Kazakhstan’s Digital Revolution: The Right Time, the Right Policies, and the Right Investors
Jul 22, 2021
In-person interactions remain limited as new variants of COVID-19 spike in Central Asia. The digitalization of commerce provides an alternative pathway for businesses to reach consumers, and the Government of Kazakhstan has been nurturing it for the past four years.
The Right Time
In March 2020, President Kassym-Jomart Tokayev declared a state of emergency as COVID-19 cases escalated. Over the first nine months of 2020, online sales increased by 93 percent with the average resident’s digital expenditure growing by 25 percent. Pandemic-induced restrictions on movement and the closure of shopping centers led to a move away from the online purchase of luxury items towards basic necessities, like food and everyday goods.
Kazakhstani audiences are embracing a digital lifestyle that extends beyond online shopping, according to Mikheil Lomtadze, CEO and Co-Founder of Kaspi.kz. In addition to shopping, residents are increasingly turning to the internet to pay bills, arrange travel, register vehicles, and track finances. In 2020, these types of digital transactions on the Kaspi app increased by 160 percent, with 10 million monthly users.
The digital revolution in Kazakhstan, like in many countries, is being expedited by the global pandemic; however, it is the country’s established legal framework and incentives for businesses to invest in new technology that ultimately make it a regional paragon of how digitalization offers economic growth and greater connectivity.
The Right Policies
Four years ago, the government of Kazakhstan released the “Digital Kazakhstan” roadmap for 2018-2020 to use digital technology, or electronic devices that store and generate data, to grow the country’s economy in the long-term. Digital Kazakhstan’s objectives include digitalizing energy, transportation, and agricultural industries, introducing advanced technology into state bodies, offering more online public services, developing high-speed internet infrastructure, improving citizens’ digital literacy, and supporting technological innovation.
The Astana International Financial Center (AIFC), created as a part of President Nursultan Nazarayev’s “Plan of the Nation” restructurings, has proved pivotal for implementing Digital Kazakhstan and supporting digital entrepreneurs. Since becoming operational in 2018, AIFC created an “E-Residence” system, similar to Estonia’s E-Residency initiative launched in 2014, that allows entrepreneurs to register businesses, make investments, participate in educational courses, and submit legal claims online.
In addition to streamlining business services, AIFC provides investors with assurances of transparency and rule of law. The Center has aligned Kazakhstan’s legal and regulatory policies with the standards of English common law, provided tax exemptions, and established independent mediation and arbitration centers and a dispute courts designed to protect foreign companies’ investments. Over 833 registered companies from 53 countries currently participate in AIFC’s programs.
The Right Investors
The business climate fostered by AIFC attracts a range of foreign investors in the digital sector from the United States and China.
UPS is partnering with KazPost to increase the national postal services’ digital information flow through package tracking software and increased online options for customers, such as the ability to change delivery addresses. According to Mark David Hughes, Deputy Chairman of the KazPost Board, this digital infrastructure supports the recent growth of out-bound packages from Kazakhstan as small and medium-sized enterprises increasingly sell their products to U.S. and European markets.
Amazon Web Services (AWS) has developed a digital literacy academy with eight universities in Kazakhstan to educate the next generation of entrepreneurs. Additionally, AWS is helping local companies “go global” by increasing their online presence, thereby reducing operation costs, and virtually connecting Kazakhstani start-ups with U.S. and European firms. Local banks are collaborating with Mastercard to develop online payment software in support of the expanding e-commerce sector.
Chinese companies are likewise key partners in Kazakhstan’s digital revolution. Beijing launched its “Digital Silk Road” project in 2015 as a component of the multibillion-dollar Belt and Road Initiative (BRI). Huawei dominates the telecommunication sector in Kazakhstan, boasting contracts with Kazakhtelecom, Kcell, Beeline, and Tele2. The Kazakhstani firm Korkem Telecom partnered with the Chinese company, Zhejiang Dahua Technology, to provide surveillance technology for Nur-Sultan’s “smart city” initiative.
The Right Path Forward
Kazakhstan is at the forefront of Central Asia’s digital transformation. Digitalization not only improves the quality of public services through streamlined transactions, but has the potential to advance economic equality by overcoming gendered and rural-urban information barriers.
Nur-Sultan must now reinforce its rapid gains with digital security. Protecting the storage of personal information and making digital services impenetrable to potential data breaches is vital to safeguarding the country’s technological advancements. International firms are helping digitalize Kazakhstan, and they can also help secure the country through knowledge-sharing initiatives that can be replicated in the wider Central Asian region.
Image Source: Inform.kz