The CAREC Startup Ecosystem

In recent years, the CAREC region started to recognize the economic benefits of developing its startup ecosystems. Each member country took measures to improve business creation prospects by offering incentives, hosting accelerator programs and creating tech parks.

Among the eleven member countries, the People’s Republic of China and Pakistan distinguish themselves as front runners when it comes to developing successful startup ecosystems. The achievements of these two countries present themselves as an opportunity for CAREC to share knowledge and best practices and accelerate growth.

Due to the deeply heterogeneous nature of the region, constructing a genuine startup ecosystem portrait of CAREC is a task that will need to be approached from 2 different perspectives.

The first one focuses on outlining the main initiatives for developing startup ecosystems that unite all member countries. These initiatives can mainly be attributed to the Asian Development Bank, CAREC Institute, CAREC Program Strategies and other governmental agencies.

The second approach is to provide an overview of the startup ecosystem scene in each member country, highlighting the tax incentives, funding opportunities and strengths of the ecosystems. A more detailed view on each country will further be provided in our Country Briefs section.

Top Investments & Initiatives in the Startup Ecosystem of the Region

From 2001 until the end of 2020, $40 billion worth of investments have been made in the CAREC region through financing coming from the ADB, development partners or CAREC governments. While these figures do not represent direct investments specifically in the startup ecosystems, they contribute to the overall economic stability and infrastructure development in the region. These, alongside digital literacy, access to talent and accelerators are key elements in later developing solid startups. Stimulating trade and sharing good practices between the member countries is also an objective of CAREC.

Mitigating the Effects of the COVID-19 Pandemic on the Startup Ecosystem

CAREC HACKATHON- The #DigitalCAREC Challenge is a part of a larger project aimed at mitigating the effects of the COVID-19 pandemic and boosting the economy through the Startup Ecosystems. The funding of the project (USD 1.0 million) is provided by the ADB and the Republic of Korea e-Asia and Knowledge Partnership Fund. This project will further encourage the integration of digital technology and ICT in member countries.

The CAREC Startup Ecosystem Development Hub is planned to be a virtual platform for creative and innovative proposals in combating the negative impacts of COVID-19.

Creating Tech Parks:

The establishment of tech parks in the CAREC region has had a positive effect in boosting competitiveness of the economy, stimulating the private sector and increasing the number of hi-tech companies. Among the most notable ones is Astana Hub, Azerbaijan Hi-tech Park (HTc), the People’s Republic of China’s Zhongguancun Science Park and the National Information Technology Park in Mongolia.

The creation of these parks attests to CAREC’s determination to simplify bureaucracy, cut down on overregulation and support the startup ecosystems of their region. Many of these tech parks (e.g. the High Tech Park in Kyrgyz Republic) offer special tax breaks or incentives for their residents.

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Main Accelerator Programs, Hubs & Resources:

Startup Central Eurasia: Startup Central Eurasia is an online platform built to ease collaboration between startup ecosystem stakeholders in the region and boost regional growth. The platform is active in Azerbaijan, Georgia, Armenia, Kazakhstan, Kyrgyz Republic, Uzbekistan and Tajikistan.

Accelerate Prosperity: This is an initiative of the Aga Khan Development Network (AKDN), providing technical expertise, creative financing solutions and market connections for small and growing businesses. Accelerate Prosperity operates in 3 of the CAREC countries (Pakistan, Tajikistan and Kyrgyzstan) investing in programs ranging from commercial services to agriculture, tourism, textiles and ICT.

Central Asian Business Angels: Headquartered in Bishkek, the organization is dedicated to angel investing in the Kyrgyz Republic and its neighbors.

GIZ: GIZ is the German Society for International cooperation, active in 7 of the CAREC member countries operating on a wide range of issues including Environment and Climate, Economic Development and Employment and Social Development. As a part of it’s Economic Development and Employment efforts, GIZ supports initiatives involving startups, innovation and entrepreneurship.

DAI: In Tajikistan and Kyrgyz Republic, DAI runs the Enterprise and Innovation Program (EIP), supporting inclusive and sustainable economic growth in the countries. The main activities are aimed at creating business and innovation centers, strengthening company-investor linkages, provision of market-making activities, and improvement of the business advisory infrastructure.

Startup Grind: This Is the world’s largest independent startup community, uniting 2,000,000 entrepreneurs. Among the CAREC countries, Startup Grind has chapters opened in Azerbaijan, People’s Republic of China, Georgia, Kazakhstan, Mongolia, Pakistan, Tajikistan and Turkmenistan.

Main Events:

Startup Ecosystem related events have started to revive in recent years with many countries hosting startup weekends (e.g., Mongolia, Tajikistan, Turkmenistan, Uzbekistan). A special focus has been placed on tech events and the digital development in the region. The main players in organizing events in the CAREC region are Startup Grind and the Founder Institute.

Notable past events include the StartupFest hosted by Azerbaijan in 2019, Startupgrind Europe-Asia Connect held in Georgia and Uzbekistan’s Global Women Startup Weekend.

Main Strengths of the CAREC Startup Ecosystem



    Azerbaijan



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    • Azerbaijan has an emerging innovation hub, ranked 89th globally. The ecosystem exceeds in the software and data industry, with the country boasting strong internet connectivity and good penetration among the population.

    • The Government is actively supporting the startup ecosystem with the creation of funds and support programs. Startups in Azerbaijan are exempt from taxes on profit and income for three years as of 2019.

    • Special attention is paid to tech startups, with the government deploying multiple agencies to support and develop this sector.




    Afghanistan




    • The startup scene is emerging with prospects for the future since the Founder Institute and Startup Grind began operating in Afghanistan.

    • Universities are showing support for startups, and events such as Startup Weekend are taking place in Afghanistan.






    The People's Republic of China




    • China has the strongest startup ecosystem in the CAREC region, ranking 7th in the world and showing a positive trend compared to previous years.

    • Beijing (ranked 3rd globally) and Shanghai (ranked 7th globally) are 2 of the front runners in startup ecosystems, and both are home to an impressive number of unicorns and innovation hubs.

    • The government shows active support and has a cohesive strategy for developing startups. China has made a priority in becoming a global leader in technology and innovation and has a qualified workforce for the digital economy.

    • There are multiple tax breaks and funding opportunities for startups, especially in the sectors supported by the government.



    Georgia




    • The country is advancing in its ecosystem ranking in Eastern Europe, now taking up the 21st position.

    • Georgia has a positive approach towards startups and shows interest in both investing and reducing bureaucracy.

    • Same day registration and friendly tax laws are creating a favorable climate for startups (especially for the IT industry).

    • The startup scene for entrepreneurs is alive with multiple networking opportunities, accelerators, and funding sources.



    Kazakhstan




    • The country is making active efforts to shift from an oil-dependent economy to a more diversified startup ecosystem.

    • Kazakhstan’s Startup Ecosystem is the front runner in Central Asia and ranks 76th worldwide. Since 2020, the country has shown positive momentum, advancing 20 spots in the global ecosystem rankings.

    • Kazakhstan has some strong incubator and accelerator programs: Astana Hub, AIFC Fintech Hub, Teach Garden, Nuris, and Most.



    Kyrgyz Republic




    • The desire for entrepreneurship and innovation is high among the younger generation compared to other countries in the CAREC region or even the United States.

    • International collaboration, the attraction of outside investments, and an outsourcing culture has opened the country for entrepreneurship and beneficial foreign partnerships.



    Mongolia




    • Mongolia’s startup ecosystem is ranked 88th globally and 5th in East Asia, with a special interest placed on the software and data industry.

    • The National IT Park, built over 20 years ago, attests to Mongolia’s long commitment towards developing startup ecosystems.

    • Mongolia’s investments law provides a favorable environment for business through tax exemptions, tax credits, longer terms to possess land, increased quota of foreign employees, and simplified visa arrangements.

    Pakistan


    city buildings near body of water during daytime

    • Pakistan is the 2nd best startup ecosystem in East Asia and is ranked 75th worldwide.

    • Pakistan has a large and growing technical talent base of 360K software developers, estimated by A.T. Kearney.

    • There is a wide range of government-led initiatives to develop startup ecosystems around the country, evidenced by a growing number of startup success stories.

    Tajikistan




    • Due to the increasing government interest in the startup scene, business incubators, tech parks, and networking events have started to emerge in Tajikistan.

    • There are some notable startup success stories (e.g. Alif Bank) that are boosting the morale of the startup ecosystem, generating investment interest in other startups.



    Turkmenistan




    • There are promising prospects for the future as the government seems to be moving towards digitalization, proposing a 5-year plan for a digital economy.

    • Free Enterprise Economic Zones (one in each of the eight regions) have been created in Turkmenistan with special incentives for companies that invest in them.



    Uzbekistan




    • Startups based in the subordinate divisions of the various ministries and agencies (e.g. IT Park, Center for Advanced Technologies, Yashnabad Innovative Technopark, and Mirzo Ulugbek Innovation Center) take advantage of reduced or waived taxes.

    • Uzbekistan has the largest population in Central Asia, offering a sizable internal market conducive for launching startups.





    Takeaways for CAREC’s Startup Ecosystem:



    CAREC countries vary in their policies, attitudes towards business and innovation, and commitment to improving the startup ecosystem scene. Due to large discrepancies in GDP, population, and political environments, the startup ecosystems in the region may offer some strong initiatives, while other countries are still at the seed level.

    The overall trend in the CAREC countries seems to be promising, especially with the active involvement of the ADB and the CAREC program. These welcomed initiatives are beneficial not only due to the funding they provide but also because they encourage countries to collaborate and share good practices. By all accounts, CAREC strategies and events promote international cooperation and increase opportunities for entrepreneurship and innovation.

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