Sagintayev Digitalization

It looks like Kazakhstan’s Prime-Minister Bakytzhan Sagintayev has found his own hobbyhorse. Saddling it up, the minister will not only be executing the presidential order and implementing his policies but also trying to pave his own way into the country’s future. We are talking about his recently announced program “Digital Kazakhstan”.

In his public speech made on September 13, 2017 in front of the president and a number of Kazakhstan officials and experts including those from abroad, Bakytzhan Sagintayev tried to make an impression on everyone. His PR-service published both the official statement and the entire text of Sagintayev’s speech online. So, we suggest evaluating the ideas of Kazakhstan’s “official #2”. Mostly, from the standpoint of their usefulness and feasibility.

Here is a quote from the press-release (bolding of the text is ours – Kazakhstan 2.0):

“In his speech, Bakytzhan Sagintayev reported that, in working out the Program, they had taken into account the global challenges and possibilities that the digital epoch would bring to the Kazakhstan economy. Thus, two courses of action had been chosen: creating the sustainable institutions of innovative development and ensuring the practical start of the Program consisting of concrete projects in the real sector”.

We must congratulate the prime-minister’s advisers and assistants who are knowledgeable of the bureaucratic slang and masterfully use it when writing the speeches important for their boss. Even though the “creating the sustainable institutions of innovative development” and “ensuring the practical start of the Program consisting of concrete projects in the real sector” are, undoubtedly, the elements of any innovation, digitalization, modernization program, they, by no means, cover them all.

Or, more precisely, these courses of action are secondary (if not ternary) to the business activity of private capital. Moreover, Russia’s experience with the projects such as Rosnano and Skolkovo tells us that the state efforts in this sphere are much less effective than the private initiative if for no other reason than the fact the responsibility for investing state money is not quite the same than that for investing private money.

Here is another quote:

“The government had chosen a strategy of accelerated digitalization of nine sectors. The Program is to with a special focus on the energy, agriculture, industry, logistics, and information technologies sectors. By doing so, the government plans to create an additional impulse for the technological modernization of the key economy sectors and to form the conditions for a large-scale growth of labor productivity. At the same time, it was underscored, that, besides the digitalization of the economy sectors, the Program was based on developing the mobile state, forming a creative society, and building a new infrastructure required for the digital transformation of the country. All the four segments of the ecosystem have their “ice breaker projects” designed to “break” the entire economy sectors to create new kinds of digital businesses. As of today, there are 23 such “ice breakers” …

Since the aforementioned sectors are functioning as part of a market economy, here is a question: will the businesses be interested in spending their money on the digitalization?

In Kazakhstan, as in the other developing states, the ratio between the labor cost and the digitalization of the industry is such that, often, it is cheaper to hire people than to install new technologies (unless it is required by the business process, enduring the quality of the product, or industrial safety).

Considering all this, implementing the “digital mine” model in the ore mining industry is as far from reach for Kazakhstan as arriving to the Moon by foot. And we are not even talking about the digitalization of the agricultural sector that is barely surviving in the conditions of the low earning power, weak capital-labor ratio, the absence of a market mechanism of attracting investments, etc.

Apart from that, the ideas of developing the mobile state and building a new infrastructure required for the digital transformation of the country are wonderful. Especially, if the state, being the main client, will not economize on expenditures, equipment, and engineering solutions.

Therefore, we believe that Prime-Minister Bakytzhan Sagintayev has found himself a new hobbyhorse. If he saddles it up, he may win the recognition of a wide circle of the Kazakhstanis since, today, the majority of Kazakhstan citizens and foreign guests use the Internet.

So, go ahead, make the day, Mr. Sagintayev!


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