The cluster-based development strategy in Kazakhstan's agro-food sector: A critical assessment from an Austrian perspective

This paper challenges the uselfullness of the cluster-based development strategy to diversify and increase the competitiveness of Kazakhstan's economy, regarding the case of the country's agro-food sector. For this it refers to insights of the Austrian Market Process Theory. It is argued that already the theoretical foundations of the cluster concept suffer from severe difficiencies, because it widely neglects the function of competition as a discovery procedure with alert entrepreuneurs as the driving force. Moreover, it ignores the knowledge requirements and limitations in a modern market economy for any outside third party to identify and promote successful industry structures. The closer examination of the implementation of the cluster development program in Kazakhstan's agro-food sectors shows that cluster facilitation in practice turned out to be another form of social engineering and picking winners. In the light of the Austrian understanding of the market system as an entrepreneurial discovery process the paper suggestes as alternative policy option to concentrate on the establishment of a stable institutional framework for the whole economy that stimulates the entrepreneurial discoveries of profitable businesses. Yet, such an Austrian approach is politically less appealing, for it might bring no quick results due to the prevalence of conflicting informal institutions which in the short run might be difficult to change.