Digital transformation of Uzbekistan

• ICT market of Uzbekistan
• Technoparks and IT education support
• Digital transformation of Uzbekistan's industry
• Oil and gas industry
• Mining and metallurgical complex
• Automotive industry
• Chemical industry
• Banks and fintech
• Retail
• Agriculture
• Logistics
• Construction
• Conclusion

The digitalization of Uzbekistan began about 10 years ago. In 2012, the government of the republic approved the "Comprehensive Program for the Development of the National Information and Communication System". The implementation of the document was designed for the period 2013-2020.

In July 2013, the country launched the Unified Portal of interactive public services. In 2016, a unified OneID system became available to citizens of Uzbekistan on the my.gov.uz portal. It allows to identify users, opening access to a wide range of services of state bodies and commercial enterprises.

In 2017, the Government of Uzbekistan approved the Strategy of actions on five priority directions of the country's development in 2017-2021. In 2020, the strategy "Digital Uzbekistan - 2030" was adopted, within the framework of which more than 220 priority projects are planned, providing for the improvement of the e-government system, further development of the domestic market of software products and information technologies, organization of IT-parks in all regions of the country, providing this sphere with qualified personnel.

Ruslan Suleymanov, Strategic Director for IT, Products and Services of PRO32: "Corporate clients are more than ever interested in flexibility and speed of realization of their requirements in new versions of software products".

The effectiveness of Uzbekistan's recent digital reforms is reflected in the dynamics of international digitalization rankings:

• According to the GovTech Quality Index, in the public services sector, Uzbekistan has moved up 37 positions since 2020 and has joined Group "a" of 198 leading countries in digital transformation.

• In the 2022 UN e-government survey (e-government survey), a ranking conducted by the United Nations every 2 years, Uzbekistan moved up 18 positions at once and entered the "high/very high level of development" group of countries.

• In the "Government Artificial Intelligence Rea Dines Index" rating developed by the British organization Oxford Insights, Uzbekistan has risen from 158th to 79th place over the past four years.

According to the Telecommunications Infrastructure Index (TII), Uzbekistan is named as a country with a high level of TII. RUz ranks 19th out of 220 countries in terms of broadband internet costs.

In addition, it is envisaged to improve the e-government of Uzbekistan and bring the share of electronic public services up to one hundred percent, to introduce a system of Mobile ID-identification of a person during their provision, the projects "Digital Passport of Citizens" and "Digital Body".

The e-Government Project Management Center jointly with the Ministry for Development of Information Technologies and Communications of RUz is working on the implementation of the project "Digital Passport of Citizens".

As an experiment, from July 15, 2022 to December 1, 2023, state agencies, banks and other organizations will not require paper identity cards. In the future, instead of them it will be possible to present their digital versions in a special application OneID Mobile, which will be equal to their physical counterparts in terms of legal validity.

At the first stage of the project it is planned to introduce the system in the following areas:

• verification of documents for the right to use and drive motor vehicles;

• travel by domestic airlines;

• traveling by rail within the country;

• registering guests at hotels, sanatoriums, vacation homes and other similar establishments;

• receiving services of mobile operators and Internet providers;

• provision of state services at state service centers;

• providing services of commercial banks and insurance companies;

• receiving medical services;

• providing access to students in the systems of higher education institutions.

In addition to a passport or ID-card of a citizen of the Republic of Uzbekistan, users of the service can manage such digital documents as a driver's license, vehicle registration, marriage and birth certificates, student ID card, coronavirus vaccination certificate, and more.

ICT market of Uzbekistan

According to the statistics agency, the number of telecommunication and IT companies has increased 1.8 times in the last five years. At the beginning of 2023, there are more than 12 thousand ICT companies operating in the country. More than 100 thousand people are employed in the industry. At the end of 2022, the volume of ICT services grew by 125.5% and amounted to 22.9 trillion soums, of which 4.2 trillion soums were programming services provided by Uzbek companies and specialists. The total revenue of Uzbekistan's IT sector for the first quarter of 2023 reached 2.38 trillion soums - almost four times more than in the same period of 2022. Exports of digital services increased to $57.2 million. According to IT Park, net income amounted to more than 90% of revenue or 2.158 trillion soums.

The government stimulates the growth of IT companies by exempting from customs duties equipment, software, and various materials for ICT companies, and since last year the excise tax on mobile communication services for operators has been reduced to 10%. A whole range of benefits and preferences are available to residents of IT Park Uzbekistan. Tax benefits are now in effect for operators and providers who develop infrastructure in remote settlements, recreation areas, tourist and transport routes, as well as create infrastructure for budgetary organizations in remote areas.

Technoparks and support for IT education

In 2019, an IT park appeared in Uzbekistan. Its main tasks are education, support and development of startups, participation in the development of specialized legislation, creation of its own infrastructure. Educational centers have been established in various cities of the country, and an IT town with business centers, office and residential premises is under construction. The number of IT Park residents at the end of March 2023 amounted to 1,262 - more than twice as many as a year earlier. Of these, only 69% are registered in the capital, while the share of residents in the regions is close to a third.

There are 382 resident IT companies working for export, including 172 engaged in BPO. $300 million, which is three times more than last year's figure. 48% of digital exports are accounted for by the US, 15% is the share of the UK, 10% - Singapore, the same amount was provided by the CIS countries. The rest of the world accounted for a total of 17%. In addition, 256 firms provide IT education. The existing IT Park education programs include free and paid courses

The One Million Uzbek Coders program was launched in Uzbekistan in November 2019. This is an analogue of the One Million Arab Coders program (operating in the UAE since 2017). The program is implemented with the support of the Ministry of IT Development and Communications of Uzbekistan in cooperation with the Dubai Future Foundation. Its participants are trained in Data Analysis, Android Programming, Full-Stack Development and Frontend Development. By 2023, more than 2.5 million users have registered in the program. More than 1 million 700 thousand young people have received certificates of completion.

Alexander Molodtsov, CEO of iFellow: "Orion is a platform that has allowed us and our clients to significantly increase the efficiency of IT team management, and as a result, reduce time to market and increase profits."

Digital transformation of Uzbekistan's industry

In 2020, Uzbek President Shavkat Merziyoyev has set the goal of fully digitizing all processes in oil and gas, chemical, metallurgical and other industries. To stimulate digital change, Uzbekistan has created 19 free economic zones and more than 400 small industrial zones, with 10 trillion soums allocated for their infrastructure. To provide raw materials to the industry, geological exploration has been tripled, and more than 600 new fields have been discovered.

Oil and gas industry

Over the last 5 years, such strategic facilities as Ustyurt gas chemical complex, Kandym gas processing complex and a number of other industrial facilities have been put into operation. Also, a major strategic project on deep processing of hydrocarbon raw materials has been implemented - Uzbekistan GTL synthetic liquid fuel plant was launched in 2021. The project will produce 1.5 million tons of high-quality synthetic fuel meeting Euro-5 requirements through annual processing of 3.6 billion m3 of natural gas.

Digital solutions are penetrating deeper and deeper into the business processes of oil and gas companies, and the industry is actively cooperating with IT companies and creating its own centers of competence in this area. This process is a consequence of the new technological revolution, the so-called Industry 4.0, of which the digitalization of industry is a direct part. In oil production, it involves the development and implementation of solutions in the following key technological areas:

• Big Data (BigData, including artificial intelligence and machine learning) - tools and methods for organizing, storing, processing, working and performing calculations with huge data arrays.

• Industrial Internet of Things (IoT) - a system of interconnected computer networks and connected physical objects (things) with embedded sensors and software to collect and share data, with the ability to remotely monitor and control in an automated fashion.

• Robots and drones to help automate processes, perform hazardous work, and conduct visual or "tactile" exploration of hard-to-reach objects, such as underwater mining equipment.

Digital twins - a model of a field, well, equipment or infrastructure elements that allows testing and predicting the effects of applying certain options/solutions, as well as visualizing the results in a user-friendly way. Often combined with augmented reality tools.

• Smart materials - a class of materials of different aggregate states that retain or acquire specified physical and chemical characteristics under changing external conditions, up to extreme ones.

3D printing used in mining for prototyping development projects and field development schemes, as well as for creating new components for sensors and controllers, pumps and other oversized equipment.

• Distributed registry (blockchain) is a decentralized public application that enables record keeping and provides a high level of system security.

Mining and metallurgical sector

Uzbekistan is among the leading countries in terms of reserves of such minerals as gold, uranium, gas, copper, potash, phosphates and others. The country is one of the world's largest producers of gold, uranium and gas. As part of the investment program for 2023, projects worth more than $3.5 billion are being implemented in Uzbekistan. Among the leading investment partners of Uzbekistan's mining industry are Canadian company B2Gold, Turkish MTA and Calik Holding, which work in the field of gold mining, as well as those specializing in uranium mining JOGMEC (Japan) and Orano Mining (France).

Let us consider the demanded areas of MMC digitalization on the example of Almalyk Mining and Metallurgical Company JSC, which is the leader in gold mining in Uzbekistan and the largest copper producer in Central Asia. In 2022, the mill developed a five-year roadmap for digital transformation. Implementing several dozen projects every year, the enterprise is gradually automating technological and management processes. By 2023, data on mineral resources have been digitized, electronic document management, electronic journals have been introduced, BI dashboards of key business processes are being created. Transport management and control system saved 16.8 thousand tons of diesel fuel for 151 billion soums during the year. The PI System (Plant Information System) implemented at a copper processing plant doubled the speed of decision-making and increased production efficiency by 5%.

Automotive industry

According to the International Organization of Motor Vehicle Manufacturers, Uzbekistan ranks 28th in the world in the production of cars and trucks, with the country increasing production by 38% over the past year. Uzbekistan's automobile production enterprises GM Uzbekistan, Samarkand Automobile Plant, MAN Auto-Uzbekistan, and GM powertrain Uzbekistan are united by the UzAutoSanoat holding. Since 2019, the holding has been conducting a large-scale project of gradual transition to the ERP/CRM system SAP.

The first stage was the integration of SAP into the sales system of UzAuto Motors, which will make the process more transparent and without the influence of the human factor. In 2019, SAP University Alliance and Turin Polytechnic University in Tashkent (TTPU) jointly launched a large-scale training program for students and teachers of the university. The aim of the initiative is to train qualified personnel to participate in UzAutoSanoat's digitalization projects.

Chemical industry

The chemical industry of Uzbekistan plays an important role not only in diversifying exports and strengthening the macroeconomic indicators of the republic, but also in providing the necessary products for other industries, and in meeting the vital needs of citizens. Consumers of chemical industry products include agriculture, furniture, mining, electronic and electrical engineering, oil and gas, construction, food industry and others.

In February 2021, a presidential decree "On measures for further reforming and financial rehabilitation of chemical industry enterprises, development of production of chemical products with high added value" was adopted. The document defines strategic directions for the development of the chemical industry, in particular, it prescribes the introduction of modern software systems for enterprise management, labeling of manufactured products and accounting systems based on international standards of financial reporting. Large enterprises have already started to develop and implement ERP.

Banks and fintech

The Strategy for Reforming the Banking System of the Republic of Uzbekistan for 2020-2025, signed by the President on May 12, 2020, identified such priority tasks as creating the necessary conditions for widespread introduction of modern information and communication technologies, automation of business processes of commercial banks and expansion of remote banking services.

In the process of corporate transformation of commercial banks in the field of introduction of modern information and communication technologies, it is planned to implement the following measures:

• expansion of the number and coverage of remote banking services, including contactless payments;

• widespread use of scoring, remote identification and credit conveyor systems;

• strengthening information security of banking information and systems;

• broad introduction of new concepts and technologies in the banking sector (fintech, digital banking).

Today, 22 million people in Uzbekistan use remote banking services, which is more than half of the country's population. With the adoption of the Law of the Republic of Uzbekistan "On Payments and Payment Systems", the service infrastructure of payment system operators operating in the country has increased dramatically. In addition, 28 payment organizations specializing in the provision of digital financial services have been registered. In order to develop contactless payments, the retail payment system HUMO was created, which fully complies with international standards, which, in turn, formed a competitive environment in the field of bank cards. The share of online payments in the country is indeed rapidly increasing - in 2022 alone, twice as much money passed through payment services than a year earlier.

Internal projects of Uzbek banks in 2022-2023 are focused on increasing automation of processes, building BPM and CRM platforms for sales automation, development of card products, corporate storage and BI-analytics. Separately, we should mention the trend towards ecosystems and super-apps, which works both ways: banks expand their offer or, on the contrary, integrate into existing ecosystems, as it happened with Kapitalbank, which joined Uzum Holding.

The banking sector, supported by the government and fintech companies, is the driver of digitalization of services and services. At the same time, the development of digital banking and fintech in Uzbekistan is constrained by legislation that is not fully adapted to modern realities. For example, the law does not differentiate between classical and digital banks - both require a standard banking license. Despite the restrictions, lack of tax benefits and special preferences, fintech products such as Click, Humans, PayMe are already catching up with large banks in terms of the number of clients and transaction volume, but still depend on banking service providers, as they cannot yet obtain a traditional banking license.

Retail

The main trend that can be observed in Uzbekistan today is the transition from markets to retail chains. Foreign players and investors are already interested in the supermarket segment of the country. For example, major players have already entered the market: French retailers Carrefour, SCHIEVER, Kazakh retailer Magnum Cash & Carry, Russian chains Fix Price, Magnit, Svetofor and others. Local players such as Makro, Korzinka, Havas, Asia and Baraka Market are also developing dynamically. The rapid development of retail chains leads to the need for advanced IT solutions, ERP systems, and new loyalty programs.

The e-commerce market in Uzbekistan is at the stage of active development and growth. According to the statistics agency in 2022, the e-commerce market in Uzbekistan almost doubled and continues to grow actively. It is expected that in 2023 the e-commerce market in Uzbekistan will grow by another 40%, which is 3 times higher than the global average. The most popular categories in Uzbekistan's largest e-commerce sector are B2C: home and electrical goods, clothing and footwear, beauty and health, food and essentials, and books. The shift of more offline sales to online is the next trend that Uzbekistan is likely to see.

Agriculture

In 2022, this sector accounted for 25% of gross domestic product, 7% of investment, 6% of export earnings and 25% of employed population, with agricultural exports reaching 1.1 billion USD. 62% of agricultural products were produced by farmers and homesteads, 32% by farms and 6% by agricultural enterprises.

The introduction of the cluster system of agricultural production in the country has created the basis for significant positive changes in this sphere in a short period of time. In 2017, there were 2 agricultural clusters operating in Uzbekistan, and in 2022 their number reached 633. Today, there are 134 cotton-textile, 200 grain, 249 fruit and vegetable, 42 rice, 8 pharmaceutical clusters in the country.

Uzbekistan is one of the five world producers of cotton (China, USA, India, Pakistan, Uzbekistan), most of which is exported. Uzbekistan's main importers of horticultural products are Russia (44.4%), Kazakhstan (21%), China (6.8%), Pakistan (6.4%), and Kyrgyzstan (4.4%). The largest share in the export of fruit and vegetable products is occupied by grapes (including dried grapes) - 21.2%, peaches - 9%, tomatoes - 5.9%, melons and watermelons - 4.7%, cherries - 4.4%, cabbage - 4.3%, onions - 3.8%. The state stimulates the production of horticultural products, including those that are not typical for Uzbekistan, as many products are more profitable for export: berries, nuts, healthy food products.

Despite the high importance of agriculture for Uzbekistan's economy, the digital transformation of this sector is in its infancy: a significant share of agricultural products is produced by farmers and small entrepreneurs who are not ready to invest in innovation. To date, government efforts have focused on providing farmers with access to electronic government services and banking to obtain agro-subsidies and loans for their operations.

Large agribusinesses in Uzbekistan are following global trends and implementing projects based on the Internet of Things, sensors, GPS systems, and big data. For example, Uzbekozikovt Holding has created a specialized company "Unmanned Technologies" - the use of drones will make it possible to monitor crops, spray fertilizers and insect repellents. Farms in Tashkent Oblast have begun to implement the "Internet of Things" - weather stations have been equipped with sensors that predict precipitation, air and soil temperature, air humidity, wind speed and direction.

The concept of digitalization of agriculture also envisages such priority areas as crop identification in land management, crop forecasting, water management and determination of irrigation efficiency, and management of financial resources of the agro-industrial complex.

Logistics

Uzbekistan is one of the 2 countries in the world twice removed from the world ocean, which significantly increases transportation costs. Landlocked countries incur high logistics costs. For Central Asian countries, transportation costs in many cases reach 60% of the cost of imported goods.Therefore, Uzbekistan seeks to participate in various logistics projects. Today, the country has railroad projects with China, India, Iran, Kazakhstan, Kyrgyzstan, Turkey, Azerbaijan, Pakistan, Afghanistan, Turkmenistan, and Tajikistan.

One of the key objectives of logistics digitalization is to facilitate transport and transit procedures with partner states through the application of modern digital tools such as eTIR, ePermit and eCMR. In November 2021, a pilot digital TIR project between Uzbekistan and Kazakhstan was launched, and in March the project was expanded to include Kyrgyzstan. For the first time in the world, the organization has launched a test ePermit project between Uzbekistan and Turkey, and at the next stage there is an agreement to implement this project with Kazakhstan.

Artur Mukhamedshin, Director of SITEС Logistics: "SITEС is not only the official developer of the software product "1C:WMS. Logistics Warehouse Management", but also an experienced integrator (+150 implementation projects), four times winner of the contest "1C:Project of the Year" in the nomination "The best project in the subject area" - "Warehouse Logistics Management".

Construction

The construction industry is one of the key sectors of the country's economy. By the end of 2022, the share of construction in the GDP of Uzbekistan amounted to 6.7% (6.6% in 2021). The steady growth of the industry's performance is evidenced by the increase in the volume of all types of construction works. For example, for the first half of 2023 compared to the same period of 2022, the growth in volumes amounted to 11.4%. The highest growth is shown by the largest cities - Tashkent and Fergana. More than 12 thousand enterprises producing 180 types of building materials are working for the needs of the construction industry. As follows from the press service of O'zsanoatqurilish materiallari in January-June 2023, the volume of industrial production amounted to 5,554.6 billion soums, or the growth rate of 106.2%.

Since 2020, the national information system "Transparent Construction" is being gradually introduced in the Republic of Uzbekistan, which allows to form and develop a unified database, as well as to ensure interdepartmental exchange. The portal of electronic public procurement in the construction industry, information system of construction control, information system "Expertise of urban planning documentation", electronic rating of construction and contracting organizations, information system "State Urban Cadastre of the Republic of Uzbekistan" and electronic platform for construction of apartment buildings on a shared basis have already been developed and implemented. Also, by 2020, 626 international standards for the production of quality and safe building materials have been adopted.  

Another major digital project of the Ministry of Construction of Uzbekistan - From 2022, the authorities are developing the concept of a smart city and creating digital twins of the largest settlements of the country. Nukus and Tashkent were the first to be digitized. Digital twins of cities allow to collect, model, visualize, analyze and forecast information for more effective decision-making in the sphere of construction and housing and communal services.

The key trend in digital technologies in the construction industry of Uzbekistan as well as in the world is BIM technologies (Building Information Modeling). BIM allows for more efficient planning, design, construction and operation of buildings and infrastructure facilities through 3D modeling and comprehensive analysis of the components of the construction object. Due to the active development of the industry, the need for digitalization of all processes within construction companies is growing. Large developers are implementing platforms for project and sales management (CRM, ERP).

Conclusion

Since the start of large-scale reforms in 2017, Uzbekistan has made significant progress in changing its economy and digitalizing it, which has led to accelerated economic growth. The set of measures taken has contributed to increasing the competitiveness of the national economy, and has led to price liberalization, increased transparency in the economy, and reduced barriers to foreign investment.

Information and communication technologies (ICTs) and the Internet have played a key role in transforming economic systems and society, contributing to increased productivity and economic efficiency. Innovations generated by ICTs have significant potential to create new points of growth and realize substantial social improvements in the country.

Today Uzbekistan demonstrates a steady growth rate of the digital component, which is reflected in the following:

• Active support and interest of the state in implementing digital transformation through reforms, programs and initiatives.

Developed digital infrastructure with positive dynamics of indicators in the last few years;

• Stable demand for IT specialists, increased availability and demand for IT education

• Growing number of people using digital technologies and the Internet, with high levels of Internet and mobile accessibility across the country.

• Expansion of the scope of digitalization of scientific and technological advances.

There are also factors hindering mass digitalization of enterprises in Uzbekistan:

• The need for deep production optimization: The automation of business processes requires companies to significantly redesign and pre-optimize processes, as well as to change the established corporate culture.

• Limited resources of SMEs: Digitalization can be particularly difficult for SMEs due to their limited financial and human resources compared to large companies.

• Need for skilled professionals: Adoption of digital tools requires the involvement of professionals with both subject matter knowledge and IT skills.

• The pace of technology development and regulatory lag: The development of digital technologies often outpaces the development and implementation of relevant regulatory laws, making it difficult to incorporate them into business processes.

The experience of implementing the digital economy demonstrates that its impact on economic processes is broad and sustainable, covering all spheres of society, the state and the everyday life of the population.