The report is split into two parts. The first part examines global trends in electronic commerce [e-commerce] specifically in relation to developing countries, in particular the status of e-commerce in each region, the domain name system (DNS), gender, and mobile electronic commerce (m-commerce). The second part looks at the impact of e-commerce on selected sectors including information technology (IT), finance, commerce, insurance and export industries.

E-commerce and international ICT decision-making

‘E-commerce is one of the most visible examples of the way in which information and communication technologies (ICT) can contribute to economic growth,’ says United Nations Secretary General Kofi Annan in his foreword to the report. ‘It helps countries improve trade efficiency and facilitates the integration of developing countries into the global economy. It allows businesses and entrepreneurs to become more competitive. And it provides jobs, thereby creating wealth.’ With regard to national and international information and communication technology (ICT) decision-making processes, ‘…the objective of the E-Commerce and Development Report 2002,’ concludes chapter 1, is to ‘[contribute] to greater awareness and better understanding of the issues at stake for developing countries.’

‘The effects of Internet-induced changes in the global economy and their implications for developing countries will depend to a significant extent on factors that policy-makers, business players and other stakeholders can influence,’ notes the first chapter. ‘Policies must be designed, articulated in coherent e-strategies and implemented in partnership with all the relevant players to ensure that the new opportunities for creating, transforming, applying and exchange information and value are used to improve the productivity of developing economies and their enterprises. The process of designing the strategies that can make e-commerce a force for development must necessarily include an international component that supports national efforts by ensuring that the developmental perspective is present in a meaningful way in the multiple international discussions of the Internet, information and communications technology (ICT) and the organization of their economic applications.

A close relationship between national e-commerce strategies and international cooperation would be greatly facilitated by the emergence of a common understanding of the fundamental elements of e-commerce strategies for development, especially if, as seems desirable, ICT is to be mainstreamed into official development aid programmes…That is a major objective of the intergovernmental policy dialogue that is currently taking place in UNCTAD in the field of e-commerce both in Geneva and through a series of high-level regional workshops in the field. Contributing to greater awareness and better understanding of the issues at stake for developing countries is also the objective of the E-Commerce and Development Report 2002’.

The status of E-commerce around the world

The first chapter examines the trends, in terms of uptake of the Internet and electronic commerce, the differential between business-to-business (B2B) and business-to-consumer (B2C), and the differences between regions. Of these regions, the report summarises that ‘connectivity is slowly improving in Africa, but e-commerce remains limited; Asia and the Pacific lead in the adoption of e-commerce among developing countries; there is rapid growth but very modest volumes in countries with economies in transition; and that growth continues in North American and Western European markets. Latin America makes progress but faces sharp divides, as e-commerce in the region is highly concentrated in four relatively developed Internet markets (Argentina, Brazil, Chile and Mexico), which together account for more than two thirds of the number of Internet users in the region’.

The key trends identified are that:

• ‘Internet use and particularly electronic commerce have continued to grow at a fast pace. The number of Internet users worldwide is expected to reach 655 million by the end of 2002.
• A growing share of new Internet users are in developing countries. Overall, developing countries accounted for almost one third of new Internet users worldwide in 2001. In the most developed markets penetration is nearing saturation levels as the numbers of those who do not plan to get Internet access in the near future seem to have stabilized. Therefore, the growth in the share of developing countries will continue.



• In spite of the encouraging increase in the number of users, penetration rates in most developing countries remain very low. On the basis of ITU estimates, the percentage of the world’s population using the Internet at the end of 2001 should have been around 8 per cent, that is 30 per cent higher than the 6.4 per cent that the ITU calculated at the end of 2000, but still far below the 50 per cent and above penetration rates in the most advanced countries.
• E-commerce is also growing in developing countries, but more slowly than the number of Internet users. The Internet is a prerequisite for the expansion of e-commerce. But some estimates of the numbers of Internet users count anyone (including, for instance, children) who has had access to the Internet in the previous 30 days. A much higher frequency of access is necessary in order to acquire the familiarity and generate the confidence that are needed in order to become an e-commerce practitioner. Particularly in the case of those engaged in business-to-business (B2B) e-commerce, the order of magnitude of their use of the Internet cannot be of some hours per month, but of hours per day. It is safe to assume that in developing countries the proportion of Internet users who are also e-commerce practitioners is lower than average, owing of course to lower per capita incomes but also to other well-known factors such as low credit card usage, lack of relevant products or services or poor logistics and fulfilment services.
• B2B predominates over B2C but remains small in developing countries. It is well known that e-commerce takes place essentially between enterprises, so that B2B amounts to around 95 per cent of all e-commerce in most estimates.

Chapter 2 provides a succinct appraisal of the Domain Name System (DNS) and the issues which relate to developing countries. This begins by showing that unlike the telecommunications sector which has historically developed within international and state regulation, the DNS - particularly in its earliest stages - has not been subject to centralized regulation through international treaty or otherwise, nor has its development been marked by the initiatives of large enterprises such as telecommunications operators. Nevertheless, the rapid growth in use of the Internet has led to increasing importance being placed on the DNS as a secure and reliable general-purpose communications infrastructure. As the DNS identifies a website’s location by expressing the name, brand or other identifying features, it is a vital shop front for commercial and non-commercial purposes – the essential infrastructure of e-commerce.

The chapter explores the complex array of commercial, technical, regulatory and legal factors at play in this field, and the key organizations and decision-making structures which are in place. ‘Developing countries attempting to build up their own national infrastructure to support increasing Internet use,’ says the chapter, ‘need to be aware of the multifaceted issues that may confront them’. These include, for example:

• Country code top-level domains (ccTLDs). Policy decisions are required in relation to developing countries’ national country code top-level domains (ccTLDs). Increasing amounts of information are becoming available to developing country experts to assist in formulating an appropriate approach for management of the ccTLD. Developing-country ccTLD managers should become involved in the relevant forums for exchanging information about and participating in the DNS.

  

• Reform of ICANN. For developing countries, the reform of the Internet Corporation for Assigned Names and Numbers (ICANN) is an important issue because it gives these countries a renewed opportunity to engage in the ICANN process, either directly or through their regional ccTLD organizations so that their perspectives, requirements and international diversity are duly taken into account.

Chapter 3 takes an in-depth look at the role of gender in e-commerce and development, and noting that as the ‘digital divide’ risks excluding large parts of the population especially in developing countries, it explores whether or not the digital revolution is reinforcing gender inequalities.

The chapter begins by identifying the key barriers facing women in gaining access to ICTs in developing countries. Among them are that women often face greater barriers than men in getting education and training that can equip them with computer literacy, foreign language proficiency and business skills. In the developing parts of the world, parents tend to give priority to the education of male rather than female children. Women also often find it more difficult to engage in new forms of self-employment created by ICT, such as running telekiosks or cyber-cafes if they do not have the same access as men to family property or institutional financing. Yet at the same time, women account for the majority of the rural poor in the developing countries, and access to ICT infrastructure in the countryside is less available than in urban areas. The chapter then looks at the mainstreaming of gender in ICT policy-making, highlighting that policy-makers have to play a key role in creating an environment favourable to the participation of women in the digital economy.

Chapter 4 looks at m-commerce and wireless communications opportunities in the developing world. Mobile electronic commerce (m-commerce) is the extension of e-commerce to a mobile environment and ‘is often defined as the buying and selling of goods and services using wireless handheld devices such as mobile telephones or personal data assistants (PDAs)’. M-commerce is already seeing everyday use. B2C transactions are more important than B2B. And whilst Europe and North America should take the lead in its uptake, because m-commerce is based on a mobile platform, the rest of the world is expected to catch up at a faster rate than in other sectors. However, difficulties in making electronic payments and concerns over the security and privacy of transactions are found to be limiting factors in the conduct of m-commerce, which may have to await third-generation (3G) wireless technologies and fully Internet-enabled handsets.

Noting the lack of fixed-line connectivity and low level of Internet penetration in large parts of the developing world, the chapter points out that with the convergence of fixed and mobile ICTs, first access to the Internet for a significant part of the world will be achieved using mobile handsets and networks. ‘Wireless technologies have made inroads even in relatively low-income areas,’ says the report, ‘where prepaid cards allow access to people who cannot have a prepaid subscription because of billing or creditworthiness problems’. Moreover, ‘Handsets are acquiring functionalities that were limited to desktop PCs only a few years ago. Many are already running slimmed-down versions of PC operating systems and applications, and the difference between future handheld and desktop devices is likely to be related to the ergonomics of the physical user interface that will be designed to serve a particular purpose, rather than lack of processing power, memory or network accessibility’.

The main areas of m-commerce use are in:

• text messaging or SMS (short messaging service)


• micro-payments;


• financial services;


• logistics;


• information services;


• and wireless customer relationship management.

E-commerce and Information Technology (IT)

Two main trends in the IT industry, according to a press release, are favouring its ascendancy in developing countries:

• The development of open-source (non-proprietary) software, such as the Linux operating system, which is now used on 30% of all active website servers: The report calls these products an "ideal match" for current developing country hardware, such as ordinary, low-cost PCs.
• The customization or localization of IT, and especially software products and websites, for local and regional markets: Many SMEs [small and medium-sized enterprises] from developing countries are cooperating with TNCs [transnational corporations] in making their products or services suitable for a given niche clientele or foreign market. Major opportunities are posed by the growing demand for "Arabizing" software in the Middle East – Arabic being the world's sixth most widely spoken language – and a number of mainly Egyptian companies are already moving from the production of media content (books, films and broadcasting) to website and software translation and web hosting. These activities can in turn serve as a springboard for new ventures and other business opportunities.

The report also takes a look at opportunities for developing countries in the services export sector, which is being transformed by e-commerce. Between 1990 and 2000, developing countries' exports of services grew almost twice as fast as the world average. Leading the way among the dynamic services – which experienced above-average sales growth in global markets – are many that can be delivered online ("e-services"), such as computer-related and travel and tourism services. While developing countries' share in the global e-services market is still small, many of them are gaining world market share in the export of communications services, financial services and royalty services.

In case studies of Costa Rica and India, the report shows how much e-services can potentially enhance export competitiveness and produce high value-added services that give a major boost to the local economy. In Costa Rica, software services exports have surged from US$16,000 in 1997 to US$60 million in 2000. At the same time, the growth of the domestic IT industry has led more and more firms to use ICT in their business activities, enabling them to move rapidly into e-commerce, e-banking and e-tourism. India's IT services exports – software and business process outsourcing in particular -- have almost doubled in two years, and currently account for more than 16% of exports and 8% of foreign exchange earnings. The two countries differ in many ways, but both have succeeded in creating a critical mass of IT-literate workers and IT know-how, have experience in high-tech development and can rely on contacts in their major export markets.

These achievements, the report suggests, can be replicated by other developing countries. But to seize those opportunities they and their partners will have to increase market access and address domestic bottlenecks in technology, payments, telecommunications and standards, as well as lower tariffs and deregulate further.

Resources

The UNCTAD E-commerce and Development Report 2002 can be downloaded from the UNCTAD website:

• UNCTAD http://www.unctad.org


• UNCTAD E-commerce branch http://r0.unctad.org/ecommerce


• E-commerce and Development Report 2002 http://r0.unctad.org/ecommerce/ecommerce_en/edr02_en.htm