Focus on what you can control - How to react to a stormy macro-economic environment.

Uzbekistan and Kazakhstan are actively transitioning to market-driven economies, with ambitious reforms to boost economic growth, competitiveness, and foreign investment. Uzbekistan has achieved steady GDP growth (5.3% average since 2017), attracted $7.2 billion in FDI in 2023, and plans to secure $120 billion in private investment in major projects like wind energy and EV manufacturing over the next five years.  Kazakhstan, with a total FDI stock of $173.4 billion as of 2023, saw an 86% rise in FDI inflows in early 2023 and continues to incentivise investment through tax concessions.  Both countries are positioning themselves as dynamic, globally competitive economies.

Leading to succeed - Photo by Nick Fewings on Unsplash

Despite these aspirations, corporations in both Uzbekistan and Kazakhstan face severe challenges in their macro-economic environment that threaten their long-term competitiveness.  These include:

• Labour Market and Productivity Gaps: Low labour costs provide short-term advantages but discourage automation, innovation, and skills development.  Skills mismatches and a lack of highly trained professionals hinder efficiency improvements.

• Infrastructure and Energy Constraints: Aging infrastructure and energy shortages raise operational costs and limit industrial growth, for example, in Kazakhstan, where over 65% of the electrical grid is outdated.

• Financing and Inflationary Pressures: High inflation[MOU1]  of 9.4% for Kazakhstan and 10.13% for Uzbekistan, currency volatility, and limited access to affordable financing restrict corporate investment in productivity-enhancing initiatives.  Productivity improvements are crucial in mitigating inflationary pressures by enabling firms to produce more output at lower costs, stabilising prices and maintaining purchasing power.

Given these challenges, how can Uzbek and Kazakh corporations improve their workforce’s skills and productivity while maintaining cost efficiency?

1. Leadership-Driven Productivity Culture

   Effective corporate leadership must champion productivity as a strategic priority, fostering a culture of continuous improvement and accountability.

   1. Leaders should empower employees by decentralising decision-making, allowing teams to identify and implement efficiency-enhancing innovations.

   2. Investment in leadership development programmes ensures managers possess the skills to create the culture to drive productivity and adapt to evolving economic conditions.

   3. Example: Koch Industries, a multinational conglomerate based in Wichita, Kansas, specialises in petroleum refining, chemicals, energy, fibres, and consumer products.  Koch Industries has thrived as a low-cost leader by embedding a decentralised decision-making model that empowers employees to take initiative in process improvements, boosting efficiency and cost savings.

2. Building a Skilled Workforce for Long-Term Growth

   Companies must prioritise training in technical skills, automation, and strategic problem-solving to close labour market gaps.

   1. Collaboration with educational institutions and vocational training centres can create industry-specific skill pipelines that enhance workforce readiness.

   2. A well-trained workforce boosts efficiency and motivation, reducing operational costs and mitigating inflationary wage pressures.

   3. Example: Toyota has successfully implemented continuous employee training and kaizen (continuous improvement) principles to upskill its workforce, leading to sustained productivity gains and operational excellence.

      
      

3. Enhancing Productivity Through Process Innovation

   Businesses should shift focus from cost-cutting to investing in lean processes, automation, and AI-driven operational improvements.

   1. Implementing performance tracking and productivity metrics allows firms to identify inefficiencies and drive continuous improvement.

   2. Improved workflow management and digitisation lead to higher output at lower costs, contributing to economic stability and reduced inflationary pressures.

   3. Example: Southwest Airlines has maintained a cost-efficient and highly productive operation by optimising turnaround times, simplifying processes, and investing in employee-led innovation.

To navigate the economic challenges facing Uzbek and Kazakh businesses, success will require more than strategies; it will demand courage, unwavering leadership commitment, and a focus on developing human capital as the cornerstone of competitiveness.  In volatile economic conditions, the companies that thrive will be those that focus on what they can control: building skilled, motivated teams and fostering a culture of continuous improvement.   By prioritising workforce skills, empowering leadership, and encouraging innovation, these companies can transform constraints into opportunities, ensuring resilience and sustainable growth in an increasingly complex global landscape.

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