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E-commerce in Pakistan

Procter & Gamble experience

By Syed M. Aslam
Feb 12 - 18, 2001

Delayed adaptation of the Internet and the prohibitive costs involved to have an access to it including unaffordable prices of PCs, hardware, software and the internet connection itself are the major hindrances to the development of e-commerce in Pakistan. In addition, poor service quality due primarily to the fact that the state-owned Pakistan Telecommunication Company Limited's (PTCL) infrastructure is not geared towards high quality Internet service and dearth of contents are also restricting development of e-commerce in the country.

This was pointed out by Afaq Hussain Rizvi while sharing the corporate experience of multinational Procter & Gamble Pakistan at the lecture organised by e-Pakistan Initiatives, a non-profit organisation which sees IT as an elixir for all economic woes. The chairman of the organisation, Khurram Rafiq, cited dearth of quality human resources, an almost non-existing domestic market for the locally developed software used globally and the unwillingness of the domestic software houses to use e-commerce as a marketing tool as major obstacles for the development of an electronic Pakistan. He also introduced Afaq as one of the pioneer of the early data base back in early 1980s.

Afaq, an engineer and a senior IT specialist, is currently the IT Manager at Procter & Gamble Pakistan. He has been associated with the P&G for over a decade and has served at various international stations including his immediate past assignment in Saudi Arabia.

While PG, being a consumer goods company, specialises in developing brands — over 300 of its brands enable it maintain a heavy household presence worldwide — Afaq said that his corporate experience show that in the IT world of today focus is not on brand-related website but rather a people-related site: 'Our website in Australian is aimed at young females.'

P&G, he said, is engaged in three types of business activities in Pakistan — local manufacturing and packaging plant at Hub near Karachi, local contract manufacturing and importing and marketing items produced at one of its plants overseas. He claimed that P&G's Ariel detergent and Pampers diaper are leader in their respective markets while it enjoys half of all the shampoo market in Pakistan

Talking about the benefits of the e-commerce, he narrated some interesting facts. The IBM, he said, saved some $ 4.2 billion by redesigning the Internet procurement processing by using e-commerce around web-based technology. In the contemporary physical world of today, he added, 15 per cent of total payment transactions are done through credit cards compared to the Internet realm where 99 per cent of the financial payments are done through credit cards.

This also explains the reason for the massive credit card transactions of $ 6 billion last year between the US and UK of which $ 585 million took place in December 1999 alone, as per the figures given by Afaq.

In addition, e-commerce offers unmatched savings in terms of transaction costs — it costs just about a cent to do a single transaction over the www compared to an average of $ 1.13 through a bank, $ 0.54 over the telephone or $ 0.25 through the PC/software, he added.

Saying that the number of Internet users is projected to surpass 280 million by end this year, Afaq added that 56 per cent of the Internet users are non-US. Putting the number of websites at 4 million around the world he expressed apprehensions at an acutely low Internet penetration in Pakistan at just 0.4 per cent, a negligible low compared to 30 per cent in the developed world.

He said that indicators show that e-commerce will enjoy exponential growth in the coming years — it stood at $ 180 billion globally in 1999 and is expected to surpass $ 1,300 billion by end 2002. Business-to-Business e-commerce is projected to grow ten-times than the Business-to-Consumer, he added. The question is: Will Pakistan benefit from it?

Observers say that the creation of a massive IT awareness alone will not help the country to share even a small percentage of the massive global e-commerce market the reasons of which are highlighted at the opening of this article. An example given by Afaq can explain why not. Internet was introduced in Saudi Arabia in January 1999. During the first year the number of registered internet users in the Kingdom surpassed the target set for that initial year — from 50,000 to 200,000. In two years since, by end last year, number of internet users in Saudi Arabia crossed 400,000 which is more than the registered users in the much more populous Pakistan. Afaq attributed the rapid growth in number of registered internet users in Saudi Arabia on one simple fact — per capita income in Saudi Arabia is fifteen-times that in Pakistan. In addition, while the local banking sector like their counterpart in the developed world has decided to play a pioneering role in the development of the e-commerce much remains to be done to expand the base of credit card use in the country — one of the major prerequisite. As is 42 per cent of people in the developed world don't trust using credit card for an e-commerce transaction due to concerns about confidentiality and misuse.