significant problem • Kazakhstan has low scores on important governance indicators, even compared to some of its peers in the CIS • While the quality of laws is often considered to be good, challenges remain in implementation and independent judicial review • Kazakhstan has to address significant challenges in its broader context if it is to upgrade its economic performance Source: EBRD Kazakhstan country strategy (2004), World Bank – Governance (2004), World Bank country profile (2004)
28 Copyright 2005 © Professor Michael E. Porter Kazakhstan Competitiveness 01-06-05 CK -15 -10 -5 0 5 10 15 Political, Social, and Legal Conditions in Kazakhstan Corruption Ukraine Hungary Kazakhstan Azerbaijan Romania Bulgaria Latvia Uzbekistan Slovak Rep. Poland Lithuania Czech Rep. Slovenia Estonia Russia Note: Eastern European and CIS countries in blue, constant country sample Source: Global Corruption Report, 2003 Change in Rank, Global Corruption Report, 2003 versus 2001 Rank in Global Corruption Index, 2003 80 1
29 Copyright 2005 © Professor Michael E. Porter Kazakhstan Competitiveness 01-06-05 CK Factor Kazakhstan’s situation The Context for Competitiveness in Kazakhstan A Mixed Legacy • Geography • Culture • Vast, sparsely populated country in a remote, landlocked location – Population centers on the Southern, Western, and Northern borders – 60% of population live in cities • Potential to play an important role in Central Asia • A meeting point for many cultures – 120 different ethnic groups from Asia and Europe living together peacefully
30 Copyright 2005 © Professor Michael E. Porter Kazakhstan Competitiveness 01-06-05 CK Legacies of a Planned- Economy • Economic policy is centrally directed • Buyer/supplier linkages planned from a national perspective; many were broken after the end of the Soviet Union • Relationships between suppliers and buyers are specified and focused on production of defined goods and services • The geographic locations of related economic activities driven by political and security considerations • Companies focused on narrow parts of the value chain, lacking marketing and other capabilities Cluster-based Economy • Economic policy involves significant autonomy and well developed institutions at the regional and local level • Regions specialize in terms of the fields in which they compete • Clusters leverage externalities across firms, universities, and other local organizations that drive productivity and dynamism • Geographic choices are based on the economic attractiveness of locations; firms co-locate with others to reap cluster benefits • Company scale and scope driven by economic efficiency , including the ability to access specialized skills available in the surrounding cluster • Small and medium sized companies are an essential part of clusters The Context for Competitiveness in Kazakhstan Legacies of a Planned Economy
31 Copyright 2005 © Professor Michael E. Porter Kazakhstan Competitiveness 01-06-05 CK Microeconomic Foundations of Competitiveness The Quality of the Microeconomic Microeconomic Business Business Environment Environment
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