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ADB ESCAP ISOC Study

Unleashing the Potential of


the Internet in Central Asia,
South Asia, the Caucasus and
Beyond*
*This study focuses on the 10 countries, comprising 5 countries in Central Asia (Kazakhstan, Kyrgyz Republic, Pakistan,
Tajikistan, Turkmenistan and Uzbekistan), 2 countries in South Asia (Afghanistan and Pakistan) and 3 in Caucuses (Armenia,
Azerbaijan and Georgia). There is no single grouping that applies to them all. For consistency, therefore, the study refers to
them as Central Asia+5.

Contents
1. Central Asia+5 at a Glance
2. International and Regional Bandwidth
3. National Connectivity
4. Transitioning to a Digital Economy
5. Policy Recommendations
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Central Asia+5 at a Glance

Socio-economic development indicators


Georgia
GDP Per Capita: $3,670
Population: 4.50 mil
Median Age: 37.7

Kazakhstan

Azerbaijan
GDP Per Capita: $7,884
Population: 9.54 mil
Median Age: 30.1

Uzbekistan
GDP Per Capita: $2,038
Population: 30.74 mil
Median Age: 27.1

Armenia
GDP Per Capita: $3,647
Population: 2.98 mil
Median Age: 33.7

Afghanistan
GDP Per Capita: $666
Population: 31.28 mil
Median Age: 18.1

Kyrgyz Republic
GDP Per Capita: $1,269
Population: 5.83 mil
Median Age: 25.7

Tajikistan

Turkmenistan
GDP Per Capita: $9,032
Population: 5.31 mil
Median Age: 26.6

GDP Per Capita: $12,276


Population: 17.29 mil
Median Age: 29.7

GDP Per Capita: $1,099


Population: 8.41 mil
Median Age: 23.5

Pakistan
GDP Per Capita: $1,334
Population: 185.13 mil
Median Age: 22.6

with varying economic development

A young region
Armenia
Azerbaijan
Georgia
Kazakhstan

45

17

23

25

43

15

Kazakhstan

11

5.8%

Azerbaijan

9 6

10.2%

Turkmenistan

16

3.5%

Armenia

3.3%

Georgia

8.0%

Uzbekistan

4.4%

Pakistan

4,842

10.5%

Kyrgyz Republic

3,322

7.4%

Tajikistan

2,655

1.9%

Afghanistan

1,976

12

41

13

18

6.0%

12

43

14

19

43

30

22

41

Afghanistan

40

18

7 5

Kyrgyz Republic

30

Pakistan

33

21

36

54

Tajikistan

33

20

39

53

Turkmenistan

26

20

43

7 4

Uzbekistan

25

20

43

7 5

0-14 years

15-24

25-54

55-64

65 and over

24,205
17,516
15,474
8,138
7,582
5,576

5,000

10,000

15,000

20,000

25,000

but lagging in Internet penetration

and human development


Average annual HDI
growth (%)

2012

1990-2000

2013

78%

80%

Human
Development
Index (HDI)

70%

2000-2013
60%

High human development


Kazakhstan

0.755

0.757

-0.09

0.84

Azerbaijan

0.745

0.747

..

1.21

Georgia

0.741

0.744

..

..

0.728

0.730

0.26

0.92

Armenia

50%
World Average 43%
40%
33%
29%

30%

Medium human development


Turkmenistan

0.693

0.698

..

..

Uzbekistan
Kyrgyz
Republic

0.657

0.661

..

..

0.621

0.628

-0.34

0.52

0.603
0.607
Tajikistan
Low human development

-1.42

1.07

21%

21%

20%
10%
0%

Pakistan

0.535

0.537

1.21

1.30

Afghanistan

0.466

0.468

1.42

2.46

Central Asia+5 Central Asia+5


(ex. Pakistan)

Africa

ASEAN

Europe

once Pakistan excluded, Central Asia-9 penetration increases to 33%

International and Regional Bandwidth

Three Distinct Clusters of Internet Connected Emerge

Cluster 1:
Majority access
(>50%)
Cluster 2:
Partial access
(30-50%)
Cluster 3:
Low access
(<30%)

Country

Country Income
Classification* (2014)

% of Internet Users
(2014)

Azerbaijan (AZ)

Upper-mid (USD17,516)

61%

Kazakhstan (KZ)

Upper-mid (USD24,205)

55%

Georgia (GE)
Armenia (AM)
Uzbekistan (UZ)
Kyrgyz Republic (KY)
Pakistan (PK)
Tajikistan (TJ)
Turkmenistan (TM)
Afghanistan (AF)

Lower-mid (USD7,582)
Lower-mid (USD8,138)
Lower-mid (USD5,576)
Lower-mid (USD3,322)
Lower-mid (USD4,842)
Low-income (USD2,655)
Upper-mid (USD15,474)
Low-income (USD1,976)

49%
46%
44%
28%
14%
17%
12%
6%

With some countries underperforming

Why are some countries


performing better?
Why are some countries
underperforming?
What determines rankings?
What are the constraints?
What can mobilize growth?
What are the impacts on
the rest of the economy?
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Transitioning to Broadband
Gaps exacerbate, rankings shift

Global Average

Global Average

Regional Average
Regional Average

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Partially the result of bandwidth and speed

23.3

12.4

NA

As demand increases these constraints will become more limiting

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Demand for interl content already disproportionately strong


Country

Top 5 Websites by Traffic

Afghanistan

Facebook.com

Google.com

Google.com.af

Youtube.com

Yahoo.com

Armenia

Facebook.com

Google.com

Youtube.com

Google.am

Ok.ru

Azerbaijan

Google.az

Facebook.com

Youtube.com

Google.com

Mail.ru

Georgia

Facebook.com

Youtube.com

Google.com

Baidu.ge

Ok.ru

Kazakhstan

Mail.ru

Vk.com

Youtube.com

Google.com

Yandex.kz

Kyrgyz Republic

Ok.ru

Mail.ru

Youtube.com

Google.com

Vk.com

Pakistan

Google.com.pk

Facebook.com

Google.com

Dailymotion.com

Yahoo.com

Tajikistan

Mail.ru

Google.com.tj

Ok.ru

Google.com

Vk.com

Turkmenistan

Ok.ru

Mail.ru

Google.com

Vk.com

Google.tm

Uzbekistan

Google.com

Mail.ru

Ok.ru

Facebook.com

Youtube.com
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In a landlocked region with few transnational cables,


international supply is limited
The Trans Asia Europe (TAE) line connects Azerbaijan, Armenia, Georgia,
Kazakhstan, Kyrgyz Republic, Tajikistan, Turkmenistan, and Uzbekistan.
The Europe-Persian Express Gateway (EPEG) links Frankfurt across Eastern
Europe, the Russian Federation, Azerbaijan, Iran and the Persian Gulf to
Barka, Oman.
The Trans-Eurasian Information Superhighway (TASIM) is expected to
connect the countries of Eurasia from Western Europe to Eastern Asia
including the Peoples Republic of China, Kazakhstan, Azerbaijan, Georgia,
Turkey, to Germany.

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without effective supply and competitive transit,


prices remain high and take up remains low

Note: relative outlier status of Kyrgyz Republic (and the state of competition in next section)
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With limited supply and unrealized demand, costs remain high


Evaluation

Monthly sub for mobile


cellular with data (USD)

Cost of mobile
data package
(% GNI/cap, PPP)

Evaluation

42.2%

Unaffordable

8.23 (4GB)

5.0%

Expensive

8.77

1.2%

Affordable

3.14 (1.5GB)

0.4%

Affordable

9.50

0.7%

Affordable

5.70 (1GB)

0.4%

Affordable

1.4%

Affordable

4.00 (4GB)

0.6%

Affordable

1.1%

Affordable

5.32 (1GB)

0.3%

Affordable

Country

Monthly sub for


fixed BB (USD)

Cost of fixed BB
(% GNI/cap PPP)

Afghanistan

69.00

Armenia
Azerbaijan
Georgia
Kazakhstan

8.95
(2Mbps no cap)
20.60
(4Mbps no cap)

Kyrgyz Republic

5.83

2.2%

Moderate

6.00 (1GB)

2.2%

Moderate

Pakistan

29.40
(4Mbps no cap)

6.9%

Expensive

3.92 (4GB)

0.9%

Affordable

Tajikistan

58.44

26.4%

Unaffordable

10.87 (1GB)

4.9%

Moderate

Turkmenistan

171.40
(512Kbps no cap)

14.2%

Expensive

45.70 (4GB)

3.8%

Moderate

Uzbekistan

37.50

7.7%

Expensive

10.00 (1GB)

2.1%

Moderate

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National Connectivity

Cluster 1: good coverage, affordable access competitive mobile


Country

Coverage

Cost

Institutional Conditions

Azerbaijan

Majority coverage for


mobile BB (80% of pop.,
~70% territory)

Affordable for both fixed


and mobile BB (0.7% and
0.4% GNI/capita, PPP)

Fixed BB: state incumbent dominated


Mobile BB: competitive

Kazakhstan

Majority coverage for


mobile BB (70% of pop.)

Affordable for both fixed


and mobile BB (1.1% and
0.3% GNI/cap, PPP)

Fixed BB: state incumbent dominated


Mobile BB: competitive

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Cluster 2: where competitive, access improving, cost affordable


Country

Coverage

Cost

Institutional Conditions

Armenia

Majority coverage for both


mobile BB (94-98% of territory)
and fixed BB (all major cities)

Affordable for fixed and mobile BB Fixed BB: competitive


(1.2% and 0.4% GNI/cap PPP)
Mobile BB: competitive

Georgia

Majority coverage for mobile BB


(86% of population)

Fixed BB: state incumbent


Affordable for fixed and mobile BB
dominated, competitive ISP market
(1.4% and 0.6% GNI/cap PPP)
Mobile BB: competitive

Partial coverage for mobile BB


Uzbekistan
(39% of territory)

From expensive for fixed BB (7.7%


GNI/cap PPP) to moderate for
mobile BB (2.1% GNI/cap PPP)

Fixed BB: state incumbent dominated


Mobile BB: duopoly

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Cluster 3: need to expand coverage and improve affordability


Country
Afghanistan

Kyrgyz
Republic

Pakistan

Tajikistan

Turkmenistan

Coverage
Very limited coverage for fixed BB (ADSL
and VSAT only)
Partial coverage for mobile BB (major
cities)
Limited coverage for fixed BB (Bishkek
and larger cities only)
Partial coverage for mobile BB (>60% of
population)
Partial coverage fixed BB (2000 cities for
ADSL)
Limited coverage for mobile BB (30-66
cities)
Limited coverage for fixed BB (major
cities only)
Majority coverage for mobile BB (90% of
pop.)
Very limited coverage for fixed BB (ADSL
in Ashgabat only)
Partial coverage for mobile BB (larger
cities only)

Cost

Institutional Constraints

From unaffordable for fixed BB (42.2%


GNI/cap PPP) to expensive for mobile
BB (5.0% GNI/cap PPP)

Fixed BB: state dominated


incumbent, competitive ISP
market
Mobile BB: competitive

Moderate for fixed and mobile BB (2.2%


GNI/cap PPP)

Fixed BB: state dominated


incumbent
Mobile BB: competitive

From expensive for fixed BB (6.9%


GNI/cap PPP) to affordable for mobile
BB (0.9% GNI/cap PPP)

Fixed BB: state dominated


incumbent
Mobile BB: competitive

From unaffordable for fixed BB (26.4%


Fixed BB: state dominated
GNI/cap PPP) to moderate for mobile BB incumbent
(4.9% GNI/cap PPP)
Mobile BB: competitive
From expensive for fixed BB (14.2%
GNI/cap PPP) to affordable for mobile
BB (3.8% GNI/cap PPP)

Fixed BB: state dominated


incumbent
Mobile BB: state dominated
incumbent

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Vicious VS Virtuous Cycle


Limited supply of
bandwidth due to
lagging investment

Unrealised
demand

Need for more fixed infrastructure to


support mobile usage
Greater adoption, growing demand

As the digital economy emerges there is a


danger that this pressure will increase
The impact of institutional
constraints at the national level are
particularly damaging

Role of the Government


Enabling competition to spur
growth
Aggregating and helping to

Lower prices and broader coverage

Greater competition in mobile

stimulate nascent demand


through social development
programs*
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Transitioning to a Digital Economy

What is the Digital Economy?


INTERNET
ECONOMY

Interconnectivity
Interoperability

Internet = stand-alone vertical


Economies of scale

DIGITAL
ECONOMY
& SOCIETY

Internet = universal platform


Economies of scope

Digital Economy: transition of traditional industries and non-IT goods


and services beginning to utilize the Internet in their design, production,
distribution and consumption
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Regional Examples
Afghanistan: financial inclusion
Pakistan: mobile money
Azerbaijan: e-government network
Kazakhstan: open government
Pakistan: virtual university campuses
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Afghanistan Mobile money extending financial


inclusion

But m-money products


lack interoperability,
hindering economies of
scale
Source: Roshan website (2013);

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Pakistan Branchless banking is growing rapidly


60%

8
7.54

49%

7
46%

46%

44%

50%
43%
40%

5.41

5
4.71
4

30%

4.24
3.83

20%

3.48

20%
2
10%
1
0

0%
Dec'13

Mar'14

Jun'14

Total Branchless Banking Accounts (in mil)

Sep'14

Dec'14

Mar'15

but needs to
boost consumer
engagement
beyond OTC to
sustain growth
and impact

Proportion of Active Accounts

Source: State Bank of Pakistan (2015), Quarterly Branchless Banking Newsletter Jan-Mar 2015

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Azerbaijan: E-government network


Azerbaijani Service and Assessment Network (ASAN)

Delivering an one-stop-shop for


simpler and and more accessible
government services through an
integrated portal
With built-in objectives that
promote:
- Ministry coordination
- Interoperability among
different government services
- Cashless transaction to
promote transparency and
efficiency

Source: State Agency for Public Services and Social Innovations (2015)

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Kazakhstan - Open Government


By opening up government
data, KZ government
intents to:
enhance the
transparency of public
administration
promote innovative use
of the data to create
new services
Stimulate economic
growth
Source: Kazakhstans E-government Web Portal

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E-gov: Status of E-gov Development


Country

Ranking

EGDI

KZ
GE
AM
AZ
UZ
KY
TM
TJ
PK
AF

28
56
61
68
100
101
128
129
158
173

0.7283
0.6047
0.5897
0.5472
0.4695
0.4657
0.3511
0.3395
0.2580
0.1900

Online Service
Component
0.7480
0.5984
0.6142
0.4331
0.4488
0.2756
0.0866
0.0630
0.3228
0.1811

Telecom Infra
Component
0.5749
0.4261
0.3889
0.4605
0.2333
0.3801
0.2189
0.2306
0.1174
0.1472

Human Capital
Component
0.8619
0.7895
0.7660
0.7480
0.7264
0.7413
0.7478
0.7249
0.3337
0.2418

The region needs to upgrade telecom infra but has high levels of human capital
Source: UN Public Administration Country Studies (2014), UN E-Government Survey 2014,

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Pakistan: Increasing number of universities are


providing online learning
But challenges remain at
the at the connectivity
level
Basic connectivity
Lack of bandwidth
Lack of interoperable
platforms and
applications between
schools
Source: Virtual University of Pakistan (2015)

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Policy Recommendations

Policy Recommendations
1. Prioritise Wireless
Mobile has become the agent of
change and most people coming
online now are doing so via a
mobile device. Outlying or
marginalized individuals and
communities should be
proactively targeted for mobile
connectivity. Internet access and
national digital economy plans
need to be adjusted to recognize
the increasing mobile centricity of
the population.

2. Stimulate
Demand
Policy makers and industry need
to work together on the two
major determinants of demand:
accessibility and affordability.
Governments themselves have
the opportunity to show
leadership in the way digital
services can be delivered,
particularly through egovernment, social protection,
and inclusion (e.g., financial
inclusion) programs.

3. Principles
Suggested principles for
promoting interconnection and
interoperability:
* Terms based on public domain
procedures;
* Rates based on long run
incremental costs;
* Practices monitored and
enforced by an independent
regulator;
* Interoperability built into all
future public sector planning.

Policy Recommendations - continued


4. Infrastructure
To support growing broadband
use and data traffic,
particularly over mobile,
substantial fibre-based
national backbones and
backhaul infrastructure will be
essential. To support
connectivity growth and
usage, policy makers need to
promote upgraded backbone
connectivity and inter-regional
bandwidth supply.

5. IXPs
One of the most effective ways
to reduce the transit costs is to
promote carrier-neutral IXPs. By
removing the bandwidth
bottleneck, the full economic
and social benefits of the
Internet economy can be
achieved and the path towards
a fully developed digital
economy embarked upon.

6. Business Climate
Encouraging investment and market
participation requires transparency
and regulatory clarity. This extends to
regulations towards imports of
software and hardware and
equipment approval procedures.
Policy makers should ensure that
device distribution and retail
networks are fully competitive.

Policy Recommendations - continued


7. Capacity
Building
To ensure effective policy
making, capacity building
needs to go beyond awareness
raising and include training of
policy makers and regulators.
Training needs to be crosssectoral and regulatory
frameworks need to be multistakeholder.

8. Statistical
Benchmarks
There needs to be a framework
and a process for the collection,
accounting, and analysis of
statistics and data. Often where
data is apparent it is nationally
defined and remains
incomparable. For effective policy
making across the emerging
digital economy, data needs to be
accurate, consistent, and regularly
updated.

9. Infrastructure
Sharing
Governments should proactively
support the sharing of scarce
resources such as towers and ducts
to maximize network competition;
as well as the sharing of certain
radio spectrum (or dynamic
spectrum assignment) to utilize
frequencies in bands of under-used
or unused spectrum.

Policy Recommendations
1. Prioritise and Enable Wireless Access
2. Identify and Stimulate Nascent Demand
3. Provide Principles for Network Interconnection and Services
Interoperability
4. Build Regional Terrestrial Backbone Infrastructure
5. Promote the Development of Carrier-Neutral IXPs
6. Improve the Ease of Doing Business
7. Promote Capacity Building
8. Develop Statistical Benchmarks
9. Promote Infrastructure Sharing

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