Central Asia: Tested by Innovation

Tashkent, Uzbekistan (UzDaily.com) — How can a region survive in the era of artificial intelligence and an intangible economy? Here are the key points from a presentation by Anna Ananyeva, head of KGF Researche, at the K25 Forum:

In today’s world, new heroes are emerging — companies that do not merely follow trends but set them, reshaping the rules of the game. We are witnessing the creation of a new reality before our eyes: artificial intelligence, digital ecosystems, and even intangible assets are becoming a kind of “oil and metal” of the 21st century — the very production base that will define the future. To understand why innovation has become the main strategic driver of growth, it is important to consider the big picture.

Research by leading consulting firms paints a revealing picture: companies that systematically prioritize innovation increase their R&D budgets nearly twice as fast as their revenue grows. This is not just a trend — it is a strategic shift, where investments in the future begin to outpace current operational results.

Such targeted investments in technology deliver tangible benefits to shareholders, adding approximately 2–3 percentage points of additional returns above the market average. With the advent of artificial intelligence, this effect is expected to intensify: by 2035, AI could boost global GDP by around 15%, creating entirely new markets and dramatically accelerating the commercialization of innovations.

It becomes clear that innovation has emerged as a key driver of growth for companies. However, to assess the true scale of these changes, it is necessary to look beyond corporate reports and see the global picture.

Over the past two decades, despite successive crises, a pandemic, and constant geopolitical turbulence, the world has demonstrated a remarkable trend: global spending on research and development (R&D) has tripled — from $1 trillion in 2000 to nearly $3 trillion today. More importantly, the share of these investments in global GDP has increased from a modest 1.5% to nearly 2%. This indicates that even amidst a growing global economy, both companies and governments are investing in the future at an accelerated pace, recognizing R&D as a strategic priority.

The distribution of these investments across countries and regions is particularly telling. The United States remains the undisputed leader, allocating nearly $784 billion, or 3.6% of its economy, to science and development. China holds a firm second place with $723 billion, accounting for over a quarter of global R&D spending. The European Union invests around $410 billion, while Japan and South Korea round out the top five — countries that demonstrate some of the highest relative investment levels globally, directing 3–5% of their GDP to science.

Behind these numbers lies a fundamental shift: traditional innovation hubs in North America and Europe are gradually losing ground, while Asia is not only increasing its presence but steadily strengthening its role as a new global hub of technological progress.

Today, Southeast and East Asia account for nearly half of all global R&D investments — an impressive indicator of a dramatic shift in global power dynamics. China’s confident leadership has been enabled by a consistent two-decade policy that elevated innovation to a national strategic priority. This policy includes extensive university funding, targeted demand creation for high-tech products, and comprehensive support for companies investing in key future sectors such as artificial intelligence, telecommunications, and biotechnology.

Modern business presents an intriguing paradox: although 83% of companies worldwide identify innovation as a priority, only 3% actually make the systemic transition — restructuring processes, directing investments, and carefully measuring the impact to ensure that innovation generates real profit rather than remaining experimental. This vast gap between intention and action exposes the central challenge of our time. Only organizations ready to invest not only in technology but also in processes, personnel, and a culture that allows innovation to thrive can overcome it. It is among this three percent that the future market champions emerge.

So who are the companies that have turned bold claims into measurable results?

This elite three percent club is primarily composed of U.S. technology giants. Alphabet (Google) remains the undisputed leader, investing nearly €40 billion in R&D in 2024 alone. Meta, Apple, and Microsoft follow — companies whose investment programs have become industry benchmarks.

The Asian region is confidently represented by titans such as Huawei, Samsung, and Toyota, demonstrating that technological leadership is no longer the exclusive prerogative of Silicon Valley. Europe maintains its position through industrial flagships — Volkswagen, Mercedes-Benz, and pharmaceutical giant Roche — proving that a strong research culture remains a competitive advantage in the digital era.

Sectoral statistics make the picture even clearer: the lion’s share of investment — about $300 billion — goes to information and communication technologies, electrical engineering, pharmaceuticals, and biotechnology. These high-tech, knowledge-intensive industries form the core of the global innovation ecosystem, setting the trajectory of global progress.

However, corporate rankings are only part of the story. To grasp the full depth of these changes, one must look at how innovation manifests at the level of entire countries and economies.

The recently published Global Innovation Index by the World Intellectual Property Organization acts as a barometer, measuring the scientific and technological pulse of 139 economies. This comprehensive assessment, covering some 80 indicators — from human capital and infrastructure quality to business maturity and intellectual output — reveals the clear reallocation of global innovation power.

Europe remains the most innovative region, while China has established itself as a locomotive for developing economies. For fifteen consecutive years, Switzerland has retained first place among high-income countries, consistently sharing the podium with Sweden and the United States. Their secret is both simple and complex: decades of systematic investment connecting fundamental science, applied technologies, education, and entrepreneurial ecosystems.

China deserves special attention this year, entering the top 10 global rankings for the first time. It not only leads in “Knowledge and Technology Outputs” but also demonstrates an impressive innovation geography, hosting 24 of the world’s 100 largest innovation clusters. The Greater Bay Area of Shenzhen–Hong Kong–Guangzhou has emerged as a global hub for IT, innovation, and creative industries.

Amid these global shifts, a natural question arises: where does our region stand in this vast innovation map? Turning to Central Asia, we can assess its position in this rapid technological race.

The Global Innovation Index is built on two fundamental pillars: innovative resources — the potential derived from human capital, infrastructure, education, and institutional maturity — and the practical results of innovation, expressed in metrics such as patent quantity and quality, successful commercialization, knowledge exports, and the creation of breakthrough technologies and business models. The balance between these two elements determines a country’s global ranking.

Uzbekistan has made an impressive leap, climbing 43 positions since 2015 to rank 79th, demonstrating its growing ability to convert resources into measurable results. Kazakhstan is ranked 81st overall, with a higher 75th place in resources, indicating a solid foundation but the need to more effectively transform potential into products and technological solutions.

Kyrgyzstan, at 96th place, shows a regional gap: 93rd in resources versus 98th in results, suggesting resources are not yet fully leveraged. Tajikistan, 108th, lags in both resources (105th) and results (104th).

A critical challenge across the region is the low R&D-to-GDP ratio, far below global leaders’ 2–4%. The near-term priority is not only expanding resources but creating mechanisms to convert potential into tangible results capable of altering economic trajectories.

Analyzing the strengths and weaknesses of Kazakhstan and Uzbekistan reveals an interesting asymmetry. Kazakhstan excels in digitalization, ranking 10th globally in online government services, yet commercializes science poorly, ranking 115th in university-business collaboration and 136th in software investment. Uzbekistan has built an effective entrepreneurship and startup financing system but shows weaker results in areas such as low-carbon energy usage. Its ambitious goal to enter the Global Innovation Index top 50 by 2030 demonstrates strong political commitment to systemic reforms.

Both nations excel in specific areas — digitalization, educational base, or entrepreneurial support — but share the challenge of converting scientific and human potential into commercial outcomes. Private investment in R&D and bridging science with business will be decisive in building an innovative economy.

We are witnessing a fundamental transition from a material-asset economy to a knowledge economy, where intangible assets increasingly determine value. These assets grow four times faster than tangible counterparts. By 2024, global investment in intangibles reached $8 trillion, with over $4.7 trillion concentrated in the U.S. Over the past twenty years, intangible assets’ share of global GDP has grown from 10% to 14%, reflecting a structural shift in the global economy.

AI investments have been a key catalyst, accelerating the value of software, data, and R&D. This is particularly vital for service- and tech-oriented sectors, where value is primarily intellectual and algorithmic.

Kazakhstan ranks 48th of 147 countries in AI readiness — a moderate but promising level with significant untapped potential. Around 60% of intangible investments remain invisible to official statistics, representing both a transparency challenge and a major growth reserve. Companies that manage these assets effectively demonstrate higher capitalization and profitability, proving that in today’s economy, real value increasingly lies not in tangibles but in what can be conceptualized and algorithmically harnessed.

The S500 Top 20 innovative companies list defines innovation as systematic investment in three areas: R&D, software, and other intangible assets. These companies consistently outpace market trends, delivering unique customer experiences through thoughtful, efficient use of resources.

Evaluation combines rigorous financial analysis with qualitative product assessment, examining investment discipline, operational performance, and a Digital Score reflecting market demand, user ratings, and scalability of innovations.

S500 leaders span sectors from finance and IT to construction, telecommunications, transport, and logistics, including both private and state-owned firms, underscoring that innovation is a strategic and cultural choice, not a question of ownership.

Kazakhstan’s financial sector stands out. Full digital ecosystems now offer clients services from payments and transfers to investments and insurance, setting benchmarks across industries. The trend favors companies building direct, continuous customer engagement and scaling digital services into integrated ecosystems, creating new growth points. Most vividly, this strategy is illustrated by the top three companies in the ranking.

Kaspi.kz is not merely a digital platform; it is Kazakhstan’s leading fintech super-app, clearly demonstrating how strategic investments in innovation, combined with exceptional operational efficiency, create a sustainable competitive advantage in the market.

The leader in the ranking is distinguished not only by high R&D intensity but also by outstanding operational efficiency. The Kaspi.kz super-app, downloaded over 10 million times and rated nearly at the maximum score, has become an integral part of its users’ daily lives. This level of integration reflects not only popularity but also the platform’s fundamental ability to scale and adapt its services to evolving needs.

In April 2024, the company made a significant breakthrough by launching overseas payment functionality via Alipay+ in more than 50 countries. This marked the first instance of a company from our region taking its payment service to such a global scale. Innovations like the “Kaspi Restaurants” service continue to expand an already rich ecosystem, strengthening the company’s market position and opening new horizons for growth.

Kolesa Group today is more than Kazakhstan’s largest online platform for automotive, real estate, and e-commerce services. It is a true example of deep digital evolution: beginning two decades ago as a modest newspaper classifieds section, the company has transformed into a multifunctional technological ecosystem, setting new standards for the entire market.

Its growth stems not merely from expansion but from successive technological upgrades and the development of platform-based solutions. Operational efficiency metrics speak volumes: the platform not only attracts massive traffic but has learned to monetize it brilliantly, demonstrating high capital returns. Our Digital Score confirms the strength of its brand and exceptional user engagement.

A key factor in its success was the implementation of an AI-based recommendation system, radically transforming how cars are selected and displayed. This solution yielded impressive results: the volume of calls and messages between users increased by 50%, creating a more dynamic and active marketplace while significantly reducing fraud risks. It is a clear example of how technology not only optimizes processes but fundamentally changes the nature of human interaction.

The People’s Bank of Kazakhstan exemplifies how a traditional financial institution can undergo a strategic transformation into a multifunctional digital ecosystem. Today, under its digital umbrella, it offers not only conventional banking products but also diverse services such as tourism, marketplaces, government services, education, and even entertainment.

The scale of this transformation is evident in the integration of public services: the bank’s app now offers 66 government services — almost twice as many as the nearest competitor. This step not only expands the user base but fundamentally changes the bank’s role in clients’ lives, making it a daily digital companion.

The bank consistently develops new directions and technologies, and this strategy yields tangible results: sustainable revenue growth confirms that investments in digitalization deliver real returns. High user trust and flawless digital experience further strengthen its market position.

Thus, the People’s Bank of Kazakhstan demonstrates a working formula for success: the integration of innovation, digital services, and intangible assets creates sustainable leadership, enabling the institution not only to adapt to change but also to set new standards for the entire sector.

In conclusion, it is clear that innovation has decisively shifted from an optional strategy to a systemic driver of economic growth. Companies that consistently invest in research, development, and intangible assets demonstrate not only higher capital returns but also sustained growth, easier entry into new markets, and greater resilience during periods of turbulence.

It is important to understand that increased investment in R&D has a powerful multiplier effect. Even relatively modest, targeted increases from 0.1% to 0.5–1% of GDP can radically alter a country’s position in the global innovation ranking, triggering a chain reaction of development.

In today’s economy, intangible assets and artificial intelligence are key drivers of competitiveness. They form a kind of “production base” for the 21st century, determining which companies and countries will gain access to the most valuable resources — capital, advanced technologies, and new markets.

The experience of the innovation leaders in the S500 ranking demonstrates that this path is not only feasible but is already yielding results in our region. Their success is the best proof that a systematic approach to innovation works, and, most importantly, that its methodology can and should be scaled across other companies and industries to lay the foundation for future economic breakthroughs.