Uzbekistan, once a blank space on the digital world map, is in the midst of a digital transformation to turn the country into a regional Central Asia hub for outsourcing and an incubator for start-ups. Uzbekistan’s ambitious plans are bearing fruit thanks to a combination of innovative, state-driven programs and fortunate jump-start influx of Russian and returning Uzbek digital talent fleeing the strife associated with the war in Ukraine.
Uzbekistan is undoubtedly a late digital bloomer, held back by a decades-long repressive He-Who-Shall-Not-Be-Named style leader who would have made Harry Potter’s Voldemort shudder. The good news for Uzbeks is that the days of slave labor and torture ended with the death of Islam Karimov in 2016, putting an end at the same time to a criminal empire run by his daughter Gulnara.
Since then, new president and former prime minister Shavkat Mirziyoyev has fostered a more open society that now appears to be reaping dividends. Like an echo from the Great Game days of the 19th century when the British and Russian empires battled for control of the region, key players are once again vying for influence, most notably China alongside perennial northern neighbor Russia. Uzbekistan is attracting increasing interest as well from countries like France with President Macron paying a visit in early November to develop a high level strategic partnership across sectors like agriculture and uranium.
This time around, however, Uzbekistan itself is a player in the Great Game and is developing a homegrown “Digital Silk Road” IT industry that is foremost among its plans; the name a nod to the 14th century empire built by the conqueror Tamerlane who is buried in Samarkand, Uzbekistan’s cultural center. The big difference today, said one local Uzbek, is the government’s change of heart: “The fear is gone.”
Uzbekistan, one of two double-landlocked countries in the world, aims to increase its IT exports to $5 billion by 2030 Uzbek government ministers told an audience at the recently concluded ICT Week 2023 gathering in Tashkent – a scene dominated by suits rather than hoodies. The scope of Uzbek ambitions is evident in that IT export revenue amounted to $145.3 million in the first six months of 2023. Government ministers hope to hit the $1 billion mark by 2026.
That growth, however, is coming from a shift into new markets. In 2022, 80% of Uzbekistan IT outsourcing came from the United States. In 2023, North America combined only accounted for 43 percent. The change coincides with the building of Uzbekistan’s IT infrastructure by two Chinese companies: Huawei and ZTE. Both Chinese companies have been targeted by the U.S. with bans over national security risks. Huawei, in particular, has pivoted from a maker of smartphones to a cloud provider. Uzbekistan is a key way station along China’s Belt And Road Initiative.
Much of Uzbekistan’s new growth is coming from Arab countries, said Sherzod Shermatov, minister of digital technologies, during an informal meeting with a small group of foreign journalists. From a big picture standpoint, this dovetails with the country’s increasing embrace of Islam after decades of a total ban on religion as Uzbek culture reasserts itself. The Muslim embrace is largely a moderate one, as alcohol is readily available in local hotels and restaurants and the country supports a thriving wine industry backed, in at least one instance, by French investment.
One consequence of the war in Ukraine has been an influx of Russian IT talent, reportedly numbering at least six thousand in 2022, fleeing the conflict. Uzbekistan is an attractive destination as Russian is spoken widely, due to its Soviet past. But Uzbekistan has been quietly positioning itself as an IT mecca all along. An innovative government program called IT Park offers foreign companies zero taxes, a special, three-year IT visa for investors, programmers and founders along with “soft-landing” incentives like one-stop legal registration as well as office space and accommodations assistance.
There’s also a 15% reimbursement of payroll for Uzbek employees. IT Park sees itself as a start-up accelerant, and it already has approximately 1,500 “residents,” according to government figures – four times the number in 2019. That target number is 10,000 companies employing more than 300,000 by 2030, supported by a massive expansion of IT infrastructure. One potential hurdle, however, is how Uzbekistan adapts to a changing IT landscape formed by the advent of artificial intelligence. Biometrics, meanwhile, is the leading area of research and development.
IT Park has shiny new headquarters in the capitol Tashkent, but its reach extends across the country as it develops a home-grown base of IT specialists. The target is the development of 1 million Uzbek coders who will serve as the base for both outsourcing and a local start-up culture that is being encouraged to expand globally. English is fast becoming the second language of choice by its 36 million people, 60% of whom are under 30 years old (a youthful number comparable to China at the start of the century). Uzbekistan’s population is larger than four other Central Asian countries combined.
With such an ambitious IT growth curve charted by Uzbekistan, one subtext at ICT Week is the direction it might take. Presenters like Sandra Sargent, senior operations officer for the World Bank, and Maengho Shin, head of UNIPRO Korea, took care to emphasize the benefits of adhering to a straight and narrow pathway to success. Andrew Wrobel, founding partner of the London-based intelligence firm Emerging Europe, reminded attendees that IT outsourcing in Uzbekistan still must comply with EU regulations when doing business with Europe, while conceding that for those who don’t care about the EU, Uzbekistan could become a haven for bad IT actors.
There also is some underlying concern as to how available IT training will be for certain populations like women and the disabled. And there are question marks as to whether the state can be the prime mover behind an IT economy. The all-encompassing question at ICT Week was: “Where does Uzbekistan fit in the global IT world?” That the question is even being asked may indicate that Uzbekistan is headed in the right direction.