Central Asia, Here we Come!

EXECUTIVE SUMMARY

RISE, the Austrian IT services powerhouse, is set to amplify its global footprint by introducing a user-friendly accounting SaaS to the Central Asian market. Tailored for small and medium enterprises (SMEs),  their software solution empowers businesses to effortlessly manage their accounting and taxes without the need for an accountant.

Goal

The Central Asian market promises an attractive opportunity for expansion. But which countries in the region, except for given Uzbekistan, are the most promising to entry? How are the tax systems structured in these countries? Who are key existing players in accounting markets there and how well can they serve the markets? How developed is technological infrastructure there? Are there any legal or technical requirements?

Methodology

To answer the first question, we created a weighted scoring matrix, a quantitative tool to objectively compare all 5 countries in the region – Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan, and additionally Georgia and Pakistan by macroeconomic, but also accounting-SaaS-specific data. After deciding on which 3 countries to analyze, we conducted adjusted PESTEL analysis, where we deeply analyzed political, economic, technological, and legal factors that influence each country's market attractiveness for RISE, with the help of secondary sources such as The World Bank, European Investment Bank, embassies, or The Big Four auditing/tax consulting companies. To dissect tax systems, to analyze competition and technological infrastructure, we conducted 12 interviews with industry experts such as tax consultants, commercial attachés, entrepreneurs, or economics professors. In the end, we created a proposed market entry strategy for RISE.

Results

From the weighted scoring matrix, Kazakhstan arose as an obvious winner, followed by Georgia. Then, Turkmenistan and Uzbekistan scored similarly, but Turkmenistan was excluded due to ESG criteria, since the country is widely held to be a dictatorship. As we conducted PETL analyses for the three most attractive markets, the promising results of our weighted-scoring matrix were confirmed. Uzbekistan showed up as a modern, fast-growing economy with fully digitalized government-citizen interaction. Kazakhstan does not fall behind in these aspects, but at the same time is a key player in the region economically and politically, maintaining neutral relations with the EU, Russia and China. While stable economic growth and high level of digitalization hold as well, Georgia has exceptional geostrategic positioning on the crossroads of Asia and Europe and is facing towards European integration. In regards of accounting and taxation environment, Uzbekistan has quite low corporate taxes and a low administrative burden, offering a simplified tax regime for SMEs via turnover tax. Tax administration, banking, and payment services are mostly digitalized. On the other hand, the accounting software market for SMEs is strongly dominated by a single player with budget-friendly offers – 1C, operating for almost 30 years there. Kazakhstan shares many aspects with Uzbekistan including special tax regimes, digitalization, or competitors. Contrary to Uzbekistan, Kazakhstan has already adopted IFRS accounting principles. Banks in Kazakhstan such as Kaspi Bank can serve companies operating in special tax regimes very well with their simple, but comprehensive mobile banking apps. Georgia stands out in the role of SMEs in the economy, since SMEs account for almost 60% of employment and for more than 40% of business sector employment. Competition in Georgia is even fiercer than in Uzbekistan and Kazakhstan, with companies such as FMG Soft, 1C, Fina, or Oris Accounting, but none of them has won a dominant market share yet. In general, they offer quite comprehensive solutions including management accounting and integration with Georgian Revenue Service. Based on the results, we recommend RISE to enter Georgia first and conduct in-depth benchmark analysis of competitors to strategically position themselves. Next step should be Kazakhstan, where their software solution promises to be successful among SMEs operating in the standard tax regime, but needs to provide affordable, yet still comprehensive solutions, benefiting from the experiences gained in Georgia. After that, RISE should be prepared to enter the most challenging market of Uzbekistan.

Cooperation Partner

• Research Industrial Systems Engineering (RISE)
  Concorde Business Park F
  2320 Schwechat
  Austria
  rise-world.com

Contact Person

• Michael Pably, MSc (WU), MSc
  michael.pably@rise-world.com

Student Team

• Mag. Patrick Lechner

• Philip Luca Löhr

• Dárius Pacholský

Project Manager

• Melina Mazzucato

• Caroline Fabian