“Breaking Down Administrative Barriers to Entrepreneurship in Kazakhstan”

In Kazakhstan, as in many former Soviet countries, the concept of entrepreneurship has long carried a negative connotation – and in the years following the collapse of the Soviet Union, this was just one of the hurdles facing businesspeople. Poor access to financing and an unfavorable legislative environment also hindered the development of the private sector, and the Kazakh government did not have a clear strategy to facilitate the development of the small- and medium-sized enterprise sector.

In CIPE’s latest Feature Service article, “Breaking Down Administrative Barriers to Entrepreneurship in Kazakhstan,” Aliya Kantarbayeva discusses the development of the private sector in Kazakhstan and the many obstacles that it faced, and still faces. The article also offers a number of policy recommendations in support of business growth that the government could implement. Creating clear and transparent procedures for entrepreneurs to open and run businesses in the formal sector is essential for the growth of the private sector and the economy as a whole. However, the onus falls not just on the government to enact reforms – the business community itself must play a role.

In 2006, the Kazakhstan Forum of Entrepreneurs (KFE), headed by CIPE partner the Almaty Association of Entrepreneurs, brought together a group of businesspeople to discuss and prioritize their needs. Through these roundtables and surveys, KFE identified the major barriers facing businesspeople and drew up some policy recommendations on how to fix the problems. You can read the Russian-language report here on CIPE’s website. It is this sort of proactive involvement of the private sector, combined with meaningful public-private dialogue, that will move reforms forward and improve the environment for doing business.

Abstract

Kazakhstan’s transition to a market-oriented economy began with the legalization of co-operatives in the Soviet Union during perestroika. This paved the way for private sector development after 1991, though small- and medium-sized enterprises (SMEs) faced significant societal, institutional, and political barriers to growth. In its formative years, small-scale entrepreneurship in Kazakhstan was characterized by highly variable growth dynamics. Attempts to control the formation of SMEs were likewise irregular: a consistent national strategy in support of SMEs was not established, nor were sector and regional priorities identified.

Nevertheless, the Government of Kazakhstan is concerned with the problems SMEs face, as illustrated by its efforts to form a favorable legislative environment, attract both foreign and domestic investment, and develop programs to support entrepreneurship. These and other support mechanisms are essential to building up the country’s private sector, diversifying the economy, and sustaining economic growth.