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 Internet.
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 answering.
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 are disappeared.