The Prime Minister of Kazakhstan

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Modernization  3.0: towards an Inclusive Future

02 March 2017, 11:07

Kazakhstan solves the problem of changing the development model. Head of competitive international research center "Astana" Anuar Buranbayev believes that to achieve these goals, it is important to change the model of development, based on sales, on a more stable and balanced. How does this affect the country's economy and whether our society will change in the near future? The expert answered the questions in an interview with Primeminister.kz.

According to him, the global trend gaining strength of mass introduction of cyber physical systems in manufacturing and business processes, called succinct word "Industry 4.0", will have a serious impact on all aspects of society. However, the modernization of the economy is not possible without the modernization of society and state institutions.

Strategy "Kazakhstan-2050": timely adjustments

A.Buranbayev believes that the President's Address to the Nation "Third Modernization of Kazakhstan: global competitiveness" offered timely corrections of tactical and medium-term goals and objectives of Strategy "Kazakhstan-2050". At the same goal - to enter 30 most competitive countries of the world, adjustments in accordance with the current reality were proposed. Since announcement of  "Kazakhstan-2050" Strategy in December 2012, there have been significant changes both in the external environment and the internal state of the country.

According to the expert, three key external factors create the very "new reality." The first is the completion of the commodity super cycle and access to the zone of the stabilization of commodity prices at lower levels. A.Buranbayev believes that we should not expect a sharp rise of commodity prices in the medium term. The second is the change in the geopolitical situation related to regionalization and increasing conflict. The third is the development of two strong integration projects EEC and "One belt one way." The internal agenda has just changed. The Government sharply reduced ability to support the growth.

Not all of society positively perceives the proposed ideas. In this regard, the expert offers to look back and remember a time when Strategy "Kazakhstan-2030" was declared in 1997. According to him, the people had also disbelief. However, thanks to the correct use of the opportunities, the main objective of Strategy "Kazakhstan-2030," the construction of a sovereign state, has been implemented. Quality of life is incomparable to the mid 90-ies of the last century. But a large part of society has a sense of injustice associated with the negative aspects of rapid growth based on the raw material model: the uneven distribution of incomes and rising inequality, the growth of state apparatus and corruption, the difference in the development of territories and access to public services.

A.Buranbayev noted that it is important for Kazakhstan to gradually move from a resource model to a more sustainable development based on a better balance between economic sectors.

Three pillars of modernization

"In the Message, in my opinion, three important things are highlighted. They are modernization of economy, society and state institutions. This is the threefold challenge and all three areas should pass in order to achieve the goal of modernization of society. Modernization of economy and technological upgrading will be impossible without the modernization of society. The modernization of society and the economy will inevitably lead to demands for modernization of state institutions, " says the expert.

Regarding the technological modernization, the expert highlights several important trends, which, in his opinion, will change the model of production of goods and services.

It is worth noting that the main targets of the influence of "Industry 4.0" in Kazakhstan will be the company's raw materials sector. According to the expert, digitalization will have a significant impact on the infrastructure monopolies, public service delivery and business models.

"Firstly, the raw materials companies in Kazakhstan will be forced to introduce modern technologies; they will not be able to achieve performance ensuring global competitiveness without it. The consequence of this is the release of a significant amount of the labor force, it will have a significant impact on the stability of single-industry towns and encourage internal migration," A.Buranbayev said.

Secondly, the use of new technologies will make the process of public services more transparent, which will reduce corrupt rents.

Third, the use of modern technology will allow infrastructure companies to dramatically increase the efficiency of the services.

Fourth, the digital technology stimulates a change in consumer behavior and will affect the change in business models. Joint consumption of Economics (Uber, AirBNB, Carsharing and so on), re-use economy (when resources are re-circulation), e-commerce (Amazon, Alibaba, etc.) and associated digital platforms open up new opportunities for entrepreneurship. In addition, the total digitalization of society lead to a change in the production model.

The acceleration of urbanization and the increasing complexity of the economy

"Previously, the issue of social stability and employment often prevailed over economic efficiency, obstructed the reduction of people in every way. Now, we come to a common consensus: if our companies, including those in the mining sector, want to survive, they need to change the model of production," A.Buranbayev said.

Reducing of labor creates the following problems: "What to do with the liberated labor," "What to do with the single-industry towns are subjected to the negative impact."

In this regard, according to the expert, sharp acceleration of the urbanization process in Kazakhstan and the emergence of problems "false urbanization" is possible.

A.Buranbayev considers that it is important to use this trend for the development of the country. It is necessary to take into account the model of the "core-periphery" in promoting the country's development. The most complex economic activities are concentrated in the economic centers of density, which is the largest city and metropolitan area.

"There is an exponential decline in economic difficulty and the investment attractiveness of the territory as we move from the core to the periphery. From this perspective, it is important for Kazakhstan to create two centers of the hubs of professional services and knowledge-intensive sectors, and large regional agglomerations - manufacturing centers," A.Buranbayev said.

It is in the center, according to him, are prerequisites for the creation and development of clusters and knowledge spillover. In addition, large cities generate demand, which allows you to successfully develop micro and small businesses, which are major sources of job creation.

The expert notes that Kazakhstan should take steps in order to make the complexity of the economy.

"In my opinion, Kazakhstan has good chances in two types of manufacturing industries “regional processing" and "global innovation for the local markets." Regional processing is the development of food processing, chemical, petrochemical industries and construction materials, and examples of the use of global innovation for local markets related to the engineering industry," A.Buranbayev said.

The most striking example of global innovation to local markets is automotive. Using one platform, a model, which takes into account peculiarities of consumer preferences and conditions, is produced for each country. In Kazakhstan it would be the production of attachments for power machines to be adapted to our soils.

"But at the same time, we must not forget that it is important for the country to start exporting processed products. Food products, petrochemicals, and in a subsequent and complex engineering products can create export potential. This will further complicate the economy,"  A.Buranbayev said.

According to him, basically, our exports are on the periphery of the space products and technological complexity is very simple. What we need to strive to complication of the economy. This will make the economy more resilient and competitive, said A.Buranbaev.

"The same model "center- periphery "shows that the most developed agriculture is close to major cities. The farther away from the city, the more it’s easier, less complicated, less developed," A.Buranbayev said.

Agriculture can be a driver only if sufficient economic difficulty. As an example, the expert cited such countries as the Netherlands, Canada, Australia, Argentina, New Zealand. These countries are the leaders in the export of agricultural products. In this case, it is - a country with a very high economic complexity and a high degree of urbanization. We have the same stereotype that if you reduce the rural population, the agricultural sector will be no one to deal with. The expert recommends to move away from this stereotype.

Force - in unity

Nevertheless, the expert is of the opinion that Kazakhstan needs to develop a strong city, and to strive for the emergence and development of global cities.

"We have little strong cities. The notion of "global city" is the trend in the shift of economic power to them. There is only one city in Kazakhstan; Almaty is included in the Beta group. In general, large cities, and especially global, promote the development of human and social capital," A.Buranbayev said.

By social capital, in his words, the positive effects that occur when people communicate with each other are understood. Social capital creates the effect of the overflow of knowledge. A.Buranbayev believes that Kazakhstan along with the support of its citizens' initiative should involve initiative people from other countries. He noted that Kazakhstan is on the 52 place on the last rating of talent attractiveness. In this ranking, our country is a leader in Central and South Asia.

"Whether we can use it or not depends on us, on whether our society is ready to accept strangers. It should be noted that the United States, Canada, Europe strongly attracted foreign nationals. Any developed country has a program for attracting talent," A.Buranbayev said.

He argues that we should not resist coming to the Kazakh market of foreign talent. After all, if a foreign citizen to come to our country and will start any business or scientific activities, the people of Kazakhstan will only benefit from this: there will be new jobs will be created knowledge will be a contribution to the country's economy.

One of the most important tasks of social modernization is a departure from the paternalistic model.

"We still have the majority of people believe that the government will solve all of them. The state should ensure their income, work to clean up the entrances, courtyards and so on,"  A.Buranbayev said.

He believes that it is necessary to deviate from this pattern of behavior, and actively involved in the development of the country. We will achieve the objectives of the third modernization of Kazakhstan only by joint efforts.

Modernization  3.0: towards an Inclusive Future
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Modernization  3.0: towards an Inclusive Future
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