The so-called digitization in Andorra has always been a priority. It's been a long time since we told here the transformation that the Principality has carried out since the last decade. We explained that the current modern Andorra is really less than 30 years old since it was born with its 1993 Constitution and that the dot com crisis of the 90s and the real estate crisis of 2008 were two great blows that accelerated its transformation. Finally, the local crisis of the Private Bank of Andorra (BPA) in 2015 has been the latest incentive for the need for reforms in the country.
The transformation of Andorra
This has meant that Andorra has gone from being a feudal, autarchic, isolated, opaque and disconnected country for being considered a tax haven dedicated to the refuge of money of dubious origin, to a country that seeks that balance of microstates between being connected with all countries in the international arena but without sacrificing too much the characteristics that allow it to survive. It is currently a microstate with tremendously attractive taxation, with great physical and legal security, transparent and open to foreign investment..
We also counted that although the country is developing very well, it still depends too much on the tourism sector and the banking sector. Being a country with 98% of forest land, three national parks and a historical tradition in skiing, despite its small size, Andorra has always been a benchmark in terms of mountain and sports tourism. Also with regard to banking services, since its status as a country historically peaceful and as a tax shelter, it invited the management of foreign capital.
First steps in digitization
During this crisis Andorra already understood that it had to seek to diversify its economy and its income, and for this he decided to bet, among others, on digitization. In this way Andorra Telecom, already founded in 1975, began to modernize Andorran telecommunications to attract digital entrepreneurs and digital businesses that perform services remotely and could relocate to any part of the world.
The idea is that anyone who can telecommute (work remotely) can be part of this digitization. As we mentioned at the time, before the covid-19 pandemic, the Government of Andorra was considering the possibility of establishing a model of digital or electronic residency in the country, similar to the one established in Estonia. However, in 2020 all this was paralyzed, although in any case it is difficult to implement due to the country's commitment to the economic substance requirements set by the OECD.
Update of the banking system and payment gateways
However, digitization is not only about preparing the country to attract businesses and entrepreneurs who carry out their work remotely. something as simple as the financial development of the country is absolutely necessary for trade and economic activity. For example, the Single Euro Payments Area (SEPA), allows payments to be made in euros, from an account located anywhere in the zone, through a single set of payment instruments and with the same terms.
Although Andorra entered the SEPA system in March 2019 de iure, it did not do it de facto, as we mentioned in our article on the Andorran banking system. This is due to the fact that banks currently have a lucrative activity with the commissions they charge for their financial services, be it transfers, currency exchange or others. And the adaptation of banking entities to the SEPA system is becoming long and ineffective, which weighs down trade and increases distances in terms of business.
Partly for this and for other reasons of financial and institutional and economic isolation, on the other hand, Many platforms in the fintech sector are not available in Andorra. We are not talking about modern payment gateways like Revolut but things as simple as PayPal, Stripe, swipe o AmazonPay to name a few, something essential for international electronic commerce. All those platforms are not available in Andorra. Not even Skrill.
On the other hand, it would be absolutely interesting to have tools derived from the system RedSys that, although it can be implemented in Andorra, it must be programmed by hand or go to a local tool of a bank that has them, since traditional tools such as PayPal or the new app Bizum, or the platforms ApplePay Y GooglePay, are not available in the country because these companies have no dealings with Andorra and do not accept Andorran bank accounts and cards, similar to what happens with Stripe.
FinTech and deFi companies (decentralized finance)
In our article on trading in Andorra We already mentioned the heavy regulation that falls on the activities of collective investment organizations by the Andorran Financial Authority (AFA). This prevents technological sectors from flourishing in the financial field, also called fintech, such as those mentioned above. For example, crowdfunding and crowdlending services, mobile banking services, so-called "escrow" services (guarantee deposit or trust), mutual insurance and much more. In practice, all financial services are oligopolized by Andorran banking entities.
And what to say about use of the cryptocurrencies as assets, currencies and consensus tools in all their splendor, starting with making them legal tender and enabling financial services with them. After that, they could be used for a myriad of decentralized financial and legal services, from medical records to cadastres and property registries, partnerships, stocks and bonds, education and police qualifications, and more. That would really mean a real digitization. It would also allow the development of the Insurtech sector, pioneering and technological insurance services.
Usually, Blockchain technology, big data, and artificial intelligence must be embraced as soon as possible in order to carry out cutting-edge digitization. This would make it possible to establish a collaborative economy where everything could be done in a decentralized, cheap, secure, anonymous, digital and fast way. From automatic mutual insurance to company constitutions through the sale of real estate. But it is obvious that the government of Andorra looks the other way.
Digitization of the administrative bureaucracy
Digitization in Andorra, At the moment, it is basically reduced to outdated electronic certificates in Social Security and Public Administrations, but in this sense some improvements are being made. For example, this year is the last that a paper edition of the Yellow Pages is published, which from now on will only be on the website pagesgrogues.ad.
Joking aside, Andorran banks are usually proud to have a digitized bank, but this digitization is usually reduced to a client platform that works poorly and in which almost nothing can be done since what is important and relevant is obtained in person and after much insistence, bureaucratic procedures and a titanic effort. Ditto with banking applications, which are more of a marketing mask with little content.
Digitization is a hot topic in the country, just look for related government news, but the truth is that it is a pending issue. Currently, the bureaucracy of the banks, as we have said, continues to be heavy on what is important: changes and important contracts cannot be made, and obviously neither can you open a bank account, distance. The same thing happens with public administrations, which are still determined to do everything on paper and in person.
As we indicated in our page on creating a company in Andorra, the procedures to be able to set up a company and obtain an Andorran residence and self-employment permit take around 3 to 4 months, and this is due both to the lack of digitization in public administrations and their procedures in their different institutions and to slowness and bureaucracy in banking procedures.
Simplification of administrative procedures
The Government has approved the modification of the Regulations of the Companies and Limited Liability Law, the modification of the Account Deposit Registry Regulations, the General Accounting Plan, the modification of the Corporation Tax Regulations as well as the modification of the presentation of the declaration forms of the Corporation Tax and the income tax of non-tax residents (IRNR). The objective of these is simplify the administrative procedures of the Corporation Tax, the Deposit of Accounts and the survey of economic activities.
The Government of Andorra already announced the will a few months ago to unify the processing of Corporation Tax, the Deposit of Accounts and the survey of economic activities in order to maximize the efficiency of the Administration and minimize costs to those administered. The approved modifications will allow these processes, which depend on three different Departments, supposedly are carried out with a single procedure and it will be the Administration that carries out the internal coordination, simplifying management and eliminating duplicate procedures.
The credit of 8 million to solve it
On February 2, The Government approved the formalization of the loan of 8 million euros from the Development Bank of the Council of Europe (CEB) to finance the digitization of the country. This is a loan agreed at the end of last year by both parties to digitize the central Administration and the country's companies in what they have called the Digital Transformation of Andorra. It is a 19-year financing with a one-year grace period and an interest rate of 0.78%.
Although the effect of this credit and the proper use of the funds remains to be seen, we must remember that digitization is one of the main axes of the Horizon 23 plan simplified to H23, the plan and roadmap proposed by the Government during the rest of its legislature to recover Andorra from the crisis derived from the covid pandemic. According to the ministers, The objective is also to help, above all, small and medium-sized companies (SMEs), although large companies can also be accommodated..
In any case, and especially in this regard, it is easy to maintain a state of doubt about the effect that this plan may have. The reason is that the business program is planned to be divided into three phases, focused on building a free digital advice platform for companies, followed by personalized advice with non-refundable subsidies and, finally, soft loans to implement the digital solutions. That is, roughly speaking: to give the money to friends to make things that are impractical, inefficient and don't work.
It will therefore be a inflated institution, far from the reality of entrepreneurs and businesses that will give a lousy and basic advice on the processing of things of public administrations, ignoring the practical problems that the country has and the REAL digitizations like the ones we mentioned above, which is a shame. In any case, it is also the second loan that the Government has agreed with the CEB after becoming a member on May 26, 2020. The first loan was 12 million euros, with 15-year financing, and intended for cover expenses with the health crisis caused by the coronavirus.
Finally, on February 10, 2022, the Minister of Finance and Spokesperson, Eric Jover, met this Thursday with the Governor of the Council of Europe Development Bank (CEB), Carlo Monticelli, at the CEB headquarters in Paris (France). ). During the meeting, Jover and Monticelli have signed the loan of 8 million euros from the bank to the Government of Andorra destined to finance part of the expenses contemplated in the implementation of the Digital Transformation program of Andorra, so there is no turning back.
The Government and the institutions of Andorra are right to worry about the digitization of the country, but they are taking the wrong path: the path of politics and empty marketing. People talk about digitization without knowing what they are talking about, simply because it is a buzzword and has an innovative touch, without really knowing what it means and what it entails. It is exactly the same thing they do when they talk about R+D+i, Big Data, artificial intelligence, Industry 4.0, blockchain technology and other technological vocabulary.
On the other hand, they believe that digitizing means creating outdated certificates in which the bureaucracy to obtain them is greater than the utility they offer, setting up beach bars to offer poor quality advice, wasting money on impractical and inefficient things, and asking for loans to to indebt the population senselessly, but this is not how the technology sector works, which is completely chaotic and anarchic.
If these loans were used to help banks integrate definitively internationally and into the SEPA model and offer support to get rid of the “fees for everything” model, it would be much better used. Also if it were used in making agreements with large technology companies (Google, Amazon, Apple) so that their services are offered in the country. So that tools like Stripe or PayPal are available in Andorra. To reduce the face-to-face bureaucracy of banks and automate their internal processes. To open the telecommunications sector to international competition and undo the monopoly of Andorra Telecom.
At the end, what an entrepreneur wants is for things to be easy and clear, not for things to be difficult but for there to be a beach bar dedicated to advising about the tangle of complications involved in running your business. It is simply a question of not disturbing: offering legal certainty, simple, understandable legislation in all languages and flexibility when it comes to obtaining what you need to start a business at an affordable price.
What an entrepreneur wants is that when he needs a POS, it is granted immediately, that he can open bank accounts telematically and online, that banking KYC is simple, that he can access foreign and cheap telecommunications services, that he can make payments, collections and commercial operations with the greatest number of people possible with the most standardized tools, that the National Accounts be simple, that the rules of the game do not change every two times three.
Or also being able to rent or buy a place without losing most of the capital that you were willing to undertake, and avoid the other part of your income being paid into a social security that is neither safe nor social (because of the obvious problems it has a pay-as-you-go pension system). Unfortunately, all these things will not happen because, it seems, the Andorran institutions, oblivious to the real problems of the SMEs that they mention so much, believe that private businesses work better with more politics, but they actually do it with less.