The growing importance of electronic commerce, especially in the developed world, led the World Trade Organisation (WTO) to adopt a declaration on global electronic commerce on 20 May 1998 at the second Ministerial Conference held in Geneva, Switzerland. The Declaration directed the WTO General council to establish a comprehensive work programme to examine all trade-related issues arising from electronic commerce and to present a progress report to the WTO’s Third Ministerial conference. The WTO General Council adopted the works programme on 28 September 1998. The third WTO Ministerial Conference flopped in Seattle in 1999, so there was no report-back as earlier proposed. At the Fourth Ministerial Conference in Doha in 2001, it was agreed to continue the work programme as well as to extend the moratorium on customs duty. The General Council was asked to report on further progress to the Fifth Ministerial Conference in Cancun in 2003. However, the Cancun conference also collapsed and no report-back took place.

In spite of the repeated failures of the Ministerial Conferences, some work has been going on in the Work Programme. Under it issues related to the electronic commerce have been examined by the Council for Trade in Services, the Council for Trade in Goods, the Council has examined issues related to electronic commerce for TRIPs and the Committee on Trade and Development. So far, discussions dedicated to electronic commerce under the auspices of the General Council include: classification of the content of certain electronic transmissions; development-related issues and fiscal implications of e-commerce between it and the traditional forms of commerce, the imposition of customs duties on electronic transmissions, competition, jurisdiction and applicability of other laws. Members hold the view that the examination of these crosscutting issues is unfinished, and that further work to clarify these issues is needed.

E-COMMERCE AND DEVELOPING COUNTRIES

The adoption of Business to Business (B2B) e-commerce platforms based on the internet and the World Wide Web is being promoted as offering producer firms in developing countries, new exchange mechanisms that enable them to compete on a more equal basis in world markets.

According to this view, the implementation of B2B e-commerce is expected to result in a reduction of the transaction costs that are incurred by these firms, thereby lowering barriers to their participation in international trade. It is argued that the adoption and implementation of Information and Communications Technologies (ICTs) facilitates a closer integration of adjacent steps in the value added chain, so allowing firms potentially to reduce costs associated with selecting suppliers, negotiating and fulfilling contracts, and ensuring that contract terms are met. It is claimed that this reduction in the unit costs of co-ordination will encourage firms to expand the number of transactions they conduct across both organisational and geographical boundaries.

Unfortunately, this view overlooks the importance of the procedures and processes as well as the dynamics involved in transacting. Underestimation of the dynamics of transacting may lead researchers to over-estimate the potential savings that may be incurred. Very little analytical work has been done to assess these assumptions. Of the little analytical work done on, for example, Internet based B2B e-commerce in the garments/apparel and horticulture/agriculture sectors, indications are that the B2B e-commerce available to user firms is not as effective in opening the doors to global markets for firms in developing countries (Paré, 2003). Empirical studies revealed that:

• There is very little evidence of support for the preparation and/or completion of transactions online using web-based B2B e-hub interfaces
• B2B e-commerce activities are related primarily to the exchange of information using Internet and web-based applications.
• B2B e-commerce generally takes the form of accessing online bulletin boards which serve as online ‘dating’ agencies for firms seeking new trading partners by facilitating initial introductions, but leaving negotiation to traditional methods.

Challenges and Constraints

E-commerce is still at an early stage and a number of related issues are not yet resolved - security, privacy, data protection, encryption, copyright and intellectual property. The constantly evolving policies and rules governing the Internet and its operations will affect the future of global e-commerce. Given the enormous economic opportunities at stake for all companies across the world, developing countries should be involved as equal partners in the development of the growing body of Internet governance. In addition to increasing the international visibility of their products, producer firms from developing countries must overcome a multitude of supplementary obstacles to ensure the successful completion of a transaction once a potential trading partner has been identified. Obstacles include:
• Awareness: There is currently a lack of awareness and knowledge in developing countries about e-commerce. Among the private sector in particular, regional differences in the level of awareness have been observed.
• Infrastructure and access: Physical infrastructure barriers including inadequate telecommunication systems, poor Internet connectivity and lack of access to the necessary hardware and software. Indeed, the gap between industrialised and developing countries in terms of infrastructure and access is huge and growing. The reach and geographic coverage of telephone services, its bandwidth, the cost of telephone services, the national policies governing the telecommunications sector and the number of computers are major determining factors to what extent developing countries and their private sectors can partake in the global push for e-commerce. The impending satellite revolution may well facilitate access and connectivity although it is not yet clear whether the pricing structure for these satellite links will be affordable for actors in the developing world.
• Human capacity and skills: E-commerce requires a different mix of capacities and skills, which is another major constraint in developing countries. It should become one of the priorities of developing countries to promote computer literacy and Internet-related skills among the workforce at large and especially among the SMEs. Programmes to train and retain skilled IT professionals should complement this.
• Legal and regulatory framework: A proper regulatory framework must be in place for e-commerce to prosper. Existing laws and regulations might not be applicable as some of the online services do not exist in the physical world and boundaries between services as well as industries have become blurred.
• Taxation: Taxation is another issue of concern and contention. As the Declaration on global electronic commerce of 1998 stands, there is a moratorium on the imposition of customs duties on electronic transmissions. However, if there is the projected dramatic shift from physical transactions, normally subject to sales and other taxes, to virtual online transactions, free from any transaction tax, the tax base of local and state governments might become eroded.
• Financial institutions and intermediaries: Thus far, financial institutions and banks in developing countries are hesitant to take an active role in promoting e-commerce. However, merchants need the involvement of banks to broaden the reach and appeal of e-commerce and to help prevent fraud and potential losses attributable to credit card fraud. But beyond the credit card approach, banks and other financial service intermediaries are challenged to develop alternative modalities for secure and reliable online transactions in environments where credit cards are not commonplace.
• Inadequate transportation and distribution networks: There is need to give high priority to strengthening logistics and transport infrastructures to support time-sensitive, increasingly tightly integrated, global supply chains.

WAY FORWARD

Despite making some efficiency gains in terms of facilitating the speed of inter-firm communications, very minimal gains if any, have been made at transactional level. If partial or full implementation of internet-based B2B e-commerce is to become more widespread, much greater attention will need to be given to the specific characteristics and positioning of developing country producer firms within global value chains and to the technical, financial, and organisational structures within which these firms operate.

Furthermore, there is need for policy-makers to give greater consideration to the multitude of ways in which digital applications are being used to deal with the operational challenges presented by different types of value chains. ‘Top-down’ government policies promoting ‘e-readiness’ will be unsuccessful unless much greater effort is given to examining how Internet applications are actually being used and to the circumstances around the implementation of new technologies. Policy makers, firms and development assistance agencies should support ‘bottom-up’ approaches that are based on realistic assessments of B2B e-commerce opportunities and obstacles, and region and value-chain-specific solutions.

REFERENCES

• Humphrey J., Mansell R., Paré D.J., Schitz H., The Reality of E-commerce with Developing Countries, Institute of Development Sudies – Unversity of Sussex – UK and London School of Economics & Political Science, March 2003.
• Paré D.J., B2B E-commerce Services and Developing Countries: Disentangling Myth from Reality, London School of Economics & Political Science, September 2003.
• Singh A.D., Electronic Commerce: Issues for the South, South Centre T.R.A.D.E. Working Paper No. 4, October 1999.
• United Nations Conference on Trade and Development (UNCTAD), Report on E-Commerce and Development, 2002.
• United Nations Development Programme UNDP) site on E-commerce, www.undp.org.
• www.wto.org