The trading of goods and services through the internet has changed the entire landscape that has unlocked the reach of business and consumers across the globe.
The proliferation of mobile devices with the development of applications linking buyers and sellers has further created opportunities for business to link with domestic as well as global customers.
According to a study conducted by the Organisation of Economic Cooperation and Development (OECD), in 2013 the estimated worth of e-commerce business-to-business transactions exceeded $15 trillion. Similarly, business-to-consumer transactions were estimated at $1.2 trillion and are growing rapidly, led by the Asia-Pacific region.
Development professionals are unanimous that e-commerce has the potential for creating economic opportunities for developing countries that would lead to sustainable development. There is compelling evidence that participation in e-commerce by business in developing countries provides opportunities for integrating with the global value chain, enhancing efficiency and lowers the transaction cost.
Read: No Amazon? No problem for Pakistan’s e-commerce pioneers
Pakistan, with a population of around 190 million, has also emerged on the radar of international companies that are exploring avenues to extend their scope by investing in e-commerce ventures. Local entrepreneurs are also coming forward and have developed online marketplaces to cater to the domestic market.
According to an estimate, the e-commerce market in Pakistan is worth $50 million and is expected to grow rapidly after the introduction of 3G telecom technology. At present, there are 15 million 3G and 4G users in the country.
In the e-commerce market overseas, the United States has emerged as a leader where companies such as Amazon, Ebay and Paypal have developed platforms that facilitate businesses to reach the global market. These platforms have enabled especially small businesses in developing countries extend their reach in international markets.
However, for businesses from Pakistan, there are barriers to entry. Amazon, Ebay and Paypal do not allow Pakistani merchants to use their services for selling goods.
Amazon.com, a Seattle-based company established in 1995, is a Fortune 500 company selling not only books but anything conceivable from apparel to industrial goods.
It has established an online marketplace where more than three million sellers from 89 countries have established online stores selling various items to customers in 185 countries and 480,000 cities. However, Amazon does not allow residents from Pakistan to sell in its marketplace.
EBay is another global giant in e-commerce business with a market capitalisation of $70 billion. It is also in the list of top 10 global retail brands.
It provides a digital platform to sellers from listed countries to sell goods through its website.
EBay has 25 million sellers with 157 million active buyers spread across 190 countries. The entry of Pakistani sellers on EBay is also restricted as EBay uses PayPal services for financial transactions. PayPal does not allow Pakistani residents to open an account to facilitate them in selling goods on EBay.
PayPal is one of the most important players in the global e-commerce market. It provides financial gateway for e-commerce transactions. PayPal, which was owned by EBay and is available in 190 markets and 24 currencies, does not allow Pakistani residents membership to its financial services.
Regarding trade in services, the situation for Pakistan is much better compared to trade in goods. Top global platforms and marketplaces for trade in services such as Odesk and FreeLancer.com allow Pakistani residents to sell services through their platform.
According to latest statistics, Pakistan has emerged as world’s fifth top freelance country where people are bidding for projects such as software development, code writing, computer graphics and content writing for clients around the globe. At Odesk, Pakistani freelancers successfully bid for projects with the total of 35 million hours in 2012.
It is evident that where Pakistani businesses have a level playing field and access to markets such as global platforms for freelancer services, they have been able to make their mark.
Read: Digital money: Paypal jumps 5.42% in first trades after spinoff
In the case of trade in goods, though it is encouraging that there is substantial local and foreign interest in e-commerce ventures for the domestic market, there are formidable barriers to entry in reaching the global market.
The barriers to entry for Pakistani business in global e-commerce platforms should be a cause of concern for the policy-makers. According to a recent OECD study, excluding countries like Pakistan from these platforms “may accentuate existing imbalances in e-commerce trade”.
The OECD advises developing countries such as Pakistan, which have immense potential to harness e-commerce but are constrained by the entry barriers, to devise a national e-commerce strategy taking on board all the relevant stakeholders.
The strategy should not only focus on the entry barriers, but also look into other constraints such as logistics, coverage of broadband internet and facilitation measures for cross-border e-commerce.
The writer is a civil servant with 20 years of experience in dealing with issues related to trade and development
Published in The Express Tribune, September 7th, 2015.
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