From oil wells to programming code: Can Central Asia become the next technology hub?

In large parts of the post-Soviet era, the economic development of Central Asia was primarily characterized by raw materials. Kazakhstan exported oil, uranium and metals. Uzbekistan relied on gold, natural gas and cotton. Turkmenistan has some of the largest natural gas reserves in the world. For a long time, technology played only a minor role in the region's economic debates. Today, however, there are clear signs of change. Throughout Central Asia, governments are investing heavily in digital infrastructure, start-ups are attracting international investors, fintech companies are reaching millions of users and a growing software industry is increasingly targeting customers in Europe, North America and Asia. The transformation is still at an early stage, but for the first time since independence, Central Asia is looking less like a collection of commodity-dependent economies and increasingly like a potential technology hub. The key question is: can the region develop a sustainable technology ecosystem from individual success stories? Kazakhstan as a technological pioneer In many respects, the modern history of technology in Central Asia begins in Kazakhstan. For a long time, international investors considered the region to be too small, too fragmented and too geographically remote to produce globally relevant technology companies. This perception changed with the rise of Kaspi.kz. What originally began as a financial services provider has developed into one of the most successful super apps in the world. The platform combines banking services, payment transactions, e-commerce and various consumer services in a single digital ecosystem. The company successfully went public on the US stock exchange and is now valued at more than 20 billion US dollars. Kaspi has not only created economic value. The company proved that an internationally successful technology company can also emerge from Central Asia. Once this hurdle had been overcome, entrepreneurs throughout the region asked themselves a new question: who will be next? Uzbekistan enters the race While Kazakhstan has provided the first proof of concept, Uzbekistan is now trying to scale up this success. The country's first technology unicorn, Uzum, has become the most visible symbol of digital transformation. Following investments from FinSight Ventures and Xanara Investment Management, the company is now valued at more than one billion US dollars. Uzum combines e-commerce, digital payment services, logistics and consumer finance in a model that is deliberately based on Kaspi. Just a few years ago, online shopping was still a niche market in Uzbekistan. Delivery times of six to ten days were considered normal and many consumers preferred traditional bazaars. Today, Uzum delivers goods across the country within 24 hours. The Uzum Nasiya platform is now one of the dominant providers in the "Buy Now, Pay Later" (BNPL) sector. Uzum's success illustrates the rapid change in consumer behavior and the country's digital infrastructure. The fintech boom is changing the region Technological development is particularly visible in the financial sector. Throughout Central Asia, many consumers are skipping traditional banking models and switching directly to mobile financial services. As a result, the region is developing into a dynamic market for digital banking. One outstanding example is Georgia's TBC Bank, which has made Uzbekistan the centerpiece of its international expansion. Since entering the market in 2020, the bank claims to have built the country's first fully digital banking ecosystem. The company now reaches a large part of the Uzbek population via the TBC UZ, Payme and Payme Nasiya platforms. The development of the entire banking sector also underlines the transformation. In the past five years, Uzbekistan's bank capital has doubled. Loan portfolios have grown 2.3-fold, while several banks have issued Eurobonds for the first time and raised international financing. This development is remarkable for a region that was long considered financially underdeveloped. Software exports as a new growth strategy Fintech alone, however, will not be enough to create a sustainable technology center. An even greater opportunity could lie in the area of software and IT service exports. Governments across the region are increasingly looking at digital services as a tool to diversify their previously heavily commodity-dependent economies. This is particularly evident in Uzbekistan. The government is pursuing the goal of increasing IT exports to five billion US dollars by 2030. At the heart of this strategy is the IT Park Uzbekistan, which is now home to more than 650 companies. Many of them will benefit from extensive tax and customs concessions until 2028. According to the Ministry of Digital Technologies, around 80 percent of Uzbek IT exports already go to the United States. Immigration of skilled workers as an unexpected growth driver A significant boost for the technology sector came from an unexpected direction. After the Russian attack on Ukraine, numerous IT specialists left Russia and Belarus. Many of them settled in cities such as Tashkent, Almaty and Astana. Uzbekistan made targeted use of this development. As part of resettlement programs, skilled workers were actively recruited and supported in setting up new companies. The significance of this immigration goes far beyond mere employment figures. The skilled workers brought with them international experience, contacts to global markets, technical know-how and entrepreneurial skills. This significantly accelerated the integration of Central Asia into the global technology economy. From start-ups to technology ecosystems However, a successful technology center requires more than just qualified specialists. Functioning financing structures are also crucial. There are still challenges here, but initial progress is visible. In Uzbekistan, IT Park Ventures has created a fund for early-stage financing that supports start-ups with amounts of between USD 10,000 and one million. At the same time, Startup Garage has developed into one of the most important incubators in the region. The organization has already supported more than 150 start-ups, several of which have raised millions in investment from international investors. The expansion of the ecosystem beyond the region is also remarkable. Startup Garage recently opened a venture studio in Morocco, making it one of the first Central Asian technology initiatives with activities in Africa. The challenge of artificial intelligence Despite all the progress made, there are still considerable challenges. The use of artificial intelligence in Central Asia is still at a comparatively low level. In particular, the use of generative AI still lags far behind leading industrialized countries. At the same time, Kazakhstan, Kyrgyzstan and Uzbekistan are among the countries with the highest growth rates in the introduction of new AI technologies in Asia. This suggests that the existing gap could narrow significantly in the coming years. Education as the basis for digitalization The expansion of human capital is a central component of the regional technology agenda. In Uzbekistan, the number of students has risen to around 1.43 million, which is more than five times higher than in 2015. At the same time, governments are investing more in technical education, digital skills, engineering and English language skills. These investments are intended to create the basis for a modern knowledge-based economy. A new economic identity is emerging The road to becoming a fully-fledged technology center remains long. Central Asia has neither the venture capital markets of Silicon Valley nor the industrial scaling power of Chinese technology centers or the software ecosystems of India. Nevertheless, a comparison with these top global locations would be too short-sighted. Ten years ago, there were hardly any internationally renowned technology companies in the region. Today, Central Asia has a listed fintech company with a market value of over USD 20 billion, several fast-growing technology platforms, a dynamic digital banking system, an expanding software industry and an increasingly active start-up scene. Technology bridge between Europe and Asia The transformation is not yet complete, but the direction is clearly recognizable. For the first time since independence, Central Asia is developing a common economic identity that is not based on oil, gas, metals or cotton. Instead, software, fintech, entrepreneurship, artificial intelligence and digital exports are increasingly taking center stage. The region may never become the next Silicon Valley. However, it has the potential to take on another, possibly equally important role: as an emerging technology bridge between Europe and Asia. The article From oil wells to programming code: Can Central Asia become the next technology hub? appeared first on ostwirtschaft.de.