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  • What opportunities does e-trade give Kazakhstan?

What opportunities does e-trade give Kazakhstan?

14 May, 2019 15:13
In Kazakhstan’s digitalization program e-trade is not out of sight. Certain measures are taken to demonstrate upward trends in this area. Read the article below to peek inside the country’s e-trade development.

In 2018, the total e-trade increased by a factor of 1.5 and stood at 269 billion tenge (earlier – 174 billion tenge), while its share equals 2.9% of the total trade (earlier – 1.9%). The number of active buyers doubled to 2.3 million people (earlier – 1.3 million people). Kazakhstan has over 1700 independent online shops, and around 20 e-market places, enabling over 1 million small- and medium-sized business entities to sell products.

Kazakhstan’s e-trade structure is represented by 68% of merchandise trade and 32% of service sales. It is a huge demand for building materials, household equipment, cosmetics, clothes and shoes, and for services such as air and railway ticket sales, paying for cultural events and utilities.

In Kazakhstan electronic food trade totals at 15.4 billion tenge and accounts for 4% of the total e-commerce market.

“E-trade has no territorial boundaries, that is there are endless possibilities for domestic agricultural producers to capture new markets and find buyers. Online trade is a great opportunity to develop trade in rural areas”, Ruslan Dalenov, National Economy Minister, said.

The country’s geographical location between China and Europe is convenient, there are all infrastructure and procedural options to distribute existing online parcels through Kazakhstan.

In 2018, 670 million parcels were transported from China to Europe, with the transit of 7% or 39.2 million parcels through Kazakhstan. The transport corridor Western Europe-Western China is expected to increase this figure to 864 million by 2025, thus boosting revenues of Kazakh companies from 132 billion tenge to 1 trillion 270 billion tenge. Trade and related sectors, including transit, will develop once e-commerce grows. This will boost GDP growth by 1.1% every year by 2025.

Legislative support for e-trade

The business environment development and trade regulation act was adopted on 2 April this year. It provides for systematic measures on furthering e-trade.

The concept of “e-commerce” was established at the statutory level, which includes trade in goods and services.

The Institution for Consumer Protection was strengthened, making a customer of e-trade protected insofar as one of normal trade.

The exporting goods declaration procedure was simplified.

The boundaries of rights and commitments of e-trade participants were demarcated.

Online trade support measures

Tax deductions (100% individual income tax and corporate income tax decrease) to stimulate online trade are envisaged by 2023, with 509 applications already received from business entities.

Fiscal incentives to offset the costs of purchasing online till or ERP systems (till+card acceptance+book-keeping of goods) are established to boost non-cash payments. Up to 120 thousand tenge will be compensated in 2 years.

To develop instant payments the National Bank rolled out a project, making it possible to use mobile phones as means of payment (from 7 September 2018). The project already involves 3 banks, it is planned to add other 10 banks by the end of the year.

SME Training

Under the service support from the NCE Atameken 15 thousand SMEs were trained in doing business online. Other 20 thousand entrepreneurs will undergo training this year. KazPost established four E-commerce centers, training over 1500 business representatives in running online-trade and creating online shops from scratch.

Existence of accessible and technologically advanced infrastructure

The concept of “fulfillment house” and its functional, offering a whole spectrum of logistics services – from receiving and storing to delivering to the final consumer was introduced.

Measures to stimulate e-trade

To provide Kazakh rural settlements with access to the broadband internet using fibre-optic communications links and wireless network access through LTE and satellite technologies. 12.5 million people have access to the broadband internet, and 5.9 million people or over 300 settlements are expected to be covered.

Around 12.3 million people got a skills-based education in 4 areas (basic digital skills, open gov skills, e-gov skills, e-commerce skills). The roll-out of mobile payment systems is envisaged. The instant payment system “Suńqar” allowing to use a mobile phone was designed.

“Internet directly affects e-trade development. Therefore, the Ministry carries out the projects to ensure Kazakh rural settlements have access to the broadband internet through LTE and satellite technologies. Following the creation of necessary tele-communications infrastructure in 2022, 100% of rural settlements will be provided with broadband access to the internet”, Askar Zhumagaliyev, Minister of Digital Development, Defense and Aerospace Industry of Kazakhstan, said.

The total number of tills used in Kazakhstan is 545 000 units, of which 270 000 online tills.

The outlook for e-trade

The volume of trade reached 153 billion tenge on Kazakhstan’s online platforms, and 147 billion tenge on international ones, this year it is supposed to grow by 50%. The most demanded goods are clothes, foods, household items, medications, films and music.

The planned share of e-trade in the total retail trade was reached and made up 2.9%, with 2.32 million online customers. A 24% e-trade growth and over 15 million online customers are expected by 2025.

In 2018, 10 thousand workplaces in the e-trade field, and 33 thousand in related fields were created. It is planned to create an additional 134 thousand workplaces in e-trade and 314 thousand workplaces in related fields.

Adlet Seilkhanov