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bne February 2019 Cover Story I 21
The tech sector is booming in Central and Eastern Europe (CEE) and e-commerce is growing at about ten-times the rate
of the traditional economy as emerging Europe leapfrogs over several stages of development and in many cases goes straight to state-of-the-art.
In this febrile pool of innovation where the new digital version of a business is not replacing an existing one, but creating
a product or service from scratch then often the eastern European service is better, newer and cleverer as the entre- preneurs seek to get round very real and physical problems thrown up by the chal- lenges of working in a transition country.
Yet investment into the start-ups of the region remains meagre. Venture capital funds that fund the development of western tech ventures have small, but growing mandates, and a handful of funds are seeking out opportunities.
At the same time the private equity industry remains underdeveloped in the region leaving most of the play to the state or local oligarchs. Yet nevertheless the region has already produced some world beating companies.
Tiger Leap
The Baltics were probably the earliest to throw themselves into promoting the digital economy. Already in the 1990s Estonia adopted the “Tiger Leap” initia- tive where the government increasingly put government into the cloud.
Today Estonia is one of the most digi- tized countries in Europe. Banks have closed branches as they are usually empty because all their customers bank online. The government has taken the digitization idea to its logical conclu- sion and is now offering e-Residency, a digital ID open to anyone in the world that, among other things, allows you to have a virtual existence in the small- est of the three Baltic states and set up a locally domiciled business in this EU country without ever having to physi- cally go there.
And the citizens of emerging Europe
are tech savvy thanks to the traditional emphasis on the hard sciences in the education system. Estonia also produced
Russia’s Odnoklassniki sets up shop in Kazakhstan
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Kazakhstan may not be the most populous country in Central Asia but its population is by far the wealthiest thanks to oil and the prudence of Kazakh president Nursultan Nazarbayev.
Odnoklassniki (OK), a major Russian language social network owned by Mail.Ru Group and sometimes called “Russia’s Facebook,” has launched a marketplace in Kazakhstan in a bid to challenge Chinese and US global e-commerce giants.
The OK marketplace intends to make available no less than 30mn items, including fashion items, electronics goods, home appliances, cosmetics, car spare parts and other types of goods.
“This launch and the integration with [the national postal operator] KazPost are a landmark stage for the development of our social network,” stated OK General Manager Anton Fedchin in a press conference in Astana.
Thanks to the partnership with KazPost, Kazakhstani online customers will enjoy free delivery in up to 13 days across this vast country which is the size of western Europe.
“The buyer has the ability to fully control the delivery process thanks to SMS notifications, a Telegram bot and the mobile application Post.kz. We also continue to actively develop our delivery network so that our offices and order points be within walking distance for the customers, or one kilometer,” said Azat Mashabayev Advisor to the Chairman of the Board at KazPost.
While many of the applications and services are being developed in Russia, they are quickly spreading to neighbouring countries thanks to the wide spread prevalence of Russian as a Soviet legacy. At the same time the use of Cyrillic, in what is known as the RuNet, also creates a barrier to entry for other sites and an opportunity for local copy cat entrepreneurs. Russia has a population of 144mn, but if you include all of those on RuNet in neighbouring countries the total market is some 300mn people.
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