Development and Modern Industrial Policy in Practice

Development and Modern Industrial Policy in Practice

Issues and Country Experiences

Edited by Jesus Felipe

Development and Modern Industrial Policy in Practice provides an up-to-date analysis of industrial policy. Modern industrial policy refers to the set of actions and strategies used to favor the more dynamic sectors of the economy. A key aspect of modern industrial policy is embedding private initiative in a framework of public action to encourage diversification, upgrading, and technological dynamism to achieve development in the twenty-first century. The book reviews key questions that policymakers ask about industrial policy, such as: who selects sectors; what is the rationale for sector selection; what are the main tools to promote sectors; what is the role of human capital; and what are the mechanisms for monitoring and evaluation? Expert contributors discuss how to undertake industrial policy effectively and examine the experiences of Australia, the EU, the Republic of Korea, Malaysia, and the US.

Chapter 7: Economic diversification: implications for Kazakhstan

Jesus Felipe and Cesar A. Hidalgo

Subjects: economics and finance, industrial economics, industrial organisation, politics and public policy, public policy, social policy and sociology, labour policy


Over two decades since independence, upper-middle income Kazakhstan—a large, landlocked, sparsely populated but resource-rich country—remains an economy in transition. Oil production accounts for a fifth of gross domestic product (GDP) and 60% of merchandise exports. The discovery in 2000 of oil in the Caspian Sea’s Kashagan field vaulted Kazakhstan’s oil reserves to the world’s ninth largest. With production at 1.7 million barrels per day in 2010, Kazakhstan is now the region’s second largest oil producer after the Russian Federation (BP 2011), and oil is now the economy’s main driver. Kazakhstan was hard hit by the crash in oil prices as global economic conditions worsened in late 2008. Tighter credit conditions caused by restricted access to international capital markets amid the global financial crisis also played a role in the slowdown. But the economy staged a V-shaped recovery with 7% GDP growth in 2010 on the back of improved global conditions and a revival in external demand for energy. Even so, the crisis starkly exposed the pitfalls of a growth strategy dependent on natural resources.

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