Trade has fueled economic growth in Central Asia, despite geographic challenges. Goods from Central Asia, without seaports, must go the extra mile to reach their destination. Trade costs for landlocked developing countries–equivalent to a 540% tariff,–hinder the competitiveness of the region’s entrepreneurs and curb potential income growth.
E-commerce may be the solution for helping traders in the region connect with new markets. In 2023, global e-commerce sales reached approximately 30 trillion USD (higher than US or Chinese GDP), offering a significant opportunity for rural producers, MSMEs, and women.
E-commerce provides direct access to global trade, allowing local producers and MSMEs to extend their reach beyond local commerce to national and international customers. It also reduces transaction costs, through the elimination of intermediaries and their associated margins, improves supply chain efficiencies, and supports job creation, especially in areas traditionally limited by geographic isolation – like Central Asia. Additionally, e-commerce empowers women by offering financial independence.
However, to fully boost e-commerce opportunities, Central Asia must address challenges like poor infrastructure, low digital literacy, and the need for supportive policies.
What’s going on with e-commerce in Central Asia?
E-commerce development is a viable way to reduce poverty in Central Asia. Except for the payment sector, which requires financial experts, the e-commerce ecosystem, particularly in production, marketing, and delivery, offers job opportunities that facilitate the participation of the poor and less skilled in online markets.
Recognizing the potential, industries, such as as textiles, agriculture, and tourism are becoming involved in e-commerce. Kyrgyzstan, Tajikistan and Uzbekistan are enacting e-commerce laws to regulate and encourage its growth. Some marketplaces have experienced rapid development, such as Uzum, a marketplace in Uzbekistan that reported growth reaching a multiple of 23 from December 2022 to 2023. In 2024, Uzum became Uzbekistan’s first unicorn—a privately held company worth over $1 billion. International e-commerce platforms eBay and NOVICA also have presence in the region.
Fig.1: Key Active Players in E-commerce Ecosystem in Uzbekistan
Source: Not WB calculations but estimates based on consultations with local players in 2023-2024.
Note: *Othersinclude multiple companies that contribute to e-commerce retail sales according to Euromonitor International such as Arba.uz, Asaxiy.uz, eSavdo.uz, HM.uz, Home24.uz, etc. Data is based on estimates of market analysts such as Uzum, KPMG, Mastercard, Statista in 2022-2023.
However, the adoption of e-commerce by local companies has been sluggish and the market is still very small. Some estimates show market size of the whole Central Asia e-commerce is less than 3 billion USD. What does hamper its development?
Fig.2: Key Active Players in E-commerce Ecosystem in Tajikistan
Source: Not WB calculations but estimates based on consultations with local players in 2023-2024.
Note: * Othersinclude multiple smaller online retail companies that contribute to e-commerce retail sales. Data is based on estimates of market analysts such Mastercard, Statista in 2022—2023.
The problem of selling and buying online is holistic, meaning it requires good logistics, internet connection, financial infrastructure, skills and digital literacy. The reasons for not going online are often connected to poor digital literacy, cash habits, expensive transportation services, sagging connectivity, and small markets. There is no single Central Asia e-commerce market that can solve these issues.
Fig.3: Key Active Players in E-commerce Ecosystem in the Kyrgyz Republic
Source: Not WB calculations but estimates based on consultations with local players in 2023-2024.
Note: * Othersinclude multiple smaller online retail companies that contribute to e-commerce retail sales. Data is based on estimates of market analysts such Mastercard, Statista in 2022—2023.
The main e-commerce channel in the region is a social informal e-commerce. Complex and opaque tax regulations, along with restrictions on shipping, internet access, financial transactions, and information gaps, encourage businesses to operate under the radar. These systemic challenges push entrepreneurs to stay informal, avoiding regulatory hurdles, inefficiencies, and the steep costs of compliance.
Many of these challenges are associated with the absence of laws and regulations that enhance e-commerce readiness in Central Asia. Despite the legislative and regulatory efforts, some sectors, such as electronic payments, lack regulations; others, like telecommunications, are overregulated; and others, like consumer protection, have not been adapted to the new challenges of e-commerce.
Coordinated Push
E-commerce offers a path to boost income and create jobs. But there is a need to better coordinate and combine efforts to develop e-commerce. In Central Asia, there are many development organizations working separately and in a fragmented way with projects that may repeat each other with low sustainability. Discussions on developing a systematic and single approach to e-commerce development in Central Asia are vital for growth, but not enough. Collaborating closely with development partners addresses inconsistencies and duplication of efforts. This is a call for coordinated push by governments, businesses, associations, and donors to advance e-commerce in the region.
Source: blogs.worldbank.org