The relief of Central Asia and the remoteness from the main routes for laying underwater fiber–optic cables are one of the main difficulties for installing broadband connections, which means successful digitalization of the economy.
Access to the Internet and online services after the pandemic in the region has become as important as access to roads or electricity. E–commerce and electronic payments help more residents to access funds, sell their goods online, and migrants from the region to send money transfers back to their home countries at a lower price. Every country in the region takes initiatives to digitalize all spheres of life as an integral part of national strategies. Governments have committed themselves to accelerate the digital transformation of key sectors of the economy.
Do digital initiatives really benefit the economy?
Central Asia has no access to the world ocean and is located far from the main routes for laying underwater fiber optic cables. Because of this, it is more difficult to establish broadband connections, especially in countries with mountainous terrain like Kyrgyzstan, Tajikistan.
The region faces a number of problems in terms of providing Internet access, including the cost, quality and speed of connection (especially in rural areas), low level of digital skills and leadership in the digital sphere, as well as the lack of modern digital infrastructure that would be able to ensure the transition to digital government and digital economy.
Aziz Soltobaev, an expert on digital economy, says that in Central Asia, factors such as geography and electricity directly affect the digital economy.
“ICT includes mobile communications, infrastructure, financial technologies (POS, e-wallets, terminals, cashless payments, mining, bitcoin). A village with terminals automatically becomes part of the digital economy. But nothing will happen if there is no electricity. If we want to compare the countries of Central Asia, the most important thing in the digital economy is the Internet. If it is weak, then all other indicators will be weak,” the expert explains.
According to him, telecommunications networks are crucial throughout Central Asia. The terrain of the countries and the remoteness from the main routes of laying underwater fiber–optic cables are one of the main difficulties for installing broadband connections. The presence of data centers are also indicators of the digital economy: the presence of CRM, ERP (1C) provides an environment for the growth of the digital economy.
Kazakhstan has the smallest digital gap compared to other countries in Central Asia, along with Georgia, so we took three countries of the region to compare digital economies: Kyrgyzstan, Tajikistan and Uzbekistan.
Kyrgyzstan
There are problems with providing basic internet connections in the country due to limited coverage and high prices. The e-government system of Kyrgyzstan is consistently expanding its e-services for the population within the framework of the Digital Transformation Concept 2019-2023, planning to provide 80% of public services online by 2023.
Kyrgyzstan is working with the World Bank to eliminate shortcomings within the framework of the Digital CASA project. The main goal of the project is to provide high–speed Internet access via fiber-optic cables in Kyrgyzstan, while reducing prices.
According to the Caspian Policy Center, from 2018 to 2019, the volume of non-cash financial transactions increased by 53%. In the first half of 2022, the money supply in Kyrgyzstan reached a volume of 360 billion soms ($4.2 billion). It includes both cash and non-cash funds that belong to citizens, entrepreneurs, companies, organizations and the state. According to Azattyk’s calculations, at that time, 41.75% of the money supply in the country was cash, and 58.25% was cashless. Compared with the data of five years ago, the nominal amount of money has increased, but the percentage ratio has remained the same.
Tadjikistan
Tajikistan has one of the lowest Internet speeds in the world and very few secure servers for storing users’ financial information. In 2010, the country introduced an excise tax on the services of mobile companies and Internet providers of 3%, and since the beginning of 2022, after the introduction of the new Tax Code, it has increased to 7%.
Despite the low level of ICT development and expensive Internet, in June 2023, the presidential decree “On measures to expand non–cash payments” was issued – from August, government payments will be made only in non-cash form. According to official data of the National Bank, in the first half of 2023, Tajikistan recorded a sharp increase in non-cash payment for goods and services.
The volume of payment for goods and services by non-cash transactions amounted to 5.5 billion somoni (about $ 505 million), which is 83.2% more than in the same period of 2022.
Uzbekistan
Among the three countries considered in the work, Uzbekistan is in the first place in the development of the digital economy, which occupies 2.8% of the country’s total GDP. Since the beginning of the pandemic, TBC Uzbekistan Digital bank, which allows users to create bank accounts, request loans and deposit money online, has attracted 200,000 new users to its application. And the digital payment service grew by 74% during the pandemic.
According to the central bank of the country, in 2022 the number of transactions with non-cash payments increased by 1.8 times compared to 2021. The volume of transactions increased 1.6 times.
Financial investments, political will, transparency of processes
According to experts, in order to connect half of the population of Central Asia who do not yet have access to broadband Internet by 2030, countries should invest at least 6 billion US dollars.
The growth of the digital economy depends on the level of ICT infrastructure, including coverage, speed and power of the Internet connection. In addition, effective national digital strategies, the introduction of digital public services and e–government and the basic level of digital skills of the population are necessary conditions for the successful implementation of the digital economy.
The World Bank experts stressed that the Central Asian countries should focus on strengthening regulatory bodies, eliminating the remaining monopoly rights and limiting the dominant position in the market that existing structures have.
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