Central Asia

KAZAKHSTAN IN THE ERA OF DIGITALIZATION

Cristian Istrate

Kazakhstan is one of the former Soviet states in search of their own identity after 1991 and a rediscovery of a road leading to an accelerated development. A crucial opportunity for this country comes from China and its The New Silk Road project. The aim of this initiative is to strengthen and improve the commercial connectivities between China and other European markets. Some analysts believe that the flagship project will also contribute to relaunching Central Asia’s role in the current globalized world.[1] Kazakhstan’s development will not depend solely on Russia anymore due to its inability to dominate Central Asia’s economic market, therefore, Kazakhstan has become a strategic point of interest for powerful states like China, the United States or other Asian states looking to expand their interests.

Kazakhstan’s digitalization strategy is part of the nation’s long term development plan, being one of  15 countries which have ongoing nation-wide digitalization programs.[2] The Kazakh program under implementation targets 5 relevant areas:[3]

  1. Introduction of digital technologies in all sectors of the economy;
  2. Changing the state’s approach to its citizens from a traditional to a digital one: providing predominantly digital services;
  3. Creating a Digital Silk Road, which means that this country aims to create and develop a secure and high-speed infrastructure for the purpose of transmitting, storing and processing data, both externally and internally;
  4. Developing human capital;
  5. Create the necessary conditions for technological entrepreneurship, but also to strengthen the connections between the business environment, the state and the scientific environment.

Kazakh President Nursultan Nazarbayev has publicly submitted estimations for its expected impact and according to them, the economy will see a 30% growth after its implementation of this program.[4]

Beyond the digitalization of Kazakhstan’s public spheres of activity, other effects will be noticeable in the industrial sector. The impact is predicted from the perspective that this state will rise to through the ranks of high-income countries, the energy industry being one of the most important sectors of the economy that attention is focused on. Technological upgrading of the basic industrial sectors is scheduled to take place by 2025.

Kazakhstan has taken the example of the Industry 4.0 initiative, which comes from another 2011 initiative where politicians, scientists and business people showed interest and studied the necessity of increasing the competitiveness of the German manufacturing industry. The first steps in implementing such a program in Kazakhstan were initiated by the Ministry of Investment and Development and by the Institute for Industry Development. On May 10, 2017, an agreement had been signed with the Fraunhofer Society for the Progress of Applied Research.[5] On May 18, 2017, an agreement with Nokia had been signed. There are other agreements in preparation and negotiation and Kazakhstan will sign them with other external entities to implement the digitization program.

Another step that Kazakhstan makes in this direction is the elaboration of the National Investment Strategy for the period 2018-2022, with the support of the World Bank. Among other things, the strategy promotes investment in potentially active industries and promising industries.[6] The category of potentially active industries includes oil processing, machinery industry, food industry, as well as the processing of minerals, oil and gas. In the second category provided by the strategy may be included finance and tourism.

An important part of the digitalization of the economic sectors is the energy sector. The Minister of Energy Kanat Bozumbayev has publicly presented several measures, part of the Kazakhstan Digital Program, and their aim is to introduce informatic systems in the energy sector. The proposed measures are:[7]

  1. SanaField will allow increased quality and volume of oil production and will reduce production costs .;
  2. Productivity of uranium mining enterprises will increase by up to 10% through the Digital Mines system.
  3. An oil accounting system will be implemented, which will reduce the underground economy in this area by increasing the collection of taxes resulted from the extraction, preparation, processing, transport, sale or export of oil.
  4. In order to ensure equal and non-discriminatory access of companies and gas supplying organizations, and to prevent the irrational distribution of gas, the system called The balanced liquefied petroleum gas will be created;
  5. To organize transparent auctions, the program called Online Auction of Programs will be created. It will exclude direct contact between state officials and entrepreneurs;
  6. An automatic maintenance system shall be established for the maintenance of the oil-producing enterprises .;
  7. An information system for monitoring environmental protection will be created, providing accessibility to real-time information;
  8. Intelligent technologies will be introduced to increase the efficiency of the country’s energy industry.

The extensive digitalization strategy of Kazakhstan does not extend until 2022, but even to 2050, depending on the difficulty of implementing the proposed objectives. Another issue of Kazakhstan in the energy field is  the attempt to reduce the economic and energy dependence on oil resources. The kazakh officials have proposed that 50% of the total energy will come from from renewable sources by 2050.[8] The central objective of the strategy is to make Kazakhstan one of the 30 most developed countries in the world.[9]

Kazakhstan’s evolution proves that Central Asia is not a static region, and even engages in difficult and evolving perspectives. The digitalization process in which Kazakhstan engages is a certain way of evolving from all points of view, not only from an economic perspective, only to the extent that the authorities will maintain this interest until the end of the strategy they had adopted. The fastest effect of economic development will be from the reform of the energy sector, but also of the other industrial sectors.

The combination of scientific research with the willingness of the business community to have a favorable, modern and digitalized environment, as well as the objectives Kazakhstan has in this direction, will turn this state into an example for all ex-Soviet republics and will become Estonia of Central Asia.

 

Sources

 

[1] Kemal Kirișci, Philippe Le Corre, The new geopolitics of Central Asia: China vies for influence in Russia’s backyard. What will it mean for Kazakhstan?, în https://www.brookings.edu/blog/order-from-chaos/2018/01/02/the-new-geopolitics-of-central-asia-china-vies-for-influence-in-russias-backyard/, accessed on 29 June 2018.

[2] ***Digital Kazakhstan: current state of affairs and prospects for future, în https://primeminister.kz/en/news/all/tsifrlik-kazakstan-shinaiiligi-men-perspektivalari-16155, accessed on 29 June 2018.

[3] Ibidem.

[4] ***Digitalization should increase Kazakhstan’s economy by 30% – Nazarbayev, în https://bnews.kz/en/news/digitalization_should_increase_kazakhstan’s_economy_by_30__nazarbayev, accessed on 29 June 2018.

[5] ***Industry 4.0: How the Fourth Industrial Revolution works, în https://strategy2050.kz/en/news/48918/, accessed on 29 June 2018.

[6] ***Government prepared a package of measures to increase foreign direct investment in Kazakhstan, în https://primeminister.kz/en/news/all/pravitelstvo-rk-podgotovilo-paket-mer-po-uvelicheniu-pryamih-inostrannih-investitsii-v-kazahstan-15133, accessed on 29 June 2018.

[7] ***It is planned to introduce modern technological systems to the energy sector of Kazakhstan, în https://primeminister.kz/en/news/energetika/15168, accessed on 29 June 2018.

[8] ***Kazakhstan puts focus on renewable energy, în https://moderndiplomacy.eu/2018/04/30/kazakhstan-puts-focus-on-renewable-energy/, accessed on 29 June 2018.

[9] ***New opportunities under the fourth industrial revolution, în http://mfa.gov.kz/en/baku/content-view/kazakstanny-sinsi-zagyruy-zaandyk-bsekege-kabilettilik-3, accessed on 29 June 2018.

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