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Start-up Doesn’t Fill a Purse. IT Sphere in Kyrgyzstan Relies on Business

The government of Kyrgyzstan has repeatedly raised digitisation issues and shift to public services online. However, experts say the experience of IT specialists in state-run projects has been a failure and young professionals are reluctant to cooperate with the state.

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In early summer, the news feeds of Kyrgyzstan were filled with the news “Kyrgyz project recognised the best start-up in Central Asia”. Participants from Kyrgyzstan entered the top five among 20 teams in the final of the Visa Everywhere Initiative competition at Nur-Sultan (Kazakhstan).

Nora Azygalieva at the Visa Everywhere Inititative competition. Photo courtesy of Nora Azygalieva

Nora Azygalieva, the winning project manager, said the idea of a start-up came to her last year. Together with developers, she created a full-fledged concept of the product and a universal payment platform came up as a result, which joins other payment systems and wallets.

The project fits both regular users and business. The former can download the application to make cash remittances, while for businessmen it’s a comfortable tool of control and communication with customers.

“The IT start-up market in Kyrgyzstan is still developing. According to the theory of Silicon Valley, only 10 per cent of all start-ups survive, so our country seems to not any start-ups at all. However, in general, the whole IT industry has demonstrated considerable growth in the last 5 years,” Azygalieva said.

 The financial issue wasn’t a problem for her – the company she works with is a part of the large investment holding. However, if we take the entire process of start-up creation from the idea to the ready product stage, the process gets hindered at the stage of financing. 

Start-up doesn’t fill a purse

This situation is known first hand to young start-uppers, the authors of Stylum and Swipe Up projects. The apps are being developed for more than a year now. Stylum is a mobile photo editor with a set of original filters and tools. Swipe Up is an app for stickers to be used in Instagram stories.

According to the project marketing manager, Artur Malakhov, both apps are available on the App Store, but the Kyrgyz market of start-ups is underdeveloped and the very few reach the top of charts.

“We have spent 12 thousand hours so far for development and a small fortune, which could be used to buy a house in the centre of Bishkek, for promotion. However, there’s more to come,” Malakhov said.

According to him, he has had another experience of financing of another project. However, local investors offered too little compared to expenses, while foreign investors wanted to have rights to change the concept.

There are many cases when newcomers in the market rely on their efforts and resources only. However, you should not have any illusions that the effective IT start-up will pay back fast.

“It all depends on the start-up business model. Let’s take for example our app Stylum. It brings some humble income already, but when it would justify all expenses remains to be seen. The income is based on the expansion of functions, or promotional integration,” Malakhov said.

Therefore an IT start-up in Kyrgyzstan is the means of earning money only in exceptional cases. The majority of start-uppers are people whose main activity is the IT sphere and who develop their own products concurrently. Or these are specialists who want to get their project to a more serious market, overseas. In the longer term, they want to move from Kyrgyzstan. The United States top the list of destination countries. 

Azis Abakirov, a chair of the Kyrgyz Association of Software and Services Developers, said that despite the fact that the country has no gas, no oil, and no access to the ocean, it still has human resources and the internet is its ocean.

Azis Abakirov. Personal account on Facebook

“If 20 years ago 15 IT specialists worked in some basements, today we have about 50 thousand professionals who have even managed to work with the Silicon Valley. It’s more profitable for our guys to work with outsourcing companies. There’s nothing bad in it. Our slogan is “Live in Kyrgyzstan, work with the world”, Abakirov said.

How the state supports beginners in IT business?

There are single cases of state support provided to the IT sphere.

One of such cases is the High Technology Park created in 2013. This organisation is actually a special tax regime for companies, as well as individuals, who work in the IT sphere. However, to become a resident of the Park, one should be a major business entity, which is not the case for the teams of young and committed guys.

The second state preference is the state-funded places at the departments of information and communication technologies in state universities. However, the majority of IT specialists interviewed during the Soros Foundation Kyrgyzstan survey said they took additionally some courses or studied individually since the scope of knowledge provided by universities is not sufficient for work.

Business analyst Zhyrgal Botobaeva said the state could create conditions for local specialists by means of government contract and incentives to young people for their personal fulfilment. In her opinion, Kyrgyzstan could adopt the experience of Belarus – a leading country among CIS in innovations that has already created a legal framework for blockchain technologies.

Photo courtesy of Zhyrgal Botobaeva

According to Botobaeva, Kyrgyzstan has a possibility to create technohubs, exempt developers from bureaucratic procedures and find a minimum financial support from the state to start-ups.

“IT start-ups may create products with fewer investments, but they can be expanded and can create jobs in the country,” Botobaeva said.

However, Azis Abakirov said the most effective measure is free market relations. In his opinion, business should be interested in technologies and invest into them. Moreover, IT start-uppers are more willing to cooperate in this way rather than work with the state.

“This tendency might be related to some disappointing experience with some state projects. For example, the ambiguous case of tenders for the state registration service of Kyrgyzstan.  Young IT professionals suffered from personal corrupt and mercantile interests of individual higher-level persons,” Abakirov said.

Development of the IT sphere is very promising for Kyrgyzstan, especially because the country has unfavourable geographic location, according to economist Azamat Akeneev. According to him, transportation and logistics problems with the delivery of goods to foreign markets considerably restrict the competitiveness of the products of Kyrgyz origin.

“However, there are spheres where all countries are relatively equal regardless of their locations. One of such spheres is IT sector. Its development and particularly development of start-ups will inevitably lead to the implementation of new information technologies within the country. And this will promote more competitiveness of other sectors,” Akeneev said.

Данный материал подготовлен в рамках проекта «Giving Voice, Driving Change — from the Borderland to the Steppes Project», реализуемого при финансовой поддержке Министерства иностранных дел Норвегии. Мнения, озвученные в статье, не отражают позицию редакции или донора.

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