Diversification of Kazakhstan’s economy: A capability-based approach September 2015 Study conducted with the support of ______________________________________________________________________________ London (Europe), Dubai (Middle-East & Africa), Astana (Eurasia) 1 Acknowledgment The study was funded by the EBRD Shareholder Special Fund and the government of the Republic of Kazakhstan. This funding is gratefully acknowledged. This report was completed by Whiteshield Partners led by Fadi Farra, Partner, Olga Sigalova, Senior Economist, Yulia Dmitrieva, Economist, Nadia Klos, Senior Associate, Dinara Ospanova, Associate. The authors are grateful to Alexander Plekhanov, lead economist at the EBRD, and Adiya Belgibayeva, EBRD-Weidenfeld research fellow, for their valuable input and contributions. The authors would like to also thank Kosman Ajtmuhametov, Vice Minister of Regional Development, and the governors of the regions of Almaty Province, Atyrau, Karagandy, Pavlodar, South and West Kazakhstan for their valuable input and comments. The findings, interpretations and conclusions expressed in this report are those of the authors and do not reflect the official position of the EBRD. Keywords: regional development, capabilities, competitiveness, product space, innovation, Kazakhstan JEL Classification Number: O11, O14, O33, F43 Contact details:
[email protected] 2 Executive Summary Kazakhstan faces a major challenge of diversifying its economy and achieving higher and more inclusive growth. To do so, it needs to move up the value chain, raise productivity, and enhance competitiveness, while boosting job creation across sectors. To address existing challenges, a long-term development strategy should be able not only to take into account aggregate social and economic indicators, institutional variables and the regulatory framework, but also to address a major driver behind economic growth: knowledge.