The first concerns the objective ofregional development. International experience and the vastliterature on economic geography suggest that as Kazakhstantransforms itself from a middle income country to a highincome country, the spatial distribution of economicactivity will continue to be uneven. Growth will beconcentrated in a few leading cities and regions, as firmstake advantage of agglomeration economies and workersmigrate seeking higher wages. The second finding concernsthe instruments of regional policy. Much of the discussionof regional policies focuses on the use ofgeographically-targeted subsidies or financing aimed atencouraging investment in lagging regions. But the WorldBank's experience shows that this emphasis is toonarrow. The most important policies that affect the growthof a region may not be those that are geographicallytargeted. The third finding concerns the design of regionaldevelopment financing mechanisms. While regional developmentgrants play, at best, an ancillary role in the economicdevelopment of lagging regions, they can be an importantsource of financing. Finally, the World Bank has learnedthat Municipal Development Funds (MDFs) may require reformsat the local level. Local governments vary in their capacityto prepare 'bankable' projects.
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