Uzbekistan is missing out on up to $4.5bn in annual economic gains due to a controversial data localization requirement, according to a recent report by Kotib AI Research. The analysis points to Article 27, Paragraph 1 of the law on personal data as a major barrier to digital growth and foreign investment.
The provision mandates that all personal data of Uzbek citizens must be stored on servers located inside the country. As a result, international companies are required to establish local data centers, communication infrastructure, and dedicated teams—investments that often cost tens of millions of dollars.
“Given the limited size of the Uzbek market, many global firms simply decide not to enter,” the report states. “This results in lost opportunities, not just in convenience, but in tangible economic value.”
One of the most notable consequences of this law is the continued absence of PayPal in Uzbekistan, making it the only country in Central Asia where the platform is unavailable. Kotib AI Research estimates that the non-operation of PayPal alone has cost the country at least $1.8bn in revenue over the past five years. Overall, the local data storage requirement is costing the economy between $3.2 and $4.5bn per year—equivalent to 4–5.7% of GDP.
The analysis stresses that key sectors such as e-commerce, banking, IT, fintech, and startups are being disproportionately affected. Without access to international services such as Stripe, Netflix, Spotify, Amazon Web Services, and Microsoft Azure, innovation and expansion are stalling. Google Pay and Apple Pay are only partially functional in the country.
“This single flaw in the law is keeping investors out and stifling startup growth,” the report concludes.
It also notes that lack of access to global cloud services and APIs is hindering development in artificial intelligence and other digital services.
“Without international payment systems, Uzbekistan loses an estimated $500–800mn each year.”
Critics argue that the legislation is outdated and overly restrictive. Political scientist Kamoliddin Rabbimov described the law as technically unfeasible.
“It is impossible to store all communications on a single server inside Uzbekistan. If there’s a power outage, all that data could be lost,” he said. “There are serious technical and legal issues here.”
Former lawmaker Rasul Kusherbayev called the legislation unconstitutional and said it was passed under external pressure, despite warnings from within parliament.
“I advised other deputies not to vote for it,” he said. “Unfortunately, the concerns were ignored.”
Economist Abdulla Abdukodirov criticized the law’s origins, noting that it was copied from Russian regulations without proper public consultation.
“This is a strange and incomprehensible law. None of the major global platforms—Facebook, Twitter, TikTok—accept such terms,” he said. “It erodes investor confidence in Uzbekistan.”
The regulation has led to high-profile platform restrictions. Twitter was blocked in 2021 but later unblocked in 2022. TikTok remains inaccessible. Other platforms, including YouTube, Telegram, Facebook, and Instagram, faced temporary restrictions but were reinstated after public backlash.
The law is also blamed for delays in monetization of platforms like YouTube, limiting the expansion of the digital advertising market and job creation. In 2024, the market reached UZS 2.1 trillion ($164.3mn), with digital advertising accounting for 29%—a figure experts say could grow significantly with proper legal reforms.
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