding, 2000-2005 (mln. tenge)

(Source: RK Statistics Agency, Research and Development, Series 20, Almaty)

125 New technologies for human development in Kazakhstan

Table 21. Shares and rates of increase of internal costs of R&D, by sources of funding

(Source: : RK Statistics Agency, Research and Development, Series 20, Almaty)

Table 22. Financial resources, by types of organization, 2000-2005 (mln. tenge)

(Source: RK Statistics Agency, Research and Development, Series 20, Almaty)

126 Annex 2. Statistical annexes

Table 23. GDP of CIS countries, 1990-2005 (as % of previous year)

Source: Kazakhstan and CIS States, issue 1 of 2000-2006. RK Statistics Agency. Brief Statistical Yearbook of Kazakhstan. Almaty, 2006.

Table 24. Composition of Kazakhstan’s GDP, 1990-2005 ( as % of total)

Source: Kazakhstan Through the Years of Independence. RK Statistics Agency. Almaty, 2006.

127 New technologies for human development in Kazakhstan

Table 25. R&D and dissertations, by sectors

(Source: data provided by the RK National Center for Scientific and Technical Information for 2006)

Table 26. Organizations most frequently subcontracted for preparation of economic R&D reports (fragment)

(Source: data provided by the RK National Center for Scientific and Technical Information for 2006)

128 Annex 2. Statistical annexes

Figure 1. - State registration of dissertations (Source: data provided by the RK National Center for Scientific and Technical Information for 2006)

Figure 2. - Highly qualified personnel, by age (Source: data provided by the RK National Center for Scientific and Technical Information for 2006)

Candidates of Science

129 New technologies for human development in Kazakhstan

Figure 3. - Highly qualified personnel, by age (Source: data provided by the RK National Center for Scientific and Technical Information for 2006)

Doctors of Science

130 BIBLIOGRAPHY

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133 New technologies for human development in Kazakhstan

HUMAN DEVELOPMENT REPORT 2006

Authors’ group:

1. Yuriy Shokamanov – first deputy chair, RK Statistics Agency 2. Erbol Suleymenov – general director, RK National Center for Scientific and Technical Information 3. Asan Jumabekov – expert, RK National Center for Scientific and Technical Information 4. Irina Aleksandrova – head of international relations department, RK National Center for Scientific and Technical Information 5. Gulnaz Alibekova – head of marketing and information department, RK National Center for Scientific and Technical Information 6. Iliyas Songgul – specialist, division for analysis of evidence-based justification of economic and innovative development, analytical department, RK National Center for Scientific and Technical Information 7. Dinara Seitova – expert, RK National Center for Scientific and Technical Information 8. Kanat Shakenov – deputy director general, RK National Biotechnology Center 9. Aidar Kazybaev – director general, Center for Modern Economy and Business 10. Saule Kairzhanova – economic development expert, Center for Modern Economy and Business 11. Gulnara Essengazina – chief project manager, JSC Center of Engineering and Transfer of Technology 12. Saltanat Tamabaeva – technological research manager, JSC Center of Engine- ering and Transfer of Technology

Consultative Board:

1. Yuriko Shoji – UN Resident Coordinator / UNDP Resident Representative in the Republic of Kazakhstan 2. Azamat Abdymomunov – Vice-Minister of Education and Science of the RK 3. Bakhyt Sultanov – chair, RK Statistics Agency 4. Zhanar Sagimbayeva – UNDP Development Center Manager 5. Erlan Ramankulov – director general, RK National Biotechnology Center 6. Talgat Batpenov – vice-president, JSC Center of Engineering and Transfer of Technology 7. Saule Ospanova – UNDP Environmental and Sustainable Development Programme Coordinator 8. Gennady Doroshin – UNDP Project Manager (Kazakhstan - Wind Power market development initiative)

UNDP Coordination Group:

1. Alma Nurshaikhova – UNDP Human Development Programme Coordinator 2. Togzhan Assan – UNDP Programme Assistant

Technical support:

Maps – Lada Nikolayenko Russian text editing – Valentina Semykina Translated and edited in English – Seamus Bennett Translated and edited in Kazakh – Kaisar Zhorabekov The photos used in the Report presented by NCSTI, NBTC and GEF/SGP project.

Отпечатано в типографии “S-Принт”. Республика Казахстан, 050050, г.Алматы, ул.Булкышева 4Е, тел./факс: (327) 233-28-18, е-mail: [email protected]. Заказ № 15, Тираж 600 экз.

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