BEDROCK Podcast E17 – Talk about Central Asia

TC:

Hello everyone, welcome to the BEDROCK Podcast.

Tracy:

Hello everyone, this is the 17th episode of the BEDROCK Podcast. In this episode, TC and I have just returned from field research in Central Asia, and we’ll discuss some local opportunities. Welcome to the show. Today we’re going to talk about Central Asia. Recently we spent roughly two weeks on the ground in Central Asia, including Almaty and the capital Astana in Kazakhstan, as well as Tashkent in Uzbekistan. We visited a number of local organizations, including government investment promotion agencies, investment institutions, startup incubators, IT parks, and several SuperAPP companies. We also attended some conferences and met with local friends. We’ll look at things from an investment perspective today. People may be relatively unfamiliar with Central Asia—TC, why don’t you start with your overall impressions of the trip? What stood out, or what differed most from your prior expectations?

TC:

We stayed in Central Asia for two weeks. While that’s not particularly short, it’s still limited for a truly in-depth understanding of a region’s development. So we tried to speak with as many people as possible and visit various institutions to deepen our understanding of the local market. Overall, our impressions are still preliminary and partial.

TC:

The general feeling is that although people often refer to Central Asia as a single region—and geographically there are commonalities, such as being in the center of Asia, mostly landlocked countries, part of the ancient Silk Road, and under the influence of both China and Russia, occupying a very interesting position that connects East and West—the region has been changing in recent years after a relatively lagging past.

TC:

Under the influence of China, Russia, and even Europe and the U.S., each country has actually pursued a different path, with distinct resource endowments and differences. It’s a very interesting set of countries to observe comparatively—far from something a single word “Central Asia” can capture. So the first overall conclusion is: although we call it Central Asia, in fact it’s a rather interesting and fairly complex regional economic landscape.

TC:

Take these countries for example: after the dissolution of the Soviet Union in 1991, the five Central Asian states adopted different approaches. Some were relatively closed, following development paths similar to the Soviet era—pursuing self-sufficiency and relative isolation as national policy or governance. Over the past three or four decades, they have gradually undertaken reforms and opening up, or chosen different development routes, resulting in very divergent changes.

TC:

Even today, as far as we know, Turkmenistan remains relatively closed—some call it the “North Korea of Central Asia.” But there are countries that opened up earlier and are closer to market economies, developing more rapidly; others began shifting later. You can clearly see that the timing and choice of paths across countries have had significant effects on their economies. Kazakhstan is relatively more market-oriented.

TC:

Although the previous president was in power for a very long time, and outsiders (especially in the West) might perceive that as authoritarian, local views may differ. Kazakhstan essentially moved earlier on reform and opening. One city in particular gave us a strong sensory jolt—its capital Astana, a city only established in 1996, less than 30 years ago. When you go there, you find a brand-new city that has developed very rapidly, with skyscrapers everywhere. The core area is already quite comparable to walking in China’s Shenzhen or Beijing, especially along the main arteries.

Tracy:

Including the CBD, excellent hotels, and great shopping centers. If no one told you it was Astana, you wouldn’t realize it’s a city that developed in such a short time.

TC:

You can really feel that visual shock and the momentum of explosive growth in a short period. It’s very similar to the impact felt when Shenzhen, after China’s reform and opening, quickly rose from a fishing village. In Uzbekistan the change is even more dramatic: the new president took office only in 2016 and started reforms and opening up, dramatically different from before. With less than ten years of reform, the country’s per-capita GDP is only about 3,000 USD—still relatively low.

TC:

But if you go to Tashkent, you’ll find that in such a short time the vitality, energy, and urban construction—especially in the new districts—already look very much like many new towns we see in China or Europe, not at all the backward image many might have.

Tracy:

Two points: if you look only at the headline number—per-capita GDP around 3,000 USD—and then go experience Tashkent with that number in mind, it’s hard to imagine a city at that income level; it’s far more modern than you’d expect. Another thing: the first time I went to Tashkent was 15 years ago, transferring there on the way to Egypt. That was during the old government’s closed period. My overall impression then was a very small airport with chaotic management—no one paid attention to me during the layover, there was a language barrier, and I nearly missed my onward flight to Egypt. It felt like a war-torn place. But this time, it felt like a modern, vibrant metropolis—booming with energy—the contrast between past and present was striking.

TC:

What struck me most is that as these countries emerged from relative isolation, the public’s passion was ignited. In both Kazakhstan and Uzbekistan, you can see a very strong entrepreneurial enthusiasm. Although the countries are small and local venture investment is insufficient, and while many are transitioning from socialist systems with many SOEs to increasingly private economies, the people’s passion is very high—the zeal to work hard and to start businesses is palpable. That’s a key reason why they’ve shown such vigor and rapid development in a short time.

Tracy:

To add a bit: in Tashkent we visited a youth cultural and entrepreneurship center that left a deep impression. It was the weekend, and the place was full of young people and kids—some reading, some working on startup projects—everyone seemed driven. The government official who guided us was very young, around 30, and came out to host us on a weekend. He was enthusiastic, not just doing a job but pursuing a mission. They’re ambitious-hoping to take Uzbek projects to the world, to create a great environment for youth entrepreneurship and bring in global content. They feel they have opportunities; they’re not just executing tasks but doing meaningful work.

TC:

Why does it feel so much like China 20 years ago? As Tracy said, many young people—because multiple industries and the whole country are developing rapidly—can take on very important roles at a young age, and they’re brimming with passion. This kind of energy is harder to find in China nowadays.

TC:

For example, a classmate of mine there became a senator before 40, traveling with the president around the world and leading national youth development and entrepreneurship initiatives. His entire demeanor—and that of his subordinates—was different: full of passion, devout in a way, and ready to fight for a cause.

TC:

We also met many entrepreneurs and young people—whether in internet companies or AI. Although the countries are small and the markets can’t compare to China or the U.S., there are many opportunities—building Central Asian versions of various internet or AI plays. People are very driven—that left a strong impression.

Tracy:

Another example that stuck with me: we met a 17-year-old girl from a relatively remote mountain valley in Uzbekistan. Because the country has been open for such a short time, she wanted to study within the Western education system—like the SAT—but it simply didn’t exist there. She became a trailblazer to introduce these exams nationally—very much like how New Oriental brought standardized tests to China. She took the tests herself, earned good scores, and shared her experience with those around her. The sense of mission this era confers is fascinating.

Tracy:

She also applied to U.S. universities and hopes to build her own entrepreneurial project there. She’s coming from a small place, a small country, yet she’s ambitious about going global.

TC:

She’s also involved on the government side with an Uzbek startup incubator literally called “U-Combinator”—a copy-paste of Y Combinator’s story, which is interesting. China’s rise often involved “copy-to-China” of U.S. experience. They’re “copying to” Central Asia—also interesting. Imagine going back to China 20–30 years ago and doing these things—it’s exciting.

TC:

While we’ve emphasized that these Central Asian countries are relatively small, that doesn’t mean there are no opportunities. Kazakhstan has 20 million people with per-capita GDP above 10,000 USD—similar to China—think of it as an economy the size of a Chinese province. Uzbekistan’s population is close to 40 million and grows by about 1 million annually. Both countries are very young. Because of Islamic traditions, fertility remains relatively high—an average family may still have more than three children, though lower than the previous generation.

TC:

You can feel the youthfulness. With a youthful population, once opportunities appear, competition intensifies. You can imagine: if opportunities exist and I strive, my upward mobility can be much higher than peers. This mindset is indeed similar to China 20 years ago. It’s not only about the tens of millions of people, but that these tens of millions are on a fast growth track, with a high share of youth.

Tracy:

Uzbekistan adds 1 million people each year—that’s enviable. In China, a country of 1.4 billion, annual births are now only 7–8 million. Their total population is under 40 million, yet annual new births are about 1 million—the contrast is striking. Their average age is also very low—under 30. It really feels like they’re at a different stage of the life cycle.

TC:

Also, traditionally some of these peoples have nomadic heritage—Turkic roots—and given the small local markets, they have strong incentives to go abroad, strong personal agency, and a greater willingness to accept outside influences. In the past, the impression was that the Russian influence was enormous—almost everyone speaks Russian. Historically, due to the USSR, many markets were bound to the Soviet/Russian sphere. China’s influence is rising, but it still doesn’t compare to Russia’s. Many young people want to go out; the uptake of English education and Western culture is growing rapidly among youth. We heard that in the past, Russian classes might have occupied 70% of language learning time each week; now in many places, over 70% of language learning time is English. This change in mindset and the agency among the youth is substantial. For example, at the top local universities, among investors, startups, and public companies, nearly all mid- to senior-level people speak good English—arguably better on average than many Chinese entrepreneurs or companies. Many elites are eager to study abroad to integrate internationally-similar to China back then. You don’t see this attitude as much in China now or in larger inland markets of other countries.

Tracy:

Indeed. We engaged with institutions of very different backgrounds—government agencies (including investment institutions, youth entrepreneurship centers, and investment promotion bureaus), startup incubators, IT parks, companies, ICT conferences, as well as private meetings, malls, tourist sites, and hotels. Across these settings and people, what stood out in Kazakhstan is bilingual fluency in Russian and English—many people speak excellent English. In Uzbekistan it’s a bit weaker but still far above my expectations. The prevalence of English is higher than in China and much higher than in markets like Brazil that we visited later.

Tracy:

So that’s the overall impression: although these countries are all labeled “Central Asia,” they’ve chosen very different development paths. Kazakhstan and Uzbekistan resemble China 20–30 years ago; they’re growing fast and vibrant. We also discussed demographics—very young—with modest population and market size, but youth creates many opportunities.

Tracy:

Next, another interesting topic: religion. In both countries, Islam is the major faith. People may traditionally think Muslims have many complex rules and daily rituals, and that strict observance could hamper work efficiency. Our on-the-ground experience diverged from those preconceptions.

TC:

I think in many traditions like Sunni Islam, religious influence and secular life pull against each other. In my rudimentary understanding, religion historically functioned as a high cost-effectiveness belief system. For example, for ancient peoples—especially nomads—Islam’s doctrines often helped them survive better and bound them together through shared faith. That cohesion improved survival odds. Over millennia, a shared identity formed, grounded in pragmatic survival.

TC:

But as national economies develop, humans adopt different cost-benefit modes—more market-oriented and secular approaches bring benefits. Among secular groups, you can find common ground not through religion but through business and other forms of community. This happened in Christianity, later Protestantism, and Western development. If you rigidly adhere to strict rules, the cost-benefit may no longer fit. Some countries, from a governance perspective or to enforce consensus, may resist external cultural shocks—including Western commercial culture—and prefer to remain relatively backward.

TC:

We can find counter-examples in many places, including more traditional Islamic contexts, or in places like North Korea. But once a society opens, allowing external cultural influences, and lets people choose what’s most beneficial to their lives, you see religion and secularism gradually blending.

TC:

For example, in Europe and America, many Protestants emphasize “God in my heart”—within certain principles—but not necessarily strict observance of all rules, integrating better with real life. We feel this is happening in many Islamic countries that have clearly moved toward market economies, and in some traditionally Catholic regions. Many strictures are easing among the young—not that religion has no influence, but people are finding a balance: ensuring economic development and freedom of choice. How much to believe or adhere to rules becomes a personal decision. We saw some people praying five times a day, while others were less strict—believing without rigid practice.

Tracy:

One of the five daily prayers is at 5 a.m. Many people we spoke with do observe strictly, including the early prayer; others do not maintain all five daily prayers. There’s flexibility. As for women wearing headscarves, at least from the feedback we heard, it’s increasingly a woman’s personal choice rather than an imposed requirement.

TC:

In the past, education framed women largely as appendages of the family. But now, even in Islamic countries, women are rising, playing significant roles in the workplace. In Kazakhstan and on international stages we see many examples—many women in senior roles. Faith may be internal, but actual practice is a personal choice. This model is getting closer to Christianity’s development path.

TC:

Female labor force participation seems to have increased significantly. Whether it’s comparable to Europe and the U.S. is hard to say, but the openness is evident—education too. Overall, the religious impact appears much weaker than before. And in these countries you can’t imagine—there’s plenty of alcohol available, and people aren’t restricted from drinking, for example.

Tracy:

In some sense, current fertility patterns also reflect changes in women’s status. Parents’ generation might have had seven or eight children per family; for our generation and younger, while many still value larger families, it may be three children. Many women still prioritize family over career, but more and more are ambitious and want to achieve. At the margin there’s quite a bit of change. From our conversations, religion seems less and less a constraint on economic development.

Tracy:

Another aspect: beyond religious perceptions or biases, people often think about Central Asia’s relationship with Russia. The region was indeed deeply influenced by Russia in the past, and many assume that influence is very negative—hindering future development and cooperation with the West. Our fieldwork challenged some of those preconceptions.

TC:

First, the current reality: on the ground, Russia’s influence feels profound—even greater than we expected. Of course, these countries were part of the Soviet Union and were influenced for many years. But when you arrive, you find that almost everyone speaks Russian; the ties run deep. The influence is far greater than China’s influence in these countries. This helps explain why when the Russia-Ukraine war broke out, beyond the crash in Russian markets, Central Asian companies and currencies also fell—highly correlated. On one hand, the historical ties explain it; on the other, it’s a knee-jerk reaction that still has logic.

Tracy:

Some influences are visible. In Tashkent’s metro, station architecture and decoration clearly reflect the Soviet era. When you talk to people in Uzbekistan and Kazakhstan, Russian is a dominant language; the legacy of the USSR and Russia is tangible everywhere.

TC:

In many business contexts, Russian is essentially an official working language—most business terminology is in Russian. This is true across Central Asian countries and facilitates mutual understanding. In education, Russian is typically compulsory, occupying a large share of language learning—perhaps 70–80% of language study time—more than time spent on their national languages (Kazakh or Uzbek). That’s the current situation. On the ground, you can clearly sense Russia’s influence is very large and far exceeds China’s. Chinese speakers are relatively rare, and there aren’t many Chinese tourists.

Tracy:

Another interesting example: we visited a state-owned gold mining enterprise in Uzbekistan and found that the executives we talked to were all people shaped in the Soviet era. As an SOE and given the leaders’ backgrounds, our communications were infused with the flavor of a planned economy—again reflecting Russian influence.

TC:

After the Russia-Ukraine war, you can clearly see that… because these countries originally had relatively high shares of ethnic Russians (though the main ethnicities are Kazakh, and in Uzbekistan there are fewer Russians). Kazakhstan, sharing a long border, is more affected—Russians are relatively numerous in many cities. One reason for moving the capital to Astana was to reduce the influence of a high Russian proportion in the northern regions. From many angles you can see how strong the Russian consciousness, Russian language, and economic ties are. At least historically, that’s obvious.

Tracy:

This is a legacy of history. Looking forward, however, it’s equally clear that Russia’s influence is weakening. Since the Russia-Ukraine conflict, Central Asian regions are both “de-Russifying” and more actively participating in the global economy. On the one hand, they’ve benefited from the inflow of Russian talent and companies; on the other, their greater embrace of the world means weaker relative ties with Russia. With Russia’s influence waning, new opportunities open up for integration with the global economy.

TC:

Post-war, Russia’s own development prospects are limited. Previously, many workers from these countries went to Russia and sent remittances home, significantly impacting local incomes—not the main pillar, but important for many households. Now, as opportunities in Russia decline, that impact diminishes. People feel they should move more toward market orientation and the West, where opportunities may be greater. The shift in enthusiasm is obvious; the balance tilts—Russia’s influence and attractiveness are declining, while the West’s is rising. Among the young, choices mirror this: more are learning Western culture and language. From our rough inquiries and some research, English learning has gone from negligible (or very low) to 20–30% of language time, and now perhaps most of the time. It has essentially replaced the previous tendency to devote 70–80% of language study to Russian. From the perspective of the youth—more market-oriented, more West-embracing, more eager to learn English—this value shift is clear.

Tracy:

Another point: when discussing influence, we spoke with a former foreign minister of Uzbekistan. He shared a logistics route for exports from China to Europe: originally via Kazakhstan, Russia, and Belarus, taking about 15–17 days from China to Europe. With Russia’s influence weakening, they can begin building the China–Kyrgyzstan–Uzbekistan railway (Russia had long rejected this project but now has agreed). Using this route would reduce the distance by 900 km, shortening shipping time to 9 days (down from 15–17). The route would bypass Russia–Belarus and go via Kyrgyzstan, Uzbekistan, Azerbaijan, and Turkey.

TC:

Because Russia’s influence used to be strong, it wouldn’t allow you to bypass it—whether oil and gas pipelines or land transport by rail and road, it wanted everything from East to West to pass through Russia. That previously imposed constraints. Now, with diminished influence, these countries have more autonomy. If they can choose freely, it’s clear that continued development requires more market orientation and closer alignment with the West.

Tracy:

Another interesting data point: after the conflict began, a large number of Russians and Russian companies moved into Kazakhstan. Before the conflict there were fewer than 500 companies operating there; after, the number jumped to 1,500. That’s company count—behind it is a significant influx of people. In some respects, the integration of talent and strong companies into Kazakhstan, along with “de-Russification,” is a good opportunity for countries in the region.

TC:

Russian education—especially in STEM—has historically been strong. Before visiting, we had little sense of local education, and world university rankings place these schools far down the list. But on the ground, you find that countries influenced by Russia have a solid foundation in math, physics, chemistry—STEM basics are good—and they’re transitioning toward technology fields. Add in the inflow of Russian talent Tracy mentioned, and you can see why industrialization and tech/internet are advancing quickly—the underlying foundations are there.

Tracy:

In summary: Russia has had a profound historical influence on Central Asia, and that influence remains large today. But looking forward, the weakening of Russian control creates development opportunities for Central Asia. The conflict has also driven a large inflow of talent into the region, injecting resources for growth. Overall, the outlook is positive.

Tracy:

We’ve covered demographics, religion, and Russian influence. Next, let’s talk about economic development. People often think of Central Asia as resource-rich in oil, gas, uranium, and rare metals, but know little about non-resource sectors. On this trip, we found that both Kazakhstan and Uzbekistan are working hard to reduce reliance on resources and develop consumption, services, and manufacturing. Kazakhstan emphasizes digitalization; Uzbekistan does as well but with different focus. With stronger talent reserves, Kazakhstan emphasizes higher value-added areas of digitalization; Uzbekistan aims to develop IT outsourcing, leveraging lower costs.

TC:

Kazakhstan is relatively wealthier and puts more emphasis on AI. Uzbekistan, with lower per-capita income and larger population, is building China-like digital centers, offering free office space and various tax breaks to attract companies. Whether you do outsourcing or other digital businesses, they provide solid communications and power infrastructure. In many ways, their investment promotion playbook resembles China’s a decade ago.

Tracy:

What impressed me in Kazakhstan is the strong protection for foreign investors. They introduced common law practices, for instance creating the AIFC (Astana International Financial Centre), which helps foreign investors quickly establish local presence. Registration, legal protection—there’s a one-stop system so you don’t have to run around government departments. Ten to fifteen years ago, when designing legal frameworks to favor foreign investment, they conducted extensive research. Previously, local law followed the Russian system, which posed significant barriers for foreign investors. By learning from other jurisdictions, they introduced Anglo-American common law to make entry easier. This shows a proactive stance to attract foreign capital and accelerate development.

TC:

Compared with China, which has a massive domestic market and thus greater pull, China emphasizes many “Chinese characteristics”—judicial and administrative rules tailored to local context without necessarily seeking international harmonization, which relates to the strength of its domestic market.

TC:

But for Central Asian countries, the local market isn’t as attractive—far fewer than 1.4 billion people—only tens of millions. They must integrate into larger markets. Previously that meant integrating into the Soviet sphere; now they need to integrate into global and Western markets. In judiciary, administration, and perhaps politics, they’ll increasingly need to align with the West and the world, rather than build a wholly separate system. Some countries have already chosen a direction; once they do, they must more actively embrace international markets to develop.

Tracy:

Second, they’re actively working to break biases so others will come. When speaking with Uzbekistan’s unicorn Uzum, they said their biggest challenge is that people don’t understand Uzbekistan, aren’t interested, and don’t want to invest. Both the government and private companies are eager to build more successful cases so foreign investors become interested in the country and its industries.

TC:

Otherwise, they’re easily overlooked globally—dismissed as negligible. If they can produce a cohort of unicorns, proving the Central Asian market can create large opportunities, that would help enormously. For now, however, the Central Asian countries are relatively fragmented, which is a major barrier to creating large unicorns. Each country still has its own barriers. Although there’s a regional economic union with efforts to open up taxes and facilitation, in practice big and emerging companies still largely operate within their own borders. That forces companies to grow by deepening their domestic ecosystems rather than expanding regionally into true SuperAPPs.

TC:

It’s hard for SuperAPPs to operate cross-border, which affects whether Central Asia can produce large unicorns attractive to international capital. At least for now, despite linguistic commonalities and seemingly convenient transport, there isn’t a cross-regional champion. This differs from Latin America.

Tracy:

It is interesting. Take Kaspi, a Kazakh SuperAPP that began with banking and expanded into e-commerce, local services, and delivery. When it chose to expand abroad, its first market was Turkey—not neighboring Central Asian countries.

Tracy:

Kaspi started from banking and expanded to payments and e-commerce. In Uzbekistan, however, the state presence remains high (given the short opening period), especially in finance, making it hard for Kaspi to enter. In e-commerce, for various reasons, Kaspi missed the window; entering now means facing Uzum, which already has 90% share. With poor infrastructure, entering e-commerce requires heavy investment in logistics. For many reasons, Kaspi—though a Kazakh SuperAPP—hasn’t expanded into Uzbekistan.

Tracy:

This may be a common challenge for Central Asian companies trying to expand regionally. Building a unified regional market is difficult. Companies tend to focus on their home markets, trying to become SuperAPPs domestically to attract investment and retain talent.

Tracy:

Another common feature of emerging markets: relatively high inflation, high interest rates, and exchange-rate instability—all concerns for foreign investors. Governments are taking measures—allowing free capital flows, providing interest subsidies, and trying to stabilize exchange rates. On this front, Uzbekistan fares somewhat better; Kazakhstan faces depreciation issues. In Kazakhstan, the government subsidizes interest rates: with headline rates around 16%, the government adds a 6% subsidy, bringing the net rate to about 10%.

Tracy:

Because of exchange-rate issues, Kazakhstan may also compensate for FX losses or directly use USD in some cases. These measures help address barriers for foreign investors. While high inflation, high interest, and FX volatility are negatives, they also have positives. For financial industries, as long as risks are controlled, high rates mean wide spreads and attractive profitability.

TC:

High rates are typical in some emerging markets. Before manufacturing is fully developed, supply (capacity) lags demand. Locals see demand exceeding supply. China experienced this early in its reform. Some countries may never build manufacturing bases to rival China.

TC:

High inflation may persist through phases of rapid development. But it also implies strong demand—the flip side of the coin. Without demand growth—like today’s Japan or parts of Europe—rates and inflation wouldn’t be high. These countries have solid growth and youthful demographics, so household demand is robust, which pushes rates up.

TC:

You can also see that even with high rates, many sectors still develop—implying ROI/ROE are attractive and the market has many opportunities. As the economy scales and stabilizes, and domestic industries mature, inflation should ease and rates can fall substantially. Current policy rates of 15%–16% are too high. For creditors, returns are attractive if risks are controlled. Equity returns should be even higher. As rates gradually fall (the U.S. has begun cutting), these economies could gain further momentum.

Tracy:

Indeed, one of the best opportunities we saw in both countries is the combination of e-commerce (or internet) plus finance. The macro is growing; internet penetration is still low; finance, as part of an emerging economy, has strong demand with controllable risk, and profitability (spreads, etc.) is high. This combo in a SuperAPP is among the best opportunities we’ve seen.

Tracy:

Another interesting point: because of unique language and cultural backgrounds and historically closer ties with Russia rather than the West, the market’s appeal to players from other countries is limited (and the countries aren’t large). Conversely, those unique traits give local players an advantage in mastering know-how and quickly building user stickiness and scale. Since development paths tend toward SuperAPPs, local incumbents have obvious advantages. Global giants don’t treat this as a priority market, so external competition is relatively light. Once a company becomes a SuperAPP, competition mainly comes from domestic rivals pursuing the same path from different entry points.

TC:

For global giants like Amazon or Alibaba, creating a Kazakhstan-specific version with local logistics and warehousing is costly. Customer acquisition is also challenging. For outsiders, the market isn’t compelling enough. For local companies, a single product line hits ceilings, so they expand vertically into other sectors. As Tracy mentioned, whether entering from finance, payments, telecom, or securities, we’ve seen many broaden into multiple domains. With a relatively small total market, the goal is to keep customers on one platform—the competitive dimensions differ.

TC:

This creates hurdles for international operators—but not impossibilities. Russian e-commerce platforms like Wildberries and Ozon compete regionally on the back of the larger Russian market and a shared language. While we haven’t yet seen cross-Central-Asia successes, long term it’s possible, especially across the Russophone sphere. Yandex has done well in ride-hailing and delivery—a cross-Russian-language success. So we can’t rule out future cross-regional platform companies spanning Greater Central Asia plus Russia. Given shared linguistic and cultural roots, there are opportunities. Western or Chinese platforms face barriers, but for local companies familiar with on-the-ground realities, opportunities exist long term.

Tracy:

Yes. Another investment-relevant point: because it resembles China 20 years ago and infrastructure is ramping, there’s scope for leapfrogging. They learn from China and the U.S., and copy-paste can generate many opportunities. We saw startups clearly replicating proven models: facial recognition, enterprise SaaS, online preschool education, etc.

Tracy:

There are also businesses building services for merchants on top of Kaspi’s e-commerce ecosystem—like ranking optimization. Beyond startups, there are incubators and even models akin to Silicon Valley Bank emerging. You can clearly see a copy-paste pattern bringing projects to life in Kazakhstan and Uzbekistan.

TC:

With proven models elsewhere, they have a late-mover advantage—just as China once copied U.S. successes at speed. Since Central Asia shares similarities with China and the U.S. in some respects, this advantage helps them quickly replicate. We can see the pace is indeed fast—Uzbekistan’s opening has been less than a decade, yet new districts are developing at a jaw-dropping speed.

Tracy:

Some things are developing in sync with the world—for example, AI applications. They’re disadvantaged in AI infrastructure because of heavy capital intensity—so they lag there. But in applications, some are in step with global frontiers. A hot project called Higgsfield focuses on AI video generation and has become the first unicorn in Kazakhstan’s startup scene. Around 70–80% of its financing comes from overseas capital. Its focus—film-grade camera control and one-stop video generation—differentiates it. This is a very successful local project. It shows that in some cutting-edge niches—like AI applications—their development can be synchronized with the world. When discussing Kazakhstan and Uzbekistan, we inevitably have to mention star companies like Kazakhstan’s Kaspi, currently the most successful SuperAPP, and Uzbekistan’s Uzum.

TC:

Kaspi is publicly listed, so information is relatively transparent. It doesn’t just hold around 40% share in banking locally; because it’s built on banking and payments (especially with deep payment penetration), even in remote villages and mountain hamlets, you can see Kaspi’s QR codes—similar to WeChat Pay.

TC:

The difference from WeChat Pay is that you must have a bank account to settle transactions. The bank’s penetration is extremely high to make those QR codes usable everywhere. With trust established through bank accounts, Kaspi expanded into payments, then e-commerce retail, food delivery, ride-hailing, travel, and more.

TC:

You can say the SuperAPP has penetrated daily essentials—transport, payments, shopping, deposits, loans—becoming indispensable. In some sense, it has achieved what WeChat + WeBank or Alibaba + Alipay aspired to. That internet-plus-finance dream didn’t fully materialize in China for various reasons, but in a smaller market like Kazakhstan, it has. The ecosystem’s power is strong: payments and finance boost e-commerce, and e-commerce expands scenarios for finance and payments.

Tracy:

Because its core services are comprehensive, user stickiness is strong; competition is relatively less intense. You see, for the same e-commerce business, its take rate is high—double-digits—which would be a luxury for Chinese e-commerce firms.

Tracy:

Another company worth noting is Uzbekistan’s Uzum, now the largest e-commerce platform in Uzbekistan and expanding into payments and banking. Its growth is astonishing: founded in 2022, under three years old, it already reaches nearly half the Uzbek population. Growth was over 10x in 2024 vs. 2023, and this year is still growing around 50%. Its valuation has made it the first unicorn, raising roughly 100 million USD.

TC:

If these new private companies can build large platforms and attract more capital, they can pull ahead decisively. Kaspi, for instance, has profitable banking at its foundation. With policy rates around 15–16%, if NPLs are controlled, banking is lucrative—ROE can reach 100%. Those high returns fund e-commerce and logistics infrastructure, building advantages that competitors struggle to match.

TC:

Retail, warehousing, logistics—all require heavy investment. Without a strong foundation, rivals can’t easily catch up. Kazakhstan’s VC market totals under 100 million USD annually—astonishingly small. If you’re starting a new e-commerce venture without strong fundraising capacity, you’ll find it hard to match a competitor that’s already profitable elsewhere and investing heavily in retail logistics. Uzum’s founders have very international backgrounds—top global education and successful experience in places like South Africa. In 2024 alone, Uzum raised 100 million USD—more than the entire Uzbek VC market. If it invests 200 million USD in logistics, that dwarfs local market funding. A company with such advantages can outpace peers.

TC:

China’s e-commerce evolution had similar dynamics. If you can attract international capital early—as Alibaba did—competitors without strong backing face structural disadvantages. That’s largely due to limited local capital depth. Once a company gets on the right track, it can become very strong.

TC:

Although only three years old, Uzum has already achieved standout positions in many areas: over 50% population penetration; late to payments but now the largest offline payment provider; moving from e-commerce to payments and beyond; and it has secured a banking license. Its SuperAPP advantages and cross-sector expansion are remarkable.

Tracy:

Yes, and its early fundraising capacity was crucial, especially for the most capital-intensive part—logistics infrastructure. The model’s success also comes from building its own logistics. Traditionally, Uzbeks shop offline at bazaars. When they started, many people opposed the idea—arguing that bazaars are cheaper and convenient, and few believed in e-commerce.

Tracy:

They succeeded because they recognized this and built logistics so that the purchasing experience and delivery reliability were no worse than offline. Plus, online offers natural advantages—lower prices and far more selection. Their SKU count is about 1.5 million—roughly ten times offline. More choice, lower prices, and logistics no worse than offline—that’s how they reached today’s scale.

TC:

Financial penetration is low in these countries. With platform-based financial support, the appeal to both consumers and merchants grows.

Tracy:

Because they operate payments and banking, they can negotiate special arrangements, making costs far lower than ordinary bank cards. That allows the ecosystem to offer better cost-performance than competitors on almost any single function.

Tracy:

We’ve talked about Central Asia’s profile—demographics, development opportunities, Russian influence, and promising investment directions. Finally, could you speak about China’s influence? Given U.S.–China strategic competition, China urgently needs new markets and diversified manufacturing bases. Central Asia’s location and resource endowment seem to give it advantages in taking on some manufacturing. We’re indeed seeing growing China–Uzbekistan and China–Kazakhstan cooperation beyond energy, into manufacturing.

TC:

China has had trade frictions with the U.S. and Europe recently. Central Asia, on the one hand, could become an important outlet for Chinese products as it develops—a region of over 100 million people with rapid growth. At least for now, it’s resource-rich and economically complementary with China. We clearly sensed strong goodwill toward China—they very much welcome Chinese investment. Because of their relationship with Russia and Russia’s entanglement in war, prior Russian investment is no longer reliable; meanwhile, due to that history, Western investors are more cautious. China, as a neighbor with leading technology, is an excellent partner.

TC:

Their friendliness toward China is evident. Beyond market opportunities, we see Chinese automakers building factories; Chinese consumer brands like Mixue Bingcheng opening stores; and Huawei has long helped with 5G infrastructure.

TC:

Strategically, Central Asia could also be a bridge to Europe, given its proximity to Turkey and Eastern Europe. If treated as a manufacturing base, it has good fundamentals to radiate into Turkey and Eastern Europe. Costs—especially in Uzbekistan—are relatively low, and logistics are convenient.

TC:

So there is real potential as a manufacturing base. Overall, strategically it’s complementary to China, closer to Europe, with many areas for cooperation; politically and geographically it’s close to China. I think that’s an opportunity for Chinese investors and many Chinese industries.

Tracy:

Great. We’ve discussed Central Asia quite comprehensively. Before going, we had preconceived notions: first, that it’s highly resource-dependent and little else is known; second, that as an emerging market it’s very risky. After the visit, it feels very much like China 20 years ago—the institutions and infrastructure strongly encourage marketization and openness, and the region is on a fast growth track. So while we initially thought risks were high, fieldwork revealed abundant opportunities—very meaningful from an investment perspective.

TC:

We can’t say it’s entirely like 20 years ago, because in some areas—certain infrastructure—it still lags far behind. But in internet and technology, the gap isn’t that large—so it’s not uniformly 20 years behind. With late-mover advantages, many areas can develop quickly.

Tracy:

That’s right. A very specific example: the density of traffic cameras on Kazakh roads is extremely high—so high that in places like Almaty, the density feels even greater than in China. In some aspects, government digitalization isn’t “20 years behind” at all. That’s it for our Central Asia sharing today. We’ll also share findings from other regions in the future.