By Syed M. Aslam
Feb 02 - 15, 2004





Karachi hosted the premier e-Business event of the region organised by Pakistan Chapter of AFACT the 16-member Asia Pacific Council for Trade Facilitation and Electronic business. AFACT is a non-profit, non-governmental organisation open to participation from the representatives of member countries and experts from private sectors within the Asia Pacific region.

The 21st plenary session of the AFACT held in Karachi on January 12-14 was attended by over 70 delegates from 14 countries as well as over 1,000 domestic delegates from all over the country. AFACT aims to promote the commitment and development of trade facilitation, electronic business policies and activities in the Asia Pacific region, mainly focusing to promote the United Nations Centre for Trade Facilitation and Electronic Business (UN/CEFACT) to guide, stimulate, improve and promote the ability of business, trade and adminsitrative organisations as well as exchange products and relevant services effectively within the AFACT community Australia, Chinese Taipei, India, Indonesia, Iran, Japan, Korea, Malaysia, Mongolia, Peoples Republic of China, Pakistan, Philippines, Singapore, Sri Lanka, Thailand, and Vietnam.

The plenary session was followed by e-business exhibition and conference. The opening session of the meeting of the Steering Committee was inaugurated by Advisor to the Prime Minister and Federal Minister Incharge for Science and Technology, Prof. Dr. Ata ur Rahman and Minister of IT, Sindh Syed Mustafa Kamal. The e-business conference and exchibition was inauguarted by Federal Minister for IT and Telecom, Awais Leghari. The concluding session was chaired by Dr. Ishrat Hussain, the Governor of the central bank, State Bank of Pakistan.

The event offered Pakistan, which ranks the lowest in e-readiness among the 16-member AFACT with a score of 2.74 compared to 8.25 score of the most-ready AFACT member Australia, a number of benefits the least being sharing the experience and knowledge of international experts that attended the 6-day conference. In addition, it also helped identify several projects for e-business implementation in the country and setting up of E-Commerce Resource Centre (ECRC) to facilitate the event and to work as a focal point for AFACT and the related bodies to promote e-business in the country.

Talking to PAGE the Chairman of ECRC, Javed A. Naushahi who almost single-handedly was responsible for the efforts to organise the event as the host chairman, said that the primary aim of the AFACT is to promote paperless trading to cut the cost of doing business and international and local delegates attending the event shared experience and knowledge to address three primary pre-requisites to make that happen the logistics and payment modes within a member country plus the simplication of procedures at ports, customs handling, ships and cargoes. So just what kind of benefits does paperless trading offer to Pakistan in term of economy?


A paper read by Director Payment Systems of the State Bank of Pakistan (SBP), Aftab Mustafa Khan, highlights the importance of central's bank role in payment systems and benefits that the paperless trading would offer. He said that payment-infrastructure in Pakistan primary compromises around 7,708 branches of some 40 banks operating in the country in addition to approximately 12,000 branches of postal services, clearing houses operated by the State Bank in 10 cities and Automated Clearing houses in 5 cities. The payment system in Pakistan is almost entirely paper-based including cash, cheques, pay orders, demand drafts, telegraphic transfers and mail transfers. Between 2000-2002, the SBP's inter-bank clearing and settlement system depicted a substantial increase of 23 per cent in term of volume from 30 million cheques to 37 million cheques. The amount of cheque settlement through the SBP's payment system increased from Rs 15.8 trillion in 2000 to Rs 19.8 trillion in 2002 while the amount of cheque clearing increased from Rs 5.4 trillion in 2000 to Rs 6.7 trillion in 2002.

The substantial rise in the amount of SBP's inter-bank clearing and settlement system, in turn, pushed the circulation of currency to new highs, the cost of printing of which was borne by the economy. In June 2001, the value of total currency in circulation was Rs 375 billion which increased to Rs 434 billion in June 2002 and to Rs 495 billion in June 2003. In last October, total currency in circulation stood at Rs 549 billion 174 billion more than that exactly 28 months ago meaning that the government had to print an average of Rs 6.2 new currency each month between July 2001 to October 2003 or Rs 74.5 billion in fiscal 2001-2002 and 2002-03. Since we don't know just how much it costs the government to print the currency let us assume that it costs just 1 per cent which still goes to show that over Rs 1.7 billion was spent on the printing of new currency for 28 months ended October last year. The benefits of paperless trading and development of reliable, time-saving and low-cost payment systems in electronic payment transactions particularly the retail payment infrastructure can hardly be better highlighted.

However, it is hearty to note that the use of electronic banking infrastructure is on the rise. The number of ATMs has registered a healthy growth of 39 per cent during the four years between 2000 to 2003 from 206 to 552 while on-line branches have expanded with a much bigger growth rate of 70 per cent during the same period from 322 to 1,579. Some 446,000 credit cards were in circulation while 1.016 ATM/Debit Cards were in use as on September 30 last year. The credit card use has also depicted a healthy annual growth of an average 20 per cent between 2000-2003- the monthly transaction volume increased from 280,000 to 500,000 while monthly amount registered a much higher annual growth of 32 per cent from Rs 710 million in 2000 to Rs 1.62 billion last year.


Why this heavy emphasis on trade facilitation? A paper jointly presented by Amer Z. Durrani and John S. Wilson, both of World Bank, attempts to answer the question. "Trade facilitation simply means the simplification of trade procedures through reduced transport costs, improved port and border facilities, efficient and transparent customs procedures, transparent and harmonized regulations and the last but not least improved communications and information technologies.



"Just how important the economic implications of trade facilitation is obvious from the following facts. International shipping costs as a ratio to trade value is greater than tariffs paid for 168 of 216 US trading partners. Logistics costs acount for 30 per cent of shipment while administrative and customs costs inflate the costs of business by 20 per cent. What does poor trade and transport facilitation cost Pakistan? The total cost of non-factor services including transport, insurance and related services alone adds up to 15.8 per cent of the country's foreign trade account compared to 4-6 per cent in the EU thereby offering estimate potential savings of $ 582 million."


Another delegate Dr. Somnuk Keretho, Director Institute for Innovative IT at Kasetsart University Thailand, highlighted the induction of e-commerce saying that future belongs to it. "E-commerce, both B2B and B2C, would make up $ 2,294 billion or 18 per cent of the total global sales of $ 12,837 billion in 2006, the major beneficiary of which would be North America at $ 7,338 billion followed by Asia Pacific region at $ 2,645 billion, ahead of Western Europe, Latin America, Eastern Europe and Africa and Middle East. The B2B would predominate the B2C."

Encouraging forecast indeed. However, for Pakistan, the least e-ready AFACT member, much remains to develop reliable, efficient and inexpensive trade facilitation and e-commerce infrastructure to benefit from the expected windfall for that e-commerce offers to the region.


A paper presented by Furqan H. Qureshi, the CEO of KASB Technology Services highlighted the correlation of e-readiness and economy. Calling e-readiness the future yardstick of measuring economies, he said that its importance lies in the transparency that it brings in business transactions, the efficiency that it offers in business to business and business to government transactions and the effectiveness of government services to the citizens. He emphasised heavily to focus on developing e-payment infrastruture to achieve the objectives mentioned above.

"E-payment is a two way street outwardly relates to pay salaries, pensions, micro credit, purchase of goods and services at all public and private, retail and corporate payments. Inwardly, it can help simplify the collection of payment of utility bills, insurance premiums, government taxes, credit card debts, etc., etc. Cash still remains the preferred medium of payment, the primary sources of the payment of which are the banks and post offices. Since services are available during the working hours only it inconveniences the consumers resulting in long queues, petty disputes. Though 'plastic' has arrived in Pakistan its reach is limited despite the fact that PTCL issued 10 million prepaid phone cards in 2002-03 and mobile phone service providers issued over 8 million prepaid phone cards in 2002."

Mr. Qureshi said that conditions in Pakistan offers great marketing opportunities for outward payment system: "The cash dispensing system comprise a large network of around 28.27 million bank accounts 21.99 million savings, 4.71 million current and 1.51 million micro-credit and agriculture credit accounts plus another 4.90 million Post Office Savings Accounts. By end this year, there would be over 700 ATMs in the country and under one million ATM/Debit Cards and Credit Cards each. The number of total personal bank accounts is 15.09 million of which 4.36 million are between Rs 1-10k, 8.71 million between Rs 10-50k, 0.81 million between Rs 50-100k and 0.49 million bewteen Rs 100-200k. There are 4.79 million government and military pensioners, over 3 million public sector employees and over 5 million private sector employees.

But that's not all. "The inward payment infrastructure also offers immense opportunities for converting to e-payment: WAPDA issues some 156 bills a year, KESC 21 million a year, SNGPL 25 million, SSGC 23 million, PTCL 54 million bills, mobile phone companies 30 million, water and sewerage 3 million. In addition, there is also potential to issue 15 million motor vehicle registrations a year, 8 million radio licenses, 3 million TV licenses, 4 million gun licenses, I million sales tax and income tax, 70 million railway tickets, 5 million insurance premiums and 3 million tuition fee of university and professional colleges."

The issuance of some 400 million bills/licenses and tuition fee each year offers immense opportunities for investing in e-commerce, e-trade and e-payment. And that is the primary objective of AFACT to promote trade facilitation, e-commerce, e-trade and e-payment among the member countries.