The “Digital Silk Road” in Central Asia

Guest post: Leyla Muzaparova www.beltandroad.blog January 2022

The development of the Belt and Road Initiative (BRI) requires the creation of digital infrastructure as well as transport and logistics infrastructure. With this in mind, the People’s Republic of China proposed the so-called “Digital Silk Road” initiative (DSR) in 2015. The scale of Chinese investment is testament to the government’s immense interest in the project. According to data gathered by the International Institute of Strategic Studies, China is currently participating in digital infrastructure projects in around 80 countries, and has already invested some 79 billion US dollars in DSR schemes worldwide.

Beijing sees the DSR as an instrument that will allow it to reconfigure the global digital order. In particular, China is attempting to achieve this goal by capturing new markets for homegrown technology giants such as Alibaba, Tencent, and Huawei.

Furthermore, the DSR rollout is linked to the “Made in China 2025” and “China Standards 2035” programmes, and is aimed at broadening Beijing’s opportunities in industry and technological innovation. The initial aim of the “Made in China 2025” programme was to catch up with other countries in various economic sectors such as robotics, aviation and space travel, new materials, and transport run on renewable energy sources. The “China Standards 2035” programme is the next step in the process and focuses on the promotion—both direct and indirect—of Chinese technological standards abroad.

China is striving to reduce its dependence on the old technological leaders—in other words, on Western countries. As a result, the DSR is paving the way for Chinese technology companies to establish a foothold in foreign markets and attract investment in order to develop digital industry.

Central Asia as a region has not been left out of these efforts. Rather, it has become an arena for the further development of the DSR. Since 2017, trade and investment ties between China and Central Asian countries have been reinforced under the umbrella of the BRI, resulting in the robust alignment of digital development strategies with the DSR in all five Central Asian countries: Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan.

In principle, the development of the DSR has the potential to provide major opportunities for Central Asia. The relatively poor developing countries of Central Asia are in the early stages of digitalizing their economies and public sectors, and are therefore committed to ramping up their digital capabilities through cheap and effective solutions, even more so given the socioeconomic difficulties caused by the COVID-19 pandemic. In the current climate, IT products engineered by Chinese firms have become highly attractive based on price and the possibility of minimizing expenditure. What’s more, some Chinese companies are providing services at a discount or even free of charge. According to Russian experts in the field, “Chinese suppliers, unlike companies based in Europe and the US, are not burdened by political constraints connected with human rights and ‘democratic values’”.

Central Partnerships in Central Asia

It is worth noting that there is high demand in the region for Chinese digital products, and close political and economic ties between China and the countries of Central Asia allow China to boost cohesion in this area. The drive to reinforce collaboration on the DSR in Central Asia was formalized in a communique released by the Ministers of Foreign Affairs from all five Central Asian states and the People’s Republic of China on 17 July 2020.

It should be pointed out that the expansion of China’s digital presence in Central Asia is currently being aided by both “soft” (alignment of norms and standards) and “hard” (construction of communication lines) measures aimed at universalizing infrastructure, spurring rapid growth in transnational trade (including of electronic goods), and fostering collaboration in training specialists and arranging professional exchanges in the IT sector. Multilateral platforms on digital issues (World Internet Conference, World Artificial Intelligence Conference, Smart China Expo, Digital China Summit, “Innovations for Digital Central Asia” Conference, China–Central Asia Cooperation Forum), created and launched by the People’s Republic of China, also allow Chinese companies to promote their products and services successfully and dominate Central Asian markets.

The initiatives developed in connection with the DSR are one of the most promising areas of collaboration between the People’s Republic of China and Central Asian states. Chinese companies are placing their bets on the development of 5G networks, “smart cities” (cities with smart infrastructure and digital methods of managing the entire metropolitan area), the Internet of things, fibre-optic communications cables, mobile payment systems, telephone communications systems, and IT platforms for processing cargo shipments, among other things. At the same time, emphasis is being placed on expanding transnational e-commerce which, according to Chinese experts, has already become the driver of the Digital Silk Road in Central Asia.

In terms of the DSR, the main partner countries in the region from a Chinese perspective are Uzbekistan and Kazakhstan, judging by the number of joint projects across diverse areas of the IT sector. In Kyrgyzstan and Tajikistan, Chinese investment is largely focused on the creation of “smart cities” and the development of new-generation telecommunications networks. In Turkmenistan, the main focus is on building a fibre-optic communications cable under the Caspian Sea.

Above all, the adoption of Chinese technologies, equipment, and approaches to social governance are seen by Central Asian governments as a forward-thinking way of making the state apparatus more efficient. Kazakhstan, for example, which is considered the regional leader in digital development, was recently confronted with the need for a digital revamp and replacement of its e-governance platform, eGov.kz, which had ceased to fulfil its functions due to technical obsolescence. The Kazakh e-governance system is in urgent need of a contemporary cloud platform, which would take the country to a new level of technological development.

In spite of the vast sums of government money that have been poured into the development of the IT sector over the past ten years, Kazakhstan found itself unable to cope with this task without outside help, and considered turning to the Chinese company Huawei, which boasts one of the most sophisticated cloud platforms on the market today. However, US sanctions against Huawei prevented Kazakhstan from communicating directly with the company, prompting the Kazakh government to sign a memorandum of cooperation with Russia’s Sberbank, which had already adopted Huawei’s cloud platform. Granted, this provoked a measure of outrage among the general public, as well as criticism of the government and claims that signing the memorandum had been an act of incompetence and represented a failure to implement the digital revamp independently.

It is worth mentioning that Huawei, as the standard-bearer for the DSR in Central Asia, is now the market leader in the IT sector in three countries in the region: Uzbekistan, Kazakhstan, and Kyrgyzstan. The corporation has expressed its intention to “build a digital Central Asia and move the region towards intelligence”. Huawei is actively pursuing a policy of “soft power” in the region by organizing multiple cultural and educational events. Since 2017, it has been holding regular “Central Asia Innovation Days” in each of the region’s capitals, in order to create a forum for dialogue on issues related to DSR development in Central Asia. It is also hiring and training IT specialists from Central Asian countries.

Huawei representatives are convincing government agencies across Central Asia of the importance of digitalizing their work process and creating a “smart government”. However, the corporation’s main focus is realizing the “smart cities” project, on which it is prepared to collaborate actively with local partners. Huawei is promoting the idea that implementing the aforementioned initiatives would create the necessary conditions for the modernization of Central Asian economies and an influx of investment across the board from the People’s Republic of China, and that the expansion of 5G networks backed by Chinese technology in the region would advance the development of the Internet of things and “smart cities”.

Potential Downsides and Growing Imbalances

Although the use of “smart city” technologies actively promoted by China as part of the DSR is undoubtedly solving most of the problems currently facing state administrations, it is also opening the door to negative socioeconomic and political consequences which may arise during the process of digitalization in the fledgling democracies of Central Asia. Indeed, the process of digitalization embedded in neoliberalism fans the flames of de-democratization and produces a technocratic system of government which targets the unregulated generation of profit and glosses over negative socioeconomic consequences.

We should not forget that the “smart city” model is being promoted by major IT companies (in particular by Huawei), which are counting on earning money from huge state and city contracts and the monetization of the big data that they have collected. This affirms the shift in the role of the state from source of social support for vulnerable sections of the population to supplier of business services and benefits to the upper and middle classes. Moreover, as experience overseas has shown, the digitalization of a city in the midst of social polarization (as in the case of Rio de Janeiro), when a significant proportion of urban residents live in deprived areas, only serves to reinforce existing inequalities.

Another element of the “smart city”—and currently most controversial—is the integrated system of surveillance cameras equipped with facial-recognition technology. It is highly contentious from the point of view of individual privacy and the threat of expanded police surveillance powers. Civic activists and members of the public in various Central Asian countries have already begun to recognize the dangers this poses. They are concerned that corporations, along with the state, may secure new instruments for monitoring and policing the behaviour of the population.

Given that Chinese companies promoting “smart city” technology in the region are, as a rule, actively and routinely offering the use of their own equipment (such as surveillance cameras and accompanying technology), local communities are becoming even more worried. In particular, experts and the general public in the region have misgivings about the storage and security of citizens’ data if Chinese companies were to gain access to it while implementing projects rooted in digital collaboration.

Suspicions and speculation about possible systems of monitoring the populations of Central Asian states through Chinese IT products, along with periodic surges in Sinophobia, are taking a toll on the implementation of the BRI in Central Asia. In particular, growing trends of nationalist and anti-Chinese sentiment are already being observed in Kazakhstan and Kyrgyzstan in the context of China’s dynamic economic activity. The political analysts and experts on China Anton Bugaenko (Kazakhstan) and Nargiza Muratalieva (Kyrgyzstan) spoke on this subject during an online discussion on the influence of the BRI on socioeconomic processes in Central Asia organized by the Rosa-Luxemburg-Stiftung on 19 November 2020.

Against this backdrop, Uzbekistan is becoming the new centre of gravity in Central Asia for investment, collaboration, trade, and transcontinental projects initiated by China. Adil Kaukenov, director of Kazakhstan’s China Center, has written that, “in spite of Kazakhstan’s objective stake in investments and the necessity of increasing its sales on the Chinese market, the exact opposite is actually taking place, driven by public opinion, which is responding to shameless ‘hype’. Trade and investment cooperation with Kazakhstan’s neighbour, a major economic power, is diminishing. That is to be expected. Indeed, the levels of Sinophobia, public resistance, and spread of misinformation mean that the Kazakh market is becoming too risky and impractical for collaboration.”

In this sense, the Central Asian community recognizes the importance and, in some respects, indispensability of cooperating with the People’s Republic of China in the digital sphere, and is becoming aware of certain challenges and risks. Central Asian experts believe that the main challenge posed to the region by the BRI is the increase in debt owed by all states in the region to China. To put that in context, it is estimated that Kyrgyzstan’s debt to China constitutes 43 percent of the country’s total foreign debt. In the case of Tajikistan, this figure is 38 percent; for Uzbekistan, 20.6 percent; and for Kazakhstan, 14 percent.

Another alarming aspect is the imbalance in mutual trade between China and the countries of Central Asia. Although a substantial proportion of the region’s trade is carried out with the People’s Republic of China (37 percent of all imports and 22 percent of all exports), Central Asian governments account for only 0.008 percent of China’s foreign trade turnover.

A Mixed Balance Sheet

In summary, it can be argued that the development of projects linked to the DSR is allowing Central Asian countries to transform their economies. All countries in the region have already drawn up basic strategies for developing a digital economy, which contain a large Chinese component in both investment and technology. Furthermore, the potential benefits for the region of collaborating with the People’s Republic of China are generally the development of logistics capacities and the formation of new economic and industrial clusters.

On the other hand, recent agreements between the countries of Central Asia and the People’s Republic of China to reinforce cooperation in medicine and healthcare and develop ties in light of the BRI also stipulate that those countries be included in projects of digitalization, which is highly relevant during the ongoing pandemic. Although the COVID-19 pandemic led to a reduction in trade between China and Central Asian countries in 2020–21, it has also fuelled collaboration in the spheres of healthcare and digital technology.

In general, the COVID-19 crisis has demonstrated the extent to which economies in the region depend on China and its crucial position in industrial supply chains, including representatives of small- and medium-sized enterprises. Therefore, local experts believe that despite the existence of a number of challenges and risks, and in light of the selective, project-based approach of regional governments (i.e. one that meets national interests and observes ecological and other standards), the BRI, including the Digital Silk Road, can become a means of accelerating the post-crisis recovery for Central Asian economies.

Translated by Helena Kernan and Joel Scott for Gegensatz Translation Collective.

Leyla Muzaparova holds a PhD in economics and works as a project manager at the Rosa Luxemburg Foundation’s Central Asia Office in Almaty.

This post was first published in the Dossier ‚The New Silkroads’ of Rosa Luxemburg Foundation, Berlin.

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