Uzbekistan is unveiling unique opportunities for Business Process Outsourcing

In the rapidly changing world, companies are confronted with the necessity to optimize their processes. Through a clear delineation of operational activities, companies identify the least effective directions in terms of resource management. In such cases, BPO providers can offer the most advantageous conditions and take on these challenging tasks.

Business Process Outsourcing (BPO) is a strategy whereby companies delegate the execution of certain business processes to third parties. The primary goal of BPO is to enhance the efficiency of a company’s operations and reduce costs. This practice enables companies to focus on their core tasks. BPO outsourcing may encompass delegating tasks such as data processing, customer service, financial operations, human resource management, and more. Let’s delve into these areas more comprehensively.

  1. IT outsourcing: In the field of information technology, BPO involves technical support, testing, data collection, and processing, allowing companies to concentrate on innovation rather than operational issues.
  2. Customer service: Outsourcing contact centers play a crucial role in improving customer relations, order processing, and support, freeing up client resources to concentrate on strategic customer interactions.
  3. Financial services: In the financial domain, BPO organizations can provide qualified services in accounting, financial analysis, and invoice processing.
  4. Human resource management: BPO providers assist companies with hiring, training, and personnel management.
  5. Logistics and supply chain: In this sphere, companies can maintain continuous operations by engaging contractors from different regions.

How the BPO market developed

The global Business Process Outsourcing market emerged in the 1980s and 1990s. The primary reason behind the development of the BPO sector mirrors the trend of relocating manufacturing facilities from Western countries to the Asian region during that period — aiming to reduce costs through lower operational expenses and more accessible labor resources. However, BPO offers additional advantages:

  1. Concentration on core activities by delegating non-core tasks to external organizations.
  2. Competitiveness and global market presence with access to unique resources.
  3. The experience and expertise of BPO providers enable companies to achieve superior results in specific domains.
  4. Flexibility and scalability based on the resources and needs of the company.

The initial forms of outsourcing involved transferring functions such as data processing and telemarketing to third parties. With the evolution of information technology, BPO transformed to meet the needs of IT giants. In the early 2000s, India emerged as a global hub for BPO services. Through state incentives, the country was able to offer skilled professionals with excellent language skills at competitive labor costs. Companies from North America and Europe began outsourcing customer service and IT processes to India.

Since then, outsourcing has diversified into new areas. Companies started outsourcing financial and human resource management tasks to contractors. In the IT sector, clients expressed a need for data processing and analysis, as well as development of artificial intelligence technologies, and automation. Over time, the geography of BPO centers also expanded. Countries like the Philippines, Malaysia, Poland, Romania, Ukraine, and BPO providers from South America started competing for market share.

Uzbekistan was not an exception and joined the race in 2020.

BPO Support in Uzbekistan

A distinctive feature of BPO in Uzbekistan lies in the direct support provided by the government for this sector. Assistance is facilitated through the IT Park complex, established in 2019. Collaborating with the Park is not limited to technological corporations, enterprises seeking to delegate non-core business processes to specialized professionals also engage in partnership.

220 IT Park resident companies provide BPO services in the following segments:

  • Dispatch services - 121 — 55%
  • Call centers - 50 — 22.7%
  • Accounting - 27 — 12.3%
  • Other services - 22 — 10%

These companies contribute 20% of the total volume of IT service exports, which amounted to $305 million in the first 11 months of 2023. IT Park actively supports the development of BPO companies in the following areas:

  • Dispatch services;
  • Customer support services and call centers;
  • Recruiting and HR agencies;
  • Data processing and entry;
  • IT process outsourcing;
  • Procurement management;
  • Digital marketing.

Advantages of Collaborating with BPO Providers from Uzbekistan

Despite being a newcomer to the relatively mature BPO market, Uzbekistan has much to offer to foreign companies. Beyond the availability of knowledgeable professionals at a competitive labor cost, the government actively incentivizes the industry through preferential measures. As mentioned earlier, IT Park undertakes this task by uniting not only technological companies and startups but also creates equally favorable conditions for BPO service providers. These conditions include low tax rates and preferential opportunities for utilizing the Park’s infrastructure.

The following is a detailed comparison of Uzbekistan’s capabilities, particularly those of IT Park, in relation to the global BPO market.

Low Taxes

In Poland and the Philippines, a zero or low VAT rate exists. However, such preferential taxation is not extended to BPO companies. The same situation applies to the progressive income tax scale. In the Philippines, low-income professionals may qualify for a zero rate. According to average salary, BPO employees are subject to an income tax rate of 15-20%. In India, this figure stands at 5-10%.

Following tax reforms, Uzbekistan has fostered a favorable business climate conducive to entrepreneurial development. Currently, VAT, corporate, and income taxes are lower than in other BPO centers.

By obtaining residency in IT Park, companies can reduce income tax and completely eliminate corporate tax and VAT. However, it is crucial to note that residents, after the preferential 6-month period, are obligated to transfer one percent of their total income to the deposit account. These funds are allocated to the maintenance and development of IT Park infrastructure.

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Optimal Combination of Cost and Workforce Qualification

Employee salary and qualifications are pivotal factors when selecting a BPO provider. Uzbekistan can boast a relatively low labor cost, coupled with workers proficient in foreign languages and possessing high literacy and requisite competencies.

Approximately 60 IT universities in the country annually produce over 29,000 skilled professionals. Notably, at the branches of leading foreign educational institutions such as INHA and Amity, training is conducted in English. Over 5 million young Uzbeks are fluent in English. The youth under 30 years old constitute two-thirds of the country’s population. Consequently, this talent pool is open to acquiring new knowledge and adaptable to changing conditions in the labor market.

Certain positions in Uzbekistan are more highly remunerated than in some regions. However, as previously noted, specialists from Uzbekistan possess advanced skills, and the preferential tax system enables a more competitive salary.

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Benefits Offered by IT Park to Residents

In addition to favorable tax incentives, IT Park creates unique conditions for residents to launch new businesses and develop existing ones. The following programs make business in IT Park advantageous:

Zero Risk — program aimed to reduce costs and risks for foreign companies entering the Uzbekistan market. Benefits include:

  • Free office equipped with furniture and equipment in regions for 12 months.
  • Reimbursement of up to 15% of employee salaries.
  • Reimbursement of up to 50% of expenses for training and professional development courses.

One Stop Shop — program for the swift and easy turnkey opening of a company, including:

  • Registration of a legal entity.
  • Preparation of initial documentation.
  • Obtaining the personal identification number (PINFL) by power of attorney.
  • Opening a bank account.

Local2Global — program supporting local companies in Uzbekistan when expanding into international markets to stimulate their export activities. Residents can receive 50% coverage of expenses for:

  • Foreign visits of clients to Uzbekistan.
  • Export consulting services.
  • Export mentoring.
  • Foreign trips and participation in international exhibitions and seminars.
  • Free access to top courses on Coursera.

IT Visa — foreign investors and IT professionals, as well as founders of IT Park residents, can obtain a multiple-entry visa for up to 3 years, extendable without leaving Uzbekistan. IT visa provides specialists with:

  • Medical services and education equally with Uzbekistan citizens.
  • Temporary registration for the visa duration.
  • The opportunity to purchase real estate of any value.

Procedure for Obtaining Residency in IT Park

IT Park comprehensively fosters the BPO market in the country. Foreign clients can easily discover the most suitable outsourcing service providers with qualified professionals, while BPO companies can benefit from unique incentives, reducing operational costs and risks.

To obtain residency, it is necessary to establish a legal entity within the territory of Uzbekistan and submit an online application with a business plan on the my.it-park.uz portal.

 

Information about the author:

Otabek Arzykulov — systems analyst, author of analytical articles for the publication “Economic Review”, and scientific articles on the digital economy, developed technologies and methodologies for Gazpromneft (Russia).

2024-01-16

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