The Shanghai Cooperation Organization (SCO) is working to establish a regional bank to synchronize digital payment gateways using local currencies in an effort to boost e-commerce within the Eurasian bloc while reducing its dependence on external platforms, such as Master-card and Visa.
The matter was discussed during the fourth Model SCO Youth Conference with the development of e-trade and digital economy as its topic. SCO Secretary-General Vladimir Norov acknowledged it as the top issue that’s drawing the attention of the organization’s leadership.
At the SCO Secretariat in Beijing, he said that this is the top issue to which leaders are paying attention. “It was discussed at the Qingdao Summit in 2018 and again at the Bishkek Summit in 2019. In all statements of heads of state, the importance of using national currency for transactions between the countries was emphasized.”
MINIMIZING USE OF US DOLLAR: A joint statement, released after the day-long deliberations, proposed the creation of an SCO Bank to facilitate banking transactions and inter-payment systems within SCO countries. The SCO has eight member states – China, Pakistan, Kazakhstan, Kyrgyzstan, India, Russia, Tajikistan, and Uzbekistan.
In addition, Afghanistan, Belarus, Iran and Mongolia have observer status while Armenia, Azerbaijan, Cambodia, Nepal, Sri Lanka, and Turkey are on board as dialogue partners. Noting that some SCO countries have already initiated trading in local currencies among each other, Vladimir Norov stressed that more needs to be done to make such transactions consistent within the SCO region while also minimizing use of the US dollar as the main global currency of exchange.
“We have practice of transactions between two or three countries – Russia with China or Central Asian countries with China and at the same time Central Asian countries with Russia and so on. But there is a need for a platform which can be automatically used by each country which has the interest for using these payments system,” he said.
The joint statement noted that SCO countries lose approximately 10-20 billion US dollars annually merely on transaction and conversion charges while using external payment gateways. To curb the financial loss, the young delegates at the Model SCO proposed the use of payment gateways from SCO countries for transactions within the region.
The youth conference was organized by SCOLAR Network, a Beijing-based association of young professionals and students from the member countries. The conference follows the format of the SCO leadership summits where all decisions are arrived at through consensus. Delegates from all the 12 member and observer states deliberated on the potential of e-trade and digital economy in the region.
E-COMMERCE DEFINITION: “The topic is very important because there is no common understanding and common definition of e-commerce. What is e-commerce? Different countries, especially in SCO, they have their own understandings. For China, it is in one way. For Russia, for Pakistan, it is another way. India has very different approach,” said Odil Gafarov, SCOLAR member and one of the main organizers of the Model SCO.
Statistics show that in terms of e-commerce, China is in a leading position in the SCO region. At the Sixth World Internet Congress, China published a report on China’s Internet development 2019. According to the report, China’s digital economy reached 31.3 trillion yuan in 2018, representing 34.8 percent of GDP.
BIGGEST DIGITAL MARKETPLACE: At the same time, other data shows that by the end of 2018, seven of the world’s ten largest companies by market capitalization were focused on the digital economy, and two of them were located in China: Alibaba and Tencent. By 2018, China’s Alibaba Group had total sales of 485 billion dollars, more than Amazon and eBay together.
SCO authorities as well as the young delegates acknowledged that China’s phenomenal success in transforming itself as the world’s biggest digital marketplace offers a huge learning curve in e-commerce for other members. Today, China has attained more success in e-commerce than even developed countries, Vladimir Norov remarked.
QR CODE: Tabrez Mas, who is pursuing a master’s program in power electronics from Beijing-based Beihang University, said that China has achieved some monumental achievements when it comes to e-commerce like the use of digital e-payments. “Using the QR code for payment is one of the breakthroughs,” he said.
China can act as a global anchorage for propelling the e-commerce adoption and new technologies in e-commerce adoption first in SCO and not only in SCO region but all across the globe, other countries in the globe as well, he said. The SCO region has 800 million young people between the age of 14 and 25 with a potential to exponentially increase cross-border e-trade in the coming years.
An SCO Bank along with a coordinated payment gateway may just be the much-needed fillip to the regional e-commerce landscape.