Academic journal article Academy of Entrepreneurship Journal

Entrepreneurship and Investment Environment in the Central Asian Transition Countries: Case Kazakhstan

Academic journal article Academy of Entrepreneurship Journal

Entrepreneurship and Investment Environment in the Central Asian Transition Countries: Case Kazakhstan

Article excerpt

INTRODUCTION

Kazakhstan is geographically nine largest country in the world (the surface area is 2,724,900 km2). The country has a common border with Russia (north part of territory), China and Mongolia (east), Kyrgyzstan, Uzbekistan and Turkmenistan (south), and the Caspian Sea (west) (Koshim et al., 2018). In terms of administrative structure, Kazakhstan is divided into 14 provinces and three cities with special national status (Astana, Almaty and Chimkent) (Karatayev et al., 2017a). Kazakhstan is the fourth largest former Soviet republic in terms of population size; the population of Kazakhstan is 17.8 million people (ANS, 2017). Kazakhstan is an emerging economy and is considered as a newly industrialised country. The economy of Kazakhstan mainly depends on exports; where exports account for 75% of GDP (WB, 2015; Cotella et al., 2016). The economy of Kazakhstan grows dynamically during the period of independence. Between 1990 and 2016, the GDP increased from 26.93 to 133.7 billion USD (WB, 2016). The oil and gas sectors are main resources for GDP structure and the significance of oil and gas sectors have increased by year (Karatayev & Clarke, 2016a; Karatayev et al., 2016b; Hall and Karatayev, 2017); the share of oil and gas in the GDP structure has increased from 10.9% in 2001 to 42.3% in 2014 (IEC, 2015). Basically, Kazakhstan suffers from the "Dutch disease" (Kutan and Wyzan, 2005; Karatayev et al, 2017b). It means due to the high reliance on income from oil exports, the Kazakhstani economy and its competitiveness are vulnerable to international commodity prices. The Kazakhstani economy was hit in 2015 when oil prices decreased from USD 147 to USD 36 per barrel (Bloomberg, 2016). The Kazakhstani government expects a low level of GDP growth. Under the low oil price scenario, the average annual GDP growth rate in 2017 to 2018 is expected between 1.5 to 2.5% (IEC, 2015). To reduce its dependence on revenues from natural resource extraction and ensure more sustainable and broadbased growth, the Government of Kazakhstan tries to modernise its economy through development of small and medium-sized businesses (SMEs). Currently, in Kazakhstan, there is a total of 87130 SMEs, representing 24-28% of total business establishments, 58.4% of the establishment was in the service sector, 13.1% in the manufacturing sector and 9.6% in the construction sector. The remaining was in the agriculture sector, 8.7% and mining & quarrying, 10.2%. The SMEs contribution to GDP has increased from 5.4% in 2000 to 10.3% in 2016 (ANS, 2017), however, SMEs in Kazakhstan are still constrained by many problems.

There are many published studies in peer-reviewed literature as well as business research reports from government and non-government organisations, which study barriers to SMEs in both developed and developing countries (e.g., Mathew, 2010; Ogbo and Agu, 2012; Karatayev et al., 2016). According to mentioned studies, these barriers include regulatory inefficiency, lack of professional workforce, difficulties in accessing to the financial resources. As well as factors like high taxes and general business environment were identified as one of the main barriers to SMEs. In addition, large number authorisation issues, certificates and licenses and constant inspections from governmental institutions have negative impact on the development and growth of SMEs. Moreover, it was identified factors like incompetency of government officials and lack of professionalism, which often causes unnecessary costs and leads to inefficiency in day-to-day activities. However, reviewed studies also show that factors influencing on entrepreneurship are shaped by the country context. These factors might be related to religion, gender, culture, historical paths, geopolitical, environmental and resource base characterises of country, existing economic and technological challenges and opportunities, and the country's financial, economic and political profile. …

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