e-commerce in Pakistan
There is a need to address the real issues
By SHABBIR H. KAZMI
Nov 08 - 14, 1999
There is no generally accepted definition of electronic commerce (e-commerce). However, the World Trade Organization(WTO) Work Programme on Electronic Commerce is understood to mean the production, distribution, marketing, sales or delivery of goods and services by electronic means. A commercial transaction can be divided into three main stages: advertising and searching; ordering and payment; and delivery. Any of these transactions can be carried out electronically and may therefore be covered by the concept of e-commerce. Pakistan has to take two initiatives. One is joining the information technology agreement and second is conducting the study on the implications of e-commerce. The issue is directly related to WTO agreements like Trade in Services, TRIPs and transparency in domestic regulations.
The advent of Internet has not only opened a new chapter in the life of an individual but has created new vistas in corporate environment. It has never been so easy to communicate, gather information and then use it one's best advantage. The natural outcome is that globally the economies are going through transition at a very fast speed not only to compete in the global village but also to get an edge over others.
The process of globalization offers new opportunities besides posing many threats. As the tariff and non-tariff barriers are being demolished, the competition is intensified. The countries desirous of attaining larger market share, on the one hand, have to be more competitive, and on the other hand, need to have access to more and more customers to get a bigger bite of the pie. They have to offer better quality of goods and services and cut down delivery time. The e-commerce has thus been evolved as a competitive advantage. Presence of a company on the worldwide web acts as its virtual front office 24 hours a day. The e-commerce offers enormous potential and Pakistan just cannot afford to miss the train.
The worldwide web has enhanced global connectivity. It offers a new corporate face to the world. The web has not emerged overnight. The evolution of information technology (IT) led to e-mail emergence in 1972. The Internet, a connected set of networks, came up in 1982 and invaded every country some getting linked up faster and many lagging behind. However, it is a fact that whether some one likes it or not or postpones the global connectivity, worldwide web is the name of the game only laggers will be the losers.
The e-community is rapidly growing at an unprecedented rate. The worldwide Internet connectivity surged from 27 million in 1996 to 70 million in 1998. It is expected to touch 100 million by the end of this year and more than double to 240 million by the year 2004. The USA has the largest community of Internet users but the population in Asia is expanding at the highest rate and China is emerging to be the largest user of Internet in Asia.
Pakistan cannot remain immune to this phenomena. It is very fortunate as well as very unfortunate when one looks at the state of IT and its use. It is fortunate because any product launched in the developed world is also released in the Pakistan simultaneously. But the government policies, shortage of skilled manpower are the largest impediments. It is also the national psyche of "keep it pending' when it comes to actual use of hardware and software. However, it is heartening to note that there has been a visible and significant change in the thinking of up coming generation over the last five years.
The rapid advancement in the IT has rendered conventional channels of communication obsolescent. In Pakistan, over the last two years there has been a recognition of the fact. It has been realized that delays in making timely decisions, with regard to IT matters, have resulted in Pakistan lagging far behind. Whatever, activities have so far undertaken were based on attempts made individually with minimum level of government coordination.
The progress in IT in the country has been amply hampered due to absence of a central coordinating authority. There is a need to ensure coherent, focused and accumulated efforts to produce quantifiable results.
During Nawaz Sharif rule the draft of Information Technology Policy was prepared and circulated. The steering committee was given the mandate. The then deputy chairman planning commission and the chief coordinator Pakistan 2010 programme was nominated IT coordinator for Pakistan. To ensure meaningful implementation, a two-tier structure was conceived. The Board of Information Technology was to be created as the highest decision making authority for the IT related issues. The steering committee, in addition to its mandate, was to ensure implementation of the decisions and policies and formulate recommendations.
Any product that can be reduced to digital format can be delivered electronically. This includes music, books, films, computer software and financial services architecture plans etc. These products can also be delivered by conventional modes of transportation or non-electronic means. The introduction and speed of Internet has established e-commerce as an important means of carrying out commercial transactions.
It raises a basic question that "Can e-commerce replace the traditional trading system?" To certain extent it can become a substitute. An increase in the volume and value of transactions conducted on Internet is expected to surpass the quantum of transactions conducted by traditional means.
According to some experts, e-commerce has this potential as it can reduce the cost per transaction, increase efficiency, promote competition, lower prices and enhance international demand. It can open new areas for transactions like on-line education, medical services, consultancy and data exchange. It can complement trade through domestic and international market research, advertising and marketing. In the financial services area it can facilitate speedy transactions and transfer of funds.
It has the potential benefits not only for large corporation but also help small and medium size enterprises to overcome their traditional drawbacks in trade. They can benefit from virtual presence and overcome lack of information about market opportunities and available supply.
The physical infrastructure requirement for conducting e-commerce depends on the type of business in question. Delivery of an item through Internet requires use of appropriate hardware and software, compatible telecommunication system and uninterrupted electricity supply. The Internet is the means through which transactions can be conducted. Like any other developing country, Pakistan is far behind in required physical infrastructure. These include: computer hardware and software, telephone lines and uninterrupted electricity supply.
The other but more important issues are: transfer of funds in foreign exchange, customs clearance, payment of duties and taxes. Goods traded electronically may never cross the border physically and thus it will be almost impossible to collect customs duties and there is an incentive to by-pass the conventional trading system. This may lead to not only economic distortions but also result in loss of revenue for the government. However, there is a need to study the potential loss of revenue against long-term benefits.
There are some legal issues involved. For example: determination of country of origin, agreements, need for original documents, establishing the authenticity of documents. UN Commission on International Trade Law has already undertaken the work on model laws for conducting e-commerce. Pakistan needs to keep a track off these developments and interact more with the Commission and its trading partners.
Despite many deficiencies and inefficiencies, Pakistan has been able to make a beginning. According to sector specialists, there are more than 50,000 Internet connections in operation. A large number of Internet users are still using normal telephone lines or a group or groups of users use the same connection. More and more companies are creating web sites.
However, the biggest constraint today is the availability of trained personnel. Even the developed countries suffer from this deficiency but the problem is more acute due to poor literacy level, both in overall education and IT knowledge. For the government the top priority in education and training should be the information technology. Unless trained people are available, even the availability of most modern technology can help in overcoming the problem.
ATMs, on-line and tele-banking are already in use and the infrastructure available in the banking sector has the largest potential for e-commerce or e-business. While domestic e-commerce has the largest potential, it may take some time to conduct international transactions due to legal requirements.
Globally Toyota follows 'just in-time' delivery of components. Its Pakistani operation is also trying to follow the same guidelines. This has helped them in cutting 'inventory carrying cost' and substantial reduction in overall cost of production. If this philosophy is followed by other manufacturing companies making extensive use of e-commerce they can also make cost of production more competitive and make the best use of installed capacities.
The successful use of e-commerce by Intel can be taken as a role model by the Pakistani corporations. Similarly, Pakistani banks can use the system, to start with, in their stationery departments. Currently, it takes days to get the delivery of cheque books and other items. By using the current on-line system, stationery printing and delivery system can be atomized. This can help in cutting cost, improving efficiency and reducing unnecessary wastage of time.
During Nawaz Sharif rule at least some efforts were made to address the Y2K issue and to prepare the draft of information technology policy. It is expected that the new economic managers and policy makers will continue the efforts in a better way. The country needs to address these issues and come up with clear cut policies as it cannot afford to continue limping while rest of the world is moving really fast. One should not ignore the words of Dr. Javaid Leghari, "As e-commerce flourishes, we must all take initiatives to join it because there is no turning back. In the end only the 'connected' will survive. Pakistan can chose to either become e-literate or become extinct. The choice is our."