Paving the New Silk Road: Boosting Investment in Central Asia for the Sustainable Future We Want

Dr. Shamshad Akhtar delivering her keynote address at the Invest in Kazakhstan Conference at the 47th Annual Meeting of the ADB Board of Governors in Astana, Kazakhstan.
Photo Credit: UNESCAP/Robert Spaull

Delivered during the International Investment Conference, Invest in Kazakhstan, ADB’s 47th Annual Meeting of the Board of Governors - Astana, Kazakhstan, 2 May 2014

Honourable Ministers,
Excellencies,
President of ADB,
Development Colleagues,

Introduction

It’s a real pleasure for me to return to Kazakhstan after some years. Kazakhstan is and will remain a key strategic partner of the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).

As a traditional hub for commerce and innovation, and strategically located on the ancient Silk Road, Kazakhstan has great potential to lead industrial and socio-economic development, not only for its own people, but for Central Asia at large, and to be a role model for other landlocked developing countries.

It is paving the way for the success of a modern new Silk Road, already taking impressive strides forward in rethinking its approach to growth, energy, and the environment.

It has adopted forward-looking strategies to boost trade and investment, and is building on its position as a bridge between East and West, North and South, creating innovative 360 degree connectivity, which is a very futuristic agenda.

But Kazakhstan cannot unlock this potential alone. It requires regional partners who share its vision of a more vibrant and dynamic subregion. It needs backers with the capital and expertise to support its initiatives. And, ultimately, it needs the regional, global, and multilateral private sector to invest in building the sustainable future we want for all in Kazakhstan and Central Asia.

I will focus my remarks today on highlighting a few essential issues that will support the achievement of these goals: macroeconomic transformation; industrial diversification which generates jobs; and integrated connectivity.

Macroeconomic Transformation

For Kazakhstan to extend its successful leadership in regional coordination and cooperation, the country will be intensifying its national economic and social transformation, in line with the vision and action plans already articulated so well in its Kazakhstan 2050 Strategy, and the Road Map for Business 2020.

Plans for sustainable development of the country, if effectively implemented, will further contribute to improving the living standards of people, while improving environmental management. Most critical within this context will be for Kazakhstan to execute and implement effective, forward-looking policies which help, among others, to achieve at least four broad objectives:

  1. Launch inclusive, balanced and sustainable development;
  2. Diversify and strengthen its domestic economy;
  3. Lend confidence to investors in the State’s governance and investment regime; and
  4. Ensure efficient and effective corporate governance and natural resource management.

The key strategic directions of the Program for Accelerated Industrial Development and other reforms being pursued by Kazakhstan, which aim to diversify the economy by rationalizing and strengthening investment, are steps in the right direction. Some degree of change is already visible, as evident from the rise in the ranking of Kazakhstan in the World Bank’s Ease of Doing Business Rankings, from 81 in 2008 to 50 – and I am sure that in a few years we will see this ranking further improve.

Consistent and transparent implementation of the modern laws and regulations, coupled with a comprehensive framework and approach to nurturing competition, would also augur well for the long-term sustainable development of Kazakhstan.

Industrial Policy

It has been my observation and experience that countries which offer competitive investment opportunities have encouraged economic diversification, and have pursued, amongst others, at least three key components of industrial policy reform:

  • Directing investment to productive sectors, by allowing a more level playing-field with local companies, including the state-owned enterprises. An example of this would be the rationalization of the indigenization program, and elimination of the administrative barriers to foreign companies;
  • Offering comprehensive support to small and medium-sized enterprises (SMEs), enabling them to effectively participate in global supply chains and addressing the need for greater SME access to financing; and
  • Boosting investment in research and development (R&D) capabilities. The 0.2% of GDP being currently spent on R&D in Kazakhstan is below the recommended levels for countries at a similar development stage (1%–1.5% of GDP).

Integrated Connectivity

Kazakhstan is in a unique position to serve as a regional production network and transit hub, backed by efficient transport corridors to connect Central Asia with Europe and Asia at large. At the same time, appropriate and efficient investments in infrastructure will allow Kazakhstan to serve as a unique corridor for the trading of energy resources, not only its own hydrocarbon resource potential, but allowing others to also use its corridors to export oil and gas.

ESCAP’s work with other landlocked countries in the region has shown that achieving regional integration and connectivity with neighbouring countries, and the wider Asian region, through the right policies, the development and facilitation of transport, trade, transit, and logistics has high payoffs and is win-win for all. Yet, at present, Kazakhstan unfortunately ranks low in terms of connectivity.

Recognizing this, ESCAP has been working with our development partners, especially through the United Nations Special Programme for the Economies of Central Asia (SPECA) to advance economic integration and cooperation in Central Asia. We provide the intergovernmental platform for deliberations on regional cooperation and connectivity. This has been especially successful in the development of the Asian Highway and Trans-Asian Railway networks, as well as the implementation of the new regional Intergovernmental Agreement on Dry Ports.

The Central Asian countries, especially Kazakhstan, must be developed as consolidation and distribution centres for Euro-Asian trade. Connecting the landlocked countries of Central Asia with more prosperous coastal regions and sea ports, will better integrate these economies with regional and global production and supply chains.

Conclusion

ESCAP will continue to be a steadfast partner for Kazakhstan and Central Asia at large, to help to maximise the subregion’s investment potential, and to advance important cross-border dialogues on key development issues such as transport, water and energy.

Through our subregional office for North and Central Asia, in Almaty – and together with our offices in Incheon and New Delhi – we are working to support the Governments and people of Central Asia to promote the kind of investments and the type of sustainable infrastructure development which will pave the success of the new Silk Road.

We believe in the potential of Kazakhstan and Central Asia, and we are excited to extend our partnership with you, to unlock this potential – for the subregion and for all the countries of Asia.

I thank you.