In the world of industrial policy a key question keeps surfacing: does government support actually lead to higher firm productivity? Or are we seeing more headlines and programs than real impact? As subsidies, infrastructure spending, and incentives rise, this question becomes critical for countries like Kazakhstan. China – with its massive and complex industrial policy apparatus – offers a clear lesson: not all support equals progress. Sometimes growth exists only on paper, without improvements in labor productivity, innovation, or exports.
Over the past few decades, China has poured billions into sectors like microelectronics and automotive. Yet, research shows this support doesn’t always lead to better firm performance.
Key problems:
• Support is often based on whether a firm belongs to a “priority sector” – with little regard to its internal capacity.
• No deep assessment of company strategy, constraints, or growth potential.
• Support rarely comes with conditions tied to performance, jobs, or exports.
What Kazakhstan should do:
• Use filters and pre-qualification tools to assess a firm’s model and growth potential before funding.
• Avoid “automatic” subsidies with no performance terms.
• Require strategic growth plans linked to productivity outcomes.
Tools: Independent expert panels, business model audits, mandatory digital reporting.
Chinese data shows more companies, more projects, more industrial parks. But this doesn’t mean more productivity.
Findings from research:
• Labor productivity remains stagnant;
• Innovation is concentrated in a few clusters;
• Firms often fail once subsidies end.
Main error: Too much focus on physical outputs – square meters, number of new factories – and not enough on value created per worker or business sustainability.
For Kazakhstan:
• Monitor “output metrics” like revenue per worker, export per tenge of support, and subsidy payback period.
• Set up an independent review panel under national business chambers or economic institutes.
Tools: Sector-based performance dashboards, conditional disbursement based on real-time metrics.
True industrial policy builds internal capacity. Fake policy just creates noise.
What works:
• Anchoring programs in actual market demand;
• Supporting tech and workforce investment;
• Ties with universities and R&D.
What doesn’t:
• Covering operational costs with no transformation plan;
• Grants with no accountability;
• Counting events or workshops instead of outcomes.
Recommendations:
• All programs should include feedback and adjustment mechanisms.
• Judge impact by actual results: higher productivity, new exports, lower costs.
Tools: Performance-based contracts, government–business–university pacts, independent external reviews.
Some Chinese regions have shown lasting success with smart policy. Common traits:
• Support was tailored by sector, region, and development stage;
• It followed phased plans with performance gates;
• The focus was on ecosystems – companies, education, logistics, standards, and export platforms.
Example: Suzhou tech cluster
• Phase 1: R&D support and foreign partner attraction;
• Phase 2: Building campuses and labs;
• Phase 3: Tax breaks tied to production and export growth;
• Constant monitoring via KPIs.
Kazakhstan can adopt:
• Scenario-based project design (venture capital logic);
• Milestone-driven support (like startup sprints);
• Private sector co-financing as a prerequisite.
If firms grow dependent on endless support, motivation to improve disappears.
Chinese remedies:
• Shift from entry-based to outcome-based funding;
• Create environments that reward productivity investment (automation, training);
• Introduce time-bound support with strict exit reviews.
For Kazakhstan:
• Support should be temporary and purpose-driven.
• Extensions only if firms show gains in productivity, exports, or tech upgrades.
Tools: Tax credits for tech upgrades, co-funded accelerators, removing persistent underperformers.
A major shift in China’s policy was a solid KPI system for all levels:
Firms:
• Revenue per worker growth;
• Export share in total sales;
• R&D investment share;
• Process digitalization.
Governments:
• Share of high-tech firms;
• Public-private research ties;
• Post-subsidy firm survival;
• Regional non-commodity exports.
Best practices:
• KPIs should match sector maturity;
• Metrics must be transparent and trackable;
• Accountability lies with both recipient and agency.
Tools: Open KPI dashboards, public reporting, program “passports” with goals.
Pitfalls to avoid:
• One-size-fits-all programs;
• Untied subsidies with no efficiency goals;
• PR-focused projects;
• Lack of return analysis.
What to do instead:
• Build industrial ecosystems, not just factories;
• Support teams and institutions, not just assets;
• Invest in analytics and adaptive feedback;
• Ensure private sector buy-in and risk-sharing.
Tools: Smart contracts, innovation-linked procurement, pilot zones with flexible regulation.
Industrial policy isn’t just about tax breaks and subsidies. It’s about building long-term productivity, when it’s tied to measurable outcomes. Kazakhstan shouldn’t copy foreign models. It should ask:
• What change are we targeting?
• How will we know it worked?
• Are firms and cities ready to lead?
True efficiency means more than PowerPoints and events. It’s about creating value through skilled work, tech, and collaboration.
