5. Way forward
Since 2013, Kazakhstan has been developing an ambitious digitalisation agenda. However, a large number of businesses, particularly SMEs, have not yet started their digital transformation. This report has assessed the remaining gaps in the digital framework conditions that would allow firms to do so and developed some actionable policy recommendations in cooperation with the government of Kazakhstan.
Over recent years, the efforts made by Kazakhstan to develop its digital infrastructure have translated into widely accessible and affordable internet. However, existing infrastructure seems to hold back a broad digital uptake of firms across the country for two main reasons: small firms mainly use mobile internet, whose quality in terms of speed has not progressed in recent years, while low coverage remains in several rural and small urban areas. Policymaking also suffers from a lack of data on firms’ digital use and needs.
Mobilising the regional public sector to improve digital connectivity along three main dimensions could help address these constraints. First, to develop an integrated evaluation process of digital infrastructure rollout and quality, especially in rural and small urban areas, through the use of key performance indicators, and regular data collection from both operators and end-users. Second, to develop high-speed networks financed by local governments or public bodies, which compensate for market failures where private investments are not deemed profitable. Finally, to develop systematic data collection on business use and needs in relation to the digital transformation, and feed it into the policy-making cycle.
Highly concentrated with a regulatory environment favouring incumbents, the telecom market is difficult to enter for new operators, and access to infrastructure and tariffs remain highly variable for smaller last-mile connectivity providers. In addition, the sector suffers from a lack of investments to develop next generation digital infrastructures. This weighs even heavier for smaller operators, which do not benefit from dedicated investment support measures despite being an essential link in densifying networks.
While the demonopolisation of the telecom market has started, best practices from OECD countries show that the single most important pro-competitive reform is the creation of an independent economic regulator. Kazakhstan could benefit from the creation of such an agency with an autonomous and sufficient budget, a clear mandate, and staffing rules that prevent from undue influence. An investment attraction strategy with targeted financial and regulatory investment incentives could help prepare for the deployment of next generation communication networks, and further streamline the investment environment for infrastructure.
Finally, while efforts have been made to adapt the legal and policy framework for firms to new challenges created by the digital age, the pace of change remains too slow and scattered to support firms in their digital transformation. This is true on content, but also on the process, where frequent and partial amendments to laws are creating additional complexity for firms. A regulatory review in consultation with the private sector to update all laws relevant to the digital transformation of firms, starting with data protection and IPR would be an important step towards improving their framework.
In addition, despite recent cyber security policies, the digital culture of businesses remains low across the country, while cyber security threats have been on the rise over recent years and firms remain poorly equipped to manage them. Only a few digital security management initiatives exist, primarily private sector driven and coming at a considerable cost, especially for small firms. Kazakhstan needs to develop public tools to raise both the awareness and capacity of firms to manage their digital security risks, by expanding a targeted advisory and training offer. We also suggest developing preferential access schemes to these services, for instance through cost-sharing options to ensure the widest reach of these initiatives.