Kazakhstan’s IT sector is receiving significant government backing as its public and private sectors open the door to digital transformation.
The central Asian country launched its Digital Kazakhstan programme in 2018, and created local tech hubs to support tech firms.
According to Pavel Koktyshev, CEO of the Astana International Financial Center (AIFC), Kazakhstan’s IT sector is a constantly growing ecosystem with specialisations including govtech, smart city tech and fintech areas. He told Computer Weekly: “The government contributes huge financial and non-financial support to the IT industry, and the biggest projects are accomplished for the needs of the state.”
The needs of the state are addressed through the Digital Kazakhstan programme, which was set up with the goal of improving the living standards of every citizen of the country through the use of digital technologies.
Within AIFC is the Astana Hub. Its chief operating officer, Abay Absamet, said: “The launch of the Digital Kazakhstan programme and the establishment of the Astana Hub, the first platform for the development of IT products for the private market, came as a major boost.”
Astana Hub’s 558 residents enjoy tax incentives and other privileges. In two and a half years, they earned 166bn KZT ($383m) and attracted $111.7m in investments, grants and loans, according to Absamet. “Thanks to tax incentives, IT companies saved $34.4m,” he said. “These are good results, which should be strengthened.
“The main objectives of the programme were to accelerate the economic development rates of the Republic of Kazakhstan and improve the quality of life of the population, as well as create conditions for the transition of the economy to a fundamentally new trajectory – the digital economy of the future.”
Meanwhile, the digitisation of the public sector has already produced some achievements. More than 90% of public services in Kazakhstan are available digitally for more than 10.7 million users annually, saving more than $21.5m.
In 2020, the total value of the Kazakh IT industry was more than $1.35bn, and the number of IT companies exceeded 10,000. The Kazakh government aims to increase the export of Kazakh IT products to $500m and train up to 100,000 highly qualified IT specialists by 2025.
Competitive edge
Kazakh IT companies have been taking advantage of the relatively low entry threshold to the industry and the highly qualified personnel.
“The cost of entry to the market is relatively low,” said Aidana Aituarova, CEO and co-founder of Cerebra, which develops AI-powered software for the early detection of strokes. “Also, as the IT market is generally not mature enough; there are many opportunities to build solutions fast, test, validate and commercialise them without facing much competition.”
“Kazakh IT companies have strong engineers,” added Doszhan Jussupov, CEO of Parquor, a company that provides smart parking as a service.
According to Jussupov, the fact that the founders of Russian tech giant Yandex, “the Russian Google”, came from Kazakstan, is a testimony to the high quality of Kazakh IT professionals. “Cost-efficiency of R&D is a main strength of Kazakh IT companies,” he said.
Zhandos Kerimkulov is CEO at EGISTIC, which offers a suite of digital applications for agricultural management, ranging from procurement and personnel search to machinery leasing and consulting services.
“IT companies in Kazakhstan have many benefits from the government which helps us to develop rapidly.” he said.
“For example, EGISTIC is a participant of the special economic zone Astana-Technopolis, which allows us to be exempt from several taxes. Also, in Kazakhstan, it is relatively cheap to create an IT product. Salary requirements of our programmers are not so high because they work more on enthusiasm and to gain practical experience.”
Exploring export markets
According to Absamet at the Astana Hub, Kazakh startups are increasingly exporting their products and services.
“In 2020, the volume of exports amounted to $33.6m), and in nine months of 2021, it was already $117.3m,” he said. “This became possible thanks to the creation of a catalog of IT products and a programme to adapt IT products to the USA, Europe, Southeast Asia, the CIS, the Baltic states’ market needs. In addition, Astana Hub interacts with Big Tech companies such as MTS, Yandex, Mail.ru Group, Sber and Huawei.”
“Today, Kazakh products are exported as custom-made software, proprietary products and equipment,” said Koktyshev at AIFC. “At the next stage, domestic products for export will be scalable services, IT freelancing and IT outsourcing, products created on the basis of proprietary technologies.”
The main types of export products are in the govtech and smartcity sectors having already proved themselves in the domestic market.
“Working in the domestic market, companies develop the necessary competence, the right business model and industry expertise,” he said. “In addition, having worked in the public or quasi-public sector, companies create new products or services for further scaling to new markets.”
Koktyshev added that Kazakhstan’s market provides an opportunity for startups to pilot their offerings and interact with large local and international corporations, as well as a possibility of entering the neighbouring markets of Russia, China and others.
Challenges lying ahead
However, while working on expansion beyond Kazakhstan’s borders, local companies face some challenges.
“When it comes to expansion, challenges depend on a particular field of IT,” said Aituarova at Cerebra.
“For Cerebra, the main problem lies in legal approval as the software works with medical data, thus requiring to be certified separately in each country it enters due to different jurisdictions.”
Absamet said the main problem for Kazakh IT startups is their focus on the domestic market.
“Nevertheless, through our programmes, we show entrepreneurs that from the moment a startup is founded, it is important to think about exporting, because the Kazakhstan market is not very big,” he said.
Meanwhile, Koktyshev said the biggest challenge is a lack of global awareness of Kazakhstan’s IT products. “It will naturally take some time until it earns the credit it deserves,” he said.