BOOSTING EXPORTS THROUGH E-COMMERCE

In the economic field Japan continues to be a major trade partner of Pakistan

By SEEMA TUNIO
Isra University Hyderabad
Feb-18  24, 2002

This article tries to analyze how e-commerce can boost Pakistani exports. The major aim is to study the export trends of Pakistan and comparing it with other developing countries exports. Countries who want to increase their exports are utilizing the boom in the e-commerce related fields and are growing rapidly in terms exports with the exponential growth of internet and other e-commerce tools. Foreign Companies are flocking on-line to take advantage of the Internet's ability to generate efficiencies, cost savings and improved customer relationships. The Internet is also helping companies to compete in new markets, both domestically and internationally.

Pakistan is low-income country but shows optimistic signs of growth. It is surviving amid ingrained economic problems like high population growth rate, lack of foreign investment, huge deficits, heavily indebted on foreign aid, unstable government and large chunks of GDP going to military expenditures. And most recently the drought like conditions in the country which is affecting 58 of the total 106 districts in the country. Keeping aside all these problems Pakistan has to grow utilizing its full potential and tapping its full resources. Here, major problem with Pakistan is that Pakistan is not trying to search the potential market of its product and make capture major market share. If we only promote our exports properly, the current scenario of our economy may be changes. It is however possible if Pakistani companies use latest technology i.e. E-commerce or Internet in discovering, developing and communicating new products and markets.

Current exports scenario

Current state of economy of Pakistan does not indicate a very favourable position especially in terms of exports. The only pliable solution of the problem seems to be increasing exports and decreasing imports. Exports are engine of growth for any economy. Merchandise exported contributes to the rise in gross national product. The result of growth in exports leads to lower trade deficit and more jobs attributed to exports. Today many firms export occasionally but want exporting plans fully integrated into their marketing plans. Others export to two or more markets but want to expand into many countries. Just 15 per cent of the Pakistani exporters account for 85 per cent of the value of the Pakistani -manufactured exports. More than half of the Pakistani exporters sell only in one foreign market. Less than 3 per cent of the companies export to more than 5 markets.

There is tremendous potential for Pakistan to become more active in exports however export trends narrate another story. Pakistan's exports in the year 2001 amounted only to $9.14 billion. It was not able to reach the target of $10.1 billion. Though there are many reasons for low exports like global recession, particularly in US, Japan and European union which are principal importers of Pakistan, drought-like condition in the our country, high cost of production e.t.c. One of major problem, which has further deteriorated the condition of Pakistani exports, is that Pakistan has not positioned itself as a very reliable country.

Export of Top 17 countries: 1998

Country

US $ billion %

% of global exports

1. United States

934

19

14

2. Germany

623

13

9

3. Japan

437

9

6

4. France

387

8

6

5. United Kingdom

373

8

6

6. Italy

310

6

5

7. Canada

248

5

4

8. Netherlands

225

5

4

9. Hong Kong

209

4

3

10. China

208

4

3

11. Belgium

192

4

3

12. Spain

161

3

2

13. Korea, Rep.

157

3

2

14. Mexico

130

3

2

15 Singapore

129

3

2

16. Switzerland

120

2

2

17. Sweden

103

2

1

Total

4,946

100

72

Global Exports 6,767  
Source: World Development report 2000-2001 New York: Oxford University press, August 2000, pp 302,303, Table 15

If we compare Pakistan's exports in the year 1998, it only amounted to $8.7 billion. Which means our exports comprise of only 0.13% of world market. Pakistan can also improve its exports by expanding its global markets. World markets is approximately 777 times larger than Pakistani markets. Our exports are highly concentrated in few countries i.e. USA, U.K, Japan, Germany, Middle Eastern countries. 47% of our exports are going only to six countries. Moreover some 30 per cent of Pakistan's total exports currently go to the EU, making it the country's biggest trading partner. Last year, Pakistani exports to the EU were valued at more than $2 billion, with cotton, textiles, garments and leather goods accounting for 75 per cent of that. Another 23 per cent of Pakistani exports are sold in the United States. [Source: Exports Receipts, June 2001, State Bank of Pakistan, Statistics Department].

There is a need to expand our global market. Competition from India, China and Asian tigers can have further disastrous effects on our exports. Growth rates at many markets outpace the domestic markets and beating competitors abroad can keep you on the edge at the domestic markets as well. As our export data related to recent years shows that Pakistan is not trading with countries with, it has close and good bilateral relations like China, Turkey and Iran. Pakistan exports to China, Turkey and Iran amounts only to less than 2%, 1%, and 3% respectively.

Export partners of Pakistan for the year 2001:

Country

%

US

24

Hong Kong

7

UK

7

Germany

6

UAE

6

We imported commodities worth $9.6 billion in the year 1999


Import partners of Pakistan:

Country

%

Saudi Arabia

8

UAE

8

US

6

Japan

6

Malaysia

4

Source: Exports Receipts, June 2001, State Bank of Pakistan, Statistics Department

Moreover if we look at Pakistani exports Pakistan is still relying heavily on textile cotton and related products constitutes around 60% of our total exports. We export commodities like textiles (garments, cotton cloth, and yarn), rice, other agricultural products. On the contrary we import machinery, petroleum, petroleum products, chemicals, transportation equipment, edible oils, grains, pulses and flour. Diversification of export trade should be followed by Pakistani exporters. It means that Pakistan should not rely only on Agricultural products but we should broaden our export base. There are mineral products, canned food & software which needs to be fully exploited and search of potential market. If we compare Pakistan with India who is exporting assorted products we come to the conclusion that India is exporting variety of products ranging from software to canned food from fashion apparel to satellite programmes.

What is E-Commerce?

We need to define Electronic Commerce before considering its benefits for exporters. We can define electronic commerce from four different perspectives:

Communication perspective, electronic commerce is delivering of information, products/services, or payments via telephone lines, computer networks, or any other means.

From a business process perspective, electronic commerce is the application of technology toward the automation of business transactions and workflow.

From a service perspective electronic commerce is a tool that addresses the desire of firms, customers, and management to cut service costs while improving the quality of goods and increasing the speed of service delivery.

From an online perspective, electronic commerce provides the capability of buying and selling products and information on the internet and other online services.

There are a myriad of positive benefits associated with E-commerce including customer convenience, increased sales, professional image and the list goes on.

E-commerce through Internet and other devices has revolutionized the world in past seven eight years. It all started in 1994 when Jeff Bezos working on Wall Street, watching Web usage grow by 2300% each year. He knew that internet would be everywhere soon so he thought of selling through Internet by launching Amazon.com at Seattle, which is now Earth's Biggest Bookstore.

E-commerce can appear simple (well, almost) once you understand how all the components work together. A merchant account allows you to accept credit cards, your web host shows your web-site to the world, your shopping cart helps your customers order easily and real-time processing processes the orders in real-time and approved transactions are credited to your merchant account. All are independent components but they all function together to make e-commerce work. Find a designer or webmaster who can bring all these elements together on your site & watch e-commerce work for you. [Lisa Schmeckpeper, 2001]

Electronic commerce

"Electronic commerce can play a major role in boosting Pakistan's exports, which have stagnated.[A.R. Kemal 1998]. Pakistan can improve its condition by using E-commerce. Internet could play a dramatic role in boosting Pakistani exports. All types of companies in Pakistan have the excess to Internet through which they can increase trade nationally and internationally. The Internet is a powerful tool revolutionizing all aspects of business. However, few firms are using the Internet effectively to generate or support international sales. Some firms are even turning away international orders because they are unfamiliar with export requirements. Even developed country like America is making efforts to raise awareness about the global scope of electronic commerce and build support for a private-sector led approach to e-commerce policy, both nationally and internationally. For the above mentioned purpose the U.S. Department of Commerce, keep on informing American exporters through seminar series on strategies and procedures that will help firms overcome the challenges of international business and make more effective use of the Internet to expand global sales. Pakistanis have always considered America as a Paragon in every walk of life so why not in terms of export policies.

Forrester Research found that the typical U.S. Company can expect 30% of its web traffic to come from overseas from the day it goes into operation. It can also expect 10% of its orders to come from abroad. However, nearly half the international orders received by U.S. companies go unfilled. Moreover, Forrester estimates that non-U.S. e-commerce transactions will increase from $167.1 billion in 2000 to $3.69 trillion in 2004. This growth means that any firm without an international e-commerce strategy will not be able to participate in an increasing share of the available business opportunities.

By comparing Pakistan with India we come to know that India has focused much more attention on E-commerce related tools. Indian companies have made themselves available at every site thus using the Internet to export. They are concentrating mainly on web marketing, branding and advertising internationally. Pakistani exporters have failed grab this opportunity. Pakistan has thirty Internet Service Providers (ISPs) and 1.2 million Internet users in the year 2000. These internet users have increased tremendously since then.

National Statistics conducted a survey of about 1,800 adults. They said Hotel and flight bookings are the most popular purchases made by Britons over the Internet although well over half of Web surfers have still not bought anything online. Official figures showed that just over half of the adults in Britain, or about 23 million people, have used the Internet at some time. Of these, roughly three quarters used it to find information about goods and services, 71 per cent to send or receive e-mail, and 35 per cent to buy something. Flights and hotel accommodations made up 35 percent of the total; books or magazines, 26 percent; music or CDs, 25 per cent; and tickets for events, 19 per cent. Of those who bought online, only 18 percent had spent more than $736 in the past three months, and 29 per cent had spent under $147. Another interesting finding made by them was that the main reason given for not spending money over the Internet was security concerns, 29 per cent said. However only 5 per cent of those questioned had actually experienced any security problems on the Internet. [Government statistical agency England, 2001]

Major challenges in e-commerce

It's also important to know that fraud runs rampant on the Internet. And unfortunately Exporters bear the primary responsibility for ensuring whether a transaction is legitimate before filling the order. In other words, if a transaction is fraudulent, exporter failed to take the all important steps to verify the legitimacy of the order. While many companies are successfully using the Internet to support their domestic activities, its use to move into the global marketplace is posing more difficult challenges. There are many cost and risks associated with the exporting through the net as well. It is the company to weigh against these costs and risks. These difficulties have led many firms, especially small- and medium-sized enterprises (SMEs) to ignore international markets and reject international opportunities even when orders land on their doorstep via the Internet. Thus there are many issues which needs to be addressed before using e-commerce like internationalization, multi-currency pricing and payments systems; legal and regulatory issues; vertical and horizontal marketplaces; and fulfillment and delivery. If one of the key benefits of electronic commerce is its creation of a seamless global marketplace, then one of the most significant challenges is national, legal and regulatory issues that impact electronic commerce. From taxes and tariffs to privacy, from consumer protection to content, government policies will play a role in shaping the future of electronic commerce and how companies use the Internet to transact international business. Government of Pakistan should provide an overview of the key policy issues to watch, how they are being addressed, and how they could impact the international business model.

Probable solutions

Solution to these problems is neither easy nor impossible.

1. Pakistan's all the Chamber of Commerce with the help of Ministry of Finance and Technology should build a comprehensive profile of countries containing e-commerce legal and regulatory data. It should follow-up consultations with Department of Commerce's staff of global experts. Further they should conduct various seminars to extend the reach of the companies in industry sectors.

2. Trade policies should provide more incentives to the exporters.

3. Exporters could obtain a qualified export counseling and make a master international marketing plan before exporting business. The plan should tell goals, objectives, problems encountered.

4. Exporters should also take sufficient care selecting distributors abroad. There may complications in the international combinations and transportation so chose international distributor than a local counterpart.

5. Establish a basis for profitable operations and orderly growth. Although no international inquiry should be ignored but the firm that responses to unsolicited sales lead to unmatched success. Devote continuing attention to exports. Too many companies devote to exports when the business is falling and again to domestic markets when the market boom and renegade it to secondary position.

6. Do not assume that given marketing technique works in different countries what works in Switzerland may not be suitable for Saudi Arabia. Each market has to be treated separately. Be willing to modify products to meet the requirements of importers and related products.

7. Pakistan should position itself as a very staunch and upstanding country by exporting the good quality products on time.

Conclusion

Pakistan must act quickly in terms of adapting E-commerce as one of the modes of exporting to other countries. The Internet's global reach enables it to bring together far-flung businesses into communities or hubs focused on common business interests. In order to compete with other countries or even to survive Pakistan should take effective measures to boost its exports, reduce its deficit, and widen its global markets. Pakistani exporters can increase their exports by diversifying their product markets and product lines. Exporters should also build up good image abroad. Image, which has been marred by delays, low quality products and cheating.

References:

1. A.R. Kemal (1999) The Pakistan Development Review 37:4 Part II (Winter 1998) pp.37:4,849-859.

2. Lisa Schmeckpeper, of LRS Marketing. Lisa's e-zine, "Website Success" email adress: subscribe@lrsmarketing.com or visit www.lrsmarketing.com.