PROJECT BACKGROUND
The Ministry of Digital Development, Innovation and Aerospace Industry the Republic of Kazakhstan (hereinafter – MDDIAI RK) in cooperation with the World Bank (hereinafter – WB) is implementing the Fostering Productive Innovation Project (hereinafter - Project).
Kazakhstan is an upper middle-income resource-rich economy with significant but quite narrowly focused R&D and human capital endowments. Its main natural resource assets are in mineral (oil, gas, ferrous and non-ferrous metals) and agricultural sectors.
Despite short-term vulnerabilities accentuated by an uncertain global and regional economic outlook, Kazakhstan's medium-term prospects are positive with strong growth on the back of the expanding oil sector and structural reforms envisioned by the comprehensive long-term “Kazakhstan-2050 Strategy” (The Strategy).
The Strategy foresees the country’s transition to the knowledge economy within 10-15 years and joining the top 30 most developed countries by 2050. Having implemented a number of successful strategic reforms during the last five years, the country has been focusing on diversifying away from the resource-based growth through a major industrialization and innovation support program and a number of Small and Medium Enterprise (SME) development activities. Structural reforms described in the Strategy indicate strong commitment to building a knowledge economy that would drive growth, diversification, and global competitiveness by improving the country’s key factor endowments—human capital, infrastructure, and institutions.
The Strategy highlights seven priority areas for action by the government, including the need to improve science potential. Financing of science is set to reach three percent of GDP, with an objective to increase scientific capacity, accelerate knowledge and technology transfer through Foreign Direct Investments (FDI), and to improve efficiency of the National Innovation System (NIS). Productive innovation is seen as a key growth factor pervading and effectively linking all areas of economy and society. Understanding of context and use of innovation is very important because the current level of Kazakhstan’s economic development limits its ability to translate new-to-the-world technologies into economic returns and increase the country’s competitiveness in the global market. Therefore, adapting and efficiently using existing global knowledge and practice would be most cost- and time-efficient at this stage, and would boost innovative capacity to the level of critical mass generating a culture of innovative competition in all sectors of the economy and society.