Future of E-Commerce in Pakistan

By Ali Iqbal

E-commerce, short for electronic commerce, is conducting business online, including buying and selling products with credit card or digital cash, by transfer of data between different companies using networks, such as the Internet. More precisely e-commerce is the collection of tools and practices involving Internet technologies that allow a company to create maintain and optimize business relations with consumers and other businesses.

However, in general, if we use any type of electronic devices in getting orders and sending catalogues, like telephone, fax or any other such instruments, we are supposed to be applying electronic business techniques. However, the real sense of e-commerce is the business on the internet of which there are different modes, like opening a retail store on internet, where all transactions are done on line, from selection of product to payment of bills.

The over-all volume of e-commerce is more than $4 billion annually. Doing business on internet is not a very costly investment. It is estimated that in near future, almost 25 per cent of the traditional business will be converted into internet business.

Trends

E-commerce is an information technology trend developing fast in the business world. The corporate and the business world, aptly supported by the IT industry, already stands transferred, which by recent estimate will exceed $400 billion this year.

As we start warming up to global e-commerce in Pakistan, we must understand that almost 78 per cent of the e-commerce activity takes place in the USA, obviously driven by the use of internet in that country. As the January 2000, over 110 million people have internet access there compared to 279 million the world over.

The amount of internet users are speeding up day by day all over the world and same is the trend with Pakistan. In 1995, the number of internet users in the world was almost 16 Millions but now in 2008 it fly high to almost 1400 Million. This shows that the internet usage is increasing with the passing minute and this will grow more rapidly. In 1995, almost .01% of Pakistan population use internet but in 2008 this rate goes high and now it's almost 14.1% of the total population.

The people in Pakistan are slowly getting aware of the fact that business on the internet is less costly and are more beneficial.

Nevertheless, Pakistan can make good use of this opportunity with proper planning and execution. To begin with, let us focus on the domestic front before going all out for the global market.

Domestic activity

Offer for improving and productivity to bring it to the excellent level. It also allows our entrepreneur to test their web business and marketing skills before taking on the international markets. E-commerce is not for all but for those who understand it. Yet, e-commerce is not a technology.

The issue at the individual level, it is purely a business matter. At the govt. level, it is a matter of providing infrastructure for transactions on internet. 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 taking place on the internet.

Most studies, however, suggest that e-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, product/services and other related information, which can help visitors to learn more about the hosts. The second step involves asking customers to lose their pockets and buy on line.

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.

However, Pakistan is still far behind in chasing the west in this regard. 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 led many Pakistani firms to give low priority to e-commerce due to unavailability of proper framework for the internet in the country.

Some activities that are being performed by the Government of Pakistan are:

o Foreign Investment

Foreign investors are allowed to invest up to 100% in software companies, and foreign interest in Pakistan's technology sector has been increasing. Local entrepreneurs have set up around 100 call centers in recent years in Pakistan; one of the first was a call-centre that Align Technologies (US) set up in 2000.

o Intellectual Property

According to an August 2006 report from the government, the Electronic Data Protection Act 2005, the revised Electronic Crimes Act 2004 and a law relating to electronic payments had been drafted and were ready for legislation, although there is no schedule to present them. The Electronic Data Protection Act would provide protection and safety to foreign data regarding the processing of such data in Pakistan; details for the other two acts were not yet available by August 2006.

o Consumer Protection

The president passed the Electronic Transactions and Governance Ordinance 2002 in September 2002. It extends the coverage of laws concerned with physical contracts or documents to their electronic forms.

o Basis of Tax

No rules have been established on how to tax e-commerce or determine "electronic residence" in Pakistan.

o E-Commerce as a course

After the government realizes the importance of e-Commerce, they asked all the universities to make e-Commerce the part of their syllabus.

Barriers to Face

In Pakistan, e-commerce is still in its infancy and faces many barriers to grow. The notable barriers are:

o Misconception of e-Commerce in Pakistan

o Mistrust

o Low Literacy Rate

o Access to Technology is late

o Policies of Government

o unavailability of proper infrastructure [telephone line of stem lines of steam age, frequent failures of power]

o limited user of internet hardly one per cent of the entire population have access to the internet]

o the issue of security of transactions on the internet

o high bandwidth rates

o the rigid and monopoly role of the PTCL.

However, the Government 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 speed up the process.

Predictions

Those who create, distribute, and sell goods and services to consumers also have reason to look forward to this new mechanism. All enterprises, including the small and medium sized can reach customers throughout the world instantly and comparatively inexpensively. Many vendors can sell globally without the costly infrastructure of worldwide retail stores, sales offices, distributors, or warehouses.

Pakistan is still an under developing country and is in a process of making their way towards the road of technology. The internet is prevailing like dark cloud on Pakistan and it will hit the Pakistan economy positively in the near future. People are getting aware of the importance of business on the internet rapidly and this will prove good in the favor of Pakistan.

Pakistan Government is taking bold steps when it came to the concern of e-Commerce. Calling FDI, making laws so that they could be able to invest more in Pakistan in the field of Technology. The policies of decreasing the rigidity and monopoly of PTCL will help in this regard. These steps will lead to more investment in the field and towards a bright future of e-Commerce in Pakistan.

Banks are playing an important role in increasing the awareness of e-Commerce in Pakistan. The banks start e-Banking and also the availability of merchant account that will help the investors to invest in the internet business.

The literacy rate of the country is a big block when we thought of the future of e-Commerce in Pakistan. It will take a lot of time in increasing the literacy rate of the country and more time will be required to give awareness to the people about the e-Commerce.

Pakistan became a member of AFACT in September 2000 at Taipei, Taiwan and was nominated its Chairman last month at AFACT 2002 held in Kuala Lumpur, Malaysia. Which surely reflects that e-Commerce got a very bright future in Pakistan.

The young entrepreneurs can also play an important role in making the e-commerce a bright activity in the business field. Fresh students who know about the internet and the business over it will focus on the internet business as it requires fewer budgets and it pays more.

Conclusion

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 E-commerce is not expected to increase in near future due to low PC and internet penetration. Industry, businesses and trade people prefer to use traditional ways of business enjoying personal contacts and mode of payments. We think that companies have started realizing the potential of ecommerce and electronic data interchange In Pakistan, especially in the Banking sector. So the future of Ecommerce in Pakistan is bright. We will embrace ecommerce by desire or by force as more and more international transactions are undertaken electronically.

Ali Iqbal

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