Information about the Project
The Ministry of Digital Development, Innovations and Aerospace Industry of the Republic of Kazakhstan (MDDIAI RK) with the World Bank implements the Fostering Productive Innovation Project.
Kazakhstan is an upper middle-income resource-rich economy with significant but quite narrowly focused R&D and human capital endowments. Its main natural resource assets are in mineral (oil, gas, ferrous and non-ferrous metals) and agricultural sectors.
Despite short-term vulnerabilities accentuated by an uncertain global and regional economic outlook, Kazakhstan's medium-term prospects are positive with strong growth on the back of the expanding oil sector and structural reforms envisioned by the comprehensive long-term “Kazakhstan-2050 Strategy” (The Strategy).
The Strategy foresees the country’s transition to the knowledge economy within 10- 15 years and joining the top 30 most developed countries by 2050. Having implemented a number of successful strategic reforms during the last five years, the country has been focusing on diversifying away from the resource-based growth through a major industrialization and innovation support program and a number of Small and Medium Enterprise (SME) development activities. Structural reforms described in the Strategy indicate strong commitment to building a knowledge economy that would drive growth, diversification, and global competitiveness by improving the country’s key factor endowments—human capital, infrastructure, and institutions.
The Strategy highlights seven priority areas for action by the government, including the need to improve science potential. Financing of science is set to reach three percent of GDP, with an objective to increase scientific capacity, accelerate knowledge and technology transfer through Foreign Direct Investments (FDI), and to improve efficiency of the National Innovation System (NIS). Productive innovation is seen as a key growth factor pervading and effectively linking all areas of economy and society. Understanding of context and use of innovation is very important because the current level of Kazakhstan’s economic development limits its ability to translate new-to-the-world technologies into economic returns and increase the country’s competitiveness in the global market. Therefore, adapting and efficiently using existing global knowledge and practice would be most cost- and time-effective at this stage, and would boost innovative capacity to the level of critical mass generating a culture of innovative competition in all sectors of the economy and society.
Fostering Productive Innovation Project in Kazakhstan
On February 2, 2016, the Parliament of the Republic of Kazakhstan ratified a Loan Agreement for the Fostering Productive Innovation Project, which was signed between the Republic of Kazakhstan and the International Bank for Reconstruction and Development.
A joint project of the Government of Kazakhstan and the World Bank is aimed at strengthening the capacity of key institutions of the national innovation system and envisages the introduction of market mechanisms for selecting and supporting innovation projects and technology startups, as well as encouraging private sector participation in them.
The aim of the Project is to stimulate high-quality, nationally relevant research and commercialization of technologies.
Project has 5 components:
- Development of the Knowledge Base for Innovation.
- Innovation Consortia.
- Consolidation of the Technology Commercialization Cycle.
- Strengthening Coordination of the National Innovation System; Enhancing the Capacity of the Existing Institutional Structures.
- Support Project Implementation.
The Project will carry out 3 grant programs to fund research group projects focused on high-quality research with commercial potential which will support PhD students. In addition, the planned creation of consortia by bringing together science, industry and government to ensure the needs of the market and the manufacturing sector on the basis of higher education institutions involved in the implementation of the GP IIDK and JSC "Nazarbayev University".
To demonstrate the effectiveness of earlier investments, in technology start-up companies will be formed venture fund through the mechanism of public-private partnership, a brokerage office to generate deal flow and refining technologies and innovative ideas into commercial investment projects. It is expected the establishment of the office of technology transfer abroad for promotion of Kazakhstani technologies and research, and the introduction of new technologies in Kazakhstan.
Implementation period of the Fostering Productive Innovation Project is 5 years, from 2016 to 2020.
Component 1. Development of the Knowledge Base for Innovation.
The component aims at promoting high-quality, nationally relevant research and development and advanced human capital activities and deal flow for Component 2 – Innovation Consortia and Component 3 – Consolidation of the Technology Commercialization Cycle.
Sub-component 1.1 - Grants for Senior Scientist Groups and Junior Researcher Groups.
The purpose of the SSG and JRG Grant Program is to support multidisciplinary teams of Kazakhstani scientists and businesspersons in the commercialization of promising R&D results of scientific research institutes, universities and other institutions or groups engaged in scientific and scientific-technical activity in the Republic of Kazakhstan. The program aims to stimulate the domestic scientists’ research and development in priority directions of science, focused on strengthening ties with the production, local and global markets.
Types and maximum amount of the grant:
-SSG Grant: 230 000 000 (two hundred thirty million) tenge;
-JRG Grant: 180 000 000 (one hundred eighty million) tenge.
The amount of funding for each group will vary depending on the volume of envisaged work and features of the research work. The amount of the requested funding will be justified and defended in front of the ISCB in the form of presentations. Groups will receive funding for a period of up to three years, conditional on the successful completion of agreed implementation stages.
Sub-component 1.2. PhD Research and Training Grants.
This sub-component is aimed at applying the potential of the world's leading educational, scientific and production organizations in the development of industrial and innovative potential of the Republic of Kazakhstan in the area of training, professional development and retraining, as well as joint scientific research, introduction of scientific developments to the industry.
The objective of this component is to create high-tech enterprises that produce high value-added products with high export potential, to promote cooperation among local research institutes, design bureaus and science and technology laboratories, and between these research centres and the private sector, world innovation leaders through productive sector consortia and inclusive innovation consortia.
The component has two subcomponents:
(a) Productive Sector Consortia: consortia in the productive economy - agriculture, mining, manufacturing and other industries.
The following types of consortia will be supported:
PSC I: Industry–Science Cooperative Center.
PSC II: Industry–Science Technology Consortium.
The types and maximum size of the grant:
- Grant for PSC I Planning: up to 6,5 million tenge for the period up to five months.
- Grant for PSC I: up to 650 million tenge for a period of up to three years. Before applying for the PSC I Grant, applicants must first apply for the PSC I Planning Grant and successfully complete it.
- PSC II Grant: The maximum size of the Grant will be 650 million tenge for a period of up to three years.
Co-financing is a mandatory requirement for the PSC Grant Program.
(b) Inclusive Innovation Consortia: Long-term collaboration to improve the delivery of social services (health, education, water, urban and rural infrastructure and others) to increase the incomes of urban and rural populations.
This component implements grant programs for productive sector consortia and inclusive innovation consortia to support the most promising actors to create products and technologies with maximum economic and social impact.
Program documents of the grant program are at the stage of approval. The expected start of the grant program is 2018.
Supporting startup companies through:
A. Establishment of the Early Stage Venture Capital Fund (“ESVC Fund”) for purposes of providing ESVC Investments to finance ESVC Sub-projects, including provision of management support;
Although Kazakhstan has a limited number of venture capital funds, there are very few transactions for early stage financing and technology companies. The availability of early stage financing remains problematic. The Sub-component is aimed at making the early stage financing available for technology startups and making demonstration effect of commercial viability of such investments. This demonstration effect is expected to attract other VC companies and therefore would allow a critical mass of early stage and venture capital to evolve.
B. Provision of consultants’ services to develop technology and innovation ideas into viable commercial projects, through innovation brokerage and deal flow generation activities, pursuant to criteria set forth in the POM;
This sub-component would seek to catalyze a market for specialized business development services that are able to transform technology and innovation ideas into commercial projects acceptable for early stage venture capital or other investors. The key lesson from other countries that have attempted to introduce early stage funding pinpoints to the need for additional assistance that will facilitate the availability of “deal flow” i.e., investment ready projects. Recognizing this, the sub-component would support the formation of an innovation brokerage team that would assist an entrepreneur in all stages of the incubation cycle. More specifically, the functions of the “deal flow” promoters would comprise: (i) assessing the technological viability of the project; (ii) estimating the commercial potential of the innovation; and (iii) generating, presenting and marketing new information about the project.
C. Establishment and operation of Technology Acceleration Offices outside of Kazakhstan;
In order to enhance marketing and technological capabilities of technology companies several technology acceleration offices will be created abroad in accordance with recommendations of an international consultant of subcomponent 3 (d). The guiding principle is to establish such “antenna” offices in locations where it clearly benefits Kazakhstan’s innovation system.
D. Establishing the capacity of existing Technology Transfer Offices at major Kazakh universities and enhancing their capacity through the provision of Training;
This sub-component will enhance capabilities of existing TTOs with an objective to reach a critical mass of technology commercialization and transfer capabilities within a coherent network of about 5-6 capable TTOs. Operating in concert with sub-components (b) and (c), this sub-component will facilitate an adequate deal flow for the ESVC fund (sub-component (a)). It will finance services (training, study tours) to upgrade capacity of TTOs.
The purpose is to consolidate, coordinate, and achieving synergies between existing innovative enterprises and public authorities to refocus the research sector of the country in the production of goods and services demanded by the market.
In this component institutional structures’ functions / features will be supported and for this purpose consultants’ services on the development of the Innovation Observatory will be financed as well as the operational costs and employee training. The component will finance:
Innovation Observatory - a permanent framework to monitor innovation performance both in productive and public sector and
Awareness raising and coordination activities to articulate and disseminate an inclusive innovation agenda for Kazakhstan.
This component will contribute to the achievement of high level projects’ goals, namely, to the cultural change of NIS, development of NIS in accordance with international standards and optimisation of its functioning. At the global level, the implementation of this component will entail the improvement of Kazakhstan's position in the Global Competitiveness Index of the 12th Division: Innovation.
The Component will support the Project Implementation Unit in carrying out the project management, monitoring and evaluation, awareness raising activities, and capacity development.