E-commerce: barriers to its growth in Pakistan

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Mar 192008

TARIQ HUSSAIN TUNYO

ARTICLE (March 18 2008): Among the wonderful inventions of twentieth century, Internet has come to wield
immense influence on our lives. From reading newspapers to monitoring the performance of companies on
stock exchange, from learning the first aid techniques when in emergency to learning the recipe of making a
cake when guests visit, and from listening to music to keeping abreast of the latest cricket scores, our lives
have got increasing intertwined with internet.

Doing business online is yet another application of internet, which is changing the way business is done.
The term electronic commerce or E-commerce may loosely be defined as doing business over the internet,
selling goods and services which are delivered offline as well as products which can be “digitised” and
delivered online such as computer software, videos, and music.

E-commerce in its wider sense encompasses all transactions involving business organisations,
governments, or consumers that are done online through internet. However, the narrower view of E-
commerce focuses only on transactions between Business and Consumers (Business to Consumer E-
commerce or B-to-C E-commerce) and among two or more businesses (Business to Business E-commerce
or B-to-B E-commerce).

Banking, entertainment, telecommunications, and manufacturing industries globally have already started
using E-commerce business models, and have been reaping the benefits in terms of greater revenues and
lesser costs.

Within these industries, Internet is used for four major tasks with respect to E-commerce: Firstly, attracting
new customers through online marketing and advertising; secondly, serving existing customers via customer
service and support function; thirdly, developing new markets and distribution channels for existing products;
lastly, developing new information-based “digitised” products, which are then transmitted online.

Like every new technology, the potential uses of E-commerce were at first over-hyped, leading to the Dot
Com Boom of 1996-2000, which was briefly followed by a crash that kicked many companies out of
business; thereby, temporarily tarnishing the promising role of internet as an effective and state-of-the-art
medium of business. However, with the survivors of the crash and the new comers doing well these days,
the quantum of business online is expanding with rapid pace.

In Pakistan the size of E-commerce is small and uncertain at the moment. Yet as in most developed
countries of the world, it is expected that with the realisation of full potential of this new mode of commerce
in future, it is bound to gain a sizable chunk of business in Pakistan as well, due to the several potent
advantages that E-commerce enjoys over the conventional mode of commerce like its open structure that
surpasses all geographical barriers, low costs of transactions, low barriers to entry and improved access to
information, besides more efficient management of supply and distribution.

However, currently the growth of E-commerce in Pakistan is hampered by a number of factors, which are
discussed below. These barriers must first be removed for E-commerce to grow in the country.

1. MISCONCEPTIONS ABOUT E-COMMERCE IN PAKISTAN Most people in Pakistan have developed

wrong conception of E-commerce. They take a very limited view of E-commerce, restricting it to only those
products which may be “digitised” and transmitted online through internet and the payments for which is also
made online through credit cards.
This narrow view excludes the other three main functions of E-commerce outlined above ie attracting new
customers, serving existing customers, and developing new markets and distribution channels for existing
products. This misconception is among the main reasons that have held most Pakistani entrepreneurs with
existing conventional business back from entry into the ‘cyberspace’.

2. MISTRUST: Among the most important impediments to the growth of E-commerce in Pakistan is the
issue of trust. Counterfeiting and distribution of below par products in the face-to-face transactions is a
common problem in the country. How can people be expected to trust the sellers whom they do not know,
and who would deliver goods online/offline after the payment is made.

The issue of trust is further aggravated by the lack of confidence people have with respect to the security
and privacy of their personal information like credit cards, home addresses, phone numbers etc. The
emergence of trustworthy web-based companies, with support/guarantees from Government or trustworthy
multinational companies, in the county is required to dispel these fears of the consumers.

3. TRADITIONALIST NATURE OF PAKISTANI SOCIETY: A large number of people in Pakistan will take a
long time to come round to the idea that they can order goods and make payments through internet from
their homes without physically going out. This is due to the fact that on-site commerce has a socialising
effect, which is altogether absent from E-commerce. In a strongly relationship-oriented society like Pakistan,
people tend to form individual relationships and long term associations with the businessmen and vendors.

These relationships are maintained over the years and may not be easily replaced by the anonymity of the
E-commerce transactions. Moreover, most of the retail business in Pakistan is conducted through small local
enterprises rather than chains of departmental stores. These small local businesses are run by relatively
less educated entrepreneurs who are least eager to embrace the new technology.

4. LOW LITERACY RATE The literacy rate of the country, according to official figures, is around 54 percent.
Out of these 54 percent literate people at least 50 percent are computer illiterate. Thus, with around 75
percent of the population without computer literacy, the growth of E-commerce in the country cannot be
expected to progress at any faster pace.

5. ACCESS TO TECHNOLOGY: In order to undertake E-commerce transactions, one must be connected to

the World Wide Web, for which possession of a personal computer (PC) or a laptop is a basic requirement.
Although the prices of computer hardware have declined in the past few years, yet a personal computer is
still not affordable by vast majority of the people of the country. Besides a personal computer, a telephone
line or cable line are also required for a user to get connected to the World Wide Web. Thus, high costs of
computer hardware are proving to be a bottleneck to the growth of the E-commerce in the country.

6. ACCESS TO INTERNET SERVICES: It is true that in the past few years there has been a significant
increase in the number of internet users in Pakistan, with some observers claiming that in Pakistan the
internet access is now available to 800+ cities, towns and villages covering almost 97 per cent of the
population.

Even if this, seemingly exaggerated, estimate is accepted, the per hour cost of internet use in Pakistan,
along with the common problems of low speeds and getting disconnected frequently, render this wide
accessibility of internet useless. For e-commerce to flourish we need high speed, cheap and reliable internet
connections available to the vast majority of the population.

7. LACK OF E-TRANSACTION SUPPORT IN PAKISTAN: Online payment systems are an essential part of
e-commerce, which require, inter alia, possession of personal credit cards by consumers. However, few
people in Pakistan have personal credit cards. Among the various reasons people avoid getting credit cards
from banks include possibility of unnecessarily getting into the debt trap.

The unpopularity of personal credit cards in Pakistan is responsible for the weak e-support infrastructure,
forcing the use of old mechanism of money transfer like, cash payments, cheques, and postal orders which
may work as viable substitutes to credit card for a short term to accommodate limited existing commerce of
the country but cannot be relied upon for long.

8. POOR TRANSPORTATION/DISTRIBUTION CHANNELS An essential part of e-commerce is

establishment of cheap, quick and reliable transportation channels for the physical distribution of those
products which cannot be digitised and distributed online. In Pakistan, the Pakistan Postal Service, despite
its extensive network and large number of employees is inefficient, to say the least; hence, unreliable. The
private courier services, on the other hand, are expensive.

In the absence of any reliable and economical distribution channel, the web-based companies in Pakistan
will be faced with the challenge of delivering their products at the doorsteps to their consumers without
adding to price of the product.

(The writer is Assistant Commissioner (Income Tax) RTO, Karachi.)

Courtesy: Business Recorder
E-commerce and its future in Pakistan
by Dr Mushtaq A. Sajid | Published on 5/10/2003

E-commerce is a very hot issue these days. After the revolution of Internet, more and more countries are
getting involved in it.

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.

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 loose 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.

In Pakistan, e-commerce is still in its infancy and faces many barrier to grow. The notable barriers are:
unavailability of proper infrastructure [telephone line of stem lines of steam age, frequent failures of power]
limited user 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 the 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 speed up the process.

Prospects: 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.

Greater sales and inventory efficiency maybe possible through the increased interaction with prospective
customers that electronic commerce can afford. One to one marketing becomes possible on massive and
global scale. Active and alert supplier will also benefit from the new structure of product and service
distribution likely to results from electronic commerce. With conventional distribution ,a manufacturer must
reply to wholesalers and retailers to serve customers in large volumes. E-commerce's automated customers
self-service capabilities can eliminate the need for these intermediaries .The manufacturer no longer has to
share profit with others. In addition, the manufacturer gains direct contact with consumers that can facilitate
future sales.

With this, as the role of conventional intermediaries-such as retail store clerks, travel agents, bank tellers,
and wholesale representatives may diminish or end, new intermediaries have started to appear.

Electronic commerce connects manufacturers directly to consumers. The consumer gets product information
directly from the ultimate source. The manufacturer can get customer preferences and needs directly from
the ultimate source. Each consumer's physical location no longer determines whom the consumers contacts
to purchase a product. With the purchase of intangibles that can be delivered electronically, physical location
becomes irrelevant to product delivery as well. The internet makes the connection between a French
consumer and an Egyptian supplier virtually indistinguishable from the connection between a Persian
consumer and a Parisian consumer and Parisian manufacture.
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 framework and limited internet
market, companies are holding their plans to start e-business until clouds of barriers as discussed are
disappeared.

Article courtesy of Dr Mushtaq A. Sajid

 Permanent, Temporary Barriers
Interfering With Pakistan's Internet
Print Version
E-Mail Article
Reprints

By Anthony Mitchell
E-Commerce Times
09/26/05 8:15 AM PT

During the outage of Sept. 24-25, "The satellite bandwidth provided was totally
insufficient" to meet the needs of Pakistan's Internet service providers, said V.A. Abdi of
ISPAK. According to Abdi, "The worst fear of ISPs is a sudden relapse of the problem."
He said that the cause of the most recent failure has not been discovered.

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On Saturday night, Sept. 24, an undersea cable connecting Karachi, Pakistan, and
Mumbai, India, to the West failed around 10:27 p.m. local time in Pakistan. The cable
fault blocked 75 percent of Pakistan's Internet connectivity to the outside world and some
voice traffic as well.

Service was restored at 1:25 a.m. the next day, but has left the high tech industry in the
region jittery, particularly in Pakistan.

The service outage, however, is being overshadowed by the Government of Pakistan's

pursuit of permanent restrictions on Internet use in order to raise revenue for the
government-owned telephone company there.

During the service outage, Internet and call center traffic in Pakistan was shifted to 240
MB satellite backup facilities, which gives priority to call centers in Pakistan serving U.S.
and UK customers. According Babar Jhumra, who runs the NBA Computers commercial
call center in Karachi, his facility did not experience any loss of service or latency
problems when it switched over to a satellite connection.
Anwar Kazi, who directs the new commercial call center in Karachi for Alt-Source.com,
said that their voice services to the United States had also shifted over smoothly to
satellite backup systems, but he lamented the impact on Internet users who do not have
backup arrangements.

Economic Impacts

Consumers in Pakistan were reportedly hit hard by the outage, along with high tech firms
that do not qualify for preferential satellite backup links. Saturday night is a time of
heavy Internet use in that country.

The last major outage of this submarine cable largely cut Pakistan off from the outside
world for 10 days and 8 hours (June 27 to July 8). During that outage, Indian call centers
that rely solely on this cable to reach customers in the West were also without voice
service to the West. But since India as a whole has redundant external Internet
backbones, the extent of damage from that outage was small compared to the
consequences in Pakistan.

Additional disruptions from the most recent outage were reported in Djibouti, where the
cable fault reportedly originated. Traffic to the United Arab Emirates (U.A.E.) and Oman
could have been disrupted as well, because those countries are part of the five-nation
system linked by the undersea cable network called Southeast Asia, Middle East and
Western Europe-3, also known as SEA-ME-WE3 or SMW3.

In October, service was scheduled to begin on new submarine cable, SEA-ME-WE4

(SMW4), that will connect Pakistan, India and Bangladesh to France. A cross-border
connection between India and Pakistan is reportedly also being built.

However, in a statement released today to InternationalStaff.net by V.A. Abdi, Secretary

of the Pakistan Internet Service Provider Association (ISPAK), Abdi questioned the
government's ability to provide redundant connectivity as planned:

"One would recall that when the country was hit by an earlier blackout during
June-July of this year, the Minister for IT&T [Information Technology and
Telecommunications], Mr. Leghari, had informed the nation and the international
media that within weeks an alternate cable route with India would be completed
and the SEA-ME-WE4 cable system would also be completed by the end of
September 2005. There seems to be no news on either of the two projects."

The Lahore, Pakistan-based Wateen group plans to connect Pakistan with western China,
Afghanistan and the U.A.E. The Wateen connection into China could allow foreign firms
to deliver content to China and other central Asian nations from servers hosted in
Pakistan, which has a pro-Western business climate and no taxes on export-oriented IT
products and services.
Critical Infrastructure Issues

According to Faruq Khan, VP of Karachi-based ARPATech Pvt. Ltd., which provides

support and training for Linux, Apache, MySQL and PHP:

"In Pakistan, there is no concept of critical infrastructure. There are no risk

models associated with this infrastructure. There are no in-line backup systems to
provide redundancy to this infrastructure. For any commercial entity to rely on
such an infrastructure for mission-critical services is foolhardy. Are the
infrastructure providers at fault, or the businesses who refuse to accept the
obvious?"

"It is for this very reason that we will remain relegated to a third-tier status in the
IT world. Given all things equal in this world in terms of quality of resources, cost
of business is the single most important element for the off-shore market. Capital
expenditure for VSATs [satellite backup], 50 KVA backup power generation
units, redundant Internet connections, loss of time and productivity through
outages -- all these have a direct negative impact on our competitiveness."

According to Faruq Khan, Pakistan's IT industry wants the government to provide

reliable infrastructure and then to step aside and watch the IT industry grow. "You need
the basics and then you need an unregulated market, and people usually find a way to
succeed," he said.

Internet Service Providers Impacted

During the outage of September 24-25, "The satellite bandwidth provided was totally
insufficient" to meet the needs of Pakistan's Internet service providers, said V.A. Abdi of
ISPAK. According to Abdi, "The worst fear of ISPs is a sudden relapse of the problem."
He said that the cause of the most recent failure has not been discovered.

ISPAK members were hit hard by the ten day outage in June and July because they had to
simultaneously pay for satellite backup and for the Internet service that they failed to
receive from the disabled submarine cable. Revenues to ISPs during that time from
providing consumer dial-up services also suffered because consumers simply stopped
buying prepaid Internet access cards. Prepaid cards are popular among Internet users who
often switch back and forth among competing ISPs depending on which provider is
offering the best service at the time.

On July 14, the board of directors of the Pakistan Telecommunication Company Limited
(PTCL) directed the management of PTCL to provide compensation to ISPs. PTCL
governs SMW3 use in Pakistan.
Efforts by ISPAK to negotiate a financial settlement between the ISPs and PTCL have
since bogged down. The financial settlement that was being negotiated would have
compensated ISPs for lost revenue from the June-July outage, but would not address the
wider impacts on the economy from the Pakistan government's reliance on a single
undersea cable.

Settlement efforts are now being overshadowed by larger tensions between ISPs and the
Government of Pakistan.

Continuing Tensions

Relations between ISPs and the Government of Pakistan have become increasingly
strained in recent weeks, as the Pakistan Telecommunications Authority (PTA) seeks to
force ISPs to begin shutting down VoIP and other integrated voice and data services in
the country. The agency is also attempting to force ISPs to keep records on broadband
customers so as to further restrict Internet telephony use.

The sole reason for PTA's actions is to push voice traffic back out onto the circuit
switched networks operated by PTCL, in which the government owns a majority share.
Despite pleas to Pakistan's President Musharraf and intensive lobbying by ISPAK, the
PTA is pressing forward.

Businesses around the world are rushing to integrate their voice and data communications
networks so that everyone in a company and its supply chain and key customers can
communicate on the same network. Everywhere now except Pakistan, which is being
encouraged by the PTA to turn inward.

VoIP is an essential element for modern business. Without access to VoIP, many clients
who would normally seek to do business with firms in Pakistan will simply go elsewhere.
Without VoIP, Pakistan's vibrant private sector instantly becomes less competitive.

\
 Business Communication and Technical Writing

Report On Future Of E-commerce Globally

And In Pakistan

Submitted

To

Mr. Bilal Anwar

Lecturer, BCTW, PUCIT.

Submitted

By

Fahad Farrukh

MECF06M016

Submission Date

14.2.2007

Punjab University College of Information Technology

University of the Punjab, Lahore .

To: Sir Bilal Anwar Reference No . 1

 From: Fahad Farrukh Date: .14.2.2007

Subject: Future of E-commerce

Defining Electronic Commerce

From a Communication Perspective :

“E–commerce is the delivery of information, products or
payments via telephone lines, network or any other means.”

From a Business Perspective :

“It is the application of technology towards the automation of business
transactions.”

From a Service Perspective :

“E – commerce is a tool the desire of firms to cut service costs while
improving the quality of goods and increasing the speed of delivery.”

From an Online Perspective :

“E–commerce provides the capability of buying and selling products and
information on the Internet.”

Types of E-commerce

Business-to-Business (B2B):-
This form of e-commerce B2B forms a major part of the overall e-
commerce it stands for automated electronic transactions, which take place amid two businesses.

Business-to-Customer (B2C):-
This form of e-commerce B2B forms a major part of the overall e-
commerce it stands for automated electronic transactions, which take place amid two businesses.

Business-to-Business (B2B):-
In this categorization a customer will go to business to satisfy his needs.

Customer-to- Customer (C2C):-

In this classification a customer will go to customer to satisfy his
needs.
Customer-to- Business (C2B):-
The type of E-commerce in which the customer sets the price is
referred to as Customer-to- Business (C2B).

Business-to-Government (B2G):-
This type of E-commerce deals with the commerce activities between
businesses and Government.

Government-to-Citizens (G2C):-
The commerce based interaction between the Government and the
Citizens is known as Government-to-Citizens (G2C).

History of E-commerce

Electronic commerce applications started in the early 1970s, with such innovations as electronic fund
transfers (EFT). However, the extent of the application was limited to large corporations, financial
institutions, and a few daring small businesses. Then came electronic data interchange (EDI), which
expanded from financial transactions to other transaction processing and enlarged the participation
companies from financial institution to manufactures, retailers, services and so on. Many other applications
followed, ranging from stock trading to travel reservation systems. Such systems were described as
telecommunication applications and there strategic value was widely recognized. With commercialization
of the internet in the early 1990s and its rapid growth to millions of potential customers, the term electronic
commerce was coined, and electronic commerce applications expended rapidly.

Future Of E-Commerce

There are varying opinions regarding the future of e-commerce. Despite the fact that online sales are
growing exponentially, some analysts believee-commerceont>

is heading for a fall. They believe that as time goes on, sales will decrease instead of increasing. They
believe that net consumers are very different than mall shoppers and catalog shoppers. Furthermore, they
says that dot-coms are responsible for ruining their own chances to sell because they have spoiled
customers to the point that consumers expect cheap prices and freebies and if they don't get them, they just
move on to another site. E-commerce, they say, is an unpredictable world with little, if any, customer
loyalty. They found some interesting differences between online shoppers and traditional shoppers. For
instance, 34 percent of online shoppers describe themselves as comparison shoppers but only 8 percent of
traditional shoppers describe themselves as comparison shoppers. Another comparison is that only 1
percent of Web shoppers say they hate stores but 10 percent of traditional shoppers say they hate stores.
Web shoppers are by and large comparison, price-sensitive consumers.

An analyst who spent two years studying the consumers who purchase online, said that as nonusers begin
to use the Web for purchasing, they will be less adventuresome than people already making purchases
online. They will also be slightly older than the norm and they will be more fearful and cautious about
privacy and security. In other words, as nonusers begin using the Web to shop, they will be a more
conservative group than current users. It is probable they will also be less unpredictable and more loyal to
brands/stores. She pointed out that there were numerous problems with people receiving exactly what they
ordered online during last holiday season. Based on that, she suggested sales may be lower this year.
Surveys conducted after the last holiday season suggested online shoppers would continue shopping online.
One survey, for instance, indicated that more than 90 percent of consumers reported that shopping online
met or exceeded their expectations. Eighty percent said they would increase their online shopping in
future. Studies found that consumer confidence in using the Internet for shopping reached very high levels,
which were due to a number of factors. Positive comments from family and friends were one of the factors
that swayed more people to utilize this option. Better selections from online stores also made the
experience more satisfying.

Secure credit card transactions played a major role in increasing sales. Consumers were enticed to try
shopping on the Internet by the massive marketing campaign last year for both dot-com stores and retail
stores online. More than 70 percent of Net shoppers said they bought from e-commerce sites that offered
free shipping. Another 54 percent said they were enticed by the discounts offered for their first online
purchase. Forty percent used online coupons and 25 percent responded to the offer of free gifts for their
online purchase. The Direct Marketing Association projected that sales generated from catalogs and the
Internet would double in the next four years, reaching $3.33 billion. A study agreed saying that sales would
increase this holiday season. This study reported that holiday shoppers would spend almost $12 billion in
online purchases between November 1 and December 31 this year, which represents a 66 percent increase
over the same time period last year. The increase in last holiday seasons was 126 percent. There is a
slowdown in the degree of growth but it is still a substantial increase The Gartner Group predicted a much
larger growth this year. They projected sales of $19.5 billion.

This group also believed that dot-com stores and retail stores online would not spend as much money on
advertising this year. Instead, they will spend resources on retaining customers. As a number of dot-com
collapsed during this past year, many retailers felt a wave of relief but it was short-lived. The Web's bite
into retail store sales is about to become noticeable and hurtful. It is reported that there is a rule of thumb
that says a 10 to 15 percent loss in sales vaporizes a store's profits. In 2000, online sales of books alone
will top 11 percent of all books sold. That is up from 8.5 percent in 1999. CDs and videos will more than
double their sales from 1999 and that will bring them to 10 percent of the entire market. Computer
hardware and software already totals more than 18 percent of the market. In order to combat this trend,
some retailers are trying to lure consumers to their own online sites. They are also trying to use their Web
sites to bring people into their stores. Since 94 percent of online buying is nothing but a shift from stores
to a more convenient way of shopping, some of these strategies could work. Still, physical site retailers
have begun to feel the effect of Net shopping. And, the fact is that sales on the Web are at least doubling
every year. The overhead is far less for dot-coms.

They sell from a central warehouse and do not have to support thousands of stores around the country. This
fact is so clear that a real estate investment trust in San Francisco , sold $560 million worth of local
shopping centers and invested the proceeds in warehouses close to urban centers. The expectation is that
the demand will be greater for warehouse property than for mall property. Research Corporation's forecast
is that Internet sales will rise in the next two years. The survey of Internet product buyers showed that the
number of companies that use Internet-based selling will likely quadruple in the next two years, going from
44 percent from its current 10 percent. The reason for the dramatic increase is related to universal
standards that will unite millions of businesses with billions of consumers. Research Corporation looks that
the electronic economy in terms of a series of three technology waves. The first wave was able to save
companies money by publishing on the Internet and the second wave opened up online sales profit centers.
It was the second wave that made e-commerce a component in commerce as a whole. The third wave will
re-intermediate buyers and sellers through the creation of places on the Internet where buyers and sellers
meet to exchange goods and services and complete transactions completely on the Internet and to complete
them securely.

The third wave has a significant influence on how business is normally conducted. At some point, the third
wave will be similar to a fax machine, or at least, the importance of a fax machine was a number of years
ago. If you don't have one, you won't be able to conduct business.
The over-all volume of e-commerce is more than $4 billion annually. It is estimated that in near future,
almost 25 percent of the traditional business will be converted into internet business.

E-commerce with respect to Pakistan

The above was the picture of future of e-commerce in general throughout the globe. Now let us see the
future of e-commerce with respect to Pakistan .

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

• Unavailability of proper infrastructure [telephone line of stem lines of steam age, frequent failures
of power]
• Limited user of internet [hardly one per cent of the entire population have access to the internet or
are with the ability to use it]
• The issue of security of transactions on the internet.
• High bandwidth rates.
• The rigid and monopolistic role of the 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 speed up the process.

This great promise of e-commerce as an equalizer has failed to benefit developing nations like their
developed counterparts. Despite realizing the importance of e-commerce trade, businesses and
entrepreneurs in the developing world are lagging far behind to benefit from the immense opportunities that
e-commerce offers. Like many developing countries e-commerce still remains more of an academic topic
here in Pakistan .

While e-commerce still much remains a concept rather than a reality, another ongoing project to improve
Pakistan 's competitiveness in international trade and to also play an important role to serve as a
prerequisite for e-commerce. The project called Trade and Transportation Facilitation Project is aimed
to make Pakistan 's international trade competitive by adopting internationally recognized best trading
practices and introduce efficient transport and communication systems.

The Ministry of Commerce, in collaboration with the World Bank and the United Nations Conference
on Trade and Development (UNCTAD) , launched the $ 2.9 million project started last year. It aims at
modernizing trade and transport-related laws, simplifying and streamlining trade and transport procedures,
aligning relevant documents with international standard formats and introducing modern Electronic Data
exchange and e-commerce techniques. The project, in its own distinct way, will help facilitate e-
commerce in the country to fulfill one of the prerequisite towards a full scale e-commerce in the country.
The project has many partners in both the public and private sector including Ministries of Commerce,
Finance, Railways, institutions like CBR, Customs, KPT, as well as importers, exporters, transport
providers, banking and insurance institutions.
While business-to-consumer portion of e-commerce is not expected to increase in near future due
primarily to low PC and internet penetration plus an even more negligible number of such e-commerce
enablers and prerequisites as ATM and credit card users, even electronic trading between businesses has
not picked up in Pakistan . Industry, business and trade in Pakistan still prefer to use the traditional ways of
doing business enjoying personal contacts and mode of payments — cash or draft/cheque.

Pakistan , thus, reels from an extremely low volume e-commerce which is the lowest in the region: It has
about 100 business-to-business (B2B) users compared to 75,000 in Hong Kong — the top e-commerce
user nation in the region. Even Sri Lanka has more B2B users than Pakistan . And though the number of
B2B users in Iran is about the same as Pakistan, it has an edge over us as it enjoys a better rating as far as
infrastructure readiness, awareness/education and investment in the e-commerce is concerned.

The lack of interest to facilitate e-commerce on the part of the banks in Pakistan unlike the pioneering role
played by their counterparts in the developed world, can be attributed to huge investments to develop the
infrastructure and recurring maintenance costs. But the single most important factor discouraging the
investment is the absence of economies of scale due mainly to low credit card and ATM use, low saving
and purchasing power and most of all the low per capita income.

By many standards capital investment in e-commerce may look discouraging for many companies,
including the big ones. However, benefits of e-commerce justifies the investments because it enhances
trade efficiencies by eliminating the delays and cutting the documentation costs by allowing trade partners
to exchange transaction data digitally. It also reduces errors to help increase productivity and efficiency.

A study conducted by Pakistan Institute of Developmental Economics in 1999 shows that the full scale
implementation of e-commerce would help widen the tax-net by Rs 42 billion due to electronic
documentation. It would also offer Rs 18 billion in costs savings from increased competitiveness from
efficiency gains in the manufacturing sector, logistics, financial, information and various other
services.

e-commerce is becoming increasingly important for another reason beyond logistics efficiency and
productivity gains. There are indications that in near future the digital enability may become of the
conditions for trade with other countries. Developing an e-commerce infrastructure is important for
Pakistan .

Trends show that generally the economies where services sector contribute about two-third to the GDP
enjoy a high per capita income of $ 20,000 and above. Services sector has immensely benefited from the e-
commerce to play an increasingly important role in the knowledge-based economies of the developed
world.

Information and Communication Technologies (ICTs) is one of the major catalyst and has played a
distinct role to increase the economic prowerness of the developed world. In many countries it is the single
top contributor contributing as much as 37 percent to the GDP.

The share of services sector in the GDP of Pakistan remains extremely low. Services sector is contributing
a negligible 5 percent to the GDP of which about 3 percent comes from the ICTs sector and around 2.5
percent from the financial services. Increasing the share of services sectors including ICT, sectors in the
GDP would only come in due time. However, a beginning should at least be made to develop e-commerce
infrastructure in the country and the private sector can be its catalyst.
 Conclusion

We should explore the opportunities offered by e-commerce, and should not neglect it at all as it was done
in developed countries in the beginning, leading them to face difficulties with there new competitors.

Therefore, a beginning should at least be made to develop e-commerce infrastructure in the country and the
private sector can be its catalyst.

Bibliography
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