Crossroads Asia

Can Kazakhstan’s Silicon Valley Effort Succeed?

The country is making a big effort to develop its IT sector.

Can Kazakhstan’s Silicon Valley Effort Succeed?

Nazarbayev University

Credit: Wikimedia Commons

In early June 2015, Kazakhstan news agency announced that information technology giants, General Electric, Samsung, and Microsoft would be among six high-tech companies joining Kazakhstan’s much anticipated Science Park Astana Business Campus at Nazarbayev University.

The center at Nazarbayev University is meant to serve as an “intellectual innovation cluster.” Ninety companies are expected to participate, although memorandums have to date only been signed with six technology giants: General Electric, Microsoft, Intel, Hewlett Packard, Samsung, and Huawei. The center is another step forward in the development of Kazakhstan’s technology sector, and reflects a commitment to developing its non-energy sectors and becoming a leader in research and ideas.

According to the promotional video for the Astana Business Campus, construction of the Astana Business Campus will begin in 2015 and will focus on the prioritization of a “knowledge economy,” defined as “higher profitability of intellectual capital compared to natural resources.” To boost competitiveness and sustainability, Kazakhstan needs to turn to move away from natural resources production and towards value-added industry. The video declares that Nazarbayev University should be the platform for the knowledge economy, according to President Nursultan Nazarbayev. The Astana Business Campus is to bring together enterprises, students, innovators, inventors, scientists, venture capital funds, and companies both foreign and domestic to create Kazakhstan’s equivalent of Silicon Valley.

The Business Campus highlights a unique innovative ecosystem that will “boost commercialization of scientific research results,” “involvement in business and scientific research,” and the “integration of science and industry.” The campus territory will be zoned into four clusters: information and communications technology, engineering, biomedicine, and geology. The Business Campus will offer a multicultural English-speaking business and learning environment and wants to attract visionaries. The campus provides benefits to foreign companies in a six-spoke approach: high-tech SMEs, startups, service organizations, investors, corporate R&D centers, and research institutes.

The Kazakhstan government, understanding the importance of IT and its potential to make Kazakhstan economically competitive, has pursued a number of programs and initiatives that promote its IT sector, diversify its economy, and facilitate the liberalization of its telecommunications. Among them are the Innovation-Industrial Development Strategy: 2003-2015, Program on De-monopolization and Liberalization of the Telecommunications Market in Kazakhstan, and the International University of Information Technologies in Almaty. The Innovation-Industrial Development Strategy is focused on achieving stable development through economic diversification, participating in global innovation, and moving from natural resource extraction to processing.

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Kazakhstan has been trying to develop its technology sector for some time, but has lacked the necessary human capital. This is a weakness that the Astana Business Campus is designed to address, in conjunction with Nazarbayev University. Kazakhstan has been strengthening its telecommunications capacity, and since 2009 its telecom capacity has been booming with 100 percent mobile market penetration attributed to a strong economy and “positive regulatory reform,” including a 2004 law that allowed for “[liberalization] and development of the telecom sector” and ended Kazakhtelecom’s monopoly. The increase in capacity comes from “[fiber] optic lines linking all major cities in the country”; the use of the mobile market; and growth in Internet activity. Kazakhstan’s telecommunications sector now supports 9,396,000 internet users (54 percent of 17.4 million people, compared with 28 percent in 2009) and has 30,364,900 mobile-cellular telephone subscriptions, or 184.69 per 100 inhabitants. There are ten internet providers in the country, including Kazakhtelecom JSC, NURSAT Company, ASTEL Company, and Digital TV Company. During 2011, the number of internet users increased 20 percent, to a ratio of 53.4 users/100 persons. Still, Kazakhstan’s ability to keep its IT sector evolving in step with the rapid urban development of Astana has not always been successful. The country hopes to attract more companies, to drive innovation. The presence of foreign firms in particular could very well be a predictor of success in reducing corruption, a concern with large projects.

There have been multiple smaller innovation clusters in Kazakhstan. In 2005 in Kurchatov, Semipalatinsk Region, the Park of Nuclear Technology was to be a center of startups and innovation and develop nuclear and radiation technology, nanotechnology and alternative energy sources. The idea for the Nuclear Technology Park was developed in 2003 and received funding from Germany, South Korea, and Russia and was supposed to bring in 40 companies. The establishment of the Nuclear Technology Park has provided new opportunities for nuclear centers. The Park of Information Technologies was created in Alatau Village or Silicon Alatau and covers telecom services, satellite communications, and nanotechnology. The National Industrial Petrochemical Plant was established in the city of Atyrau under Presidential Decree No. 498 and is a special economic zone.

The Astana Business Campus has a very good chance of success, as Kazakhstan has been able to attract foreign investment and foreign oil and gas companies. The investment will allow Kazakhstan to execute its high-tech vision. Countries and corporations alike see multiple investment opportunities in Kazakhstan, the most stable of the five Central Asia states. Kazakhstan is also the fastest growing economy in Central Asia and the most business-friendly. Its country risk is low. Kazakhstan has become more accessible to businesses and is facilitating innovation with some bureaucratic streamlining. The Kazakh education system has also incorporated these ideals into its autonomous Nazarbayev Intellectual Schools – a network of innovative public schools in Kazakhstan for gifted adolescent students – in the hope of producing intellectual leaders. If Kazakhstan invests in its people, its people will invest in Kazakhstan.

Domestically Driven

In the meantime, Kazakhstan will need to include its people in the IT expansion, which must be domestically driven. A Silicon Valley-type campus cannot succeed if Kazakhstanis cannot take advantage of its technologies or if they lack the tools and environment to develop their own. The potential is there. A number of startups originating from Kazakhstan have in fact done well in the original Silicon Valley. The Kazakh National Welfare Fund, Samruk-Kazyna, is setting up a subsidiary, Samruk Innovation, in Silicon Valley to focus on agriculture and energy cooperation. In 2013, ten startups were sent to Silicon Valley seeking development and financing. Kazakhstan invited Tesla Motors to take part in the Astana Economic Forum in May 2015 and to discuss joint projects as part of preparations for EXPO 2017. IBM established a Linux investment center in Kazakhstan in 2009, and in May this year it opened an additional office in Astana to meet growing demand of its services. Kazakhstani startups have also entered Southeast Asian markets as Kazakhstan realizes the potential of that region. Five Kazakh startups will be showcasing their technologies during the June Echelon 2015 Expo in Singapore.

The successful development of IT in Kazakhstan requires the free flow of information and unfettered access to the Internet by its visitors and citizens. The Freedom House 2014 Internet Freedom rankings ranked Kazakhstan as Partly Free, with a score of 60 (100 being the worst), 15 on obstacles to access (25 being the worst), 23 on content limits (35 being the worst) and 22 on the indicator of violating user rights (40 being the worst). The government has blocked social media and information communications technology (ICT) apps, censored political and social content, and bloggers and ICT users have been arrested.

Last year, Kazakhstan passed a decree on “Rules for the Application of Additional Measures and Temporary Restrictions during a State of Emergency,” permitting the government to “suspend or terminate media publications” and “requires media outlets to provide copies of material for approval prior to publication during a declared state of emergency.” In late 2012, the government of Kazakhstan was reported to be initiating litigation against Google, Twitter, Facebook, and Live Journal, while the local courts decided to shut down opposition media, including eight local newspapers and 23 Internet sources, as a threat to security. Hardly a welcoming environment for the kind of U.S. startups that have changed the communications landscape.

Kazakhstan’s current political arrangement would not seem to be compatible with the ideals that drive a Silicon Valley-type technological park, such as freedom of expression, the ability to disagree, and the scope to be creative. The Astana Business Campus will be a technological cluster that seeks to generate new ideas and highlight Kazakhstan’s growing innovation, positioning the country as the technological leader in the former Soviet space. Certainly, the lack of political pluralism, the flimsy civil liberties and human rights, the poor transparency, and a consolidated autocracy are unlikely to impede efforts to attract foreign business. As long as Kazakhstan maintains a business-friendly environment, internal stability, and avoids any large-scale human rights abuses, investment will be secure.

But if Kazakhstan truly wants to become a modern country commanding international respect, Nazarbayev will need to allow more freedoms for its citizens and incremental steps towards democratization. Ideally, the presence of outward-thinking, idea incubators in the Astana Business Campus will encourage him to do just that.

Samantha Brletich is a contributor and Advisory Board Member of Modern Diplomacy. Her writing and research focuses on Russia and Central Asia, particularly economics, defense, regional relations, extremism and terrorism and social issues. Ms. Brletich possesses a Master’s Degree in Peace Operations Policy from George Mason University and is an employee of the U.S. Department of Defense. Opinions here are her own.