Data policy costs Uzbekistan 5.7% of GDP

Uzbekistan may be losing up to $4.5 bn annually because of its rigid data localisation rules. A new report by Kotib AI Research outlines the economic cost of the 2019 law on personal data.

Local Servers Rule Out Global Integration

Under Article 27-1, all personal data must be stored on servers inside Uzbekistan. This rule affects cloud services, increases infrastructure costs, and discourages foreign tech companies.

Localisation Rules: Billions Lost Across Key Sectors

Annual losses by sector include:

E-commerce: $900–1,250 mln
Banking: $850–1,170 mln
IT and startups: $675–975 mln
Fintech: $575–825 mln

These losses add up to 5.7% of GDP each year.

Global Tech Platforms Stay Away

Due to the law, 87% of foreign tech companies avoid the Uzbek market. These include PayPal, Stripe, Netflix, Spotify, AWS, and Microsoft Azure. The country has missed out on $1.35 bn in foreign investment in just three years.

The AI sector also suffers. Modern AI models rely on global cloud access. Uzbekistan cannot join the international AI ecosystem under current restrictions.

Kazakhstan Shows a Better Way

Kazakhstan reformed its data policy in 2018. It only localises sensitive government data. The country introduced a grace period and allows safe cross-border transfers.

These changes helped Kazakhstan grow its digital economy to 5.9% of GDP.

Experts Recommend Policy Shift

The report suggests key reforms:

Classify data by sensitivity
Allow cross-border data transfers with safeguards
Set up innovation-friendly regulation zones
Provide a transition period for businesses

These steps could add $2.8 bn in investments and create 35,000 new jobs within five years.

Uzbekistan now faces a choice: remain isolated or embrace a digital future with smart, open data policies.

Kursiv Uzbekistan reports Uzbekistan adds Zaamin Kazan Patyr bread to protected list.