29 Nov. - 5 Dec. 2001
Issue No.562
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Al-Ahram Weekly Online 29 Nov. - 5 Dec. 2001 Issue No.562 |
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Embracing e-potential
An UNCTAD report is optimistic about the prospects for e-commerce in developing countries
The first issue of a new annual publication by the United Nations Conference on Trade and Development (UNCTAD) urges businesses in developing countries to capitalise on e-commerce to create business opportunities. The report entitled "E- Commerce and Development Report 2001," aims at helping developing countries understand the implications of e-commerce and its potential for their economies. It also cautions developing countries against falling further behind the industrialised countries in terms of technology.
Although the report acknowledges the fact that the world is plunging into a recession, it notes that e- commerce has survived the dot-com crash and is now expected to grow without major disruptions.
As Dimo Calovski, economic affairs officer with UNCTAD's electronic commerce branch, put it during a press briefing, regardless of problems facing the Internet and e-commerce, both are here to stay and their impact on business has been positive for the most part. ''The potential of e-commerce to raise productivity and improve living standards is just beginning to materialise,'' Calovski said, adding that information has become as important as labour and capital for productivity. In fact, according to the report, growth in productivity does not result from technology alone, but occurs because of the changes that technology can introduce in the functioning of enterprises and across the sectors that assimilate them. For instance, such changes allow for increased efficiency in the areas of finance, marketing and logistics.
With this in mind, Calovski said, "Embracing e- commerce is a must."
UNCTAD's report suggests the Internet is a useful tool for businesses in developing countries because it can facilitate outsourcing by making communication easier. For the less developed countries (LDCs), the report points out, the Internet enhances their potential to offer services for transcription, data entry, software development, remote access server maintenance, Web development, database creation, digitisation of documents, translating and editing. Coupled with Internet capabilities, the huge difference in wages between LDCs and industrialised countries makes it possible for LDCs to be competitive in offering such services.
The report also mentions that although the size of business-to-business (B2B) transactions in developing countries has been negligible, it is expected to grow, especially in sectors that these countries already compete in, such as tourism and primary commodity marketing.
Challenges do exist, said Calovski, such as inadequate infrastructure, financing, IT skills, legislation and financing as well as problems with payment methods, but "they are not insurmountable."
The report says the most serious problem for LDC enterprises as they embark on e-commerce is not technology, but their business culture and practices. The report explains that "in the digital economy, information flows faster, in more directions, and decision-making becomes less centralised. This represents a serious challenge for many developing countries and economies in transition where traditional notions of authority and hierarchy may be more deeply entrenched."
Tourism, one of the key foreign currency earners and job-generating sectors for developing countries, may also be an area in which they have considerable potential on the Internet.
E-tourism is one of the fastest growing sectors of e- commerce. Last year, the report said, online travel bookings in the US and Europe were worth nearly $15.5 billion. Of the $64 billion in e-commerce sales in the industrialised countries during 1999, travel, transport and hotel reservations as a group, represented the largest category, accounting for 38.5 per cent of e-commerce sales. Developing countries' share of the international tourism market in 1999 was 29 per cent. Of all online bookings, only three per cent were for tourism in the LDCs.
Whether in tourism or other sectors, e-commerce globally is expected to grow. Business-2-Consumer (B2C) e-commerce, which is expected to reach $120 billion this year, is forecast to double by the end of next year. Asia and the Pacific are the regions expected to witness the most growth in B2C. "In the US and Canada, spending and Internet penetration has levelled off," said Calovski.
In the meantime, B2B e-commerce, the larger portion of the e-commerce pie, estimated to be four or five times B2C figures, is predicted to propel the world economy. However, the report notes that projections could decline in a slowdown. Sectors in which B2B is expected to grow are computing and electronics, utilities, motor vehicles, petrochemicals, paper, office supplies, food and agriculture.
There are also high hopes for online financial services. Banking by Internet is predicted to increase 25 per cent annually, as compared to three per cent for the overall banking industry. In developed countries, half of all banking and 80 per cent of all brokerage activities are expected to go online. For emerging economies, the figures are 30 per cent for e-banking and 40 per cent for e- brokerage, said the report.
But to achieve those figures, financial service providers from developing and transitional economies, "will have to address the high initial costs and technological complexity of establishing online payments before they can hope for e-finance preparedness," the report pointed out.
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