Consumers are increasingly buying online, and this behavior has been further accelerated by the coronavirus epidemic. Companies that offer goods and services also show interest in digital commerce. Further growth of online trade is possible, but changes are also necessary - in the region, the prices associated with online trading are such that it is often not worthwhile to make deliveries outside the local market. Some studies also show that out of four attempts to buy something online in neighboring CEFTA markets, only one is successful.
This, among other things, was said by Zdravko Ilić, an expert on trade in services at the CEFTA Secretariat, in an interview with "Vijesti".
He also said that they expect the value of the Montenegrin e-commerce market to reach 2022 million euros in 134.
CEFTA - The Agreement on the Establishment of the Central European Free Trade Area was signed in 2006 by Montenegro, Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Macedonia, Moldova, Romania, Serbia and Kosovo. After joining the European Union in 2007, Romania and Bulgaria withdrew from CEFTA. Montenegro started fully implementing the Agreement after ratification at the end of July 2007.
How would you describe e-commerce in Montenegro in the last five years, are there any changes, what are the most important changes and how much did the coronavirus epidemic contribute to everything?
The increasingly widespread use of the Internet, through computers and phones, is slowly changing the habits of consumers who are becoming more and more relaxed in the virtual market. Digitalization of the economy, on the other hand, opens up new sales and service channels for companies. Let's add to that the effect of the pandemic, which further accelerated this process, by "forcing" both companies and consumers to completely change their attitude towards electronic commerce.
When it comes to Montenegro, last year almost half of adults shopped online, which is significantly more than 30 percent in 2019. In a survey conducted by Visa, about 40 percent of respondents started using mobile phones to pay during the pandemic. On the other hand, three out of four companies have websites where they advertise their products and services. One of these three companies takes orders online. All this tells us that there is a clear interest to develop digital commerce. With that in mind, we need to enable both companies and consumers to benefit from this process as much as possible. The local market is not enough for significant development, and it is necessary to enable them at least regionally, as a springboard for the European and global market.
The CEFTA market has 20 million consumers and is estimated at more than one billion euros. This market can motivate companies to invest in the resources and human resources needed to digitize their operations. Small markets imply small investments, which results in lagging behind the EU. By opening the door to a large e-commerce market, we help companies take advantage of the digital economy and reach consumers around the world.
Who plays the biggest role for the development of e-commerce? What are the biggest challenges for the development of e-commerce in Montenegro, and what are the obstacles and how do you see that development taking place in the future, as well as what would be your recommendations for overcoming the barriers?
Last year, CEFTA adopted the Action Plan for Electronic Commerce, which focuses on four groups of obstacles, identified in close cooperation with the economy, with the aim of removing or at least reducing these restrictions and thereby facilitating trade, primarily in the Western Balkans. The first group refers to the costs associated with the fact that each market has its own rules. Companies that want to sell their goods online across the CEFTA market must comply with not one, but seven sets of rules. This is one of the reasons why they often decide to limit themselves to only one or two markets that they know well.
Another group of barriers is high transaction costs, which refers to expensive and excessively long package deliveries and payments. Unnecessarily high costs of electronic identification are also recognized as a problem, because the use of, e.g. of electronic signatures or seals limited outside the domestic market. Finally, the costs and time of customs procedures are one of the main problems highlighted by companies in the region.
Removing or reducing these barriers is an important task for CEFTA. If we add to this the elimination of unjustified discrimination of consumers based on their location, the so-called geo-blocking, we will get a good overview of CEFTA activities in the next four years.
To what extent do the prices of services accompanying e-commerce (transactions, deliveries...) limit some markets from being successful when it comes to e-commerce, can we talk about some kind of discrimination between consumers depending on the region they live in and from want to do business or take orders? And how much is it worth to do deliveries outside the local market?
Transaction costs are very high today and significantly slow down the regional development of electronic commerce. This primarily includes delivery and payment costs. Their reduction is certainly one of our key priorities. If you ask me how they can be reduced, my answer is - let's apply the European practice. CEFTA follows the European Union in everything. When it comes to delivery, this means establishing transparency of postal delivery prices and improving cooperation between parcel carriers in order to have efficient and cheap delivery from one CEFTA market to another. Currently, the prices are such that it is often not worthwhile to make deliveries outside the local market.
When it comes to payments, we also follow the regulations and policies of the European Union. The goal is to equalize the costs of domestic and regional payments.
As far as discrimination is concerned, CEFTA has almost done a survey on the so-called geo-blocking and the result of the study is that only one out of four attempts to buy something online in neighboring CEFTA markets is successful. There are many reasons: impossibility of registration and delivery are the most common. Here, too, there is an EU regulation that limits companies' ability to discriminate and block, which we will try to transfer to the CEFTA system.
All the mentioned activities also help the country to progress in negotiations with the EU, because it clearly shows the European Commission and the member states the readiness and capacity to apply EU rules.
While waiting for PayPal, improve other payment systems and make them more convenient and efficient
Do you consider the fact that there is no PayPal service available in Montenegro in such a way that money can be received on a PayPal account an obstacle, and what would you recommend as a replacement for those who are engaged in some businesses that would potentially rely on PayPal? Or should there not be a replacement, but that the state and state institutions enable some form of such payment, or even PayPal itself?
If instruments for international payments, such as PayPal or credit cards, are unavailable or expensive, it is a big challenge for both companies and the population. That is why it is important that the state, together with the business community, find concrete solutions that would enable cheaper and more efficient digital payments. As I mentioned, this is one of the important priorities for us, on which we are working with the World Bank and the Council for Regional Cooperation, with the support of the European Commission. Our focus is cross-border transactions in the region between two bank accounts. If we provide it, then it will be reflected in all other transactions. I live in Belgium today, and I can pay for services in Cyprus or Sweden without additional costs, but that's why if my mother, who lives in Belgrade, would like to pay for her hotel in Herceg Novi through a bill, the costs are too high. It's not worth it. We have to change that.
At the same time, we are examining the possibility of integration of the payment services market, which would facilitate the work of operators such as PayPal, which would then have more interest in coming to Montenegro, because for them coming to Montenegro would also mean easier access to other CEFTA markets. But here we need to carefully weigh the costs and benefits before charting the path to establishing uniform rules that would apply to all CEFTA markets. And that's what we're working on.
Finally, my advice to companies that offer their products and services online is to make maximum use of existing instruments, such as international credit cards, but at the same time to clearly show interest to their government authorities that they expect payment systems to be improved, digitized and connected to the in the region and Europe, so that these transactions are as cheap and efficient as possible. My experience in Montenegro tells me that the Central Bank and other authorities are very interested in this process, and that the first steps have been taken in this direction.
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