E-commerce in Pakistan
A Survey of Listed Companies on the KSE
By Syed Asad Hussain
June 11 - 17, 2001
E-commerce or business through Internet is becoming very
popular mode of trading around the world particularly in the developed world.
E-commerce is a broad term used to quantify the trading takes place on the
Most studies, however, suggest that Commerce runs through
four steps. The very first step is, to build a website to let the world know
about your existence. The website contains information about the company,
products/ services, and other related information, which can help visitors to
learn more about the hosts. The second step involves asking customers to loose
their pockets and buy online. This step requires adopting advance level of
software capable of handling orders. In the third stage inventory, management
adds to the system and lastly, providing provisions of payments through online
banking partnership between buyers and sellers, the most difficult and complex
part of E-commerce.
The most common and popular forms of E-commerce are Business
to Consumers (B2C) and Business-to-Business (B2B). Business to Government (B2G)
and Government-to-Citizens (G2C) are other forms, running on the Internet but
with low steam. However, the use of former two still dominates the Internet.
Among four above, B2B is still and it is believed will remain
the main area of E-commerce. B2B covers everything from communication between
the retailers and their suppliers, the orders, the schedule of payment modes,
and that is mainly of electronic payment of selling and purchasing of industrial
goods. And B2B enables firms to source the inputs from best supplier. Around 84
per cent of the sales on the internet in the USA, came from B2B last year.
B2C brings the seller and the end user in contact. Any person
with access to the Internet can easily purchase books, toys or almost anything
from suppliers located in any country. However, B2C as compared to B2G is still
running in low steam, owing to lack of security of transactions on the Internet,
absence of proper legal frame work for E-commerce and last but not least limited
market for the sellers.
However, Pakistan is still far behind in chasing the west in
this regard. Against the above backdrop entrepreneurs in Pakistan are of the
opinion that E-commerce means being able to make and receive payments through
Internet and any other activity through Internet is not considered as
E-commerce. This low level of understanding has lead many Pakistani firms to
give low priority to E-commerce due to unavailability of proper framework for
the Internet in the country.
In Pakistan, E-commerce is still an infant child and faces
many barriers to grow. The notable barriers are: unavailability of proper
infrastructure [telephone lines of steam age, frequent failures of power]
limited users of Internet [hardly one per cent of the entire population have
access to the Internet.], the issue of security of transactions on the Internet,
high bandwidth rates, and last but not least the rigid and monopoly role of PTCL.
However, the SBP has recently put a crack on the barriers when it approved the
merchant ID accounts to facilitate online transactions. But there is still a
long way to go and requires government to continue to grease the wheels of
E-commerce to speedup the process.
In the above backdrop, a survey was carried out to get a feel
about how E-commerce is shaping in Pakistan. The survey was focused on
identifying the potential of selling through Internet in Pakistan, to learn
about the preparedness of local and multinational firms for E-commerce and to
seek their expert views about future of E-commerce in Pakistan. A more detailed
questionnaire could also be designed but we kept the survey to the basic
understanding about how E-commerce is developing in Pakistan.
To meet study's objective, a random sample of 95 listed
companies on the Karachi Stock Exchange was selected. The companies belonged to
various sectors of the economy details of which are in chart 1. However, 87
companies responded to the survey, which is considered to be a very good
response rate. Most of the respondents were IT experts.
A tailored made closed ended questionnaire, containing 11
questions, was provided to the respondents. The most heartening part of this
exercise was the cool and rude response of many marked local and multinational
companies. The companies (names are kept confidential) either refused to
cooperate with the interviewer or showed very indifferent attitude whilst
Respondents: A random sample of 95 local and multinational
listed companies on the Karachi Stock Exchange was selected. Method: Personal
interviews, interviews on telephone, and by facsimile.
Period: August-November 2000
Conducted by: Research and Consultancy Wing of SZABIST
Survey findings suggest that though local businesses saw
potential of selling on the Internet ( 83%) yet most of them (55%) had no idea
when they plan to start selling. Firms at the moment are simply watching latest
developments surfacing in Pakistan.
Also respondents (54%) were of the opinion that in Pakistan,
the growth of E-commerce is likely to remain slow in the near future. None of
the companies surveyed (only 1 company is doing B2B), is doing
E-commerce ( B2C) as they translate it.
The good news however, is that some firms (39%) have
tightened their belts to welcome E-commerce, by floating their websites on the
net. Not only that almost all of them ( 90%) have email addresses
and 94% have access to the Internet and 58% per cent of the companies have LAN.
This is very encouraging development. Which means firms have taken very first
step to enter the world of E-commerce.
As discussed earlier, however, around 99 per cent of the
respondents (open views gathered during the interview) were still of the opinion
that E-commerce means being able to make and receive payments through Internet
and any other activity through Internet is not considered E-commerce.
Based on the open views gathered of IT experts, it can be
concluded that there is a lot of scope of E-commerce in Pakistan, and most
companies are eager to going to the digital world, but at present due to absence
of any policy frame work and limited Internet market, companies are holding
their plans to start E-business until clouds of barriers as discussed earlier