Results of 2023. Transformation and plans for 2024.

On January 31, 2024, the Ministry of Digital Technologies of the Republic of Uzbekistan hosted “IT Park 2024: Achievements & Vision”, where the results of 2023, support programs for export development, and future plans were presented. The event brought together foreign experts, representatives of the public sector, residents, and partners of IT Park.

The strategic attention of the Government to the IT sector was particularly emphasized during the event, along with the ambitious goal set by President Shavkat Mirziyoyev for the Uzbekistan IT sector to achieve a $5 billion export volume of IT services by 2030.

Results of IT Park resident companies in 2023

By the end of 2023, the number of IT Park residents reached 1,652, including 426 with foreign capital participation, providing services amounting to $1.0 billion, with an export value of $344.0 million.

1.  Specialists of IT Park residents

As of January 1, 2024, IT Park resident companies employed over 26,000 individuals, with 22,376 located in Tashkent and 3,641 in the regions. Notably, the number of IT specialists reached 18 950, BPO company employees amount to 4 091, including 2 442 foreign specialists, and 736 IT instructors.  

It is interesting to highlight that the workforce of export-oriented exceeded 13 000, surpassing the number of employees engaged in companies operating in the domestic market.

Despite the relatively low number of employees in the regions, there is a growing interest among the youth in the IT sector, reflected in the increasing number of educational institutions.

The country boasts 362 educational institutions, with 73% (264) located in the regions and the remaining 27% (98) in the capital. Another significant point is that over the year, approximately 26,000 young people in the regions received education, constituting 67% of the total student population. This underscores a significant demand and interest in IT education among the youth in the regions.

These trends indicate the presence of a substantial pool of trained professionals in the regions of Uzbekistan. However, a job deficit persists due to companies predominantly choosing to establish their offices in the capital.

According to the Statistics Agency, in 2023, the average salary in the IT sector in Tashkent was 16.2 million sums, nearly 2.3 times higher than in the regions of Uzbekistan (7.2 million sums).

For companies, this presents a unique opportunity to open offices in the regions, where operating costs and labor expenses are significantly lower than in Tashkent, thereby contributing to the economic stability and development of the regions.

2. Indicators of residents and the volume of provided services.

 

In 2023, the number of IT Park residents totaled 1652 companies (523 in the regions, 1129 in Tashkent). Among them: 890 — service companies, 426 — companies with foreign capital, 400 — product companies, and 362 — educational companies.

It is noteworthy that in 2023, 846 companies were granted IT Park resident status, while 304 applications were rejected. The status was revoked for 281 companies (256 due to non-compliance with obligations, 25 for engaging in unauthorized activities).

The high number of residents in the capital relative to the regions adversely affects the economic condition and living standards of the people. The establishment of IT companies in the regions would contribute to job creation, the development of local infrastructure, and attracting foreign investments.

The 2.8-fold increase in the number of foreign companies to 426 underscores international interest in Uzbekistan’s IT market. This growth also reflects the global competitiveness of the local business ecosystem.

It is important to emphasize that the combined revenue of IT Park resident companies in 2023 exceeded $1 billion (12.5 trillion sums), marking a 1.9-fold increase compared to the previous year ($520 million). Of the total service volume provided, 95% is attributed to the capital, while only 5% goes to the regions.

Among the total volume, service companies played a crucial role, constituting 73% of all services provided by IT Park residents. This stresses the demand for services such as outsourcing software development, customization, and technical support.

It is worth noting that only 1% (142 billion sums) of enterprise revenues are attributed to education. This indicates a significant untapped potential in this sector.

3. Export of IT Park residents

The growth in export can be attributed not only to the increase in the volume of services but also to the rise in the number of export-oriented residents, which by the end of 2023 had increased by 1.5 times, reaching 551. It is important to note that only a third of residents operate in the regions, with the majority of exports being driven by companies in the capital.

The export volume of IT Park residents continues to grow steadily. In 2023, the exports reached $344 million, marking a 2.4-fold increase compared to the previous year ($140 million). IT outsourcing accounted for 57%, product exports for 23%, and BPO and other services for 20%.

 

A significant portion of export goes to countries such as the USA ($151 million), the United Kingdom and EU countries ($82.5 million), CIS countries ($69 million), Asia-Pacific countries ($27.5 million), and MENA countries ($14 million).

4. Transformation of IT Park

By the end of 2023, IT Park Uzbekistan underwent significant changes, focusing its activities on supporting local companies on the global stage and attracting foreign companies to Uzbekistan.

Following this strategy, the organization revised its vision, mission, and values, fully automated its business processes, implemented international corporate standards, and established English as the primary means of communication. This restructuring enables IT Park to more effectively engage in the development of IT service and product exports.

The new structure aims to achieve ambitious goals, including reaching export figures of $5 billion, increasing the number of residents to 10 000, creating over 300,000 new jobs, and deploying infrastructure on 1 million square meters by 2030. 

5. Planned export support programs for companies

The current export volume of IT Park residents constitutes only 0.03% of the world’s export potential, presenting opportunities for expanding export geography to regions in Europe, the Middle East, and the Asia-Pacific region.

In light of this, IT Park has introduced key programs: “Zero Risk” for foreign IT companies interested in the Uzbek market and “Local2Global” for local companies seeking to enter the global market. These programs will be implemented in the near future.

“Zero Risk” program offers an opportunity for foreign IT companies eager to penetrate the Uzbek market with zero risks and costs. The program is designed to incentivize exports in the IT and BPO outsourcing sectors.

Participating companies receive free offices in regions for one year, along with assistance in outfitting the office with equipment and furniture for up to 100 people, with a preferential payment period over 15 months. Companies can also expect reimbursement of up to 15% of salary costs of employees — citizens of Uzbekistan and up to 50% of expenses (up to $5000) for training and professional development of their staff.

“Local2Global” program is designed for local companies aiming to successfully enter international markets. Program benefits include 50% coverage of export consulting expenses, international trips for clients to Uzbekistan, participation in international exhibitions and conferences, as well as free access to Coursera courses and export mentoring.  

IT Park also introduces the “Regional Headquarters” program, enabling international service companies operating in two or more foreign countries, with export figures surpassing those of services provided in the local market, to receive subsidies for opening regional offices in Uzbekistan and actively collaborate with local IT specialists.

“IT Talents” program encourages collaboration between educational companies and exporting enterprises, addressing the issue of workforce qualification mismatch. Participating educational companies have the opportunity to receive compensation of up to 25 million sums for each successfully employed candidate and up to 35 million sums for candidates with disabilities.

Envisaged Changes for IT Park Residents

The IT Park resident status ensures complete exemption from all corporate taxes. For instance, non-residents are subject to corporate tax ranging from 4-12%, while residents are entirely exempt from this obligation. The social tax for non-residents is 12%, whereas for residents, it is 0%. Income tax for non-residents is set at 12%, while for residents, it is established at 7.5%. Non-residents are obliged to pay VAT on imported services, while residents are exempt from this tax liability.

In a bid to stimulate export figures, it is proposed to extend the period of tax incentives until 2040 for IT Park residents whose activities are directed towards over 50% export of IT services. Such residents, achieving the 50% export by the end of 2027, will be eligible for tax incentives until 2040, rather than 2028 as initially planned.

However, for major IT Park residents with an annual turnover exceeding 100 billion sums, operating in the domestic market, a minimum of 10% service export by the end of 2024 is required to retain current privileges. This initiative aims to stimulate long-term growth in Uzbekistan’s IT service exports. 

Establishment of the International Digital Technology Center

Despite having the best tax regime for IT companies in Uzbekistan, recognizing the need to attract major foreign companies, on February 1, 2024, the Decree of the President of the Republic of Uzbekistan № DP-25 “On the establishment of the International Digital Technology Center” was adopted.

According to the decree aimed at increasing the volume of IT service exports to $5 billion, creating 100 000 jobs, and providing more attractive conditions for foreign companies-residents of IT Park (with the goal of increasing their number to 1 000), the International Digital Technology Center (ENTERPRISE Uzbekistan) will be established on the territory of IT Park.

This center will represent a special zone with attractive conditions for developing products and providing services in the field of digital technologies and outsourcing, including a regulatory sandbox, intellectual property and personal information protection, government and banking services, labor relations regulation, as well as support in customs and tax matters and resolution of commercial and civil disputes.

The Center will commence operations on June 1, 2024, on an experimental basis lasting five years, during which an experimental special legal regime will be introduced.

This step underscores Uzbekistan’s ambition to become one of the key players in the global IT sector, supported by creating favorable tax conditions and implementing programs to support companies.

We invite foreign companies and investors to join our dynamic ecosystem and participate in upcoming events in Tashkent: “Offshore Outsourcing Tour” (March 2024), “Global Business Services Forum” (July 2024), “Central Asian Outsourcing Summit” (October 2024), as well as our regular events “Uzbekistan Outsourcing Conference” held abroad.

Registration and more detailed information: https://outsource.gov.uz/