Why e-commerce? Two reasons. First, e-commerce reduces the cost of distance. Central Asia is the highest trade cost region in the world: vast distances from major markets make finding buyers challenging, shipping goods slow, and export prices high. Second, e-commerce can help pull in populations that are traditionally under-represented in export markets such as women, small businesses and rural entrepreneurs.
By Alisa DeCaprio and Jeff Procak
In 2015, Central
Asia made some important improvements in the environment for cross-border
e-commerce: Kazakhstan’s accession to the World Trade Organization (WTO) will
boost commercial transparency, while the Kyrgyz Republic’s membership in the
Eurasian Customs Union expands its consumer base.
Why e-commerce?
Two reasons. First, e-commerce reduces the cost of distance. Central Asia is
the highest trade cost region in the world: vast distances from major markets
make finding buyers challenging, shipping goods slow, and export prices high.
Second, e-commerce can help pull in populations that are traditionally
under-represented in export markets such as women, small businesses and rural
entrepreneurs.
Among Central
Asia Regional Economic Cooperation (CAREC) countries, the People’s Republic of
China (PRC) stands out on e-commerce. In 2015, the PRC had an estimated 700
million net users, more than twice as many as the US and Japan combined. By
2018, it is expected to be the driver of global e-commerce flows. But how ready
is the rest of CAREC to use e-commerce?
Business usage
is low – even though infrastructure exists
For business to
thrive online, access to high-speed broadband Internet is a must. In most CAREC
countries broadband is available, and in some cases internet infrastructure has
promoted strong growth in Internet usage by individuals in both urban and rural
areas. Yet business usage underperforms relative to other regions in Asia.
Even though
business usage underperforms, there are some serious efforts by the private
sector to use e-commerce to drive growth. Kazakhstan’s www.chocolife.me is a
B2C provider selling discount tickets to entertainment events, while the Kyrgyz
e-commerce site www.prodsklad.kg is a B2B provider selling agricultural goods
to restaurants and hotels. Payment in cash on delivery remains common because
of limited reliance on credit cards and concerns about data privacy.
Cyber
legislation is progressing at two speeds in the region
E-commerce needs
a trusted regulatory framework in place to protect both buyers and sellers.
Within CAREC, data show countries implementing facilitating legislation at
different speeds.
The first group
of countries—including Azerbaijan, PRC, Kazakhstan, and Pakistan—has complete
legal coverage of cybercrime, and nearly all have data and privacy protection
laws, with the PRC including consumer protection as well. The second group has
laws in two or fewer areas. Of the four major legislative areas, all countries
have at least a draft law on electronic transactions. There is, however, no
evidence that any country in this group aside from the PRC has implemented
consumer protection legislation.
Existing
legislation in key areas of cyber laws
Source: UNCTAD
2015 (annex 3)Note: – signifies “no data available”
Legislation is
critical to building trust in countries where e-commerce is new. In
Turkmenistan and the Kyrgyz Republic, government officials report that consumer
trust remains low, which limits e-commerce growth. By contrast, in Azerbaijan
e-commerce and public trust around it have grown since 2009. The passage of
legislation on information safety and related issues was a critical driver of
increasing consumer confidence. For Tajikistan, the WTO accession process has
also been a promoter of the legal transparency that facilitates e-commerce.
Cross-border
e-commerce targets neighbors
E-commerce
within CAREC is largely domestic and urban, but increasingly, countries are
putting in place structures needed to facilitate cross-border purchases. Many
CAREC countries report targeting e-commerce efforts at their immediate
neighbors. Afghanistan is looking toward India. Kazakhstan plans to use the
Almaty-Bishkek Corridor Initiative (ABCI) to expand e-commerce with the Kyrgyz
Republic. And the Kyrgyz Republic hopes that the ABCI can help leverage its
Eurasian Economic Union membership as well as Kazakhstan’s accession to the
WTO.
Accelerated
parcel flows pose problems for customs
Cross-border
e-commerce increases the frequency of small parcel flows, which is positive for
trade volumes. But customs officials in Central Asia report three unexpected
problems.
- Coping with the volume of flows. Customs officials in Uzbekistan and others have been overwhelmed by large inflows of small shipments using paper-based customs systems. Single-window facilities can address this problem. Azerbaijan has established a national single window; Kazakhstan, Tajikistan, the Kyrgyz Republic, and Uzbekistan are developing theirs; and Afghanistan, Kazakhstan, and Turkmenistan are implementing UNCTAD’s ASYCUDA system to automate Customs.
- Uncertainty about how to estimate risk for small parcels. Increased import volumes also pose risk assessment problems, and how new global rules on antiterrorism and anti-money laundering should be applied to small parcel shipments is not always clear.
- Confusion about how to assess
duties. When assessing customs duties based on the method of parcel
delivery rather than the nature of the traded good, traditional postal
services benefit from preferences enshrined in decades-old international
agreements, while those delivered by express service providers do not.
What’s next?
CAREC countries
are making progress toward enabling e-commerce. As automation improves,
infrastructure spreads to rural areas, and as regional cooperation promotes
cross-border exchanges, we can expect that the private sector will grow.
New areas of
e-commerce are emerging that could be particularly well suited to the Central
Asia environment. Online trade in livestock, for example, could meet the needs
of rural traders. One example is www.farmia.co, which matches sellers with
buyers in Serbia. Bringing traditional areas of commerce online also opens the
door to job creation in support services like transport solutions and payments
systems – all of which can help countries more intensively use the regional
agreements that are rapidly coming online in the CAREC region.
About the Authors:
Alisa DeCaprio is a research fellow and
the Asian Development Bank Institute. She was formerly a regional cooperation
specialist in the Economic Research and Cooperation Department of the Asian
Development Bank.
Jeff Procak is a regional cooperation
specialist in the East Asia Regional Department of the Asian Development Bank.
This article was
first published by ADB
Development Blog.
This article was released under Creative Commons Attribution-NonCommercial3.0 Unported License by the original publisher – Asian Development Bank’s Blog
