Regulation - The Times Of Central Asia

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Economic Growth

World Bank Urges Uzbekistan to Deepen Reforms to Sustain Growth and Empower Private Sector

Uzbekistan has made significant progress on economic reforms since 2017, but more decisive action is needed to sustain high growth rates and foster a dynamic private sector, according to the World Bank’s latest Country Economic Memorandum. The report, which analyzes the country's economic trajectory from 2010 to 2022, outlines key policy recommendations for the coming years. Between 2010 and 2022, Uzbekistan’s per capita GDP grew at an average annual rate of 4.2%, outpacing the regional averages for Europe and Central Asia and for lower-middle-income countries. However, the World Bank notes that this growth has been driven largely by capital accumulation rather than productivity gains, while the private sector remains underdeveloped. “To become an upper-middle-income country by 2030, Uzbekistan needs to boost its growth closer to double digits,” the report states. Achieving this requires sharp improvements in total factor productivity, which hinges on reducing regulatory and market distortions, deepening trade integration, and investing in human capital. State Role and Infrastructure Gaps State-owned enterprises (SOEs) still dominate many sectors of the economy. As of 2020, over 2,000 SOEs accounted for revenues equivalent to 32% of GDP. Many of these operate in areas where private firms could be more efficient. The report recommends accelerating privatization, particularly in competitive sectors, and enhancing transparency in the process. Infrastructure remains a major bottleneck to sustainable growth. While Uzbekistan has taken steps to attract private investment, especially in the energy sector, greater efforts are needed. The World Bank urges targeted investment in electricity and transport infrastructure, prioritizing economically strategic regions such as Tashkent and Qarshi, and improving connectivity between hubs like Samarkand, Navoi, and Khorezm. Trade and Regulation Since 2017, Uzbekistan’s trade-to-GDP ratio has more than doubled, reaching 71.6% in 2022. Still, only 6% of domestic firms are engaged in exporting. To capitalize on its growing trade openness, the report calls for further tariff reductions, streamlined customs processes, and modernized logistics and transport networks. To foster a more competitive business environment, the World Bank recommends comprehensive regulatory reforms. This includes establishing independent regulators in sectors such as energy, rail transport, and telecommunications, and enhancing the mandate of the Competition Promotion and Consumer Protection Committee. If implemented, these reforms could help Uzbekistan accelerate its economic transformation, create more jobs, and strengthen its position in the global economy.

Cryptocurrency

$15 Billion in Crypto Withdrawn from Kazakhstan Amid Calls for Tighter Controls

Approximately $15 billion worth of cryptocurrency has been withdrawn from Kazakhstan, a figure disclosed by Berik Sholpankulov, Deputy Chairman of the National Bank. The exodus highlights systemic issues in the country's digital finance regulations. Billions in the “Gray Zone” According to Sholpankulov, the primary driver of this significant capital outflow has been the absence of robust regulatory frameworks governing digital finance. "Today, the volume of crypto assets withdrawn from the country amounts to $15 billion. The fact is that there was insufficient administrative and legal regulation in place to allow citizens to invest safely,” he stated during a briefing. In response, the National Bank plans to introduce sweeping changes, including administrative and criminal penalties for the illegal circulation of cryptocurrencies and their unauthorized transfer abroad. Sholpankulov also indicated that the authorities may soon begin naming individuals involved in illicit transactions. “Perhaps we will also hold a briefing and announce by name who spent what in the ‘gray’ zone. But [there] will already be administrative and criminal prosecution,” he stated. Transparency and Licensing: Key Reforms Legislative amendments are currently under development to legitimize and open Kazakhstan’s digital asset market. The initial step will involve licensing all market participants, such as cryptocurrency exchanges and digital service providers, through the Astana International Financial Center (AIFC). Licensed entities operating through the AIFC will enable residents to legally buy and sell digital assets. All transactions will be monitored and transparent, giving the state tools to prevent illegal financial flows. A dedicated platform is also being launched under the National Bank to test emerging digital technologies and services before a broader rollout. Strategic Shift Toward a Digital Economy These reforms extend to Kazakhstan's cryptocurrency mining sector. Large-scale operators will be permitted to build independent power plants to reduce their reliance on the national power grid, thus improving operational stability and economic feasibility. Deputy Minister of Digital Development Kanysh Tuleushin emphasized that establishing a legal market for digital assets marks a pivotal phase in the country's economic transformation. The relevant authorities aim to implement a fully regulated and transparent cryptocurrency market by the end of 2025. Kazakhstan's competitive advantages, including affordable electricity, vast space, and a supportive legal infrastructure, position it well to attract investment and build a robust digital ecosystem. If fully realized, the reform package could elevate Kazakhstan to a leading position in the region for legal cryptocurrency operations, stimulating job creation, and curbing shadow capital outflows. Previously, The Times of Central Asia reported that MP Olzhas Kuspekov had proposed strengthening state controls over cryptocurrency circulation, including blocking access to unlicensed exchange platforms.

Kazakhstan Introduces AI Regulation Bill to Ensure Human Oversight

Deputies of the Mazhilis, the lower house of Kazakhstan's parliament, have introduced a draft law titled On Artificial Intelligence. The legislation proposes a complete ban on digital systems that make decisions without human intervention. The bill was presented by one of its key developers, Mazhilis deputy Ekaterina Smyshlyayeva, who emphasized the need for a transparent and effective legal framework for integrating AI into Kazakhstan’s economy. “President Kassym-Jomart Tokayev has repeatedly highlighted the importance of AI development and issued relevant directives. During a recent visit to the Artificial Intelligence Development Center, he stressed the need for a balanced approach to AI regulation. On one hand, it is a matter of security; on the other, it is essential for development. Striking this balance is crucial,” Smyshlyayeva stated. To address security concerns, the bill seeks to prohibit fully autonomous AI systems that operate without human oversight, aiming to reduce the risk of unintended consequences. AI Classification and Regulation The proposed legislation classifies AI systems by risk level: High-risk: AI systems that impact human life and health or are used in public administration will be subject to strict regulation. Medium-risk: These systems require oversight but with fewer restrictions. Low-risk: AI systems in this category can be developed without regulatory intervention. The bill also calls for the creation of a National AI Platform, a state-led technological infrastructure for AI development, training, and testing. Additionally, lawmakers propose restrictions on AI applications that assess individuals based on social, biometric, or behavioral characteristics. The bill also seeks to ban AI technologies designed to manipulate human behavior. Violations of these provisions would result in administrative penalties under a newly proposed amendment to the Code of Administrative Offenses. Lawmaker Expresses Fear of AI During the bill’s presentation, MP Anas Bakkozhayev openly admitted his concerns about artificial intelligence, stating that AI threatens national traditions and intellectual independence. “I view AI with caution, sometimes even fear. This path leads to degradation. Humans should think and analyze for themselves. Otherwise, where are we headed? Are we merely following global AI trends? What about our traditions, culture, and intellectual capabilities? I fear AI,” Anas Bakkozhayev said. He also criticized the use of AI by Kazakh officials, arguing that neural networks have become a tool for bureaucrats who prioritize their superiors’ opinions over independent thought. Furthermore, he raised concerns about AI chatbots, such as ChatGPT, potentially gathering sensitive data that could threaten national security. Kazakhstan’s AI Landscape As previously reported by The Times of Central Asia, the Chinese robotics company AgiBot recently signed an agreement with Kazakhstan’s Ministry of Digital Development, Innovation, and Aerospace Industry to establish a joint venture for AI-powered robotics in Kazakhstan's industrial facilities. However, the expansion of AI remains a contentious issue in Kazakhstan’s parliament. Last December, Smyshlyayeva's colleague, MP Magerram Magerramov, proposed restricting the use of ChatGPT and other generative AI tools in schools, arguing that their overuse weakens students’ critical thinking and problem-solving skills.

Human rights

Turkmenistan Bans Students from Celebrating New Year’s Eve

Authorities in Turkmenistan have imposed strict measures preventing students and schoolchildren from celebrating New Year’s Eve, requiring them to sign written pledges to abstain from festivities. Students are prohibited from hosting or attending parties at home or in cafes and are barred from being outdoors during the celebration. “Students have been forced to write forms stating they will not celebrate New Year’s Eve and will return to their dormitories after attending official events,” a source revealed. Violations of the ban are met with threats of expulsion. According to reports, older students in previous years were expelled for secretly hosting parties, serving as a warning to others. Similar restrictions are being enforced in schools across Ashgabat, where festive parties have been banned following an order from the Ministry of Education. Teachers have been instructed to ensure compliance with these regulations. Paradoxically, official state media in Turkmenistan are showcasing large-scale New Year preparations, including the lighting of the “Main Christmas Tree of the Country” on December 14. Despite the visible holiday decorations, New Year celebrations remain tightly controlled. Last year, schools and kindergartens canceled New Year events, and state institutions were prohibited from installing Christmas trees. Local analysts attribute these stringent measures to the conservative policies of President Serdar Berdimuhamedov. Unlike his father, Gurbanguly Berdimuhamedov, who was known for extravagant celebrations and even personal performances at New Year’s events, Serdar has opted for a more restrained and controlled approach. The restrictions reflect the growing emphasis on regulation and conformity under Turkmenistan’s current leadership, casting a shadow over what was once a more festive and unifying holiday.

Finance

Kyrgyz Authorities Unhappy With The Dollar

The Kyrgyz Finance Ministry plans to set aside 20 billion KGS ($230m) to issue digital bonds and treasury bills. Kyrgyz Cabinet Chief Akylbek Japarov has said at a meeting with journalists that according to him, the central bank's monopoly on issuing money is ending. Japarov discussed the role of the U.S. dollar in the country's economy and emphasized that it has become a tool of political pressure. “We send payments, but they are delayed without explanation. Sometimes, the delays last up to three months. This hurts trade. If there is no money, there is no trade. I think a new toolkit will soon appear,” he stated. He said the BRICS organization is already working on alternative payment systems to support trade. Cryptocurrency, and any currency backed by the gold reserves of the countries that use it, can replace the dollar in international trade. “Now everyone who has a gadget can emit cryptocurrency into various cryptocurrencies. In Kyrgyzstan, we will work on this issue and have a crypto exchange,” Japarov noted. He noted that digital bonds and promissory notes issued by the Kyrgyz Finance Ministry will be backed by gold. Corresponding amendments to the legislation are already being submitted to Parliament for consideration. Earlier, the National Bank of Kyrgyzstan also announced the launch of a pilot project for the national digital currency, “digital som,” and the creation of a legal framework for it. The Ministry of Economy and Commerce of Kyrgyzstan also announced the creation of crypto banks that will work with virtual assets. “Given the rapid development of digital technologies and cryptocurrencies, creating a crypto bank represents an urgent need to integrate crypto assets into the country's traditional financial system. Cryptobank will ensure safe, regulated, and convenient interaction of citizens and businesses with cryptocurrencies”, noted the Ministry of Economy.

Regulation

Employees in Uzbekistan to be Rewarded with Company Shares

Uzbekistan is to introduce an initiative to reward employees with shares in companies, under a regulation developed by The National Agency for Perspective Projects (NAPP). According to the NAPP, the transfer of shares to employees, as part of additional incentive programs, including bonuses, will help increase employee interest in the company's sustainable development and improve labor relations. The main goal of the initiative, modelled on ESOP (Employee Stock Ownership Plan) successfully applied in other countries, is to improve the population's welfare and develop the domestic capital market. Although joining in the Stock Ownership Plan will be voluntary, its development will be mandatory for joint stock companies with more than 50% state participation. The presidential decree on capital market development, issued in September 2023, envisioned the implementation of ESOP. Funds of up to one month's salary used to purchase shares will not be subject to personal income tax.