THE COMMERCIAL WEB

Experts believe that in a couple of years' time the total volume of trade carried out on the Internet will reach the 1.5 trillion dollar mark compared with 1 trillion in 2012. On-line commerce, which is reckoned to be the most cost-effective means of buying and selling goods and services, is developing in Azerbaijan. The rules of the preferential and simplified customs clearance of goods belonging to individuals, which were recently adopted by the Azerbaijani Cabinet of Ministers, should contribute to the advancement of this emerging form of trading.

Commercial benefit 

The first systems and methods of electronic commerce can attribute their inception to the American companies American Airlines and IBM who back in 1960 created the SABRE system for the automatic seat reservation procedure on aircraft. However, the electronic commerce market has been given its greatest impetus in the last 15 years following the rapid growth in the number of Internet users, the increasing influence of social networks, forums and other inter-active on-line sites, and also the dynamic development of electronic payment banking systems. Today the e-commerce sphere has become extremely widespread in the corporative segment in the world's developed countries. It enables large and small companies to make their mutual trade simpler and cheaper, more efficient and transparent and offer the customer the opportunity for inter-active control over the movement of goods at every stage (a so-called tracking number).

In the countries of the former Soviet Union, where "grey" trading schemes were dominating not long ago and there have been frequent cases of tax evasion, e-commerce with its non-cash transactions and financial transparency has only recently become fairly widespread in the corporative segment, whereas in the consumer segment electronic commerce in the majority of the CIS states has been developing for some time and quite actively. I am referring to the retail trade through local Internet shops or purchases on international sites like eBay and Amazon where payment is by bankers' or other cards. And in recent years the buying and selling of goods and services through popular social networks like Facebook has become widespread. Other types of electronic commerce such as Internet auctions, where ordinary customers can complete deals, are also developing apace. At the same time, virtual auctions play the role of something akin to the "flea market" or newspaper advertisement column, which were so popular in the past.

All the aforementioned systems exist to one degree or another in Azerbaijan, too. It will suffice to mention that national electronic payment systems have been created in the country in previous years and local banks have issued a number of plastic payment cards, including those specially designed for purchases on the Internet. For some time now the services of processing centres have been actively used by local Internet providers, telephone companies and airlines for communal on-line payments. Recently even cultural and entertainment establishments in the capital have started using Internet services: a large number of theatre and cinema box offices and other cultural centres in Baku have signed up to the electronic trading system. Package holidays are also now being sold on the Internet.

Retail trade is also gradually gaining momentum: there are currently over 100 Internet shops operating in the country and the regular customer base of some of the more advanced on-line ones is over 5,000. At present 91.3 per cent of the turnover in the electronic commerce market in our country is accounted for by non-food products and over four-fifths of purchases are made by corporate clients. 

Slowly but surely 

At the same time, the majority of Internet shops in the country that market consumer goods are often unable to compete with the foreign "big boys" of on-line commerce both from a price and range point of view. There are material factors here: the production of the aforementioned groups of goods is generally not localized in the country. As a consequence, local Internet shops have to bear the costs of transportation, customs tariffs, warehouse storage, and so on. At the same time, Internet commerce in the country also has a unique advantage: goods can be delivered to a customer within one or two days and the customer has the opportunity to exchange damaged or sub-standard goods promptly, which is not always possible when purchasing abroad.

"A number of Internet companies specializing not in supplying goods purchased abroad but dealing in after-sales services, for example services linked with restaurants and entertainment centres, selling tickets, and so on have emerged recently in Azerbaijan. A rather serious area has taken shape here in recent years where value added cost is being fabricated here in Azerbaijan, and not somewhere abroad. And it is in this area where something new can be made and people can make money," the executive director of the Millikart Group processing centre, Calal Orucev, believes.

The Internet trade sphere in Azerbaijan is still in the evolutionary stage and it would be premature to claim that this sector will be able to draw a significant number of customers from normal trade outlets. And it is, of course, difficult to compare local figures with those in the USA where the size of e-commerce equates with 10 per cent of retail trade turnover. In our country things are much more modest. According to the State Statistics Committee, the size of the electronic commerce market in nominal terms reached just 1.8m manats in the first nine months of this year. By way of comparison, in this same period the total volume of retail trade in Azerbaijan was 13.9bn manats. However, one should bear in mind that the real volumes of turnover of the structures engaged in electronic commerce are not always transparent and accountable. Accordingly, real turnover in the e-commerce sphere is probably much higher than declared turnover.

Still, even allowing for the gap between it and traditional retail trade the increase in electronic trade in our country is very impressive: specifically, its volume has increased 1.7 times compared with last year.

Judging by the government's recent decisions, the volumes of e-commerce can only increase and at a very high rate in the near future. The guarantee of this is the decision of the Azerbaijani Cabinet of Ministers which has introduced new rules of preferential and simplified customs clearance relating to goods belonging to private individuals that are not intended for commercial use. When this decision comes into force at the end of November there will be a simplified import/export procedure upon declaration of a number of excisable goods to the sum of 1,500 dollars (with the possibility of an increase in value by 500 dollars for each accompanying individual). The import/export of currency and securities to a sum of up to 10,000 dollars is also possible, the type of declaration for which will be established by the Central Bank.

You can buy more! 

And the Cabinet of Ministers' decision is truly revolutionary for the foreign Internet trade segment. For example, henceforth for postal items the preferential and simplified import/export procedure extends to packages from a juridical person to a private individual to a sum of up to 1,000 dollars for not more than once in 30 days. In other words, citizens are now able to receive duty-free postal items to an overall sum of about 12,000 dollars a year, and this could objectively be regarded as one of the most liberal allowances in the world. In the past the maximum amount of duty-free postal items in Azerbaijan was limited to 200 dollars, and this significantly constricted the opportunity of purchasing electronic gadgets and other costly goods on such a popular site as ebay.com.

The fivefold - in monetary terms - increase in access to goods sent by post from abroad will, of course, have a beneficial effect on non-cash bank payments, not to mention the increase in the profits of suppliers of postal services in our country.

But this positive fact will not remove from the agenda the need for a further improvement in the legal base and market instruments used by the country's e-commerce sector. In particular, in the long term a number of local companies that make up the electronic commerce market are planning to issue their own Internet payment cards similar to the international Visa and MasterCard. When paying for goods and services with these cards customers will be able to count on certain bonuses. It is proposed to set up an electronic wallet system, which is more advantageous for our users than its international equivalent Web Money, whereby local users have to pay commission.

In the more distant perspective, within the framework of the Central Bank's draft law "On payment services", Azerbaijani banks, and also local branches of foreign banks, will be able to issue electronic cash. Juridical persons possessing a licence for postal and financial services, local organizations and branches of foreign structures operating in the electronic cash sphere will have the same right.

No less important changes have become long overdue in the field of the legal regulation of e-commerce, because the law on electronic commerce which has existed since 2005 has become significantly outdated. In this connection the Ministry of Communications and Information Technology has drawn up a package of proposals for the development of electronic commerce aimed at unifying Azerbaijani legislation in accordance with that of the European Union. So a number of changes to the laws "On electronic commerce", "On e-signatures and an e-document", "On personal data", "On protection of consumers' rights", "On state purchases" and "On operational and search activity", as well as to the Criminal, Criminal Procedure and Administrative Offences Codes will be introduced. 

The aforementioned changes will significantly simplify the process of international electronic commerce and reduce production costs, but at the same time they will attract Internet magazines operating in the country to the process of full payment of taxes. Fuller protection of the rights of consumers in the online business sphere should also be a no less significant advantage of the new legislation.