On approval of the Concept of industrial-innovative development of the Republic of Kazakhstan for 2020 - 2025

New Unofficial translation

Resolution of the Government of the Republic of Kazakhstan No. 846 dated December 20, 2018.

      Unofficial translation

      In order to implement paragraph 8 of the National Action Plan for the implementation of the Head of State’s Address to the People of Kazakhstan dated January 10, 2018 “New Opportunities for Development in the Conditions of the Fourth Industrial Revolution”, approved by Decree No. 633 of the President of the Republic of Kazakhstan dated February 9, 2018 “On measures to implement the Chapter’s Address of the state to the people of Kazakhstan dated January 10, 2018 “New development opportunities in the conditions of the fourth industrial revolution”, the Government of the Republic of Kazakhstan DECIDES:

      1. To approve the attached Concept of industrial-innovative development of the Republic of Kazakhstan for 2020 - 2025 (hereinafter - the Concept).

      2. Central state and local executive bodies of the Republic of Kazakhstan to take the necessary measures to implement the Concept.

      3. This Resolution shall enter into force from the date of its signing.

      Prime Minister
      of the Republic of Kazakhstan B. Sagintayev

  APPROVED
Government Decree № 846
of the Republic of Kazakhstan
of December 20, 2018

The Concept of industrial-innovative development of the Republic of Kazakhstan for
2020 – 2025
Content

      1. The vision of industrial-innovative development of the Republic of Kazakhstan

      2. Basic principles and general approaches

      3. Measures to improve the policy of industrial-innovative development

      4. Stages of the Concept implementation

      5. The list of Regulatory Legal Acts that shall be developed for the implementation of the Concept

1. The vision of industrial-innovative development of the Republic of Kazakhstan

      Approaches to the industrial-innovative development of the Republic of Kazakhstan were formed in 2003 as part of the Industrial-Innovative Development Strategy of the Republic of Kazakhstan for 2003-2015 (hereinafter referred to as IIDS), but the subsequent crisis of 2007-2009 suspended its implementation.

      A return to active industrial innovation policy occurred in 2010 as part of the State Program on Forced Industrial Innovation Development of the Republic of Kazakhstan for 2010-2014 (hereinafter referred to as the SPFIID), which was largely based on the principles and approaches of SIID 2003-2015.

      Both documents had a wide focus and covered almost all sectors of the economy, reflecting the state’s economic policy. The State Program of Industrial-Innovative Development of the Republic of Kazakhstan for 2015–2019 (hereinafter referred to as the SPIID) established narrower priorities from 14 sectors in 6 manufacturing industries.

      From 2020, the implementation of the 3rd program of industrial-innovative development will begin. In accordance with the message of the Head of State dated January 10, 2018, this Concept lays the ideological foundation, principles and approaches to the development of the State program of industrial-innovative development of the Republic of Kazakhstan for 2020–2025 (hereinafter SPIID 2020–2025), taking into account the emergence of the “digital age” industry ". The third program of industrial-innovative development will follow the following principles:

      - continuity of industrial innovation policy;

      - support for efficient manufacturers;

      - the development of "the economy of simple things";

      - pairing of industrial-innovative and spatial development;

      - Synergy of industrial-innovative development and digital technologies.

      Further policy of industrial-innovative development will be implemented in a synchronized state planning system. The program of industrial-innovative development will take into account long-term goals and directions of development of the country, set by the Strategy "Kazakhstan - 2050" and be based on initiatives of the Strategic Development Plan of the Republic of Kazakhstan until 2025 within the framework of the policy "Competitiveness of Economy Sectors" and the reform "Technological Update and Digitalization".

      The policy of industrial-innovative development will maintain continuity and will be focused on solving the problems of the manufacturing industry. It will be coupled with adopted programs to develop the investment climate, attract and retain foreign investment, promote exports, ensure mass employment, develop common infrastructure, digital infrastructure, as well as regions development. Industrial-innovative development will take into account policies for the development of other sectors implemented by the State program of support and business development, programs for the development of the agro-industrial complex, and the services sector.

      The end result of the industrial-innovative development policy is the competitiveness of manufacturing enterprises in the domestic and foreign markets. The achievement of such a result will be confirmed by the development of a new, expansion and “complication” of the existing range of products, including consumer goods and products in demand in foreign markets.

      The Concept formulates general principles, approaches, suggestions and recommendations for direct and system state support, the institutional system, the mechanisms and the creation of conditions for the formation of the “digital age” industry for the further development of the SPIID 2020 - 2025.

1.1. Analysis of the current situation of industrial-innovative development in the
Republic of Kazakhstan

      The active industrial-innovative development policy pursued since 2010 allowed us to lay down the basic conditions for launching the process of diversifying the economy - a legislative framework has been created, the development of industrial infrastructure has continued, a system of development institutions has been built, and state support tools have been developed and tested.

      The measures taken within the framework of the first five-year plan allowed maintaining a positive growth rate in the manufacturing industry. So, after the reduction in 2008–2009, the GVA of the manufacturing industry (by 3% and 2.8%, respectively) entered a steady positive trajectory from 2010, outperforming in real growth rates (in 2014, 127.8% from 2008), the mining sector (120.6% by 2008). The volume of investment in fixed assets of the manufacturing industry in 2014 compared to 2008 increased twice (from 357 to 729 billion KZT), the real increase was 155.5%.

      By the beginning of the implementation of the second five-year period of industrial-innovative development in 2015–2016, under the influence of the global crisis in Kazakhstan, industrial production declined for the first time in 16 years (by 1.6% and 1.1%, Respectively) as a result of a decline in the mining sector (by 2%, 5% and 2.7%, respectively). Saving production growth in the manufacturing sector (by 0.2% and 0.6%, respectively) was ensured only due to the potential accumulated over the years of industrialization and was evidence of the greater sustainability of the manufacturing sector in crisis time.

      The output of the manufacturing industry in 2017 amounted to 9.4 trillion KZT, GVA volume - 5.9 trillion KZT, the share of the manufacturing industry in GDP is 11.2%. To achieve the main indicators of the SPIID 2015 - 2019, there is a multi-directional dnamics (Table 1).

      Table 1. Achievement of the target indicators of the SPIID for 2015 - 2019 following the Results of 20171

Indicator

Forecast for 2017

De facto for 2017

Change in the value of exports of manufactured goods to the level of 2015

97.0%

111.0%

Real growth in labor productivity in the manufacturing industry to the level of 2015

105.6%

102.6%

The volume of investment in fixed assets manufacturing industry

2 352 billion KZT for 2015-2017.

2,659 billion KZT for 2015-2017.

Reducing energy intensity in the manufacturing industry to the level of 2014

97.0%

87.5% 

      Source: Statistics Committee of the Ministry of National Economics (SC of the MNE)

      There are positive structural changes in the country's industry. During the years of industrialization, the share of manufacturing industry in industry increased by 6.7 percentage points. (from 35.6% in 2009 to 42.3% in 2017); in the total export volume - by 4.4 p.p. (from 27.8% to 32.2%, respectively); in investments in fixed assets - by 2.7 percentage points (from 8.2% to 10.9%, respectively); in the gross inflow of foreign direct investment - by 16.5 percentage points (from 8.5% to 25.0%, respectively).

      At the same time, an analysis of the competitiveness of the processing industry of the Republic of Kazakhstan in comparison with the OECD partners showed that Kazakhstan is significantly inferior to Russia and Belarus in terms of the ratio of fixed investment to GVA and the number of enterprises per 1,000 people in the economically active population. With the exception of Armenia, Kazakhstan has the lowest index of economic complexity. At the same time, Kazakhstan is far ahead of all OECD countries in labor productivity.

      Table 2. Comparative analysis of indicators by OECD countries4

A country

2012

2013

2014

2015

2016

The ratio of fixed investment to GVA in the manufacturing industry


Russia

21.0%

23.0%

23.0%

21.0%

20.0%

Kazakhstan

17.8%

17.9%

17.8%

19.6%

16.5%

Belarus

30.3%

33.4%

35.7%

29.4%

21.1%

Kyrgyzstan

20.1%

17.9%

20.7%

30.1%

13.1%

Armenia

5.7%

3.4%

9.5%

2.2%

2.2 %

Labor productivity in the manufacturing industry (thousands of US dollars per employee)


Russia

24.1

24.6

23.3

16.8

15.0

Kazakhstan

42.4

45.9

42.6

34.3

27.4

Belarus

15.8

16.5

17.2

12.6

11.0

Kyrgyzstan

4.6

7.4

6.4

5.4

5.8

Armenia

10.7

11.2

11.9

11.3

13.0

Number of operating enterprises in the manufacturing industry per 1000 economically active population

Russia

3.39

3.45

3.49

3.44

3.49

Kazakhstan

0.97

0.96

0.88

0.89

0.91

Belarus

2.75

2.88

2.88

2.77

2.25

Kyrgyzstan

0.56

0.55

0.49

0.45

0.48

Armenia

1.61

1.73

1.75

1.87

2.10

Place in the index of economic complexity3



Russia

56

55

52

50

48

Kazakhstan

80

106

84

91

84

Belarus

23

22

30

32

31

Kyrgyzstan

59

51

86

62

57

Armenia

n / a

n / a

n / a

n / a

n / a

      The real level of development of the manufacturing industry of the Republic of Kazakhstan is determined through the parameters of manufacturability, geographical distribution and export. The identified patterns and problems are used for SWOT analysis with further development of recommendations.

      The manufacturing industry is the most diverse of all sectors of the economy. It consists of 24 different industries, differing in the level of capital intensity, use of labor, manufacturability, choice of location and consumer nature. In the “Industrial Development Report 2018” prepared by UNIDO, Kazakhstan is assigned to countries with a developing manufacturing industry. Most of the value added in the manufacturing industry belongs to the low- and medium-tech sectors.6 (Figure 1).

      Figure 1. The structure of the manufacturing industry by technological complexity (% of GDP) 6



      Figure 1

      Низкая техническая сложность – low technical complexity

      Средняя техническая сложность- average technical complexity

      Высокая техническая сложность - high technical complexity

      Обрабатывающая промышленность - Manufacturing industry

      Машиностроение – Engineering

      Химическая промышленность – Chemical industry

      Фармацевтика – Pharmaceuticals

      Строительные материалы – Construction Materials

      Ремонт машин и прочее – Machine repair and more -

      Резина и пластмасса – Rubber and plastic -

      Продукты питания – Food

      Напитки – Drinks and beverages

      Табачные изделия – Tobacco products

      Прочие – Other

      Among the low-technology sectors, the largest ones are food production (1.7%), oil refining (1.2%) and beverage production (0.7%). Among medium-tech sectors, non-ferrous and ferrous metallurgy occupy dominant positions (80.0%). The sectors with high technological complexity account for only one eighth of the manufacturing industry.

      Nonferrous metallurgy, ferrous metallurgy and oil refining create half of the GVA in the manufacturing industry. At the same time, the consumption of products of high-tech industries is primarily domestic in nature and does not find a significant reflection in exports. More than 60.0% of the projects included in the Industrialization Map have low and medium technological complexity.

      Real growth of GVA manufacturing industry in 2010 - 2017 19.0% was provided mainly by traditional sectors - non-ferrous metallurgy - 64.0% (out of a 100% increase), food production - 23%, production of non-metallic mineral products - 13.0%. The contribution of high-tech chemical industry was 11.0%.

      At the same time, the average annual growth rate of production volumes of a number of high-tech sectors in 2010–2017. were higher than the average for the manufacturing industry (2.5%) - automotive (17.6%), electrical equipment production (2.8%), chemical industry (10.8%).

      The potential of the manufacturing industry is determined by its investment attractiveness. Conducting an active industrial innovation policy has created a positive trend. The share of manufacturing in the gross flow of foreign direct investment increased from 10.1% in 2010 to 25.0% in 2017. Investments in fixed assets in 2017 amounted to 956 billion KZT, which is 543 billion more than in 2010. For the indicated period, the real increase in investment in the manufacturing industry (70.0%) is ahead of the mining industry (3 1.6%).

      The main share of investments in the manufacturing industry was provided by two basic sectors - metallurgy and oil refining - through large projects for the modernization and expansion of existing assets. Given the completion of the modernization cycle, a decrease in investment activity in these sectors from the existing enterprises is expected.

      Figure 2. Investments in fixed assets of the manufacturing industry, billion KZT

      The current investment activity in the manufacturing industry is insufficient to achieve the goals of industrial innovation policy. The ratio of investments in fixed assets to GVA in 2016 was 16.5%, which is 3.8 p.p. lower than in Russia and in Belarus by 4.6 percentage points. Excluding metallurgy and oil refining, the indicator will drop to 13.0% of GVA, which is close to the mere reproduction of production assets.

      The number of enterprises and the level of competition are important factors determining the potential and competitiveness of the manufacturing industry.

      Since the beginning of an active industrial policy, Kazakhstan has progressively increased the potential of the manufacturing industry. There is a significant increase in the number of enterprises in the manufacturing industry per 1000 economically active population. After the fall in the period 2005-2013 from 1.47 to 1.16, the indicator increased in 2017 by 38.0% and amounted to 1.61. However, the ratio of the number of active enterprises per 1000 people, the economically active population, still lags far behind Russia (3.9 times in 2016) and Belarus (2.5 times).

      The level of competition in the manufacturing industry is insufficient. Despite the fact that by the end of 2017, there are only 689 active large and medium-sized enterprises (9.2% of the total), there is a high level of economic concentration in almost all manufacturing industries. In a number of sectors, more than half of the taxes paid in 2016 accounted for a limited number of enterprises.

      Low competition between local producers reduces their competitiveness with respect to foreign ones and stimulates the use of innovations.

      In 2017, the total export of goods from Kazakhstan amounted to $ 48.2 billion, of which manufacturing industry - 15.6 billion dollars (Figure 3). Exports have declined significantly since 2012, but the manufacturing industry has shown less volatility, and its share has increased.

      Figure 3. Dynamics of export of goods of the Republic of Kazakhstan, billion US dollars5



      Figure 3

      Общий экспорт – Total export

      Обрабатывающая промышленность – Manufacturing industry

      Доля обрабатывающей промышленности - The share of manufacturing

      The analysis of manufacturing industry subjects revealed about 1000 exporting enterprises. More than half of enterprises account for three industries - food processing, production of non-metallic mineral products, production of rubber and plastic products.

      The sustainability and growth prospects of the manufacturing industry are related to its “complexity”. An assessment of “complexity” is necessary to understand innovation activity in a country and to determine the level of technology impact on industries. This demonstrates the ability of the country's economy to resist negative external factors and show export growth.

      Place of Kazakhstan on the index of economic complexity ECI  (84) significantly lower positions on the Global Competitiveness Index of the World Economic Forum (72). Kazakhstan is also inferior to all partners in the OECD. In general, the real index of economic complexity after growth in 2010-2012. almost unchanged. To increase it, it is necessary to change the export basket in the direction of a larger number of “complex” goods .

      Kazakhstan exports 182 manufacturing goods with a comparative advantage, while Russia - 358, Belarus - 690, China - 1402, on average in OECD countries - 1950. Half of the export of the manufacturing industry of the Republic of Kazakhstan accounts for only 6 goods (copper cathodes, ferrochrome, natural uranium, distillates, raw zinc and silver) of 2439 traded in global trade. Exports of consumer goods and technologically complex goods is 16%.

      Kazakhstan has the highest labor productivity in the manufacturing industry among the EAEU countries. At the same time, the indicator varies considerably for the sectors. Productivity is high in basic capital-intensive sectors associated with the primary processing of raw materials, and in knowledge-intensive high-tech sectors.

      The high level of productivity in Kazakhstan is mainly due to the prevalence in the industrial production of base metals ($ 63 thousand per person in 2017) and coke and oil products ($ 145 thousand). For comparison, in food production - $ 27.6 thousand, Machine building - $ 12 thousand, production of Non-metallic mineral products - $ 15.3 thousand, Chemical industry - $ 24.4 thousand, light industry - 6,2 thousand US dollars.

      Analysis of the spatial aspects and geographical distribution of economic activity shows their importance in the implementation of industrial and innovation policy.

      The distribution of investments is associated with the traditional location of large enterprises in the basic branches of metallurgy and oil refining, which are sources of raw materials

      or energy. As a result, three regions account for half of all investments in fixed assets of the manufacturing industry: Pavlodar region (metallurgical and oil refining capacities), Atyrau region (refining capacities and a developing petrochemical park), Karaganda region (ferrous and nonferrous metallurgy).

      Investments in other manufacturing industries, with the exception of metallurgy and oil refining, are concentrated in regions with large urban areas or large populations. Thus, about 40% of such investments fall on Almaty (8%), Almaty (16%) and South Kazakhstan regions (15%), and 24% of investments fall on Astana (7%), Akmola (9% ) and the Karaganda region (8%).

      Similarly, at the end of 2017, 44% of the value added of the entire manufacturing industry falls on Karaganda (21%), Pavlodar (11%) and East Kazakhstan (12%) regions, where metallurgical production is concentrated. Most medium-sized enterprises (with the exception of metallurgy) and high-tech sectors are concentrated in urbanized “growth points”. Sectors related to final consumption (production of food, beverages, clothing, furniture, etc.) are concentrated around major cities of republican significance and regional centers. Thus, more than half (56%) of the gross value added of the sectors producing consumer goods are generated by enterprises located in Almaty, Almaty and South Kazakhstan regions. The number of enterprises in the manufacturing industry per 1000 economically active population depends on the level of urbanization (Figure 4).

      Figure 4. The interdependence of the level of enterprise sufficiency and the level of urbanization in the regions of the Republic of Kazakhstan5



      Figure 4

      Уровень урбанизации – Level of urbanization -

      Количество действующих предприятий ОП на 1000 человек экономически активного населения – The number of operating enterprises of the Manufacturing Industry per 1000 people of economically active population

      Кзыл-Ординская область – Kyzyl-Orda region

      Актюбинская область – Aktobe region

      Карагандинская область – Karaganda region

      Г.Астана – Astana city

      Алматинская область – Almaty region

      Казахстан –Kazakhstan

      Г. Алматы – Almaty city

      Enterprises with a high level of innovative activity also suffer from highly urbanized areas. One third of the innovation-active enterprises are in the city of Almaty and the Almaty region. Another third of the enterprises are located in East Kazakhstan (10%), Karaganda (9%), South Kazakhstan (7%) and Zhambyl (6%) regions. At the same time, the costs of R & D development remain relatively low - at the level of 0.14% of the country's GDP - which is 10 times less than the average for the OECD countries (2.3%). Today, the pace of development of the latest technological solutions in the industries is dictated by their scientific and technological development.

      The share of Kazakhstan’s GDP spent on research and development is currently 0.17% (in other countries, similar expenses are higher: from 2.08% in China and 2.73% in the United States to 4.15% in South Korea and 4,21% in Israel). In the long run, developed countries with a powerful primary sector can serve as a guide for this: Canada, where R & D expenditures amount to 1.62% of GDP, and Australia (2.13%).

      The comprehensive development of the national innovation system and the increase in the country's competitiveness are ensured by the growth of innovation activity and increased spending on R & D. 12

      1.2. Global trends of industrial-innovative development

      The analysis revealed 6 global megatrends that will have the greatest impact on the manufacturing industry of Kazakhstan. These trends need to be considered when forming a long-term industrial innovation policy and developing a program until 2025.

      1. Technological development based on digitalization

      Digitalization is a new phenomenon that changes all branches of the economy and social structure. The digital transformation of the economy sets new parameters for the competitiveness of countries. The technologies of the “digital age” change production and business models, principles and rules of the formation of value chains, sales channels and interaction with consumers.

      The concept of Industry 4.0 and similar approaches based on the convergence of production and information technologies into a single cyber-physical system is becoming a long-term trend for the global manufacturing industry. The core elements of Industry 4.0 relate to the digitization of vertical and horizontal value chains, the digitization of products and services, and the digitization of business models and customer relationships. Industry 4.0 changes the requirements for labor skills and competencies, requires access to high-quality and high-speed digital infrastructure, inter-and intra-industry cooperation to ensure interoperability between design and design, production, procurement, transportation and marketing.

      Innovative development and digitalization are becoming complementary phenomena. Nine key technologies will change industrial production: autonomous robots, multidimensional digital modeling, vertical and horizontal integration, industrial Internet of things, cybersecurity, cloud technologies, additive manufacturing, augmented and virtual reality, big data and analytics. Countries seeking competitiveness should have the resources to create competencies in these technological areas.

      2. Urbanization

      The role of global cities and large agglomerations in the middle and high-tech manufacturing sectors is growing. Major cities have become a source of technological and managerial innovation. The process of urbanization and the concentration of population, capital and knowledge complicates local markets and increases the competitiveness of local producers.

      3. The shift of economic power towards Asian countries

      The focus of economic forces in the world has changed in the direction of the rapidly developing Asian countries. Asia demonstrates the reduction of inequality and the growth of the middle class, which is a key consumer of goods. The rapid growth of the Chinese economy, together with the achievements of the Japanese and South Korean economies, forms the second new global center, which becomes a source of innovation and technology.

      4. Globalization versus regionalization

      There is a change in the nature of economic competition. Mutually directed processes of globalization and regionalization entail political and socio-cultural changes that affect the economy. Developed countries, former beneficiaries of globalization, are beginning to pursue protectionist and restrictive policies. At the same time, developing Asian countries are becoming active supporters of globalization.

      The formation of regional subsystems and integration processes is one of the most characteristic manifestations in modern international relations. The spatial context of the country becomes the strongest driver of economic development, both external and internal. Global competition is shifting from competition between countries to competition between blocs.

      5. Community Power

      Internet communities are gradually starting to play a tangible role in the life of the whole society, economy and politics of countries. Big data and the widespread availability of communication are some of the factors on the basis of which a “co-consumption economy” is based, spreading at a global scale at an accelerated pace.

      With the development of the global network, communities have become a significant factor in the development of business and the economy as a whole. They are the basis for the formation of brands, the definition of customer groups and sales channels. The possibility of feedback, the use of recommendations and experience of other users, a quick REMponse to demand trends gives an impetus to the development of business quality.

      The Internet enhances the political awareness of the population, providing virtually any information about events in the country and the world. The Internet community itself has become a political force that is harder to manage with the help of traditional power. Communities, being not limited by the state, contribute to globalization and the blurring of borders between nation states .

      6. Strengthening the role of the state in the industrial-innovative development

      Governments are actively pursuing industrial innovation policy by creating institutional, infrastructural, financial, fiscal and other types of support, as well as initiating target vectors for scientific and technological development in order to stimulate innovative and technological development of the manufacturing industry. In particular, efforts are directed to the development of industries with a high degree of processing, sectors with the most multiplicative effect, industrial clusters, and the creation of technological and industrial parks.

      Special attention is paid to the preparation of a qualified personnel base for industry, the selection of priority technologies, the improvement of innovative state systems and the commercialization of innovations.

      1.3. Analysis of strengths, weaknesses, opportunities and threats in the field of industrial-innovative development

      Further implementation of industrial innovation policy will be considered in the light of several groups of initiatives. First, the implementation of existing capabilities using existing strengths. Second, investing in weaknesses to take advantage of existing opportunities. Third, undertaking preventive measures using strengths to offset risks and threats.

      Opportunities for industrial-innovative development of the Republic of Kazakhstan

      1) The location of Kazakhstan between the second (PRC) and the twelfth (RF) economies of the world and participation in integration projects with them creates opportunities for the manufacturing industry.

      An analysis of international trade and global flows of foreign investment shows the predominant role of cross-border trade and investment.

      According to the REMults of the analysis, 3 categories of countries were identified by the level of priority as markets for potential exports of the manufacturing industry. The top priority countries are China and Russia. The next in priority were Uzbekistan and Iran. More distant Japan, South Korea, India, Pakistan, Turkey, Saudi Arabia and the United Arab Emirates were third priority.

      Removing barriers to the export of processed products to the markets of China and Russia can significantly improve the position of domestic companies to achieve the required economies of scale and reduce the adverse impact of transportation costs.

      Kazakhstan will actively use the opportunities in the framework of trade agreements on preferential trade on market access for its goods. Kazakhstan potentially remains an attractive investment platform for companies from China and Russia to create production facilities in order to penetrate each other’s markets. In addition, the “sanctions struggle” between Russia and Western countries can create conditions for attracting European companies to serve its market.

      Due to the peripheral location of the Republic of Kazakhstan in relation to the countries of the "world center" 13 diffusion of innovation is slow. However, the formation of a new technology center in China can significantly accelerate the process of technology transfer, penetration and absorption of technological innovations.

      2) The reduction of poverty and the growth of the middle class in the developing countries of Asia create a demand for inexpensive, relatively uncomplicated and high-quality final consumer goods. Kazakhstan’s proximity to the growing middle class of China and the developing countries of Central and South Asia makes it possible to expand the production and export of everyday consumer goods, while ensuring a higher quality than in the competing countries.

      3) Accelerating urbanization in Kazakhstan creates a concentration of capital, labor, knowledge and consumers in spatial growth points. The global trend of resettlement of people in urban areas, changing the landscape of country competition, is also reflected in Kazakhstan. The emergence in the Republic of Kazakhstan of the second and third million-plus cities begins to create local spatial “centers of gravity”, attractive for the production of final consumer goods, the development of existing and the formation of new innovative systems, specialized production factors necessary to attract investment in the medium and high-tech sectors.

      The development of large urban agglomerations generates a constant demand for the products of local clusters of the food industry, the production of clothing and footwear, the production of household goods, building materials, metal products and chemical products.

      4) The regulated procurement market, as the economy grows and large infrastructure projects are implemented, generates a constant and concentrated demand for manufactured goods.

      There is still a significant potential of regulated procurement for localizing the production of goods and services in Kazakhstan.

      5) The development of new production technologies and the digitization of the manufacturing industry (Industry 4.0) creates opportunities for a breakthrough in productivity and a reduction in distance and barriers to trade.

      Industry 4.0 transforms manufacturing and business models, opening up opportunities for the formation of high-tech industries in developing countries. The relative availability of key technologies in Industry 4.0 reduces the technological gap between developed countries.

      The main threats and risks for industrial-innovative development are the reverse side of opportunities and are complemented by problems inherent in the manufacturing industry. The greatest impact will have the following threats and risks.

      1) Insufficient measures to attract investment in the manufacturing industry pose a threat to "early de-industrialization"

      Investments in the traditional sectors of metallurgy and oil refining make up a large part, while investments in other branches of the manufacturing industry are fairly stable and do not show a tendency for rapid growth. Without regard to basic sectors, the indicator is close to simple reproduction.

      As a result, Kazakhstan has not formed a critical mass of enterprises in the manufacturing industry. In most manufacturing industries, there is a high economic concentration. The indicator of the reduced number of enterprises in the manufacturing industry is lower than in Russia and Belarus. The process of geographical concentration of enterprises is at the initial stage.

      The lack of investment in fixed assets at the early stages threatens the achievement of all indicators of industrial and innovative development. Lack of critical mass and geographical concentration of enterprises leads to problems of forming full-fledged industries, creating value chains, weak inter-branch relations, lack of agglomeration effects and positive external effects accompanying them, weak motivation for technological modernization, improving the quality of products, increasing its technological complexity due to insufficient competition .

      2) High competition in foreign markets, insufficient capacity of the domestic market and high competition on it from the manufacturers of China, Russia and other countries create pressure on domestic producers.

      Historically, the capacity of the Kazakhstan market is insufficient to achieve the economies of scale required for the production of a significant part of the manufacturing industry nomenclature. The availability of foreign markets is critical to achieve economies of scale with current production models.

      The foreign markets of the two largest neighbors have more developed and complex production systems compared to the Republic of Kazakhstan. In addition, these countries create non-tariff barriers that create barriers to import access. Despite being in a single economic union with Russia, domestic producers still face the conditions of unfair competition based on administrative barriers. The Chinese market historically has high entry barriers associated with special measures for admission to the domestic market, as well as the wide distribution of state-owned trade enterprises. The growth in demand for manufactured goods is mainly satisfied by imports, and domestic enterprises encounter strong competition in the domestic market from manufacturers in Russia and China.

      3) Kazakhstan has a limited export basket and insufficient “complexity”, which creates the risk of permanent technological lag.

      Exports of the Republic of Kazakhstan are characterized by a limited range of products with a comparative advantage. Most of the exports go to the products of metallurgy and oil refining, which belong to the low and medium-tech sectors. The level of technological complexity of Kazakhstan is much lower than that of China, Russia and Belarus.

      4) Kazakhstan has an average level of development of basic digital infrastructure14 , low readiness of enterprises for the “digital age” and weak motivation at the level of medium-sized enterprises to implement “digital solutions” 15, which creates an obstacle to the digital transformation of the industry.

      To take full advantage of the digital age technology, a high level of digital infrastructure development is required. Currently, Kazakhstan belongs to the group of countries with an average level of development in this aspect. Enterprises are characterized by a low level of use of current information and communication technologies, are poorly informed and do not have human resources for the implementation of digital technology solutions. Lack of understanding of the need and personnel reduces the incentives of enterprises to invest in digitalization.

      There are a number of strengths to realize opportunities and reduce threats.

      1) The manufacturing industry is in the constant priority of the political leadership of the country. The government has been consistently implementing industrial innovation policy since 2003, with activization in 2010, and also allocating financial resources to support industrial innovation policy.

      2) The formed system of development institutions allows to cover all aspects of the regulation of industrial and innovation policy. A system of subjects of support for industrial innovation has been created and is functioning, which allows covering all aspects of the regulation of industrial innovation policy.

      3) The state directly or indirectly controls and regulates the extraction of raw materials, the production of the first processing and production factors related to the infrastructure. Kazakhstan has a high level of provision with basic mineral resources. The state, directly or through JSC Samruk-Kazyna NWF, has shares in a number of mining and production first-conversion companies. This creates an opportunity to stimulate the provision of new manufacturing projects with raw materials and basic semi-finished products.

      On the other hand, the state has significant reserves for improving the efficiency of resource use and weaknesses in the conduct of industrial innovation policy, which require concentration of attention and additional resources.

      1) The problem with the efficiency of resource use.

      There is a problem with the use of funds for the development of the manufacturing industry. The allocated financial resources are characterized by a high concentration on a limited number of enterprises. In addition, a significant part of the financing of the manufacturing industry is distributed outside the stated priorities and criteria of industrialization.

      An important problem remains insufficient financing of the manufacturing industry. In the state budget expenditures of 2017, only 0.2% was allocated to the manufacturing industry, while mining expenditures amounted to 1.1%, agriculture 3.8%, and the arts and recreation sector 3.2%, Respectively.

      The volume of financing of the manufacturing industry significantly affects the growth of tax revenues to the budget and the increase in GVA. For example, the increase in the volume of financing of the manufacturing industry (in 2015 by 62% or 600 billion KZT) had a positive impact on the level of GVA (in 2016-2017, an increase of 36% or 1.6 trillion KZT) and on the volume of tax revenues (in 2016-2017, an increase of 51% or 505 billion KZT).

      In general, in the manufacturing industry there is a need for faster growth of investments in fixed assets (at the level of developed countries). If we compare their share to GVA in Russia and OECD countries, then there is a significant lag. For example, the share of investments in GVA in Kazakhstan is 16.5%, while in Russia the indicator is at the level of 20%, and in OECD countries - 26%.

      2) Lack of effectiveness of the system of development institutions.

      The activities of development institutions in the field of industrial innovation are partially duplicated and poorly coordinated. Decentralization of support functions for industrial and innovative activity led to the implementation of poorly coordinated strategies by development institutions, which significantly reduced potential effects.

      3) Insufficiently effective monitoring system and feedback mechanisms in the implementation of industrial innovation policy.

      There are significant difficulties associated with an objective assessment of the implementation of industrial and innovative development policies, including the achieved direct and final results and the effectiveness of support tools. One of the mechanisms for improving the effectiveness of industrial innovation policy is to ensure qualitative monitoring and, on its basis, analyze the effectiveness of the applied support tools, including through quantitative and qualitative assessment.

      Based on the consideration of possible combinations of factors, we can single out the following main directions for the continuation of industrial and innovation policy.

      1) Carrying out proactive trade policy by finding solutions and compromises to remove barriers in foreign trade within the framework of the OECD, access to the market of China, Central and South Asia. It is necessary to establish a permanent dialogue with existing exporters of the manufacturing industry in order to understand their real needs and barriers in foreign trade.

      2) Advance creation of specialized factors of production, taking into account the rational location of enterprises in national and regional growth points (availability of sales, sources of raw materials and competencies) in accordance with the priorities and objectives of SP 2025 in the framework of reform 5 “Strong regions and urbanization”.

      Increasing the attractiveness of the manufacturing industry requires reducing costs and increasing returns on invested resources. This can be achieved exclusively through systematic work with the main focus on the pairing of industrial-innovative and spatial development for the creation, expansion and supply of specialized production factors. Efforts will be focused on the development of high-quality industrial and digital infrastructure, human capital, competence centers, testing and certification infrastructure.

      3) Creation of new large capital-intensive and knowledge-intensive industries.

      Using the state's ability to distribute raw materials and its willingness to provide special conditions for private investors to ensure the implementation of certain large capital-intensive and knowledge-intensive projects in the manufacturing industry.

      4) Direct support for efficient enterprises.

      It is necessary to establish an attractive access to support tools for efficient manufacturers in the manufacturing industry. Efficiency should be measured by the realized ability to compete in foreign markets.

      Proactive trade policy and the creation of specialized factors of production is a necessary but not sufficient condition for building up a critical mass of enterprises. Direct support will be required for successful enterprises oriented to the domestic market and determined in close cooperation with the business community, who can become effective suppliers to the domestic and foreign markets.

      5) Improving the efficiency of the support system for industrial innovation.

      Efficiency improvement will be achieved through more precise adjustment of the coordination, financing and monitoring of industrial-innovative development policies based on the existing system of regulation and support of industrial-innovative activities.

      1.4. Scenarios of industrial-innovative development of the Republic of Kazakhstan

      For the possibility of timely adjustment of priorities and directions of industrial innovation policy, it is advisable to formulate potential scenarios. The economic development of the Republic of Kazakhstan still depends on two external strategic conditions: global economic growth and its inclusiveness.

      The level of global economic growth has a significant impact on the pricing of natural resources. Despite the growing influence of “subversive technologies”, in the perspective until 2025, the correlation between economic growth and demand for resources will be strong. World prices for natural resources will largely determine the possibilities of public finance for horizontal and vertical support for the manufacturing industry.

      The inclusiveness of global economic growth is determined by the availability of markets and factors of production for all participants. The active regionalization process and the risk of “trade wars” significantly affect the accessibility of foreign markets, investments, talents and technologies. The key to Kazakhstan will be the behavior of the two largest neighbors: China and Russia.

      The success of five institutional reforms will be the determining internal factor of successful industrial-innovative development.

      The industrial and innovative development of the country can be developed according to four possible scenarios.

      1. "Achieving the desired future"

      Global economic growth is steady and is in the corridor of 2.5 - 3.5%. This supports steady demand and attractive prices for natural resources for the Republic of Kazakhstan. "Trade wars" and the competition between the blocks is at a rational level, without extreme escalation. The Chinese economy continues to grow steadily, the Russian economy is on a trajectory of low, but steady growth. Both countries are reducing barriers to Kazakh exports.

      Reforms to create a quality business climate are moving at a planned rate. Horizontal policies are effectively enforced, the internal inclusiveness of access to markets and factors of production is growing.

      Under this scenario, it is important for Kazakhstan to continue as efficiently as possible the process of modernizing the manufacturing industry and reach the planned target indicators.

      2. "The economy of" simple things "

      The world is entering another recession. The cost of natural resources is falling. At the same time, “trade wars”, protectionism and competition between the blocs do not go beyond expectations. The Chinese economy is slowing down faster than expectations, the Russian economy is entering stagnation.

      At the same time, reforms to create a quality business climate are moving at the planned speed. Kazakhstan consistently improves business conditions.

      Under this scenario, Kazakhstan will face difficulties in financing modernization programs. Large strategic enterprises in the basic sectors will be forced to reduce costs, which will slow down their technological modernization and cause the release of excess labor. This will create additional pressure on the country's social infrastructure, reducing state financial opportunities for industrial-innovative development programs.

      The manufacturing industry will be mainly focused on satisfying final consumption both in the external and internal vector. Entry to the markets of China and Russia will be hampered due to a lack of investment and competencies.

      3. “Economic downturn”

      Another stagnation or recession in the global economy will lead to a fall in prices for natural resources. The growth of protectionism and the unleashing of new "trade wars" to protect domestic markets in order to reduce the effects of the fall in developed countries and large developing economies. Russia consistently closes markets, including from members of the OECD, while putting pressure on their domestic markets. China is increasing its investments in Central Asia on the terms of the acquisition of exclusively goods and services from its territory.

      In this scenario, Kazakhstan will begin to take measures to protect the domestic market, sharply increasing social spending. There is a high probability of curtailing reforms, the transition to "manual" management. The demand from the basic sectors is reduced, the probability of conservation of capacities and release of labor increases. Consumer demand is shrinking to essential goods. resources for the development of the manufacturing industry are not enough - the risk of starting the process of deindustrialization.

      4. “Stagnation”

      Global economic growth is steady. Commodity prices are kept in a favorable range for Kazakhstan. The risk of "trade wars" and protectionism are stable. Reforms are executed formally. Inclusion in the economy remains low.

      In this scenario, stagnation in the economy and manufacturing industry will continue. The main benefits of state support will be received by a narrow group of subjects. Reduced "complexity" of the export basket. The emphasis of industrial innovation policy begins to shift toward import substitution through the closure of the domestic market and the creation of privileged conditions for individual players.

      The described scenarios show possible scenarios. Of the options presented, the base scenario is “Achieving the Desired Future”. The state will be able to carry out the stated strategic reforms and will continue to implement a consistent and rational policy of investing resources in creating general and specialized factors to ensure country competitiveness, stimulate investment and provide domestic and foreign markets with their own processed products.

      1.5. Review of international experience

      industrial innovation development

      The return to understanding the importance of industrial-innovative development for the sustainable development of the country occurred in the world after the global crisis of 2008. Despite its relatively small share in global GDP, the manufacturing industry is the main consumer of innovations, products of the extractive, agricultural and service sectors, creates the basis for international trade and attracts a significant portion of investment.

      Developed and developing countries adopt strategic and policy documents aimed at restoring and developing the manufacturing industry.

A country

Program

Year of adoption

Russia

State program of the Russian Federation "The development of industry and improving its
competitiveness"

2012

Belarus

The program of development of the industrial complex of the Republic of Belarus for the
period up to 2020

2012

The USA

Manufacturing USA, or the National Network for Manufacturing Innovation program

2014

Germany

Action Plan High-tech strategy 2020 (industrie 4.0)

2010, 2013, 2015

Great Britain

Industrial Strategy plan 2030

2017

Japan

Innovation 25

2007

Korea

National Strategy for Sustainable Development
(five-year programs 2006-2010, 2011-2015, 2016-2020)

2015

China

Made in China 2025

2015

Malaysia

Eleventh Malaysia Plan 2016-2020, 
final chapter of the 2020 Vision Plan

2015

Iran

Iran's 20-Year Development Plan (2016-2020)

2015

Kuwait

New Kuwait 2035

2017

Saudi Arabia

Vision 2030

2016

Oman

Vision Oman 2020, 9th Five-Year Development Plan 2016-2020

2015

UAE

UAE Vision 2021

2010

Qatar

Qatar National Vision 2030

2008

      The analysis of various categories of countries allows us to identify general patterns and approaches aimed at achieving success in the implementation of industrial innovation policy.

      1) The relationship between the level of infrastructure development and manufacturing industry.

      The development of the manufacturing industry requires the priority development of the general energy, transport and logistics, engineering and, most recently, digital infrastructure.

      2) Concentration on spatial “growth points” for the formation of specialized factors.

      Developing countries pursue a policy of concentrating resources on selected spatial “growth points” to create specialized factors of production. This allows to achieve agglomeration effects and stimulate the development of competitive territorial clusters, increase investment attractiveness and create a critical mass for the emergence of demand for innovations and the ecosystem for their creation.

      3) The management system of industrial and innovative development.

      Countries with a developing manufacturing industry, as well as countries at the initial stage of industrial development, have a similar structure of state management of industrial-innovative development. The main elements of the structure are:

      the central government agency responsible for industrial development policies and trade in manufactured goods. The list of its tasks includes the development of a policy of industrial-innovative development, taking into account the socio-economic priorities of the state, the creation of an integrated system of incentives and support measures for industrial-innovative projects and industrial clusters, the implementation of trade policies aimed at creating opportunities for expanding existing or emerging productions.

      a coordinated system of institutions to support industrial-innovative development, including funds or agencies for industrial development.

      large state or national private companies, specially selected by the state, with the authority to attract investments and implement large industrial projects and create industries in new industries.

      4) Concentration on export.

      Countries with a developing manufacturing industry made an initial bet on the development of export industries and comprehensive support for exporters. In many cases, the growth of industry was associated with favorable conditions for access to large developed markets.

      5) Entry into global GVC.

      Almost all countries have the same goal of joining global value chains (hereinafter referred to as GVC). This enables technology transfer and increases the country's industrial potential.

      One of the main owners and regulators of global VACs are transnational companies (hereinafter - TNC). They choose countries for their investments based on four main motives: access to raw materials, access to a large domestic market, access to cheap labor, or access to specialized factors to increase efficiency. Therefore, developing countries pay special attention to creating value propositions for TNCs based on access to specialized factors, balanced by the criterion of price / quality.

      1.6. Goals, objectives and expected results of industrial and innovative development

      The goal of industrial-innovative development for 2020-2025 is to create conditions for stimulating the competitiveness of the manufacturing industry of the Republic of Kazakhstan in the domestic and foreign markets, taking into account the obligations of the Republic of Kazakhstan within the framework of membership in international economic organizations.

      To achieve this goal requires the following tasks.

      Task 1. Deepen industrialization.

      To deepen industrialization, it is necessary to achieve a critical mass of enterprises in the manufacturing industry and increase their concentration in the “points of growth”. This will allow, among other things, increasing the volume and range of products, including consumer goods, as well as creating a pool of new manufacturing enterprises that are in demand on foreign markets in order to implement task 2.

      While increasing labor productivity, it is necessary to preserve the number of workers in the manufacturing sector by creating jobs in new industries launched as part of industrialization.

      Task 2. Expansion of production volumes and range of processed goods that are in demand on foreign markets, taking into account the obligations of the Republic of Kazakhstan in the framework of membership in international economic organizations.

      The development of the manufacturing goods industry, which are in demand in foreign markets, will occur in two directions:

      1) an increase in the range of goods exported with the identified comparative advantage16. This will require sustainable export volumes with a share in foreign markets higher than the current share of the Republic of Kazakhstan in global exports of goods;

      2) increase the "complexity" of the export basket. This will be possible if the product complexity index of the exported goods exceeds the current economic complexity index of the Republic of Kazakhstan.

      Task 3. Increase industrial capacity.

      As part of an increase in industrial capacity, measures will be taken to stimulate enterprises to master the basic industries for the production of new types of industrial semi-finished products and components, and provide the necessary raw materials to manufacturing enterprises.

      Expected results of the industrial-innovative development of the Republic of Kazakhstan for 2025:

      1. The real growth of labor productivity in the manufacturing industry by 1.7 times to the level of 2016.

      2. Growth in the export of the manufacturing industry by 2.3 times to the level of 2016.

      3. Increasing the Index of Economic Complexity (Harvard) to 55th place.

      4. Real growth of investment in fixed assets of the manufacturing industry by 2 times to the level of 2016.

      5. The increase in the number of existing enterprises per 1000 people of the economically active population by 2.3 times to the level of 2016.

      2. Basic principles and general approaches

      2.1. Principles for industrial innovation policy

      The third program of industrial-innovative development will maintain continuity and be based on the following principles:

      1) Focus on manufacturing

      In accordance with the state planning system, the policy of industrial-innovative development will take into account all horizontal policies to create a business climate, a firm and “soft” common, digital and innovation infrastructure, as reflected in the first and second level documents of the State Planning System. The policy will be exclusively vertical with focus on the development of the manufacturing industry. Innovative development will also be considered in the context of this sector of the economy.

      2) The pairing of industrial innovation and spatial development

      Efforts will focus on the development of specialized factors mainly in points of spatial growth to achieve agglomeration effects that stimulate competition, increase the complexity of local markets, reduce transaction costs, and stimulate the development of competitive territorial clusters.

      The cluster approach as a tool to increase the competitiveness of companies in the regions should be an important direction in the development of the manufacturing industry and the productive services sector. State support measures for clusters will help to direct the efforts of the state both as targeted assistance to individual companies and to the entire sector in the region, based on the presence of business concentration and specialization of the region. This approach needs to be scaled across the country.

      3) Proactive role of the state and partnership with business

      The state will continue to play an active role in the development of the manufacturing industry, taking into account the principles of “Yellow Pages” (effective protection of business from government actions that restrict competition) and the absence of contradictions with the development of the private sector. Direct support will continue for businesses in the manufacturing industry. Taking into account the practice of neighboring countries in protecting domestic markets, the state will provide diplomatic support to domestic companies, including to support exports and in the event of their discrimination. The business community and government agencies will share Responsibility for the implementation of industrial innovation policy. This implies the direct involvement of the business community in developing criteria and providing support measures.

      4) Continuity and flexibility

      The previously created tools for planning, implementing and monitoring industrial-innovative development, provided for in the system of state planning, the Enterprise Code and the

      established ecosystem of development institutions will be used to the maximum. Flexibility in the implementation of the policy will be carried out through constant feedback with the public and business, to ensure high susceptibility to changing conditions, as reflected in the scenarios of industrial-innovative development.

      5) Result orientation

      The implementation of the policy will be focused on achieving concrete results consistent with the long-term strategic goals of the development of the country. At the same time, subjects of industrial-innovative development will be given a certain freedom in choosing the most effective way to accomplish tasks and achieve target indicators. Sufficient volumes of financing for industrial-innovative development policy will be provided, on the terms of the effectiveness of their use, to achieve the target indicators.

      2.2. General approaches

      The policy of industrial-innovative development will be built on the balance between direct and system support, taking into account the obligations of the Republic of Kazakhstan in the framework of membership in international economic organizations. Approaches determine the criteria and conditions for objects of direct support, the choice of solutions for the development of specialized factors, the external and internal markets.

      1) Direct support of enterprises

      Direct support of business entities will be conducted in three groups of objects in accordance with the objectives of the concept.

      The first group is “Strong rear”;

      The second group is “Competitive Manufacturers”;

      The third group - "Centers of gravity."

      Each group will develop its own selection criteria, mechanisms of interaction with the system of industrial-innovative development in the framework of the development of the SPIID 2020 - 2025.

      2) System support

      The system support will focus on creating specialized factors and conditions of demand for the development of the manufacturing industry in addition to other horizontal programs to improve the investment climate, support exports, attract foreign investment, and solve problems with the labor force being released.

      Development of specialized factors

      As part of the development of specialized factors, measures will be taken to expand access of enterprises to:

      - production and digital infrastructure,

      - quality specialized human capital,

      - centers of innovation and competence,

      - testing and certification infrastructure,

      - joint sales systems, industrial consulting and engineering.

      Within the framework of the third program of industrial-innovative development, efforts will be focused on continuing the cluster approach for the development of regional production systems, taking into account the associated industrial-innovative and spatial development.

      The state will take measures to institutionalize the functioning of the clusters, as well as to implement cluster initiatives (projects). Tools for technical regulation and metrology will also be actively used for the development of the manufacturing industry, including the expansion of testing capabilities in the manufacturing industry and the creation of conditions for the recognition of the results of conformity assessment tests at the international level. As part of the implementation of the “Digital Kazakhstan” program, telecom operators will provide digital infrastructure with high-speed broadband Internet access in places of concentration of industrial enterprises, special economic and industrial zones in cities of republican and regional importance. In addition, the issue of reducing the requirements for investment projects aimed at technological modernization with the introduction of elements of Industry 4.0 in terms of their own financial participation and a reduction in the financing rate will be worked out.

      The development of market factors

      The development of the manufacturing industry will depend on the development and complexity of the domestic market. It is necessary to develop a horizontal trade policy aimed at the development of the internal ecosystem of wholesale and retail trade, in which principles, approaches and measures will be formulated for developing access to sales channels, promoting and improving trade activities. This policy should include solving problems of facilitating access of domestic manufacturers to retail sales channels, increasing confidence in the results of Kazakhstan testing laboratories and certification centers, and public sector procurement. As part of the future policy of industrial-innovative development, a number of initiatives will be envisaged aimed at the development of the domestic market:

      - within the framework of regulated procurement, mechanisms will be worked out aimed at developing new high-tech industries, attracting investments and new technologies, supporting the effective implementation of innovations, as well as developing the research base of the Republic of Kazakhstan and integrating it with the production process;

      - work will continue on the development of subcontracting centers together with large private and public enterprises in the basic sectors of industry;

      - continue to improve the system of technical regulation and standardization (expanding the practice of using standards in legislation and regulated procurement based on international best practices, introducing a service model of export support, creating a reliable measurement system based on technically advanced and modernized state standards);

      - incentive measures will be developed for the development of cooperation between enterprises of the manufacturing industry and basic industries within the framework of the execution of contracts (including EPC) for regulated purchases.

      Ensuring the systemic access of enterprises to foreign markets will be carried out in accordance with the adopted National Export Strategy.

      3. Measures to improve the policy of industrial-innovative development

      3.1. Measures to improve the institutional environment

      Further development of industrial-innovative development requires improvement of the institutional system in accordance with three principles: clear Responsibility for results, uniting efforts with business and the public based on a clear division of Responsibility, and a focus on results with a certain freedom in choosing the tools to achieve it. The institutional framework for industrialization will also be built to eliminate duplicate and redundant functions of state organizations, transfer individual functions to the competitive environment, including self-regulatory organizations, as well as delegate Responsibility and ensure independence in decision-making at the lowest possible management levels.

      Strengthening the Industrial Development Commission

      The success of the industrial-innovative development policy will depend on the solution of interdepartmental issues for the development of the manufacturing industry. The work of the consultative and advisory institution - the Commission for Industrial Development of the Republic of Kazakhstan (hereinafter - the CID) - will be strengthened with the involvement of business representatives and the public. The main task of the CID will be to prepare recommendations and proposals for:

      1) improving the competitiveness of the manufacturing industry of the Republic of Kazakhstan, including by considering systemic measures for the development of the manufacturing sectors, approved by the Coordinating Council on Forced Industrial Development of the Republic of Kazakhstan, taking into account the obligations of the Republic of Kazakhstan in the framework of membership in international economic organizations;

      2) conceptual approaches to the implementation of state policy in the manufacturing industry;

      3) the criteria for selecting investment projects and agreeing on the terms of special investment contracts for projects of the “Center of gravity” group, taking into account the obligations of the Republic of Kazakhstan in the framework of membership in international economic organizations.

      Improving the effectiveness of the development institutions

      The functionally decentralized system of development institutions will be transformed into a logically built network of operators of support measures, depending on their characteristics and objects. Consolidating all non-refundable financial (grants), returnable financial, non-financial and service tools using the “one-stop” principle eliminates the risk of inter-agency disputes, reduces decision-making time by improving communications and will help achieve a synergistic effect when providing a package of support measures17.

      In order to consolidate non-returnable financial (grants), non-financial and service tools, work is underway to merge legal entities identified by national institutes for the development of industry, local content and technological development into a single Industrial Development Center (hereinafter referred to as the IDC). The LDP will also become the working secretariat of the KPR and the Coordinating Council for Forced Industrial Development of the Republic of Kazakhstan, ensuring the unity and coherence of the industrialization policy. Additionally, such a transformation will provide the following effects:

      1) creation of a single “think tank” in the field of industrial innovation policy by merging analytical functions, which will strengthen the competence in industry development, marketing research of foreign and domestic markets, technology foresight, development of the domestic market and the system of local suppliers;

      2) development of proposals on systemic measures for the development of the manufacturing sector with the participation of the business community;

      3) more precise adjustment of requirements for safety and quality of processed products;

      4) optimization of administrative costs to increase human potential without increasing the staff size.

      In order to support the development of territorial clusters on the basis of the CID, the following measures will also be provided:

      1) information and analytical support and government support aimed at the development of cooperation and cooperation of participants;

      2) development of human resources (training, training, advanced training);

      3) cluster expansion (attracting foreign investors, conducting an information and advertising campaign);

      4) innovation and technological development, including the promotion of the creation of specialized regional engineering organizations;

      5) creation of infrastructure, including on conditions of state-private partnership;

      6) stimulation of improving the quality of products (test bases, laboratories).

      NMH (National Managing Holding) Baiterek JSC will continue to act as the operator of all returnable financial support measures through subsidiaries, whose authority will include attracting resources from external and domestic debt and capital markets to provide preferential loans to manufacturing enterprises. This in turn will allow NMH Baiterek JSC to focus on improving the financial efficiency of the returnable support tools provided.

      Active interaction with the business community

      One of the differences between the SPIID 2020 - 2025 will be the possibility of sharing responsibility with an institutionally formed partner from the business community in the person of National Chamber of Entrepreneurs (NCE) Atameken. In accordance with the provisions of JV 2025, the issue of consolidating broad service support of business by transferring all frontal functions will be worked out at NPA Atameken.

      In addition, NPA Atameken will continue to perform the functions of a “single window” for service support of participants in foreign economic activity, which will reduce their cost and time costs, simplify information interaction with government agencies and development institutions, increase the transparency and predictability of business processes associated with

      Non-refundable financial support measures - monetary support in the form of grants, cost recovery, etc., which do not provide for the further return of funds to the operator

      Non-financial and service support tools - support measures, without direct transfer of money to enterprises, include training, consulting and other services.

      foreign economic activity, provide feedback between intermediated government agencies, organizations and exporters.

      3.2. Measures to increase the innovation activity of enterprises

      Stimulating the increase in innovation activity of manufacturing enterprises will be continued around elements of the innovation ecosystem and the innovation cycle. Tools for developing an ecosystem of innovation will be closely linked to the development of cluster initiatives around universities and business incubators.

      The development of innovative clusters will continue - the Innovation Technology Park (Almaty) and Nazarbayev University (Astana), for which residents who carry out their activities in the manufacturing industry will be offered special support tools. In order to create additional incentives to increase the innovative activity of enterprises, the possibility of introducing fiscal incentives, as well as revising the rules on unsuccessful innovations, will be considered.

      The establishment of international cooperation and building partnerships with international organizations in the field of industrial-innovative development and technology transfer will continue.

      One of the important directions in the development of innovative business is the development and promotion of technological entrepreneurship. In this regard, measures will be taken to stimulate the creation of venture capital funds that will focus on solving industry-based venture funds in the manufacturing industry.

      At the same time, taking into account the need to create and develop local competencies, which is a crucial element of innovative business, tools will be developed to attract start-up ecosystem players to solve technological problems and problems of manufacturing enterprises. At the same time, in order to bring modern technologies into the country, measures will be developed to stimulate the market for technological brokerage services.

      The implementation of the industrial-innovation policy of the “digital age” will require human capital that meets its requirements. In accordance with Initiative 1.2 of the Joint Venture 2025 “Updating the content of programs at all levels of education”, the cooperation between the authorized body in the field of state support of industrial and innovative activity, NCE Atameken and the base universities to bring training programs in accordance with the needs of industry with qualified engineering staff will continue. sustainable digital skills. The state educational order will be adjusted by redistributing educational grants to the direction according to Industry 4.0 technologies.

      Further improvement in the field of TaVE will continue, including the updating of curricula and the transfer of TaVE regions' experience in the training of specialists demanded by industry. The regional TaVE system will become the basis for retraining the released labor force, providing training in specialties that are in demand in large urban areas. Regional TVE will seek to integrate into developing cluster initiatives to support enterprises in training and retraining.

      An important factor determining the scientific and technological development of the manufacturing industry will be the provision of a high-quality and full-fledged relationship between science and business. In this regard, work will continue to stimulate the commercialization of the results of scientific and technological activities through the active interaction of the scientific and business communities.

      The possibility of taking measures that stimulate manufacturing enterprises to apply domestic scientific developments of a fundamental and applied nature (both their own and third-party organizations) will be considered.

      The IDC, as part of the development of cluster initiatives, will support the integration of local universities in their implementation. Emphasis will be placed on achieving synergies between business and universities in all aspects of the activity: sharing laboratory facilities, access to technology transfer networks, conducting joint R & D and pilot projects.

      As part of the implementation of Initiative 2.4 of SP 2025 “Stimulating companies to upgrade equipment”, in addition to direct support measures, cluster initiatives will include the creation of cluster competence centers, service centers for equipment maintenance, as well as centers for sharing experience and information, including on developing competencies of local suppliers.

      The Competence Center of Industry 4.0 will be created on the basis of the IDC, the task of which will include the implementation of Initiative 2.2 of the Joint Venture 2025 “Creation of Industry Competence Centers 4.0” The Intellisense Lab's technological development center, created on the basis of the PIT innovation cluster, will implement pilot projects and scale up innovative solutions and technologies of Industry 4.0 in the manufacturing industries. Such competence centers should become an integral part of the service infrastructure during the implementation of cluster initiatives. They can be implemented both by creating specialized laboratories on the basis of universities and colleges, including using the principles of PPP, and on the basis of private innovation-active enterprises.

      As part of the implementation of the Initiative 2.5 "Stimulation of technology transfer", 2.6 "Attraction of technology brokers" and 2.18 "Creating incentives for innovative activities of enterprises" JV 2025 TSPR will continue to develop technology transfer networks, will stimulate the attraction of international technology to Kazakhstan and the development of domestic technology brokers. encourage companies to develop their own technologies.

      In connection with the increasing importance of innovation in all sectors of the economy, the possibility of developing a program document on the development of innovation in the Republic of Kazakhstan will be considered.

      3.3. Measures to improve the system of support tools

      The SPIID 2020 - 2025 will take into account the principles of financing reflected in SP 2025, which include:

      1) elimination of ineffective and unclaimed support measures;

      2) reduction of budget financing for state and quasi-state enterprises;

      3) a reduction in funding support programs that distort market prices and adversely affect the development of the private sector;

      4) preferential support for projects co-financed by the private sector, with funding from public funds.

      Within the framework of the SPIID 2020 - 2025, the use of all types of support tools provided for by the Business Code of the Republic of Kazakhstan will continue. Given the domestic and international experience of industrial innovation policy, it is possible to expand support tools.

      One of the conditions for obtaining non-repayable financial support measures will be the obligatory acceptance of reciprocal obligations and responsibility for non-performance by enterprises under the criteria of the SPIID criteria 2020 - 2025. This will avoid the unfair use of public resources, increase the effectiveness of government support and subsequent monitoring. At the same time, reciprocal commitments for obtaining returnable financial support measures will be taken into account within the framework of loan agreements. A detailed mechanism for making reciprocal commitments will be developed as part of the development of the SPIID 2020-2025.

      The main tool for planning industrial-innovative activity will be UMPGS, which will be approved by the relevant decision of the Government of the Republic of Kazakhstan and be a priority in providing state support to the enterprises of the Strong Rear Group.

      Its development and cyclical updating will be carried out by the TsPR in close cooperation with the business community, according to the methodology approved by the authorized body in the field of state support of industrial and innovative activity. The selection of goods for UMPGS will be carried out including taking into account:

      - availability of available (taking into account logistical constraints and price range) and sufficient for the "economies of scale" of internal and external sales markets;

      - the possibility of development in the Republic of Kazakhstan, including the prevalence of competitive advantages, “similarity” with existing competitive products, or the prevalence of private investors;

      - sufficient "complexity" of the product, increasing the index of economic complexity of the Republic of Kazakhstan.

      The proposed support tools will be grouped around the three tasks formed in this concept.

      Task 1 "The deepening of industrialization" and the group of enterprises "Strong rear"

      “A single window” of support and service support will be the NCE “Atameken” as an established institution of support for mass entrepreneurship.

      NCE "Atameken" will develop the criteria and requirements for the support of this group of enterprises, taking into account the updating of the existing UMPGS tool. Regional representative offices of NCE Atameken together with local executive bodies will provide direct support to enterprises. JSC FDU "Damu" will become the key support institution - the operator of returnable instruments of financial support.

      The use of long-term and offtake contracts within the framework of regulated procurement will be continued for the creation of new and development of existing industries with the conclusion of the SIC corresponding to this Concept.

      Direct support of enterprises will be continued through innovative grants for the introduction of product, process, marketing and organizational innovations, subject to the achievement of industrial and innovation policy objectives. The requirements for issuing these grants will be a further increase in the efficiency of production processes, the expansion and increase in the complexity of the product range, and the monitoring of socio-economic inquiries at the regional, state and international levels in order to identify promising areas for the application of innovative potential.

      A separate area of direct support to enterprises will be grants for the system implementation of Industry 4.0 and digital transformation. Tools will be offered to reimburse companies for the implementation of international standards of Industry 4.0 and for training personnel with “digital” skills.

      Task 2 "Expansion of production volumes and range of processed goods that are in demand in foreign markets" and the group of enterprises "Competitive Manufacturers"

      Support Center will act as a “single window” of support and support. The enterprises of this group will receive comprehensive and synchronized support from the CID and JSC NMH Baiterek, taking into account the obligations of the Republic of Kazakhstan in the framework of membership in international economic organizations.

      The main support tools will be aimed at:

      1) an increase in the range of goods exported with a comparative advantage;

      2) increase the "complexity" of the export basket.

      For more effective financial support to exporters, the possibility of expanding the products of NMH Baiterek to finance medium-sized companies will be considered.

      For manufacturers of goods with a positive index of product complexity, in addition to existing measures, direct grant financing will be provided for the acquisition of equipment for the expansion or technological upgrading of production, subject to the requirements of Initiative 2.7 SP 2025 "Conducting mandatory technological expertise of investment projects." In addition, the issue of subsidizing the rate of remuneration on trade finance, as well as reimbursement of the cost of transporting and delivering goods, will be worked out. Among this group, business subjects will be selected for the implementation of the Initiative 2.3 SP 2025 “Creating Model Digital Factories”. Enterprises will receive maximum service, non-financial and financial support for the development of a roadmap, implementation and implementation of measures, aimed at creating a full-fledged digital factory on the principles of Industry 4.0.

      Task 3 “Increase in industrial capacity” and the “Center of gravity” enterprise group

      The support of these enterprises will be carried out in a “manual” mode, coordinated by the central body responsible for the manufacturing industry, and the ongoing support of the CID, with the assignment of responsible project managers for the entire period of project implementation.

      The LIS will create joint project teams with the national institute in the area of attracting investment and the ongoing support of NCE Atameken for projects involving foreign direct investment and national management holdings for projects within the framework of investment authority.

      The investment mandate of national managing holdings will include the task of raising funds for capital-intensive projects that will focus on the development of various priority sectors of the economy that are attractive and promising from a commercial point of view, which will have a multiplicative effect on the domestic economy, stimulate private business and the development of related industries through co-investments with strategic partners in compliance with the Yellow Pages principles. The role of modern high-performance institutions that pursue government and commercial goals that contribute to the long-term development of the country, without conflicting with the development of the private sector of the economy, will be performed by JSC NWF Samruk Kazyna.Financial support measures will be provided by subsidiaries of Baiterek National Holding Company JSC by mixing funds from the market and public funds.

      For such projects, it is possible to provide unique support measures outside the existing system, subject to additional commitments by them at the conclusion of a special investment contract, the preparation of which will be carried out by the Centre of Industrial Development and considered for the CID.

      For the traditional backbone enterprises, a package of compensating measures will be proposed related to the release of surplus labor. The authorized body in the field of state support for industrial innovation activity together with the authorized body for employment, the local executive bodies and the backbone enterprises will develop road maps to solve the problems related to labor surplus. These activities will be carried out in accordance with the implementation of the Initiative 1.17 SP 2025 "Support for workers released as a result of modernization and digitalization of enterprises."

      The following support measures may be applied, with the division of responsibility between the employer and the state:


joint programs for the relocation of workers from single-industry towns to large urban areas;

joint re-training programs for released workers;

creation of an ecosystem of local suppliers of goods and services for a backbone enterprise on the terms of a long-term contract.

      Solving all three tasks will require improving system support measures. The main focus will be on the concentration of resources and efforts in separate spatial growth points for further development and creation of specialized factors.

      In the development of Initiative 2.13 “Ensuring the interconnection of localized companies”, the construction of the infrastructure of all the Free Economic Zones initiated will be completed. There will be an audit and re-evaluation of the effectiveness of existing free economic zones, constructed and planned for construction of the Industrial Zones according to their potential of engineering and digital infrastructure, the quantity and quality of available human capital and the possibilities of integration into global VAC and market accessibility.

      As part of the implementation of the “Digital Kazakhstan” program and in the development of Initiative 2.9 SP 2025 “Development of Information and Communication Infrastructure”, telecom operators will have access to high-speed broadband Internet with a speed of at least 100 Mb / s and a delay of no more than 10 ms for enterprises located in special economic and industrial zones in cities of republican and regional significance. The design rules of industrial zones will include the requirement for high-speed broadband access.

      The issue of creating legal conditions for providing enterprises with access to the radio frequency spectrum, including the implementation of joint access on the basis of territorial separation, necessary for the construction of intra-corporate networks of the industrial Internet, will be removed. Obstacles to simplify procedure and reduce the time for issuing permits for importing electronic equipment and electronic components to 30 days should be removed (taking into account procedure for verifying membership of special technical means and means of cryptographic protection of information).

      3.4. Approaches to improve support measures

      Considering the importance of the manufacturing industry for the development of the economy as a whole, the SPIID 2020 - 2025 should have sufficient endowments. Funding will be provided from the republican budget, funds raised by national holdings, development institutions, as well as private investment.

      In addition, the opportunities of the International Financial Center Astana will be used to diversify investment instruments. Funds allocated will be used exclusively for direct and systemic support measures, where direct measures will be directed to irrevocable financial support measures, and systemic measures will be used to develop specialized factors.

      A balance will be maintained between financing projects aimed at increasing the size of the manufacturing industry and expanding the range of goods. The distribution of financial resources between groups of enterprises will be determined during the development of the SPIID 2020-2025.

      3.5. Measures for the organization of monitoring systems, feedback and verification mechanisms and updating the current industrial innovation policy

      In the implementation of Initiative 3.8 SP 2025 “Reduction of requirements for reporting and providing information” and taking into account the technologies of the digital era, the current tool for monitoring industrial and innovation policy (Industrialization Map18and others) will be transformed into the State Information System (hereinafter - GIS) “Industry”. GIS "Industry" will work out the question of including the monitoring of the implementation of industrial innovation policy at the central and regional levels, for individual business entities and cluster initiatives. The system will operate on the basis of the IDC and provide an opportunity to receive in electronic form reports on the implementation of individual areas and projects with state support.

      GIS "Industry" will be integrated with existing state information systems leading registration, statistical, tax, foreign trade, licensing and other types of accounting business entities. One of the obligations in obtaining measures of state support will be the consent of business entities to such integration, which will be enshrined in the relevant agreements. This will eliminate the need for additional reporting by business entities.

      4. Stages of the Concept implementation

      Achievement of the specified goals and objectives of the Concept in the specified period will be achieved through the implementation of the SPIID 2020 - 2025.

      5. The list of regulatory legal acts that will be developed for the implementation of the Concept

      The state program of industrial-innovative development of the Republic of Kazakhstan for 2020-2025 and the Action Plan for its implementation will be approved by the Government of the Republic of Kazakhstan.

      Note: interpretation of abbreviations:

      ECI - Economic Complexity Index (index of economic complexity);

      RCA - Revealed Comparative Advantage;

      AIC - agro-industrial complex;

      DBK - Development Bank of Kazakhstan;

      GDP - gross domestic product;

      GVA - gross value added;

      RFU - high frequency devices;

      GIS - state information system;

      SPIID 2020 - 2025 - State Program of Industrial-Innovative Development of the Republic of Kazakhstan for 2020 - 2025;

      SPFIID 2010 - 2014 - State Program on Forced Industrial-Innovative Development of the Republic of Kazakhstan for 2010-2014;

      PPP - public-private partnership;

      OECD – Organization for Economic Cooperation and Development;

      UMPGS - Unified map of priority goods and services;

      FIZ – Free industrial zone;

      SRC MoF - State Revenue Committee of the Ministry of Finance of the Republic of Kazakhstan;

      CID - Commission for Industrial Development of the Republic of Kazakhstan;

      SC of the MNE – Statistics Committee of the Ministry of National Economy of the Republic of Kazakhstan;

      R & D - Research and development work;

      NCE "Atameken" - National Chamber of Entrepreneurs of the Republic of Kazakhstan;

      OECD - Organization for Economic Cooperation and Development;

      FDI - foreign direct investment;

      PIT - a park of innovative technologies;

      REM - radio electronic means;

      SIID 2003-2015 - Strategy of industrial-innovative development of the Republic of Kazakhstan for 2003-2015;

      SIC is a special investment contract;

      SP 2025 - Strategic Development Plan of the Republic of Kazakhstan until 2025;

      The FEZ is a special economic zone;

      TaVE - technical and vocational education;

      TNC is a transnational company;

      VAC is the value added chain;

      CIR is the center of industrial development.


      1Statistical Bulletin of the SC of the MNE "Indicators of the State Program of Industrial-Innovative Development of the Republic of Kazakhstan for 2015 - 2019", January-December 2017

      2Data of the SC of the MNE "Labor productivity indices" (form K-23)

      3SC of the MNE data for 2016, data for 2017 will be published in October 2018

      4Statistical Yearbook "OECD in numbers" (2017)

      5 The Atlas of Economic Complexity. Harvard University. http://atlas.cid.harvard.edu/

      6 As per UNIDO classification of Technological Complexity. https://stat.unido.org/content

      7 Statistics Committee of the Ministry of National Economics of the RK, own calculations

      8 Statistics Committee of the Ministry of National Economics of the RK, own calculations

      9 SC of the MNE of the RK, RC of the MF of the RK, own calculations

      10 Harvard University

      11 SC of the MNE of the RK, own calculations

      12 Review of competitiveness of Kazakhstan

      13 the USA and West Europe

      14 Networked readiness index, World Economic Forum

      15 The Report by Franuhoffer

      16 Revealed comparative advantage (RCA)

      17 Refundable financial support measures - monetary support on credit terms, providing for the full return of funds to the operator

      Non-refundable financial support measures - monetary support in the form of grants, cost recovery, etc., which do not provide for the further return of funds to the operator

      Non-financial and service support tools - support measures, without direct transfer of money to enterprises, include training, consulting and other services.

      18 Clause 2 of Article 256 of the Entrepreneurial Code of the Republic of Kazakhstan dated 10.29.2015. № 375-V LRК

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