Prepared for: Forum on E-Commerce for Transition Economies in the Digital Age on 19-20 June 2000 in Geneva, sponsored by the United Nations Economic Commission for Europe (UN/ECE)
The East is Ready: Electronic Commerce in Asia
Karin Geiselhart
Post-Doctoral Research Fellow
and
Paula M.C. Swatman
Professor of Electronic Commerce
E-Commerce Research Group
RMIT University
There has been much water under the bridge, both socially and politically, since the popular Chinese movie ‘The East is Red’ appeared in 1992. (footnote to date and directorThere can be no doubt that the future for our increasingly globalised world will be one focused upon open economies and full engagement with the private sector. The rise of electronic commerce in central and eastern Europe is a major area of development, with an internal logic linked to their past events and current leaders. Yet, for those of us located in other geographic regions, the resurgence of the Asian "tiger" economies, following the financial crisis of the late 1990’s is of comparable importance. Across the wide range of economic, social and technical conditions in the Asia Pacific, examples abound of world’s best (and worst) practice in e-commerce. This brief overview of the Asian E-Commerce phenomenon may offer some guidance for those who would progress electronic commerce in eastern Europe or other transitional regions.
While a totally globalised and international orientation might be a desirable end state, geographically based alliances are still an essential starting point. The bulk of the E-Commerce marketplace lies in business-to-business (B2B) exchanges – even at the regional and local levels. Thus, APEC, the forum for Asia-Pacific Economic Cooperation, illustrates the importance of working within existing regional frameworks. Electronic commerce can only grow out of other forms of commerce, so the importance of strong collaborative networks cannot be over-emphasised.
The Asia Pacific spans much of the globe, and the 21 nations in APEC include the giants of this region (Japan, US), the stars (Singapore, South Korea) and the less fortunate (Russia, Peru). Many of the issues surrounding electronic commerce are discussed by the APEC Electronic Commerce Steering Group.
APEC, as the primary forum for Australia-Pacific Economic Cooperation, has a particular interest in developing a broad regional cooperative framework for development. This includes, but is not limited to, electronic commerce. The APEC group has prepared an electronic commerce readiness self-assessment guide which illustrates the interplay between traditional business infrastructure and the requirements of the new information economy. This guide provides a useful template for other regional groupings of transitional economies, and will also serve for a more detailed discussion of individual countries in the Asia Pacific.
APEC asked officials to develop indicators of e-commerce in their economies, and encouraged them to consider the United Nations Commission on International Trade Law (UNCITRAL) model law when creating the necessary legal and regulatory frameworks. The emphasis is on benchmarking best practice, supporting e-commerce in small to medium enterpries (SMEs), and consumer protection. Although the overall orientation is on market forces and self-regulation, the APEC group recognises that governments are the primary agencies to guide the creation of trust and confidence in these processes. Government uses of electronic commerce are seen as a catalyst for the private sector, an inescapable reality even in a globalised world.
The APEC site also features a provision for transparency in eliciting comments on their self-assessment tool: postings must be accompanied by identification, and will be made publicly available on the site. These sorts of measures are increasingly being accepted as part of best practice, as they assist the building of trust in open processes. This gathering and presenting of feedback is also a natural efficiency arising from Internet technologies, and is especially important in the development of policy. The APEC guide clearly serves the double function of diagnostic tool and articulation of desirable direction. An open feedback technique maintains a dynamic element in policy. It also facilitates comparative research across regional groupings and the development of international standards and consensus.
The e-commerce self-assessment tool includes predictable technical and infrastructure questions, including pricing and access, number of telephones and personal computers per capita, number of Internet hosts, etc. Access to computers and appropriate training in schools is also relevant. Questions about pre-electronic basic services, such as roads and postal services, are also included. The survey assumes that more people accessing the Internet from home is better and that high levels of local content are a positive indicator. This is logical, as business-to-business and SME activity will primary be local. However, this also signals a longer-term warning. If local inputs and content should be totally displaced by distant providers, local development will be inhibited, perhaps crippled. Thus, plans to help small and local business to get online are a sine qua non for a successful e-commerce strategy. This is widely recognised. Sophisticated strategies also recognise that government online is a critical link: if use of government services and information is a positive first experience, and provides additional resources for business applications, critical mass can be reached sooner. The independence of the telecommunications regulator is also an issue, to prevent abuse of market power. In those countries where telecommunications are still in government hands, this reinforces the need for transparent and accountable regulatory mechanisms.
Questions about privacy and consumer protection, the status and authentication of electronic documents and signatures and taxation of electronic transactions are also key elements in the APEC tool. A technological and legal approach which is neutral towards and does not penalise electronic interchange of data or goods, and which establishes a secure environment for both business and consumers, is rated highly. Within the context of self regulation, provision of alternative dispute mechanisms and the independent publicising of market evaluations are also considered important. These are ‘the less tangible aspects of trust, such as user empowerment, quality labels, comparative reports, industry accreditation systems, etc.’ The example provided is ‘a company's track record regarding its dealing with consumers undergoes daily scrutiny on the web - with any anomalies receiving instant and global attention.’
Again, this is just asserting that good corporate governance and success in an information world are entwined. The trade off for self-regulation is that this be done responsibly. Industries, and perhaps regions, which do not embrace this maxim may find themselves overtaken. It has already been argued that farmers have lost the trust of consumers by their less than responsible approach to the introduction of genetically modified organisms (GMOs).
The APEC approach to other all-important legal issues, such as intellectual property (IP), accepts the WIPO stance. The assumptions underpinning a global framework for these questions is already fairly well established, and transitional economies will have to assess their own positions, both individually and regionally. There may still be opportunities to consider alternative approaches. Net importers of IP, including smaller countries, have more at risk from present arrangements than larger economies.
The APEC assessment tool for e-commerce offers a perspective from which to compare some of the countries in the Asia Pacific. Overall, Asia is well placed to benefit from e-commerce. Several south east Asian countries are already major suppliers and exporters of electronic goods, and others are increasing their share of these markets. While poor infrastructure will inhibit some, such as China, others will capitalise on their existing intellectual and physical advantages. Others, such as Japan, may need to adjust their pricing policies to improve take-up. Consumers and businesses everywhere find flat fees more acceptable than hourly Internet rates. Political issues, such as those indicated below in Burma, will also need to be resolved before China can fully join the information economy.
It is not surprising that Burma is neither a part of the support network of APEC nor advanced in its approach to electronic commerce. Consider these excerpts from Burma’s recently released regulations for the use of its Internet services:
It has been reported that Burmese authorities have arrested several people for consulting opposition web sites based in foreign countries, and that Burma’s only ISP is now state-owned, as two private ones were shut down. All up, there seems to be little interest in creating an environment conducive to the development of electronic commerce in Burma, much less anything resembling electronic democracy. There is no encouragement of the forms of information exchange, open discourse and experimentation which underpin both market innovation and free speech.
While the Burmese approach may be extreme, even supposedly advanced countries such as Australia sometimes miss the point on Internet policy. It can be argued that there is an inherent contradiction between the policies which promote Australia as an information economy and attempts to regulate internal access to content. [add link archive to footnote here]
Closest to the authors’ home and experience, Australia has done much to stimulate regional and rural infrastructure, and telecommunications prices are slowly dropping. Some of these infrastructure projects have come from Networking the Nation grants, funded by the partial privitisation of the hugely profitable national telecommunications carrier. In many places, the rural sector still lags behind in access to advanced (in some cases, even basic) telecommunications services. There are plans and policies for the establishment of a private sector accreditation agency for electronic transactions. Despite the introduction of online content regulation and fuzziness about consumer privacy protection, electronic commerce is growing rapidly in Australia, with larger corporations taking the lead. Paperless bill payments are a fairly advanced form of electronic commerce for most consumers, and this form of financial transaction is poised to take off in Australia.
The imminent introduction of a goods and services tax is expected to create a ‘shake down’ among SMEs in Australia, as many will not be able to rise to the challenges of documentation, compliance and additional computer skills which will be required. Compliance with the GST may also slow some SMEs down in pursuing electronic commerce.
Singapore has always been a leader in Asian economic development, and has also been quick to see the pathway to the information-based future. Their government has pursued this vigorously through the Electronic Commerce Hotbed Programme (August 1996), and more recently with legislation such as the Electronic Transactions Act (July 1998). This provided a legal foundation for electronic transactions and contracts. There is also a Computer Misuse Act to protect key systems, a Privacy Code (based on self regulation) and an update of copyright laws to include multimedia products. The Netrust agency will issue and manage these digital keys and certificates. A variety of secure electronic and online payment options, which may be considered the core of electronic commerce, are available in Singapore. Electronic directory services are advanced, and include several business and shopping directories.
Orchestrating much of this is the Infocomm Development Agency (IDA), in concert with the Singapore Trade Development Board, Singapore Network Information Centre, Singapore Productivity and Standards Board, and the National Science and Technology Board. Ironically, Singapore’s success in creating a free market relies heavily on government coordination and initiation, particularly for the regulatory framework. However, in addition to these agencies, with a broad set of stakeholders, the IDA seeks out the involvement of the business community on matters such as financial disclosure. This again highlights the importance of consensus building regarding the degree and mechanisms for transparency and accountability, if only to dispell any fears of favouritism or bias in the awarding of contracts, etc. Such measures are likely to become part of world best practice in electronic commerce.
Other Asian nations, including Malaysia, Thailand, South Korea and the Philippines are following similar paths in their own ways, with digital authentication and e-commerce laws either in place or in the pipelines. These national initiatives will pave the way for wider regional agreements on standardisation, such as are being developed through the Joint Electronic Payment Initiative (JEPI). These ‘metaprotocols’ will resolve interoperability issues between vendors, and create a pathway to a fully globalised e-commerce. Malaysia’s Multimedia Super Corridor (MSC) plans confirm the relationship between government online and encouraging electronic commerce. There, electronic government flagship applications will provide for non-payment transactions such as citizen communications and electronic complaint tracking and discussions, as well as transactions that include payment.
Conclusions
While some Asian economies have a running head start in embracing the information age, regional disparities and disadvantages mean there is a long and possibly rocky road ahead. Conflict between national desires to stimulate innovative enterprise while controlling intellectual exchange in the new information economy can counteract efforts to join the global parade. This may be exacerbated by the failure in some quarters to grasp the emerging ‘native Internet’ business models. These are based on abundance, rather than scarcity, and require a good grasp of the difference between the Internet economy and its predecessors.
This paper has highlighted the commonalities between open standards, from an industry/technical perspective and openness standards, which are necessary to develop the secure and trusting framework for electronic commerce. Several studies commissioned by the World Bank reach similar conclusions in a more general context, after finding clear links between good governance and better development outcomes. While this has been described as ‘the development dividend’, it might equally be described as ‘the democratic dividend’. Beyond such formal arrangements for good governance, at both national and corporate levels, the ability of electronic commerce to refresh and enhance existing forms of commerce will depend on access in the broadest sense to these technologies. At the individual level this includes not just physical access, but also the training and skills needed to use them, and of course, a reason to do so. Australia is currently tendering out (in effect privitising) its Universal Service Obligation. This has been reinterpreted for a data-driven world to mean affordable access to 64 kilobytes per second, whereas previously it meant equitable access to an ordinary telephone line. At a systemic, social level this opens the door to a much larger discussion about rights and responsibilities and cybercitizenship.
A non-exhaustive list of institutions with some responsibility for determining the shape of electronic commerce in the coming decades includes WIPO, the WTO, UNCITRAL (the United Nations Commission on International Trade Law, which has produced a Model Law on Electronic Commerce), APEC, ASEAN, the OECD, the World Bank and the IMF. They vary considerably in their degrees of internal openness and their inclusiveness.
The pace of change means that there is only limited space (ie, time, energy and resources) for regional models and frameworks. The pressures for international solutions will jostle with smaller scales, and hopefully global standards will emerge which are both workable and mutually acceptable. Transitional economies seeking to influence the global agenda will have to act quickly and decisively, within the already established open market framework. The progress of the Asian economies, in all their diversity and occasional internal contradictions, provide abundant case studies for other regions seeking to maximise their benefits from electronic commerce.