The Republic of Kazakhstan, Taraz State Pedagogical Institute
Satybaldieva Aliya, Orazymbetova Gulaim
The Kazakhstan Information Technology (IT) sector represents a growing and dynamic market that is especially attractive for the International market players in view of the slowdown in the global telecommunications sector. Although still relatively small at about$220 million, the Kazakhstan IT market grew by 25 - 30% in 2002. It is expected to reach $275 million in 2003. The major factors for its growth in Kazakhstan were low dependence of the IT sector on fluctuations of the international economy, the increase in the home demand due to the rise of international prices for Kazakhstan’s mineral commodities and growing demand for customized solutions in the private sector.
The times when Kazakhstan’s IT market looked like the Americas of Columbus’ times have passed. However local demand is extremely price-sensitive. Average consumers generally prefer a low-cost computer to a globally recognized brand. Nonetheless, the Kazakhstan market remains one of the promising emerging markets.
A considerable increase in state purchase of computers and software within government regional procurement programmes has facilitated the spread of the Internet in the sphere of education. According to research conducted by Actis Systems Asia, each third Internet user in the country is a student.
Kazakhstan’s government has realized the importance of the internet and information technology in improving the efficiency and effectiveness of government bodies, enhancing political transparency, and improving quality of life in general.
Laws and regulations on IT sector were not a priority for the Kazakhstan authorities but during the last two years a number of important regulatory papers were developed. Some of them adopted by the Majlis and came into force.
The laws On Electronic Document and Electronic Digital Signature and On Informatizaton were passed in January and May 2003, respectively. These acts are supposed to improve the legal aspects of the activities of Internet providers and to spur up the spread of the Internet in the country. At the same time there are some legal problems in the IT sector of Kazakhstan, in common with the whole International Community. These are pirated software and “gray import” issues.
For example actual demand for IT products is difficult to determine due to the high level of pirated software products. Also, the International Planning and Research Corporation (IPR) estimate “gray” imports (shipments through third countries unauthorized by the original supplier) to be as high as 89% of the total market. In recent years, the Kazakhstan government has taken steps to improve enforcement against piracy, but pirated consumer software remains readily available on street markets. Poor IPR enforcement is likely to severely limit the sales potential of legitimate software suppliers in Kazakhstan.
The foundation in 2001 of the Kazakhstan IT Industry Association is perceived as an important step in the industry’s development and promotion of legal improvements to the Kazakhstan IT market. Around 12 companies both Kazakh and local representatives of foreign companies have become the founding members. The goals of the association are to represent the interests of the Kazakhstan IT industry domestically and internationally, to foster conditions for the future growth of the IT market and to protect the corporate interests of IT companies. Among the association members there are as well as the Kazakhstan companies BIPS, ALSI, Actis Systems Asia and GLOTUR.
The ambitious state program named “Formation and Development of National Informational infrastructure Kazakhstan” was launched in 2001 and was aggressively followed to stress the IT sector’s importance for the national authorities. The estimated cost of the program for the period 2001 – 2003 is about $130 million. The target is to create key elements of a national information infrastructure that are able to provide independence and security for the country.
Current Kazakhstan Government priorities for the sector are as follows:
• to make internet access easy for private individuals and public sector organizations.
• to support IT investments stressing support to domestic developers.
• to proceed with legislative and regulatory grounding of the IT sector
Step by step realization of the state doctrine in this field should be achieved through accomplishment of the following programs:
• Information and Telecom Systems monitoring
• Data exchange standardization
• E-Commerce promotion
• Development of information infrastructure for the state authorities
• State finance information and telecommunication integration
• Development of the state databases covering personalities, legal entities and “Kazakhstan Resources”
• Monitoring of social and economic environment in Kazakhstan
Several state-supported projects were implemented in 2001 including the presidential program ”Computerization of Secondary Schools”. According to the Statistical Agency of the Republic of Kazakhstan, around 81 thousand PCs were bought for 8200 schools in this program. There is 1 PC per 40 students on average in Kazakhstan, compared with Russia with only 1 PC per 80 students. The winners of the tender for this project included ALSI, GLOTUR, etc.
State orders have become an important demand driver for IT products. Increased government spending on computers contributed to the growth of the sector with more tenders held for government projects and budget-funded public schools in rural areas. In 2001 government and educational institutions accounted for 35-40% of computer demand. Another factor that boosted PC sales was major IT investment projects in mining, banking, financial services and manufacturing.
Software Kazakhstan’s rapidly expanding software market in 2001 was estimated at $16-20 million, and growing at an annual rate of 25%. The best sales prospects are for Data Management products, which currently account for 35% of the software sector and Enterprise Resource Planning (ERP) – 15%. There are no means for accurate evaluation of software demand due to the high level of pirate software that some industry estimates put as high as 80%.
The packaged software sector experienced a major boost during 2002, rising by 18-20%. Growing demand has been reported for basic operating systems, integrated ERP and application tools for database development and management.
Kazakhstan companies spent around $65 million on information technology services in 2002. Kazakhstan companies BIPS, ALSI, Imanali-soft, AlphaTech, ActisSystems Asia and PlusMicro are mentioned as leading local players with 10% of the market. But the maturity of this segment is pending still.
Electonics and LG Electonics work vigorously in Kazakhstan.
Enterprise management systems services are among the most requested IT services in Kazakhstan. A steady rise in demand for these services is forecasted for the next five years. The ERP/CRM segment has steady development in Kazakhstan due to the progress towards a clearer strategic IT vision of the management among local companies.
The following are the major groups of IT end-users in Kazakhstan:
• Government agencies and institutions
• Kazakhstan exporters of raw materials and commodities.
• Kazakhstan companies, with progressive management seeking to increase operational monitoring/control efficiency (banking, telecom companies, freight industry, food processors)
• Small and medium size Kazakhstan companies, which are growing in number and becoming an economic force in the country.
Almaty, Atyrau and Astana are the most important computer markets to date. However there are heavily populated industry centers in western oil-producing regions that start to become a focusing interest of IT products and services suppliers and distributors. The longer-term opportunities for expansion in the regions under the healthy economic conditions are more than promising.
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