“The opportunity for UAE companies to outsource IT services to Uzbekistan is massive”

Interview with Sherzod Shermatov, Minister of Digital Technologies of the Republic of Uzbekistan

Uzbekistan, known for its ancient sites along the Silk Road, is rapidly emerging as a technological hub. The country’s large, young population – 36 million people with an average age of 29 – is increasingly focused on the IT sector. And a state-led initiative that offers foreign companies generous incentives to outsource IT jobs to Uzbekistan is bearing some serious fruit.

We caught up with the man driving these initiatives, Minister of Digital Technologies Sherzod Shermatov, during his visit to Dubai in February. He spoke to us about what Uzbekistan is doing to grow its technology industry, the support the country is receiving from the UAE government, and how UAE companies can benefit from Uzbekistan’s emerging IT prowess.

Why were you visiting the UAE? Who did you meet with and what did you discuss?

I was invited to participate in the World Government Summit last week, an amazing gathering of leaders from across governments – but also the private sector and international organizations – with a strong focus on futurism and technological innovations. It was a week of eye-opening discussions and candid exchanges of views.

We also held our own event – the Uzbekistan Outsourcing Conference – in the DIFC. The conference was attended by the CEO of DIFC Innovation Hub, Mohammad Albooshi, as well as over 100 representatives of leading IT companies, venture funds, and other investors. Our goal with the event was to raise awareness about Uzbekistan’s technological advancement and digital economy. Specifically, the opportunity for UAE companies to outsource IT services to Uzbekistan is massive. We have a vast pool of young, talented IT professionals and a government-backed program run by IT Park that offers companies generous subsidies and incentives.

Uzbekistan is known for its ancient sites in places like Samarkand and Bukhara, not for being technologically advanced or a high-tech economy. Is this really changing?

Absolutely. We are extremely proud of our heritage: our Silk Road cities, our history as the birthplace of algebra and our architectural marvels. But today Uzbekistan is undergoing a pivot as it becomes a technologically advanced economy. We’re making investments in internet and mobile communications infrastructure. We’re transforming state services to an e-government model. And, importantly, with the support of the Government, we are focusing on increasing exports of IT services and digital products, creating attractive conditions for foreign companies.

The impact of these efforts is undeniable. Since 2017, IT export revenue has surged from nearly zero to $344 million last year, with the number of IT Park residents with foreign capital growing almost 20 times in the last two years alone. We are ambitiously targeting $1 billion in IT exports by 2024—a goal that would mark a 3-fold increase from 2023.

What exactly is Uzbekistan’s IT Park, and what does it mean for a company to be a ‘resident’ of IT Park?

Broadly speaking, IT Park is a catalyst for the IT industry in Uzbekistan, attracting both local and international companies and professionals. It contributes significantly to the development of the IT sector in the country by facilitating a conducive environment for innovation and growth in technology-related fields.

IT & BPO companies can register their business in IT Park and therefore become residents. This allows them to access a wide range of benefits. This includes tax incentives. IT companies are exempt from paying taxes, and their employees enjoy a lower income tax rate compared to other industries.

What are the subsidies and other benefits that companies that join IT Park as residents receive?

Residents are also offered technology and equipment without additional costs under an exemption from customs duties for importing equipment, components, parts, assemblies, technological documentation, and software that are not manufactured in Uzbekistan for their own use.

IT Park residents can reduce their operational costs thanks to the preferential provision of office space with high-speed internet and uninterrupted power supply. Assistance is provided in the facilitation of education and advanced training of personnel in IT-related fields.

Furthermore, we extend subsidies of up to $2,000 to educational institutions for every student successfully employed in an export-oriented resident company of IT Park. Our commitment to inclusivity is reflected in an elevated subsidy of $3,000 for individuals with disabilities.

We also provide programs “Zero Risk” and “Regional Headquarters,” aim to facilitate companies entering the market of the Republic of Uzbekistan with minimal risks and optimal support.

The “Zero Risk” program offers companies the opportunity to utilize fully equipped offices in various regions for a year, along with reimbursement for expenses related to local specialists’ salaries and the organization of training programs.

Under the “Regional Headquarters” initiative, subsidies are provided for international service companies operating in multiple countries, to establish regional offices in Uzbekistan.

Moreover, IT Park residents benefit from a special visa category IT-VISA, which facilitates entry and exit from Uzbekistan for investors, founders of resident companies and qualified IT specialists, as well as simplifies the process of obtaining a residence permit.

Finally, residents can use the Virtual Office service, which allows them to set up an IT company without being tied to a physical office. This ensures remote interaction between employees, partners and customers from anywhere in the world, reducing the cost of renting office space and reducing tax risks.

Besides the IT Park program, what are other reasons that companies from the UAE or the wider MENA region should consider outsourcing to Uzbekistan?

Amidst the current challenges posed by escalating fuel and financial costs, companies are actively seeking avenues to bolster their competitiveness through cost reduction. Uzbekistan stands out as a strategic outsourcing destination, driven by compelling factors.

To begin with, Uzbekistan features a burgeoning and youthful population, with over 30,000 IT specialists graduating from universities annually. The multilingual proficiency of Uzbek professionals is a notable advantage for IT outsourcing, facilitating seamless communication and collaboration with international clients.

Furthermore, IT, BPO, and KPO companies benefit from favorable conditions in Uzbekistan, encompassing tax exemptions and reduced tax burdens on their workforce compared to other industries.

The government’s steadfast commitment extends to creating remote job opportunities, particularly in regions grappling with high unemployment rates. In support of this initiative, fully equipped offices are provided rent-free for one year, underscoring Uzbekistan’s dedication to fostering outsourcing ventures.

The establishment of the “Enterprise Uzbekistan” International Digital Technology Center aims to cultivate a welcoming environment for those seeking expansion in Uzbekistan. This initiative not only offers tax benefits but also ensures a robust legal framework that safeguards intellectual property. The overarching goal is to instill a sense of security for international companies operating in Uzbekistan, creating a safe and enabling environment.

Significant achievements underscore Uzbekistan’s ascent as an outsourcing hub, with export growth surging from nearly zero in 2017 to USD 344 million last year. This success is reflected in the remarkable twentyfold increase in the number of IT Park residents with foreign capital over the past two years.

Is there a chance for Uzbekistan and the UAE to deepen economic and trade ties? What is needed for this to happen?

Our two governments are in close coordination, and deepening economic, trade and investment ties is a major priority for both countries. Crucially, this is not just talk, but tangible results. Uzbekistan’s trade volume with the UAE reached $475.7 million in 2023, a remarkable 40% increase compared to 2022. Notably, both in terms of trade and investment, our cooperation spans a diverse set of sectors: we’re partnering across energy, agriculture, public governance, tourism and more.

On the investment front, there are major projects underway in energy, agriculture, transport, logistics, and tourism infrastructure, with the UAE’s green portfolio alone surpassing $4 billion.

Finally, the UAE and Uzbekistan have signed agreements to cooperate on government modernization, focusing on sectors like finance, education, economy, and more. We expect cooperation in this area will accelerate as well.

Are any tech companies from our region already taking advantage of the opportunity to do business in Uzbekistan?

More than 50 IT companies from the MENA region are members of IT Park, and 60% of these entities have operational ties with the UAE or were established by Emirati founders. In 2023, 41 residents of IT Park exported IT services and digital products to the UAE, totaling $19.7 million. We’re proud of this achievement, but we believe this is just the start. Our conversations with IT companies in Dubai last week demonstrate that there is a huge potential to grow the number of UAE companies outsourcing IT and business process services to Uzbekistan.

What do UAE companies need to do to become residents of IT Park?

The key prerequisite is that residents of IT Park must be engaged in IT or Outsourcing activities. Second, they need to establish a legal entity in Uzbekistan. Even in the process of opening a legal entity, we are prepared to assist through our One Stop Shop service. Our IT Park specialists will guide applicants in registering a company, opening a bank account, and filing tax documents, all without the necessity for the applicant to be physically present.

Once they do that, they simply submit a digital application via it-market.uz and the application will be reviewed within 15 business days. It’s a straightforward process, and our team is available to support you every step of the way.