On May 26, 2021, a presentation of the results of the survey of the state and prospects of the development of the digital economy in the Kyrgyz Republic, which the IBC conducted with the support of the USAID Enterprise Competitiveness Project and with the participation of external experts, took place.

The survey considered the best international practices of advanced countries, including the USA, China, Singapore, South Korea, and Ireland, as well as the experience of the EAEU countries — Belarus and Kazakhstan.

Last year, thinking about how to revive the country's economy in a pandemic, IBC saw good prospects in the development of the digital economy and took the initiative to study this sphere in Kyrgyzstan and develop proposals for its development. This initiative found support among business, government agencies, and international organizations.

“We have very proactive, mobile and easy-to-learn people, and we can apply many world practices,” said IBC head Askar Sydykov, highlighting the possibilities of the digital economy, which can contribute to GDP growth of up to 3-4 percent per year, as in developed countries.

The survey focused on the national legislation and practical cases related to the development of e-commerce, banking services and non-cash transactions, postal and logistics services, Internet access including broadband, digital literacy of the population and the main participants in the digital economy.

Kyrgyzstan ranks 97th out of 152 countries in UNCTAD's B2C E-Commerce Index. The index assesses the willingness of countries to develop e-commerce based on four indicators: Internet penetration, the presence of bank accounts among the population, the share of secure servers per 1 million of the population, and the level of development of postal services according to the rating of the Universal Postal Union. In this rating, Kyrgyzstan lags behind almost all CIS countries — Belarus (37th place), Russia (42nd place), Kazakhstan (52nd place), Armenia (66th place), and Azerbaijan (68th place).

According to Aibek Kurenkeev, vice president of the Association of Electronic Commerce and head of the Association of Telecom Operators, 72 percent of online stores in Kyrgyzstan are just a virtual showcase of offline stores, and they do not fully use the possibilities of digital commerce. It is necessary to implement a set of measures to stimulate the transition of entrepreneurs to e-commerce, starting with an understandable and accessible algorithm for starting a business in this area, simplified taxation, modern and convenient electronic payment systems, a developed system of goods logistics, especially in cross-border trade.

A separate research issue is the development of education in the field of the digital economy. Insufficient level of digital competence and skills of the population is one of the main challenges in the development of the digital economy in Kyrgyzstan. It is necessary to develop a comprehensive program for training digital literacy, increasing the competence of not only civil servants of all ranks, but also business representatives, persons planning to engage in entrepreneurship, and the general population. It is proposed to launch pilot projects for teaching digital skills in vocational colleges and technical schools.

To create a more favorable environment and stimulate online entrepreneurship, most countries provide tax incentives and subsidies. In neighboring Kazakhstan, for example, e-commerce market participants were exempted from corporate tax and income tax — subject to certain rules, including the sale of goods via the Internet, delivery through our own courier services or outsourcing, cashless payments, etc. In China, e-commerce is also exempt taxes, and the economy benefits from increased production and increased individual income.

The survey showed that, despite the existence of national programs and strategies including for digital transformation, many initiatives have not been sufficiently implemented in Kyrgyzstan. To provide a legislative platform, it is necessary to accelerate the adoption of the Law of the Kyrgyz Republic “On Electronic Commerce”, which contains an explanation of such concepts in the field of the digital economy as “electronic commerce” and “electronic transaction”. Changes are needed in tax legislation providing for special tax regimes for e-commerce and logistics of goods.

Products and services from Kyrgyzstan do not withstand price competition with manufacturers from other countries. Domestic exporters pay double taxes when trading with some countries. It is necessary to supplement the list of countries with which the Kyrgyz Republic has signed agreements on the avoidance of double taxation, since this list does not meet the requirements and needs of modern exporters (IT, export services and creative economy), such as Ireland, USA, UK, etc.

Products and services from the Kyrgyz Republic do not withstand price competition with manufacturers from other countries. Domestic exporters pay double taxes when trading with some countries. It is necessary to supplement the list of countries with which the Kyrgyz Republic has signed agreements on the avoidance of double taxation, since this list does not meet the requirements and needs of modern exporters (IT, export services and creative economy), such as Ireland, USA, UK, etc.

Electronic money is becoming more and more popular in Kyrgyzstan. So, according to data for the first quarter of 2021, there were 3.8 million e-wallets in the country (compared to the same period last year, the figure increased by 63.4 percent). But there are a number of constraints. Therefore, it is proposed to develop an agent network, the number of points (business entities) that accept payment through electronic wallets, including for cross-border trade.

Trade logistics problems create uncertainty and costs for both e-commerce firms and consumers. Kyrgyzstan is landlocked, which leads to additional costs in trade logistics. It is necessary to develop the potential of international trade and logistics centers (ITLs), including creating conditions for a virtual logistics center — a platform for a single exchange of data between all participants in the supply chain who can benefit, especially in terms of cost savings and logistics support. Most of the ITLs established in the country are conventional warehouses, and only a few of them handle packaging or provide transport and logistics services.

You can find all the materials of the roundtable by following the link:

https://bit.ly/3wiX4Ck