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bne July 2022 Cover Story I 37
One country’s brain drain is terms of tax benefits,” Shermatov average Uzbek the wages they can
said in an interview from Tashkent. “If you become a resident of our IT Park, you are completely free from taxes.” Wages for business process outsourcing jobs such as logistics are about a quarter of those in the US and significantly lower than those in India and the Philippines, he said.
Unprecedented transformation
Uzbekistan is aware that it has come late to the outsourcing party. Besides Russia and Belarus, countries including Romania, the Baltic states and even Jamaica have been pursuing aggressive growth in the market for years,
while existing powerhouses continue to benefit from long-established connections. Uzbekistan’s technology and English-language initiatives only began in 2017, a year after Shavkat Mirziyoyev took over as president.
Mirziyoyev has thrown the one-
time pariah state open and his comprehensive reform programme that was detailed in the bne IntelliNews report Uzbekistan Rising is “adding value.” The government has taken existing sectors like cotton production and forced local firms to make textiles instead. IT is same and hopes to capitalise on Uzbekistan's young and growing population; the Central Asian republic is one of the very few Former Soviet Union countries to have seen its population grow in the last decade.
another country’s gain. In the
competitive business of IT outsourcing, Uzbekistan wants to wind up on the right side of that equation.
Russia’s invasion of Ukraine sent shockwaves through the world of outsourced IT services, as sanctions and the exit of Western companies prompted highly trained technology professionals to flee Russia and Belarus in droves. Uzbekistan, just a few years into its own tech revolution, launched an aggressive drive to attract as many as possible to the capital, Tashkent. More than 5,000 have arrived since the start of the conflict, according to the government, and 2,000 alone came from the Belarusian capital Minsk after the Uzbek government sent several charter flight to rescue those that wanted to leave shortly after the Ukraine war started. Belarus’ participation in Russia’s war in Ukraine killed what
was left of its domestic IT sector.
Mission: USA
Flush with new IT talent, Uzbekistan’s Minister for the Development of Information Technologies and Communications (ICT), Sherzod Shermatov, is leading a delegation of business leaders on a US trade tour to promote his country’s credentials as a new low-cost destination for outsourcing IT and services from software development to business processes.
With stops in New York, Washington DC, San Jose and Irvine in California, the group will meet with executives from companies including Apple, Google, Meta, PayPal and Coursera, as well as US and international officials.
Their case? Labour in Uzbekistan is half the cost and Shermatov told bne IntelliNews in an exclusive interview: “The quality is every bit as good as
in India and the Philippines, two countries that have dominated the IT outsourcing market for decades.” Add to that a friendly tax and regulation regime, new infrastructure and a young and growing population taking crash courses in coding and English.
“Currently Uzbekistan has the best proposition for IT companies in
earn in IT are much better than they can get in the traditional economy.”
Since the start of the IT reforms, the country has gone into overdrive, engaging in what the World Bank calls an “unprecedented economic and social transformation.” About 1.2mn Uzbeks have completed the “One Million Uzbek Coders” training programme and
over a million more are signed up.
Tashkent’s IT Park – created just three years ago – now hosts more than 650 companies – all of which are exempt from paying taxes and customs
duties until 2028, better terms than existed in Russia or Belarus even before sanctions were introduced. Customers already there include Amazon, UPS, DHL and Volvo.
With US help, Uzbekistan launched the English Speaking Nation programme, spending tens of millions of dollars on raising proficiency in the language. The country’s more than 30,000 English language teachers receive US-funded training, and government officials are paid a premium if they speak English. The state also opened up the country to a number of foreign universities – creating competition in the educational market and raising standards. There are 6mn children in Uzbekistan, and 680,000 will graduate this year to join the workforce. The
“If you set up a car plant you have to import machines, but with IT you import nothing and everything can go for export. Our competitive
advantage is the lower cost of labour”
“IT is one of the few industries which is a pure net positive to the balance payments,” says Shermatov. “If you set up a car plant you have to import machines, but with IT you import nothing and everything can go for export. Our competitive advantage is the lower cost of labour, but for the
president has put a high premium
on not only adding value to industry, but also the country’s human capital, one of its most valuable resources.
“I was actually minister of public education when we started pursuing projects with the idea that most of
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