State-funded Kazakhstani startups face high failure rate
Between 2018 and 2020, Kazakhstan’s Autonomous Cluster Fund «Park of Innovative Technologies» (PIT) financed 95 startups, allocating approximately $2 million in budget funds. However, 32 of these entities were later liquidated. According to a recent report from the country’s Supreme Audit Chamber (SAC) on the effectiveness of the digital development policy, another 21 projects have not paid taxes, indicating they are inactive. In total, 53 out of 95 startups or about 55.8% failed to demonstrate investment success or effectiveness.
Additionally, from 2016 to 2017, PIT received nearly $9 million in budget funds to establish five technology development centers and one venture capital fund. However, the SAC found that three of these centers proved impractical and ineffective, while two others have been operating without long-term development plans. As a result, approximately $5 million was deemed misused.
Beyond budgetary funding, between 2015 and 2024, PIT also received approximately $80 million from subsoil users as part of their obligations to finance research and development (R&D). However, since PIT was not officially responsible for conducting R&D, the SAC raised concerns about the transparency and consistency of these financial arrangements.
«Consequently, 179 projects worth 14.8 billion tenge (over $20 million) were primarily focused on addressing routine business issues rather than fostering research and developing new technologies,» the SAC concluded.
State auditors also identified factors contributing to the misallocation of funds designated for R&D projects. They emphasized the urgent need to introduce transparent management and reporting mechanisms to address these issues.
Beyond its concerns with PIT, the SAC also raised questions about other aspects of Kazakhstan’s digital development efforts. For example, the National Information Technologies company (NIT) manages 34 informatization systems, 85% of which rely on outdated technologies and operate on monolithic code. This outdated structure makes them overly complex and inefficient to update. Additionally, out of the 50 informatization objects assigned to NIT, 28 information systems and one hardware-software system are no longer actively maintained due to their irrelevance.
The audit uncovered financial violations totaling nearly $2 million. Inefficient budget and asset management accounted for approximately $4 million, while misuse of funds amounted to $90 million. The SAC also identified 45 systemic deficiencies and 143 procedural violations.
Kazakhstan’s digital development is further hindered by frequent legislative changes, significant delays in key projects, gaps in state program implementation and a tendency to postpone initiatives. The industry also struggles with a lack of domestic information technologies, making it highly dependent on imported technologies and digital infrastructure.
Since 2023, Kazakhstan has been implementing a concept for digital transformation. This strategy acknowledges the U.S. as a global leader in the field and aims to adopt key principles and approaches for development. It outlines two possible paths for Kazakhstan’s digital transformation: traditional and platform-based.
According to the concept’s authors, the traditional path is slow and labor-intensive. It focuses on maintaining and gradually improving existing departmental information systems, developing new systems, enhancing data exchange between them and integrating them over time.
The platform-based path, on the other hand, involves the digital transformation of existing management processes and structures by leveraging new technologies. The concept emphasizes that the platform-based approach is the most practical and effective choice, though it suggests maintaining existing systems in parallel during the transition.
