Central Asia’s Transition to a Digital Economy

In Central Asia, despite significant potential for growth and modernization, challenges such as limited internet access, especially in rural areas, and political constraints on digital services slow the region's full integration into the global digital economy.

Jamal Ali
Jamal Ali
Asia-Pacific Ministerial Conference on Digital Inclusion and Transformation in Astana on Sept. 3, 2024. Photo: ESCAP’s press service

Digital transformation is becoming a driving force for economic and social development worldwide, opening up new opportunities for innovation, trade, and improving quality of life. It is reshaping not only how businesses operate but also how governments deliver services, setting new standards for citizen-government interactions. In Central Asia, digitalization holds vast potential for economic growth, modernization, and integration into the global digital economy. However, countries in the region—Kazakhstan, Uzbekistan, Kyrgyzstan, Tajikistan, and Turkmenistan—face challenges that slow the transition to a digital economy and hinder equal access to digital resources.

One of the key issues in the region is limited internet access, especially in rural and remote areas where connectivity is significantly weaker compared to urban centers. This digital divide is exacerbated by not only economic but also infrastructural challenges. Installing fiber optic cables in mountainous and remote areas presents difficulties due to geographical conditions and the distance from major transmission routes. Without modern telecommunications networks, many regions remain isolated from global digital processes, limiting their access to education, healthcare, financial services, and other essential elements of a modern economy.

However, technical and infrastructural barriers are only part of a broader set of issues. Economic challenges, such as insufficient investment in telecommunications infrastructure, are often combined with political factors. State control over the internet and restrictions on information flow in some Central Asian countries hinder citizens’ access to digital services and impede innovation. In some cases, high internet tariffs and inefficient regulatory measures further obstruct the widespread adoption of the internet among the population.

Current State

Kazakhstan

Kazakhstan is actively advancing digitalization through its national program “Digital Kazakhstan,” which has enabled the country to achieve significant success in the digital sphere. The program’s main objectives include increasing the efficiency of public administration, improving the quality of life for citizens, and developing the digital economy. According to the UN E-Government Survey 2022, Kazakhstan ranks among the top 30 most digitally developed countries worldwide. The country has a relatively low digital divide compared to other Central Asian nations. However, 42% of Kazakhstan’s population resides in rural areas, and ensuring internet access in these regions remains a key challenge. The deployment of low-orbit satellites has also become a priority to enhance connectivity in rural and hard-to-reach areas.

Kazakhstan aims to significantly increase the size of its digital economy by 2026, targeting 70% digitalization of its industrial, financial, and banking sectors and ensuring 100% availability of e-government services. Digitalization has also become a driver of the Kazakh economy, contributing to GDP growth and improving public services. According to World Bank forecasts, Kazakhstan’s economy is expected to grow from 3% in 2022 to 4% in 2024, thanks to the adoption of new digital solutions and favorable external economic conditions.

Under the “Smart Astana” project in Nur-Sultan, technologies aimed at improving urban management and enhancing quality of life have been implemented. One key focus has been safety: since 2017, the “Sergек” video surveillance system, covering roads and public areas, has been in place. As a result, the capital’s roads have been recognized as the safest in the country.

The iQala project simplified the process of obtaining housing and utility services through a “single window” system. In the transport sector, the implementation of the Intelligent Transport System (ITS) has yielded tangible results: road capacity has increased by 40%, significantly improving traffic flow and reducing travel time. For public transportation, an electronic fare payment system and adaptive traffic light control were introduced.

Kazakhstan has also made substantial progress in developing e-government. The portal “e.gov.kz” offers a wide range of public services in electronic format, greatly simplifying citizens’ access to administrative processes. By 2023, more than 90% of government services were available online, and the number of portal users continues to grow.

To support startups and tech entrepreneurs, Kazakhstan has created technology parks and innovation hubs, such as Astana Hub, which has become the largest IT startup park in Central Asia. Here, young entrepreneurs gain access to mentorship, funding, and networking opportunities, fostering the development of an innovative ecosystem in the country.

Additionally, Kazakhstan is actively enhancing cybersecurity, creating national structures to protect both public and private digital systems. In 2022, the National Computer Emergency Response Team (CERT) was established to prevent cyberattacks and safeguard critical infrastructure. These measures help build trust among citizens and businesses in digital services, ensuring the safe development of the digital economy.

Kazakhstan has emerged as a key player in bridging the digital divide in the Asia-Pacific region. At the Asia-Pacific Ministerial Conference on Digital Inclusion and Transformation held in Astana in September 2024, delegates from over 30 countries gathered to discuss strategies to foster more inclusive digital economies. The conference, co-hosted by the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) and Kazakhstan’s Ministry of Digital Development, highlighted Kazakhstan’s growing leadership in digital transformation and its role in regional cooperation.

Kazakh Prime Minister Olzhas Bektenov emphasized the country’s achievements, noting that over 90% of government services are available online and that by 2025, 5G networks will be rolled out in all major cities. Additionally, Kazakhstan plans to create a National Artificial Intelligence Center in Astana to drive AI research and innovation, further positioning the country as a digital hub in the region. Kazakhstan’s efforts to implement the Digital Silk Road project, which aims to lay fiber-optic cables across the Caspian Sea, will also boost digital connectivity and data infrastructure between Central Asia and neighboring regions, enhancing cooperation with countries in the Persian Gulf and beyond.

The conference culminated with the launch of the Asia-Pacific Digital Transformation Report, which highlighted digital technologies’ role in addressing critical challenges like climate change and sustainable development. It called for reducing socio-economic inequalities through comprehensive digital policies, including investments in infrastructure, digital skills training, and expanding access to new technologies.

Uzbekistan

Uzbekistan is also making strides in digital transformation through government programs and international projects aimed at developing the digital economy and integrating advanced technologies across key sectors. The “Digital Uzbekistan 2030” strategy sets ambitious goals for the digitalization of industry, finance, and public services, helping the country enhance its global competitiveness. As part of this strategy, Uzbekistan aims to more than double the size of its digital economy by 2026, achieving 70% digitalization of industry, financial, and banking sectors, and ensuring 100% provision of government services through e-government.

Uzbekistan is actively developing its digital infrastructure in collaboration with international partners such as the World Bank and the Asian Development Bank. For instance, under the Digital CASA program, Uzbekistan aims to connect more remote regions to high-speed internet to reduce the digital divide and provide more equitable access to information services.

A key element of the digital transformation has been the implementation of the e-government portal “my.gov.uz,” which has simplified citizens’ access to public services. Currently, more than 60% of government services are available online, and this number continues to grow. By 2023, the number of registered users had surpassed 5 million.

To support local tech startups and entrepreneurs, several tech parks and accelerators, such as IT Park Tashkent, have been established, offering young developers access to training and funding.

Additionally, the Uzbek government is focusing on cybersecurity. As part of the “Digital Uzbekistan 2030” strategy, the national cybersecurity service UZCERT was created to enhance protection against cyberattacks on both public and private digital systems.

Kyrgyzstan

Kyrgyzstan continues to make steady progress in digital transformation. After completing the “Digital Kyrgyzstan 2019-2023” program, the country launched a new digitalization strategy for 2024-2028. Key focus areas include further development of e-government, infrastructure improvement, and strengthening cybersecurity.

One of the significant achievements in this area has been the implementation of the “Sanarip Aimak” system, which expanded access to government services, particularly in rural and remote areas. This is a crucial step in reducing bureaucracy and improving service quality for citizens through digital solutions, making government services more accessible and transparent.

However, the country faces several challenges, such as inadequate digital infrastructure and limited internet accessibility in some regions, especially rural and remote areas. High internet costs also remain major obstacles to the country’s digital transformation. With support from international organizations, such as the World Bank, Kyrgyzstan participates in the Digital CASA project to overcome these issues. The project aims to provide the country with high-speed internet via fiber optic cables and reduce internet service prices.

Despite these challenges, Kyrgyzstan has seen significant growth in cashless transactions. Between 2018 and 2019, the volume of cashless financial operations increased by 53%, and in 2022, the share of cashless funds in the money supply reached 58.25%, a positive indicator for a country with such a challenging internet coverage.

Turkmenistan

Digitalization in Turkmenistan faces significant challenges. Despite steps towards modernization, the country’s digital infrastructure remains underdeveloped compared to other Central Asian nations. One of the main issues is limited internet access — internet penetration stands at just 21.2%, and Turkmenistan has one of the slowest internet speeds globally. Internet services are also extremely costly. This situation is particularly severe in rural areas, where around 47% of the population lives, leading to a significant digital divide between urban and rural regions, which hinders the adoption of digital technologies across various sectors of the economy.

The digitalization of government services is still in its early stages. The country lacks a fully functional e-government system, and most administrative processes remain paper-based, reducing the efficiency of public administration. Turkmenistan lags significantly behind its neighbors in adopting modern technologies such as 5G, artificial intelligence, and big data, exacerbated by insufficient investment in telecommunications infrastructure.

A defining feature of Turkmenistan’s political system is strict state control over information. Many international websites are blocked, and internet freedom is heavily restricted, which is used more for societal control than expanding access to information and technological innovations. The development of private IT companies and startups is almost impossible due to centralized management and unfavorable conditions for growth.

Furthermore, Turkmenistan’s policies of neutrality and isolation hinder international cooperation and the attraction of foreign investments into the digital sector, limiting access to advanced technologies and infrastructure projects that could accelerate digital transformation. The country does not participate in major international digital initiatives, significantly slowing its development in the field of information and communication technologies.

These factors—a combination of political control, underdeveloped infrastructure, and limited international engagement—delay Turkmenistan’s digital transformation and prevent its integration into the global digital economy.

Tajikistan

Tajikistan faces one of the lowest internet speeds in the world and limited availability of digital services, especially in rural areas. High connection costs remain a significant barrier to the development of digital technologies. In 2010, an excise tax on mobile operators and internet providers was introduced at 3%, which was increased to 7% in 2022, further complicating access to the internet.

Although internet control in Tajikistan is less strict than in Turkmenistan, authorities block certain social media platforms and independent news sources. Low internet speed and high costs continue to limit its usage, but the country is showing progress in digitalizing the financial sector. In June 2023, the president issued a decree to expand cashless payments, and by mid-year, their volume had increased by 83.2% compared to 2022.

Tajikistan’s digital infrastructure is particularly underdeveloped in rural areas, exacerbating the digital divide between urban and rural populations. A lack of competition in the telecommunications sector and low levels of investment further worsen the situation. Economic instability and reliance on external financial sources, such as remittances from migrants, hinder active investment in ICT.

State control over the economy limits the growth of the private sector in ICT, creating barriers to the development of private IT companies, exacerbated by bureaucracy and a lack of government support. Low digital literacy among the population, particularly in rural areas with limited internet access and a lack of educational programs, also slows citizens’ participation in the digital economy.

International Projects and Cooperation

China

More than 11 years ago, China launched the Belt and Road Initiative (BRI) to establish a new model of international cooperation and global market integration. Central Asia plays a key role in this project, benefiting significantly from investments in infrastructure, transportation corridors, and advanced technologies. These initiatives are helping the region strengthen its infrastructure and economy, restoring Central Asia’s status as a key transportation hub between East and West.

One of the most important components of this initiative is the “Digital Silk Road,” which focuses on developing digital infrastructure. As part of this project, China actively invests in building fiber-optic networks, deploying 5G technologies, expanding cloud computing, and other modern digital solutions. Chinese companies such as Huawei, China Mobile, and ZTE play crucial roles in the region’s digitalization efforts, supporting the creation of data centers and satellite stations, further advancing the digital economy.

China is also a global leader in cutting-edge technologies such as artificial intelligence (AI), big data, blockchain, and smart city solutions. These advancements attract significant interest from Central Asian countries eager to implement these technologies to enhance the efficiency and competitiveness of their economies.

In addition, China actively promotes the creation of joint digital platforms and IT parks in Central Asia. These initiatives foster knowledge exchange, strengthen economic ties, and facilitate the transfer of technology and expertise.

At the 2023 Xi’an Summit on China-Central Asia cooperation, participants discussed deepening industrial cooperation and integrating Chinese digital technologies across various sectors of the region’s economies. As part of the Belt and Road Initiative, China proposed that Central Asian countries participate in targeted programs aimed at developing sustainable technologies and innovations, opening new opportunities for their growth and modernization.

South Korea

The government of South Korea actively funds projects aimed at developing digital governance in Central Asia, the Caucasus, and the Asia-Pacific region. Through these initiatives, Korea helps strengthen the capacity of digital technologies in public administration, improve administrative efficiency and transparency, and promote cooperation between governments and experts.

One such project is a three-year program (2024-2026) focused on developing digital public services in 12 countries, including Central Asia. This project builds on the successes of a previous phase, which involved more than 200 civil servants from the region. The program’s primary focus is training government employees in digital skills through workshops, study tours, and knowledge exchange. These efforts enable government structures to more effectively manage the challenges of digital transformation.

At a regional conference in Almaty dedicated to digital governance, Korea’s experience in this area was highlighted, with Korea receiving international recognition for its achievements. The country ranks among the leaders in the OECD Digital Government Index due to its innovative practices in digitalization, including the use of cutting-edge technologies to enhance citizen engagement and streamline administrative processes. Korea’s experience provides a valuable model for Central Asian nations.

A key aspect of the Korean project is also the development of cybersecurity and digital infrastructure. At the Almaty conference, Won-Gab Jo, Director of South Korea’s Cybersecurity Department, discussed Korea’s data protection achievements, which are especially important for Central Asian countries amid the rapid growth of digital services and the need to secure digital systems. These measures strengthen the resilience of the region’s digital infrastructure and support its integration into the global digital economy.

The EU and UN

As part of its “Global Gateway” strategy, the European Union has launched projects aimed at improving digital connectivity and infrastructure in Central Asia. These initiatives include developing reliable internet access through satellite communication systems, which is particularly important for regions with limited internet availability. The EU supports the development of effective and inclusive digital governance in Central Asian countries, helping establish legal and institutional frameworks to protect personal data, ensure cybersecurity, and uphold human rights in the digital sphere. Moreover, the European approach encourages the creation of green data centers and stimulates the development of the telecommunications sector in the region.

The EU also plays an active role in promoting digital transformation through the “Digital for Development Hub” (D4D), providing technical and financial assistance for integrating digital technologies into government structures and key economic sectors to achieve Sustainable Development Goals (SDGs). The EU helps establish ground stations and internet exchange centers, improving internet access, especially in remote areas. Satellite technologies, including low-earth orbit satellites, play a crucial role in narrowing the digital divide and expanding access to essential services such as education, healthcare, and finance.

The United Nations also provides substantial support for digital transformation in Central Asia. The UN Group on Digital Transformation for Europe and Central Asia (UN-DTG4ECA) coordinates the efforts of various UN agencies to promote digitalization in the region. These projects focus on developing digital infrastructure and promoting inclusive digital solutions to address cybersecurity, data protection, and human rights issues. The UN actively participates in shaping regulatory frameworks that build trust in digital services and protect citizens in the digital space.

Additionally, the UN supports initiatives for integrating information and communication technologies (ICT) into public administration, healthcare, and education, fostering sustainable development across the region. Projects aimed at digitizing transport documents, such as e-CMR and e-TIR, also simplify cross-border trade, increase transparency, and reduce administrative costs, which is particularly important for Central Asian countries striving to enhance their integration into the global economy.

Forecasts and Prospects for Digitalization in Central Asia

To fully realize its potential, the countries of Central Asia must overcome the digital divide, invest in telecommunications technology, and reform the internet services market. The delay in developing digital infrastructure and the poor quality of internet services affect not only the economy but also the daily lives of citizens. One notable example is the incident involving Kazakhstan’s chess champion Dinara Saduakassova, who in April 2024 was forced to abandon her participation in an online tournament due to poor internet connectivity. Dinara, a world and national champion, posted a video on social media expressing her frustration that she had to worry more about the connection than about the game itself. This incident highlighted a broader issue—millions of Central Asians face daily challenges due to unreliable internet access, limiting their opportunities for work, education, innovation, and civic engagement.

The problem of poor internet quality is widespread throughout the region. According to UN data, internet penetration in Central Asia remains significantly below the global average of 54%. In countries like Tajikistan and Turkmenistan, fewer than 25% of the population has internet access. Even in Kazakhstan, the region’s leader, 79% of the population has internet access, but the quality of connections remains insufficient, even in urban areas, let alone rural regions.

Internet speed is also a critical issue. All countries in the region rank low in global content loading time rankings. For example, downloading five gigabytes of data or watching a three-hour educational lecture in Full HD takes significantly longer for residents of Kyrgyzstan and Kazakhstan than in countries with well-developed digital infrastructure.

Despite these difficulties, Central Asian governments are showing a willingness to make changes. Uzbekistan, for instance, has nearly doubled the length of its fiber-optic lines, demonstrating a strong commitment to improving digital connectivity. However, for a full-scale digital transformation, the region will need to invest at least $6 billion by 2030 to ensure internet access for half of the population that currently lacks it. These investments will require political will and active private sector participation. Public-private partnerships and mechanisms to encourage private operators to share infrastructure could play a key role in modernizing the telecommunications sector.

Digital transformation also entails reforms aimed at creating a competitive telecommunications market. Removing barriers to accessing international communication channels, simplifying licensing, and creating favorable conditions for private investors are all steps that will accelerate the region’s digitalization. It is also crucial for governments to focus on developing the population’s digital skills, increasing access to modern devices, and improving the quality of local content.

Despite the significant challenges facing the countries of Central Asia, the region holds immense potential for digital transformation. Improving internet quality, expanding access to digital technologies, and implementing telecommunications reforms can lead to accelerated economic growth and improved well-being for the population.

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