E-commerce in the “Third World”: Developing Economies or Stagnant Prospects? Essay

Custom Student Mr. Teacher ENG 1001-04 20 April 2017

E-commerce in the “Third World”: Developing Economies or Stagnant Prospects?

There’s no stopping the Digital Age from seeping even in the far-flung areas of the world. Whether you’re a cowherd in Somalia or a stockbroker in New York, one could have easy access over the new forms of trading via the Internet. Thus, e-commerce has attained to become a buzzword at the turn of this millennium, along with such “big” words like globalization and multiculturalism. As a concept, it aims to bridge people and cultures making the flow of income more pragmatically accessible through one’s own computer.

What seems to be the root of all these buzz regarding e-commerce? The reason is simple. Information technology (IT) in general and e-commerce in particular have become the major facilitators of business activities in the world today (Mankin 1996). E-commerce is also a catalyst of fundamental changes in the structure, operations, and management of organizations (McLaren and McLaren 1999).

Buzzing Through E-Commerce

According to Turban et al. (2002), electronic commerce (e-commerce, EC) is an emerging concept that describes the process of buying, selling, or exchanging products, services, and information via computer networks, including the Internet. Citing Kalakota and Whinston (1997), they defined e-commerce from these perspectives:

  • From a communications perspective, e-commerce is the delivery of goods, services, information, or payments over computer networks or by any other electronic means.
  • From a business process perspective, e-commerce is the application of technology toward the automation of business transactions and work flow.
  • From a service perspective, e-commerce is a tool that addresses the desire of firms, consumers, and management to cut service costs while improving the quality of goods and increasing the speed of service delivery.
  • From an online perspective, e-commerce provides the capability of buying and selling products and information on the Internet and other online services.

Turban et al. (2002) appended two more perspectives to this:

  • From a collaborations perspective, e-commerce is the framework for inter- and intra-organizational collaboration.
  • From a community perspective, e-commerce provides a gathering place for community members, to learn, transact, and collaborate.

 In observance of the term commerce, Turban et al. (2002) defined the describing transactions conducted between business partners in e-commerce. When this definition of commerce is used, some people find the term electronic commerce to be fairly narrow. This is the reason why the term e-business is used to broadly satisfy this notion. E-business widens the scope of the definition of EC, not just the buying and selling of goods and services, but also servicing customers, collaborating with business partners, and conducting electronic transactions within an organization.

According to Lou Gerstner, IBM’s CEO, “E-business is all about time cycle, speed, globalization, enhanced productivity, reaching new customers and sharing knowledge across institutions for competitive advantage.” However, Turban et al. (2002) rationalized that using of the broadest meaning of electronic commerce, which is basically equivalent to e-business, they recommended we could use the two terms interchangeably.

Consequently, Turban et al. (2002) elaborated on several classification of e-commerce y the nature of the transaction. They have distinguished the following types of transactions:

  • Business-to-business (B2B). All of the participants in this type of e-commerce are businesses or other organizations. Today most EC is B2B (Cunningham, 2001). B2B transactions include the IOS transactions and e-market transactions between and among organizations.
  • Business-to-consumer (B2C). These transactions include retail transactions with individual shoppers. The typical shopper at com is a consumer, or customer. This business model is also called e-tailing.
  • Consumer-to-consumer (C2C). In this category, consumers sell directly to other consumers. Examples include individuals selling residential property, cars, and so on in classified ads (e.g., com). The advertisement of personal services over the Internet and the selling of knowledge and expertise online are other examples of C2C. In addition, several auction sites allow individuals to place items up for auction. Finally, many individuals use personal Web pages and portals as well as intranets to advertise items or personal services.
  • People-to-people (P2P). This type of transaction is a special type of C2C where people exchange CDs, videos, software, and other goods. A well-known organizer of P2P is Napster (com).
  • Consumer-to-business (C2B). This category includes individuals who use the Internet to sell products or services to organizations, as well as individuals who seek sellers, interact with them, and conclude transactions online. com is a well-known C2B organizer.
  • Intrabusiness (Organizational) EC. This category includes all internal organizational activities, usually performed on intranets or corporate portals, that involve the exchange of goods, services, or information among various units and individuals in that organization. Activities can range from selling corporate products to employees to online training and collaborative design efforts.
  • Business-to-employees (B2E). This is a subset of the intrabusiness category where the organization delivers services, information, or products to individual employees.
  • Government-to-citizens (G2C) and to others. In this type of EC, a government entity buys or sells goods, services, or information to businesses or individual citizens.
  • Exchange-to-exchange (E2E). With the proliferation of exchanges and portals, it is logical for exchanges to connect to one another. E2E is a formal system that connects exchanges.
  • Collaborative commerce. C-commerce is an application of IOS for electronic collaboration between business partners and between organizational employees.
  • Mobile commerce. When EC takes place in a wireless environment, it is called mobile commerce (m-commerce).

Upon realization of the gargantuan potentials of EC, the Forrester Research Institute (forrester.com) predicted in 1996 that B2C would be a $6.6 billion business in 2000, up from $518 million in 1996. They then revised the figure to $20 billion, and the figure kept growing. In 1997, about $10 billion worth of B2B transactions were conducted over the Internet. Today’s predictions on the future size of EC vary.

For 2004, total online shopping and B2B transactions are estimated to be in the range of $2 to $7 trillion. Some EC applications, such as online auctions and online stock trading, are growing at a rate of 15 to 25 percent per month. The number of Internet users worldwide is predicted to reach 750 million by 2008. Experts predict that as many as 50 percent of all Internet users will shop online (Turban et al. 2002).

While at the frontiers of the twentieth century, it became apparent that these transformations of dealing business have led to significant turn around in the world economy as it seeped its influence in other areas like politics, society, citizens and the ways in which various stakeholders interacted with each other. Holistically termed as the process known as “globalization”, all that was good or bad in the world economy were cited with this phenomenon and necessary steps should be taken to alleviate unknown fears that came with it.

In the 1990s, a rapid diffusion characterized by the ingress of advances in information technology and the use of the Internet throughout the world, especially in developed countries. In fact, an average household in the USA and other developed countries now contains at least one personal computer with access to the Internet. More importantly, the use of the Internet is pervasive in the private sector in most developed countries. The use of IT and the Internet is also beginning to increase in many developing and transition economies (Siegel & Indjikian 2005, 681). With this, we could draw thoughts about the current gap of lives in first and third world countries. Could e-commerce be the key in bridging this wide gap?

Yet, there’s something that e-commerce had attained in creating an environment of equal opportunity for companies of all sizes and background. It is an equalizer in terms of how to deal with customers in cyberspace do not necessarily care about the size of an organization provided they get value for money. Thus, in e-commerce, there may be a semblance for developing countries to compete in the global trade.

Siegel & Indjikian (2005) recently studied the impact of IT on economic performance in developed and developing countries. They have found out that studies from the developed world have yielded evidence of a strong positive correlation between IT and economic performance, as well as IT-induced changes in workforce composition in favor of highly skilled or educated workers and organizational changes that allow firms to implement IT more effectively. Obviously, developing countries lag behind their developed counterparts but there seems to be a good trend that could shift them to a better position, in terms of income obtained through e-commerce.

Siegel & Indjikian (2005) further asserted that there have been many attempts to measure the e-readiness of countries, in terms of IT use and production and its impact on their economy. In Table 1, statistics have shown the intensity of investment in IT, computed as the ratio of IT expenditure to Gross Domestic Product (GDP) for 51 countries. Table 1 clearly assessed the relatively low rate of investment in IT in developing countries. The data appears to negate the prior assumption that “diffusion patterns are somehow converging, and the digital divide is being reduced” (Siegel & Indjikian 2005, 683). In analysis, the statistics have proven the extreme magnitude of the “divide” between developed and developing economies, since developed countries are armed with more favorable environmental conditions and more stable institutions to support technical advances.

Upon perusing the current state of developing countries with regards to e-commerce, what should they do in order to be competitive in this race in the e-commerce industry? Are they leading the right path? What are the current unique conditions in each developing country that make them potentially viable in attaining success in the field of e-commerce?

Table 1. Average annual percentage of GDP devoted to expenditure on ICT (1993–2001) (Siegel & Indjikian, 2005 citing Pohjola).

Country Percentage Country Percentage
New Zealand

Sweden

Australia

Switzerland

Singapore

UK

USA

Canada

Netherlands

Denmark

Hong Kong

South Africa

Japan

Colombia

France

Czech Republic

Israel

Belgium

Finland

Hungary

Germany

Norway

Ireland

Malaysia

Korea

 

10.3

8.8

8.7

8.4

8.3

8.0

7.8

7.7

7.5

7.3

7.2

7.1

7.1

7.0

6.9

6.8

6.6

6.5

6.4

6.2

6.2

6.1

5.8

5.8

5.8

 

Austria

Slovakia

Chile

Brazil

Portugal

Vietnam

Italy

Taiwan

Greece

Spain

Venezuela

Slovenia

Poland

China

Argentina

Mexico

Turkey

Bulgaria

Philippines

Thailand

Russia

India

Indonesia

Egypt

Saudi Arabia/Gulf States

Romania

5.6

5.5

5.5

5.4

5.5

4.7

4.6

4.6

4.4

4.2

3.9

3.7

3.7

3.7

3.7

3.5

3.3

3.1

3.1

3.1

2.9

2.7

2.1

2.2

1.8

1.5

This paper will try to analyze the current status of e-commerce in five developing countries, namely Tunisia, Pakistan, Philippines, Ukraine, and Barbados. We will try to unravel the issues that hound the e-commerce industry in each country, what have been the implications of the upsurge of e-commerce and what are future prospects that would be viable for them to take to be globally competitive in the e-commerce industry.

In this attempt, recommendations on how to maximize the benefits that e-commerce has to offer for them. We could also delineate further plans enhance the position of these developing countries in the e-commerce industry as they aim to augment their economies and provide brighter prospects for their nations and their people. E-commerce is here to stay and it has huge potentials for these developing countries. Thus, their future of e-commerce is going to depend upon its interaction to their nation’s technology, regulation, laws, culture, social issues, economics, vendors, competitors and all their consumers. All they have to do is harness these potentials and allow their firms to participate effectively and efficiently in the information economy and compete in global e-marketplaces.

Tunisia

At the turn of the current millennium, Tunisia focused itself on an inordinately ambitious task: to become “a young developed nation” by creating a solid economic base in order to be fully capable of facing the growing challenges ahead. Deprived of sizable mineral resources, Tunisia’s economic future depends largely on the income from tourism and its ability to carry out a program of modernization with a minimum of friction (Borowiec 2003, 51).

Located at the center of North Africa, Tunisia’s population of 9.97 million is growing at 1.01 percent annually. About 25 percent of the population is younger than age 15. Most people (98 percent) are of Arab descent. Others, mostly of European descent, live mainly in and around Tunis or on the island of Djerba. Two-thirds of Tunisians live in urban areas. Greatly influenced by the French, who ruled the country for more than 75 years, some urban Tunisians consider Tunisia the most Westernized state in the Arab world. Still, most Tunisians identify more with their “Arabness” than their “Westernness.” People in small towns and villages tend to be more conservative than those in cities. Opportunities for personal advancement are expanding, as is the middle class: 80 percent of households own their own homes (CultureGrams, 2006).

By connecting with the global network in 1993, South Africa and Tunisia became the first African countries to join the Internet (Tripod.com 2002). By 1998, all African countries except Congo had Internet connection (CITI 2000; Tripod.com 2002). South Africa dominates this region’s Internet market According to the State of the Internet Report 2000 of the U.S. Internet Council, Internet diffusion in Africa has been hampered by factors such as poverty, low computer penetration, illiteracy, lack of trained personnel, disinterest and a failure to understand the benefits of Internet access (CITI, 2000).

However, in the latest E-Commerce and Development Report (December 2004) UNCTAD points out that in 2003 there was a 7.8 per cent increase in the number of people around the world who had access to the internet. “However, internet users in the developing world are concentrated in a handful of countries,” it says–and few of these are in Africa.  In many African businesses where the internet is used to reach suppliers and customers this usage is usually restricted to senior executives; generally note that “little has been done to take full advantage of the opportunities offered by the new technologies.”(“Africa Lags Behind in,” 2005, p. 22)

According to the Chapter 7 of the UNCTAD E-Commerce and Development Report (2004), Tunisia occupies a leading position among developing countries with respect to its development of information and communication technologies (ICTs) and competitiveness. According to recently published economic indicators, Tunisia ranks 34th in the Networked Readiness Index (NRI), which covers 82 countries (World Economic Forum, 2003). The country has the highest ranking in Africa and in the Arab world, and is ahead of several European countries. Furthermore, according to the technology achievement index (TAI), in 1999 Tunisia was the leading Arab exporter of “recent innovations in high and medium technology” (UNDP, 2001).

Table 2. How many are on-line in Tunisia?[1]

 Date Number % Pop. Source
December 2001

March 2001

March 2000

May 1999

May 1999

January 1999

January 1998

400,000

280,000

110,000

48,000

15,000

7000

3500

4.08

2.89

1.16

0.5

0.16

ITU

Ajeeb.com

DITnet

SANGONeT

DIT Group

SANGONeT

SANGONeT

It is quite a surprise that the widely criticized Tunisian Government is making an effort to foster a supportive environment for ICTs via its national e-strategy. National ICT policies cover a broad set of development targets concerned with infrastructure, institutions, legislation and education. As host to the second phase of the World Summit on the Information Society (WSIS),[2] the Government is committed to making Tunisia a knowledge-based society. Most dependent on the ICT environment and related policies is the ICT sector itself.

In Tunisia, that IT sector as a whole has been one of the fastest-growing in the past few years, with an increase in turnover of 260 per cent in software and IT services between 1997 and 2001. At the same time, the firms that produce the technologies are one of the main driving forces behind the country’s technological development. In recognition of this important role, one of the Government’s priorities is to develop a strong and competitive ICT sector. Its national ICT policies are therefore designed to give particular support to the domestic software and IT industry. For example, its current development plan (covering the years 2002 –2006) provides for greater promotion of the knowledge-based society, and in particular the information economy, including software production and IT services (République Tunisienne, 2001).

The Tunisian government formerly encouraged greater use of the Internet in 1998 after canceling the state monopoly on providing Internet links in 1997. User fees and telephone connection rates were lowered, and customs duties on computers were abolished. An increasing number of educational establishments in various regions of Tunisia were connected to the Internet as well. There were reportedly 6,000 Internet users in September; the government aspired to 10,000 by the end of the year (Zisenwine, 2001 p. 605).

Providing much jobs in Tunisia, the IT sector comprised 680 companies with 6,124 employees (accounting for 2.1 per cent of total employment). There were 350 private enterprises specialized in the field of IT services and software development in Tunisia, which employed about 50 per cent of the 6,124 employees. The rest of the workforce was distributed among IT departments of major corporations, public enterprises and public administration, hardware production and national IT centers.

The current five-year plan the Tunisian Government estimates for software and IT service companies an average annual growth in turnover of 42.5 percent, from 80 million Tunisian dinar (US$ 58.3 million) in 2002 to 655 million Tunisian dinar (US$ 477.2 million) in 2006. The average growth of other industrial sectors in Tunisia is put at 5.7 per cent. As a result, the share of software and IT services in the gross domestic product (GDP) is projected to increase significantly, from 0.27 percent in 2002 to 1.5 per cent in 2006 (ITU, 2004).

Despite the investments and growth planned by the Government, many software and IT service companies have disappeared from the market. At the beginning of 2004, there were 274 IT software and service firms (CNS SSII, 2004).

Internet use is beginning to grow as a result of falling tariffs and the digitalization of the telephone network, which allows users to connect to Internet service providers (ISPs) via their phone line. The cost of Internet access has fallen sharply, but heavy demand and low capacity mean that the speed of connections at peak times is slow. According to official figures, there were 700,000 users by mid-2004, up from 30,000 in 1999 and 400,000 in 2001. TT officials say that the figure should reach 2m by end-2006. The number of Internet accounts was estimated at 121,000 in 2004. Of these, half belong to public-sector workers who enjoy free access via one of the seven state-owned ISPs; each account serves several users.

The other accounts are shared among five local private ISPs, of which Planet Tunisie (which signed a partnership with Wanadoo in 2005) and Global Net are the two largest, and, more recently, foreign ISPs such as Yahoo. The government regards Internet use as a vital element in building a “knowledge economy”. It is promoting Internet use in schools, universities and businesses, and is seeking to increase personal computer (PC) ownership. There were estimated to be some 472,000 PCs in Tunisia in 2004, but only 7% of households (175,000) had them, although this figure is expected to grow to 10% (250,000) by end-2006.

The government target is for 50% of Tunisians to be linked to the Internet by 2009. At the same time the government wants to control Internet use, in the same way that it seeks to regulate all access to information. Internet access is controlled by a government agency, Agence Tunisienne d’internet. Mandatory contracts for Internet users restrict usage to educational and commercial activities, and give the government rights to inspect the user’s equipment to ensure compliance.

However, Internet users in Tunisia has something to lament about the extent of government intervention regarding Internet usage. Fact is that every one of the five Internet service providers in Tunisia is under government control. The Tunisian Internet Agency, created in 1996, regularly provides the names of subscribers to the government. Web sites and online publications in Tunisia that contain information critical of the government are frequently blocked, according to the State Department. Among the Web sites blacklisted by the Tunisian government is, not surprisingly, a report on Internet use in Tunisia by Human Rights Watch (Cox 2003, p. 9).

The Internet control in Tunisia is at odds with the goals of the World Summit on the Information Society. According to a US Newswire (16 November 2005), the OpenNet Initiative released the findings of its investigation into Internet control in Tunisia — “Internet Filtering in Tunisia in 2005” — which documents the degree to which the Tunisian state attempts to control the national information environment, including the filtering of Web sites, blogs, e-mail, anonymizer services, and on-line discussion forums.

Drawing on open sources and a detailed year-long technical investigation, ONI research describes Tunisia’s aggressive targeting and blocking of on-line content that goes beyond pornography and the protection of cultural norms to include political opposition Web sites, human rights groups, and sites that provide access to privacy- enhancing technologies (including ones that might be used to circumvent Web filtering). ONI research reveals that Tunisia’s government Internet agency, ATI, uses SmartFilter — filtering software produced by Secure Computing, a US-based company — as the basis of its filtering regime. Since all of Tunisia’s ISPs operate through ATI, the system is difficult to circumvent. Access to unfiltered sites is only possible through unregistered Internet services.

The report furthered that Tunisia’s public policy on filtering is opaque at best. The Tunisian government has expressed commitment to an open Internet, while employing a range of measures to limit the range of content that can be accessed. The Law on the Press, most recently amended in 2001, makes defamation of a public official a criminal offense. Extralegal measures are also reportedly used, including economic controls such as directing subsidies and advertising to friendly outlets, and informal pressures such as repressive measures against critics, to ensure that media stay within prescribed boundaries.

Sites blocked in Tunisia include those of the Tunisian League for the Defense of Human Rights (LTDH) (http://www.ltdh.org/), the unauthorized Congres Pour la Republique (CPR) political party (http://www.cprtunisie.com/), and the French language page for Reporters Sans Frontieres (http://www.rsf.fr/). In addition, Tunisia has censored additional sites during the first days of WSIS, including the Citizen’s Summit page (http://www.citizens- summit.org/) and a site calling on Tunisia’s president to respect freedom of expression (http://www.yezzi.org/’seuil=all#apropos_de_la_manifeng).

The US Newswire report also noted some key points in the Tunisian IT industry:

— The OpenNet Initiative tested 1,923 sites likely to be sensitive from within Tunisia’s network. Of these, 187 sites were found to be filtered.

— All 12 Tunisian Internet Service Providers ISPs work through ATI — the government Internet Agency — which filters at the network backbone level.

— ATI uses SmartFilter, a product sold by Secure Computing, a US- based company, to target and prevent access to four types of material: political opposition to the ruling government; human rights in Tunisia; anonymizer tools; and pages containing pornography or sexually explicit content. SmartFilter software can block pre-defined categories of on-line material, and also allows for selective blocking of individual sites.

— Filtering appears to be conducted extra-legally, and there appears to be no public oversight over the categories of filtered content. When users attempt to access blocked pages, they receive a misleading “404” error message, which implies that the attempt to access that page failed because of problems with the destination Web site. ATI thus appears to falsify the information provided to users who try to reach filtered sites.

— Most of Tunisia’s estimated 771,000 users gain access from Internet cafes called Publinets. Publinet owners are required to monitor customer access; they are expected to report on activity within their shops, and have the ability to access anything saved to disk by their customers. They also have the right to demand an individual’s national identity card, thus linking on-line activities and saved documents with the user’s identity.

Yet, it is still quite a consolation that the information highway is seen by Tunisian President Zine El Abidine Ben Ali as one of the main roads that could lead Tunisia’s economy to greater efficiency and better prepare the country’s children to meet tomorrow’s challenges. President Ben Ali, a strong believer in the advantages offered by new information technologies, has announced plans to connect all of the country’s schools and public libraries to the Internet. He also wants Tunisia’s business community to pursue the benefits of electronic commerce aggressively.

Although Tunisia’s regime of Internet control is focused and effective, Tunisia’s filtering practices are neither grounded in that country’s law nor open to public oversight. Its filtering policies appear to be in contradiction to its official position on preserving the openness of the Internet, and the government appears to wish to obscure its role in filtering behind misleading error messages. While Tunisia’s efforts at controlling the Internet cannot be put in the same category as Iran and China in terms of extent or sophistication, its current technical and policy trajectory suggest an expansion of these practices in the future.

Thus, addressing national and firm strategies in strengthening the role of maintaining and enhancing the competitiveness e-commerce in Tunisia plays a pivotal role to improve its standing with regards to “e-readiness”. The UNCTAD 2004 study revealed that the successful implementation of firm strategies in the Tunisian IT industry plays a crucial role in maintaining companies’ competitive advantages. These could differ considerably according to their target markets and would definitely assist the firms formulate and consistently implement their e-business strategies. Enabling a free and “uncontrolled” e-business environment is a prerequisite for actively developing and sustaining competitive advantages in their quest to globalize their IT industry as a whole.

Pakistan

Notoriously known for its Muslim extremists, Pakistan is a nation of diversity, and people often identify with their group before identifying with the country. Differences are evident between ethnic groups. Pashtuns and Baluchis are more conservative and traditional than the other major groups. Differences also exist between urban and rural populations, the latter being more conservative. Tensions between ethnic, religious, or political groups sometimes erupt into violent riots.

Pakistan’s estimated population of 159.2 million is growing annually by 1.98 percent. The majority of Pakistanis (67 percent) live in rural areas. The two largest cities are Karachi (14 million) and Lahore (5 million). Pakistan has four major ethnic groups. The Punjabi is the largest, comprising about 65 percent of the population. The other three groups are the Sindhi, Baluchi, and Pashtuns (also called Pakhtuns). Pakistan is also home to Muhajir (immigrants from India and their descendants) and a large population of Afghan refugees, most of whom live in camps on the border.

Pakistan’s main industry is agriculture, which employs about 45 percent of the people. Pakistan emphasizes high-yield grains to keep pace with a growing population. Agriculture accounts for more than half of all export earnings. Chief products include rice, cotton, wheat, sugarcane, fruits, and vegetables. Clothing and textiles are also important exports. At the time of independence, Pakistan had very little industry. Over the past several years, however, industrialization has grown substantially. Remittances from Pakistani workers in other countries are an important source of revenue.

The e-readiness of Pakistan can be described as reasonable in terms of Internet infrastructure, promising in terms of e-payment infrastructure and a regulatory environment, and very weak in terms of e-commerce applications and general user demand. While e-readiness may improve without a focused government policy, it is likely that a well-designed and implementable e-strategy would greatly improve overall e-readiness.

The Economist Intelligence Unit’s 2005 ratings place Pakistan sixty-fourth out of the 65 surveyed economies, lower than Iran, Nigeria, Indonesia and Vietnam. The country has, however, moved down eight places (from number 57) since 2002. The survey noted that, while infrastructure was a general consideration, business culture was decisive in the scoring. The characteristic of general e-commerce activity is virtually nonexistent in Pakistan. It is estimated that there are less than 100 companies engaging in some form of e-commerce in Pakistan.

The reasons range from the limitations of the physical infrastructure to a lack of user interest. Most small companies do not have automated systems and hence are not in a position to benefit from the various e-commerce applications such as customer relations management (CRM). This situation is in sharp contrast with the substantial level of intellectual capacity in Pakistan that can be mobilized for e-commerce. IT engineers abound, and key figures in the government and business sectors have already devoted a great deal of time to the issue of e-commerce.

Table 3. World E-Readiness Ranking (EIU, 2005)

                                                                                              (continued next page)

UNCTAD’s research (2002) revealed that, in general, businesses are not familiar with ecommerce and consequently do not feel compelled to move in this direction. Amid the many obstacles, the following are worth singling out:

  • Insufficient computerization and IT automation in enterprises
  • Underdeveloped IT infrastructure, including insufficient access to uninterrupted power
  • Lack of IT managers who can analyze and integrate systems and supervise programmers
  • Fear of the transparency that IT and e-commerce may bring through improved financial reporting capabilities, including the complementarities between e-commerce and e-finance
  • Poor success of business-to-business (B2B) portals
  • Lack of government-level guidance and support, in particular for small and medium-scale entrepreneurs (SMEs)

Exporters will increasingly feel pressure from international buyers to use IT and e-commerce tools. E-commerce helps trading partners manage and plan their activities and schedule production and shipments. For example, a sales manager can give a buyer a firm shipment date when the order is placed. Large buyers in the United States are requesting electronic reporting and want to process and track orders using Internet and ecommerce applications. Companies that have not automated their internal business processes will find this demand impossible to satisfy. Some buyers such as Walmart (http://www.walmart.com/) have already started to disqualify suppliers unable to comply.

There is surprisingly little teleservicing activity in Pakistan (given that Pakistan has many workers with English-language and computer skills), and this activity is still restricted to a few small companies – another indication that the business community is ill-informed about opportunities offered by Internet technologies.

However in the past years banks in Pakistan have made important progress in developing an e-payment infrastructure. Of 4,881 bank offices, 570 (8 percent) are connected using Internet technology and 2,036 are computerized. The National Bank in Pakistan, which has the most branches and provides services to smaller cities and towns, is far from full automation and connection.

When the government started an information-technology (IT) and e-commerce initiative in early 2000, the banks were expected to lead the way into e-commerce. This has not happened, because of weakness in the overall economy and listlessness on the part of the banks. The most progress in e-commerce has been in “e-government”. Some business-to-business (B2B) portals are available, but they are designed more for information than transactions. Some banks have started networking their ATMs, and limited online share trading is possible.

Internet merchant accounts (used for processing financial transactions of Internet vendors) were permitted by the State Bank of Pakistan, the central bank, in February 2001. However, inadequate infrastructure and security concerns remain, and in mid-2005 only Citibank (US) offered these accounts. The limited transactions that do occur use international credit cards, which are processed outside Pakistan. Users of Internet merchant accounts undertaking transactions outside Pakistan need to submit electronic forms for transactions valued at US$500 or more to their banks, which must then submit the same in consolidated form on a monthly basis to the central bank.

Government efforts to promote the IT sector include the establishment of the Information Technology and Telecommunications Division in July 2000, various incentives and the commitment of resources for education and infrastructure building. The Ministry of Science and Technology launched the National Information Technology Policy in August 2000. It was developed by a team that included working groups on the following: human-resource development; IT in government and databases; IT market development and support; IT fiscal issues; telecoms, convergence and deregulation; cyberlaw, legislation and intellectual property rights; IT research and development; Internet development; software export; e-commerce; and incentives for IT investment.

Between July 2000 and May 2004 , the government approved funding to more than 200 IT and telecom projects and allocated PRs3.5bn for 2003/04 to promote these sectors; it also established seven IT universities. It said in May 2004 that it has planned new IT and e-commerce projects worth well over PRs4.5bn up to 2007, and it aims to produce 100,000 graduates a year in IT studies from the new universities by then. The president passed the Electronic Transactions and Governance Ordinance in September 2002. It provides for the legal recognition of electronic documents and specifies offences.

Pakistan is part of the 15-member Asia Council for the Facilitation of Procedures and Practices for Administration, Commerce and Transport. The council aims to support the United Nations Centre for the Facilitation of Procedures and Practices for Administration, Commerce and Transport.

Pakistan has a number of barriers to electronic commerce, including the following: inadequate infrastructure (insufficient telephone lines and frequent power failures); relatively few Internet users; lack of security for online transactions; and the rigid attitude of Pakistan Telecommunication, the formerly-state-owned telecoms company. The government is working to overcome these problems and has made some progress. In February 2001 the State Bank of Pakistan approved Internet merchant accounts to facilitate online transactions. Pakistan Telecom’s monopoly ended in December 2002.

The number of Internet users in Pakistan is growing by more than 50% per year; the Pakistan Telecommunications Authority estimated there were 2m users in November 2004. Monthly costs for Internet bandwidth for the consumer had fallen from PRs87,000 in mid-2000 to PRs3,600 per 2 megabytes by mid-2004 (latest information available from the Ministry of Science and Technology). Bandwidth capacity increased over the same period, from 30 megabytes per second to more than 600 megabytes per second.

The delivery period for a leased line has also fallen (from several months to 4–8 weeks since 2000), and Internet access had expanded from 29 cities in August 2000 to 1,862 cities and towns by mid-2005, according to the Ministry of Science and Technology. Optical-fibre networks were available in 300 cities in May 2004, compared with 53 cities in August 2000. Pakistan had 131 Internet service providers in May 2005.

In July 2005 several laws relating to data crimes and data privacy were being prepared in order to be submitted to the cabinet, but no date was set for their submission. According to a September 2004 report from the government, a Cyber Crimes Law, Data Protection Law, e-Banking Law, Privacy, Consumer Protection, Intellectual Property Rights/Copyright Act and Tele-Medicine Development Act were at various stages of consultation, review and draft. The IT Law Forum, a steering group comprising IT and legal experts, has been formed to assist the government in drafting laws that are required to enable acceptance of electronic transactions in courts.

The government approved the installation and commissioning of the National Telecommunications Corp (NTC) multi-services data network in May 2001 at a cost of PRs286.2m. The project will establish an Intranet in ministerial and regional government offices, video-conferencing studios, and the interconnection of NTC main exchanges in Islamabad, Lahore and Karachi. It was still being implemented in mid-2005.

The Pakistan Software Export Board has a number of programs to activate the local information-technology (IT) sector. For example, the Bridge 2002 program seeks to automate small and medium-sized enterprises and to provide experience to local software companies, with technical and financial assistance from the board. Another program, the GEMS-2002, was launched in August 2002 to incubate small software companies, providing logistics support, infrastructure, and marketing and financial guidance. The import and supply of computer servers was exempted from general sales tax from January 17th 2002. Various computer-hardware components and parts also were made exempt from the tax from February 11th.

Software-technology parks have been established to develop the IT industry in Lahore, Karachi and Islamabad. But a software-technology park set up in Peshawar in June 2004 was abandoned because of lack of funds and poor infrastructure. Other IT incentives include the following:

  • IT companies are allowed an income tax exemption on software-export revenues until June 30th 2016.
  • Software exporters may retain 35% of their earnings in foreign-exchange accounts.
  • Computers and related hardware are exempt from all duties, taxes and surcharges.
  • Depreciation on computer equipment was hiked to 30% (from 10%) in the 2001/02 budget.
  • Financing options provided by banks and development finance institutions for IT-sector contracts are acceptable as collateral for the export-finance facility.
  • Accreditation and Quality Testing Councils are being set up to ensure a high standard of IT education in the public and private sector.

ICT can play a dominant role in nurturing empowerment and participation both a the public and private levels and making governments more efficient and transparent by encouraging communication and information-sharing among its people and organizations and most importantly with in itself. Using ICT governments can revolutionize the lifestyles of its citizens by bringing more convenient and cost-effective solutions to the public at large by improving the quality and responsiveness of the services, outreach and accessibility of the services and public infrastructure. One area is developing E-Government initiatives to empower people and to increase participation bring innovative solutions to the public services.

Electronic Government (eGovt) program is charted out by the Ministry of Science and Technology of Pakistan (MOST) is one such example to improve the efficiency, quality, transparency and functioning of the Government. The program will enable the citizens to digitally or electronically interact with the government, use public services and it will create transparent processes ensuring good governance best practices are not compromised at any level (www.most.gov.pk).

With the formulation of e-government Inter-Ministerial Group and e-government task force a number of pilot projects are to be initiated during the year 2001. E-Government Master Plan is ready to for the approval from the Cabinet and Chief Executive Office which include setting up of 1,000 kiosks-ATMs based network for utility bills collection; establishing Accreditation and Quality Testing Councils; developing online taxation systems; automation of Narcotics Division, case Laws of Supreme Court and High Courts of Pakistan;

Common Office Environment-Common Document Management System (CPE-EDMS); public e-Procurement System; and public Human Resource Management Information System. For documentation of the economy a Digital Tax Management Initiative is a prime example providing instant access to the public empowering them to stay updated about government policy measurers.

Philippines

Located at the prime region of Southeast Asia, the Philippines poses it self towards great advancements in terms of information Technology. Having a population of 86.2 million is growing at 1.9 percent per year. More than 10 million people live in metropolitan Manila. About 60 percent of the population lives in urban areas. Filipinos are predominantly of Malay and Spanish descent: 91.5 percent are Christian Malay and 4 percent are Muslim Malay (Moros). Roughly 1.5 percent are Chinese. The remainder includes a number of indigenous descendants of pre-Malay peoples.

Recognizing the high-growth potential of ICT and e-commerce, the Information Technology and Electronic Commerce Council (ITECC) was formed in the year 2000. Chaired by the President of the Philippines, ITECC is the highest policy-making body of the Philippines. It hopes to lead the Philippines’s ICT industry through the next millennium and beyond by providing a clearly defined direction through strong and capable leadership. ITECC will use all the necessary and available resources of both the public and private sectors, utilizing the skills and talents of the Filipino people to their utmost capabilities to achieve its vision of an electronically enabled Philippines, capable of participating in and contributing to the global new economy (ITECC Website).

In the year 2000, according to the ITECC Website, the need to streamline the different ICT-related government agencies to provide effective and focused leadership in the implementation of ICT policy, then-President Joseph Ejercito Estrada signed Executive Order No. 264 merging the National Information Technology Council (NITC) and the Electronic Commerce Promotion Council (ECPC) to form ITECC.

When President Gloria Macapagal-Arroyo took over in January of 2001, she transferred the chairmanship of ITECC to the President of the Republic of the Philippines by signing EO 18, amending EO 264. This move allowed her to oversee the direction of ITECC and ICT development in the country. It also expanded, enhanced, and accelerated ITECC’s policy-implementation capabilities and decision-making processes. With this transfer, the ICT industry has been given a champion, someone who is in a position to effect real changes in the industry and the country by putting ICT in the forefront of government priorities and national consciousness like it never has been before.

The projections for e-commerce have been staggering. Global e-commerce is expected to generate around $7 trillion in 2004. The Asia-Pacific region is expected to contribute almost a fourth of this. But this is just the beginning. We have yet to exhaust all the possibilities of ICT. This is merely a glimpse of what is yet to come, of what we can still achieve, and of all the greater possibilities. Everyday, the brightest minds all over the world are finding ways to make things smaller, faster, cheaper, and better. This is the promise of ICT.

The Philippines recognizes the high-growth potential of ICT and e-commerce. In the year 2000, the country passed the E-Commerce Act. This landmark piece of legislation, based on the UNCITRAL Model Law, not only provides the appropriate environment to encourage the growth of e-commerce in the country but it also contains the special provision mandating all government agencies to make their services available online.

The Philippine Congress enacted the Electronic Commerce Act in 2000. This law, which provides the legal framework for e-commerce, gives documents and signatures transmitted electronically the same legally binding effect or legal protection as paper-based documents. Such electronic transactions would also be admissible as evidence in legal disputes.

The law mandates the computerization of government offices that issue permits, licenses and other documents. It aims to reduce government red tape by requiring all government agencies to switch from paper-based to electronic documents in government transactions. Government agencies have moved gradually (though slowly) towards computerization in the last five years.

The law also prescribes a three-year imprisonment and a fine of P100,000 for computer hacking, but it does not cover such areas as taxation, the jurisdiction of disputes or intellectual property. The Philippine government signed the e-ASEAN Framework Agreement in 2000. The agreement binds the ten members of the Association of South-East Asian Nation into harmonizing regulatory frameworks and infrastructure for e-commerce. It aims to create high-speed regional Internet connections and eliminate duties on computer products and services by 2010.

The EIU (2005) has recognized the great prospects that the e-commerce industry in the Philippines because the Filipino people provide the Philippines the comparative advantage needed to compete and thrive in the global New Economy. The Philippines has a 94% literacy rate. 72% of the population is fluent in English, the language of the Internet, making the Philippines the third-largest English speaking nation in the world. This plus other immeasurable qualities like the Filipino’s inherent creativity and ability to interpret different cultural nuances make the Philippines among the world leaders in terms of knowledge workers.

Philippine e-commerce is characterized by businesses that are online solely to promote their corporate mission or vision. Nevertheless, e-commerce companies have surfaced in various forms over the last five years. For example, Yehey.com has emerged as a major Philippine portal. In 2002 it linked up with Bancnet, the largest automated-teller-machine (ATM) network in the Philippines, to provide an online-payment system to Filipino consumers using ATMs instead of credit cards.

A Filipino firm in the mould of eBay (based in the US) is PinoyAuctions.com; and local incubators include HatchAsia and AJOnet Holdings. DFNN.com is a leader in the business-to-business (B2B) arena, providing online services to banks, insurance companies, fund-management groups and stockbrokerage firms.

Several large companies have set their sights on the Internet. The Ayala Group, Benpres Holdings, JG Summit Holdings, Aboitiz Equity Ventures, Philippine Long-Distance Telephone Company and United Laboratories established the first B2B electronic marketplace, called BayanTrade.com, in 2000. The site lets these companies buy and sell various products through the Internet: office supplies, furniture, technology equipment, and other value-added goods and services. A similar marketplace, called SourcePilipinas.com, brings together buyers and suppliers.

Most of the country’s largest banks offer electronic banking, which lets customers enquire about balances, pay bills and transfer funds from their personal computers, land and mobile phones, and ATM machines. Online gaming is also widely available among Internet users.

In 2001 the government launched an electronic-procurement service called G-EPS to procure products and services through the Internet. The Bureau of Internal Revenue launched a system in 2002 that lets taxpayers file their tax returns online.

At least two companies, Globe Telecom and its parent Ayala, established Internet data centre (IDC) businesses in 2002. (Neither the National Telephone Commission nor the Securities and Exchange Commission keeps records of how many companies offer IDC businesses.) These two main IDCs—GlobeQuest and AyalaPort—provide outsourced IT support services such as messaging, web-hosting and co-location, which lets a company store its critical data in a server located outside its vicinity to ensure that data are preserved in the event of physical or network disasters.

Although these and a few other companies already use Internet technologies to manage their customer and supply-chain transactions, B2B commerce is minuscule compared with business volume in other countries.

There are a handful of business-to-consumer (B2C) companies in the mould of Amazon.com of the United States. But a number of factors hamper their success: low level of personal-computer penetration, few credit-card holders and unreliable distribution systems in the archipelago.

The rapid growth of mobile phone users in recent years provides an opportunity for Internet-based services, including e-commerce, to grow exponentially in future. Globe Telecom (the Philippine’s second-largest cellular-phone operator) launched G-Cash in October 2004. G-Cash is a revolutionary mobile-payment platform that lets users buy goods and services and send and receive money at the cost and speed of a text message (or short messaging system—SMS). Both Globe Telecom and Smart Communications, the country’s largest cellular-phone operator, also use peer-to-peer reloading platforms that allow sending of “load credits” (the face value of a pre-paid phone card) among subscribers. Non-voice SMS is hugely popular because of its low cost (a mere P1 per message). According to the telephone companies, 150m–170m text messages are sent daily in the Philippines, and both Smart Communications and Globe Telecom derive 30–40% of their revenues from SMS services.

The latest survey on e-commerce conducted by the National Statistics Office (NSO) in 2002, found that 88% of 3,579 establishments polled were using information and communication technology. The poll, called Survey of Information and Communication Technology of Philippine Business and Industry, found that the Internet access rate was highest among the motion picture, radio and television industries, where 100% of personal-computer (PC) users had Internet access. In the computer and related services industry, 95% of PC users had Internet access; this was followed by wholesale and retail trade (88%); hotels and restaurants (88%); personal, community and social services (81%); and financial intermediation (76%).

Although the National Telecommunications Commission (NTC) estimated that the number of Internet subscribers in the Philippines had grown to about 1m by the end of 2003, the actual number of Internet users could have been as high as 4m—assuming that each account was shared by three or four persons. But even the higher figure accounts for only 4.9% of the 82m Filipinos and is among the lowest Internet penetration levels in Asia. Internet use will probably grow rapidly, however, since the Philippines has a highly educated middle-class population and a well-developed consumer culture. The ever-increasing number of Filipino expatriates has also pushed Internet growth, since residents of the Philippines see the Internet as an affordable way to keep in touch with them.

With more Internet users have come more Internet service providers (ISPs) and local-content providers. The NTC had registered 299 ISPs by end-2003, an overcrowded market given the low number of Internet subscribers. The largest five ISPs control about 40% of the market. Philippine Long-Distance Telephone Company (PLDT) controls the largest ISP, Infocom. PLDT has also installed more than 22,000 digital subscriber line (DSL) ports nationwide since 2002; these provide simultaneous voice, video and data services.

Online shopping has lagged significantly. According to the NSO survey, only 2.2% of total users of information and communication technology (ICT) engaged in e-commerce in 2001. Only 68 establishments (1.8% of all those surveyed) generated e-commerce revenue in 2001. Among the few that did, 69% posted e-commerce revenues of less than 15% of total sales. (The remaining 31% said only that their e-commerce revenues were more than 15% of total sales in 2001.) The NSO survey also found that only 2.9% of 3,153 ICT users said they had made e-commerce purchases in 2001. The number of respondents that sold goods on the Internet was even lower.

The deregulation of the telecommunications industry in 1993 has dramatically improved the telecoms infrastructure in the Philippines. Partly because of the advantages offered by wireless communication in an archipelago like the Philippines, the number of mobile-phone subscribers has grown sharply in the last four years, to about 30m (or about 40% of the population) by end-2004 from 22.5m at the end of 2003, according to reports by the country’s three largest cellular-phone operators. The industry estimates that by end-2005, about half of the population will be mobile-phone subscribers. The NTC said mobile-phone density at end-2003 stood at 27.77 per 100 persons.

The popularity of mobile phones has in turn reduced subscriptions of fixed-line telephones. According to the NTC, fixed-line telephone density dropped to 4.17 subscribers per 100 persons at the end of 2003, from a peak of 8.91 per 100 persons in 2001.

Personal-computer (PC) penetration remains low because of meagre per-capita income and the high cost of technology. According to the World Bank, there were only 27.7 computers per 1,000 persons in 2002. However, cyber-cafés have proliferated in recent years, catering to Internet users without PCs at home. The Internet is also accessed in schools and workplaces.

Telecoms companies are moving towards technology convergence, despite the lack of a Convergence Law. High-speed Internet access using cable lines is offered by Home Cable and Infocom (subsidiaries of Philippine Long-Distance Telephone Company) and in limited areas of Metro Manila by Sky-vision (part of the Lopez group of companies). The service is costly.

However, Executive Order 436 still bans cable providers from providing telephone services over their networks. The Philippine Cable Television Association, representing about 60% of the industry players, has been increasingly vocal in lobbying the government to end the ban on cable-telephony convergence (which the Economist Intelligence Unit expects to occur in the medium term). The association also wants the government to cap the number of cable licenses that can be granted to a specific locality, in order to rationalize the chaotic and hyper-competitive market.

Given the nascent nature of e-commerce in the Philippines, regulation of content, protection of intellectual property and consumer protection will be difficult to maintain for a government inexperienced in Internet matters. However, the Electronic Commerce Act brings the government into digitized contact with citizens and firms in many different official transactions. Authorities will probably become more sophisticated in regulating the Internet as they use it more often.

Ukraine

The summary of the description of the economy of Ukraine is provided by the Central Intelligence Agency’s World Fact Book Ukraine page:

After Russia, the Ukrainian republic was far and away the most important economic component of the former Soviet Union, USSR, producing about four times the output of the next-ranking republic. Its fertile black soil generated more than one-fourth of Soviet agricultural output, and its farms provided substantial quantities of meat, milk, grain, and vegetables to other republics. Likewise, its diversified heavy industry supplied the unique equipment (for example, large diameter pipes) and raw materials to industrial and mining sites (vertical drilling apparatus) in other regions of the former USSR. Ukraine depends on imports of energy, especially natural gas, to meet some 85% of its annual energy requirements.

Shortly after independence in late 1991, the Ukrainian Government liberalized most prices and erected a legal framework for privatization, but widespread resistance to reform within the government and the legislature soon stalled reform efforts and led to some backtracking. Output in 1992-99 fell to less than 40% the 1991 level. Loose monetary policies pushed inflation to hyperinflationary levels in late 1993. Ukraine’s dependence on Russia for energy supplies and the lack of significant structural reform has made the Ukrainian economy vulnerable to external shocks. Now in his second term, President Kuchma has pledged to reduce the number of government agencies and streamline the regulation process, create a legal environment to encourage entrepreneurs and protect ownership rights, and enact a comprehensive tax overhaul.

Reforms in the more politically sensitive areas of structural reform and land privatization are still lagging. Outside institutions – particularly the International Monetary Fund, IMF, have encouraged Ukraine to quicken the pace and scope of reforms and have threatened to withdraw financial support. Gross Domestic Product, GDP, in 2000 showed strong export-based growth of 6% – the first growth since independence – and industrial production grew 12.9%. As the capacity for further export-based economic expansion diminishes, GDP growth in 2001 is likely to decline to around 3%.

Ukraine’s population of 47.7 million is decreasing annually by 0.66 percent. Ethnic Ukrainians comprise 78 percent of the population. Ethnic Russians (17 percent) live mainly in the east and in Crimea, where they comprise two-thirds of the population. Despite recent agreements between Russia and Ukraine, ethnic Russians are expected to continue pressing for autonomy in Crimea.

Smaller groups include Jews, Tatars, Poles, Germans, Hungarians, Romanians, and Greeks. Tatars live in Crimea but lack citizenship rights. They were expelled by the Soviets in 1944 but have returned in small groups since 1989. Large numbers of ethnic Ukrainians reside in Western Europe, North America, and other areas. In Ukraine, more than two-thirds of the people live in urban areas. Kyiv, the capital, is the largest and oldest city (CultureGrams, 2005).

Ukraine was the Soviet Union’s “breadbasket” because it produced more than one-fourth of the USSR’s agriculture. The potential for agriculture to be the basis of Ukraine’s growing economy exists, but it cannot be tapped without significant reform. Farms must be modernized and laborers must adjust to wage work; however, government privatization has been slow. Large coal and iron deposits contributed to the development of a sizable industrial base that produced goods for many other republics. In fact, Ukraine was the second most productive Soviet republic (behind Russia). But industry also requires materials from outside Ukraine, and these can now be purchased only with hard (convertible) currencies, which are in short supply. The country also has a large defense industry that must begin creating consumer-oriented products before it can become profitable (CultureGrams, 2005).

Corruption, political opposition, and continued state subsidies to unprofitable industries and collective farms have hindered growth and foreign investment in recent years. Reforms and improvements in infrastructure are needed to stabilize the cash-strapped economy and overcome large public debts. Many goods and services are bartered or traded informally; in fact, the size of Ukraine’s unofficial economy rivals the official economy. High inflation and underemployment are ongoing problems. Ukraine’s currency is the hryvnia (UAH).

The relatively low number of fixed lines in Ukraine continues to hold back growth in the market for Internet services. High call charges and low levels of ownership of personal computers (PCs) have also hampered the expansion in Internet services. According to UN data, Ukraine had over 300 Internet service providers (ISPs) in 2003. According to Internet World Stats, Ukraine had 2.3m Internet users as of 2003. This is almost triple what it was in 2000, but, at less than 5% of the population, represents one of the lowest usage rates in Europe. Phone communications for calls outside Ukraine are very expensive. Calling cards are available that significantly reduce costs, to about $0.45 USD per minute, but require accessing special numbers and switches (these cards are typically available for about $0.25 USD per minute in the United States).

File transfers are slow. Bandwidth is not readily available due to degraded communication lines. When lines are new or have been upgraded, bandwidth is available for a reasonable cost from a United States perspective. One of the authors was able to find an Internet café that offered 128 kbps connections for a cost of about $4.00 USD per hour. It should be noted that this is considered expensive in Ukraine. The clientele being primarily non-Ukrainians confirmed that it is expensive. Another negative is the poor condition of the telecommunications infrastructure. Jennex, et. al. (1999) found no digital/IT equipment used for energy management and plant communications. Analog phone switches and equipment were normal.

Outsourcing of Telecommunication service between dispatch centers and plants or other dispatch centers were very unreliable. Ukraine has a wide area network for monitoring the power system that is based on SM1420 and SM2 computers (these are DEC1000 and PDP11 clones). This system was observed to be frequently out of service requiring system operators to rely on voice communications for dispatch functions.

These also were frequently out of service requiring system and plant operators to use analog radios or to simply load follow resulting in poor power quality with little frequency stability with the previously discussed effects on IT. Observations of phone lines in hotels catering to westerners found that dial up connections of greater than 9800 bps were difficult to impossible to sustain for more than a few minutes due to line noise and errors. Ultimately this reduces the effectiveness of Internet, email, and fax processes, raising the cost for these services.

Availability of hardware and software can be issues in Ukraine because leading edge hardware such as personal computers, digital cameras, printers, and communications equipment are very expensive and hard to get. Additionally, many companies differentiate between hardware sold in Europe and that sold in the United States. As an example Jennex, et. al. (1999) took an inexpensive Epson printer to Kyiv.

When the ink cartridges expired replacements were found in Kyiv, however, the printer refused to recognize the replacements even though they were the correct product per the model number. It was later learned that the coding used on the cartridge was different for models sold outside the United States than for sold in the United States. Another issue is incompatible character sets. Ukraine uses the Cyrillic alphabet. The character set used to display this alphabet on computers in Ukraine makes the generated files unreadable on computers running English character sets.

But there is one blooming company in the Ukraine that tends to lead its country in the IT industry. International Business Solutions, IBS, is located in Kyiv Ukraine. Dave Sears, an American expatriate living in Kyiv, formed IBS in March of 2000. The company has an affiliated United States company, Energy Solutions, also formed in March 2000. Energy Solutions is a Nevada based corporation. IBS is a small enterprise; in December 2001 it had three full time and five part time employees, all Ukrainian.

The web sites used by IBS are distinctive, sophisticated, interactive sites. They provide audio and image information as well as text information. They work best with high-speed connections and higher end personal computers. Technically the sites are very good. They appear easy to use and navigate although this is the authors’ impression and not verified through any usability testing. These issues in context of the success factors discussed earlier include:

Understanding Customer Base Needs – The sites constantly play music. While the music changes with the different sites, there are no controls other than the user’s computer’s audio controls for turning it off. After a few minutes this can get annoying for visitors to the site and needing to scroll down through information. Molla and Licker (2001) consider scrolling a detriment to content quality.

Support of Substantial e-Business Initiatives – There is no indication that IBS has an ongoing planning process for e-business applications.

Developing the Web Site – Testing the sites on multiple computers yielded various results. When accessed with a new, top end personal computer connected to a high-speed network the site worked fine. When accessed using a mid level personal computer with a 115 kbps dial up connection using America Online, AOL, as the ISP, the music did not work with the audio controls at full volume and the introduction screen partially failed while loading very slowly, approximately 1 minute. After that, the site worked well with all sites loading within 10 seconds although the music never did work. A low-end computer or connecting at 56 kbps was not tested but are not expected to work well.

Branding the Web Site – Finding the site is difficult. Searches were conducted using the AOL, MSN, and Yahoo search engines. Searching on “Ukraine” did not locate the sites in the first 100 its. Searching on “IBS” did not locate the sites in the first 100 hits.

Searching on “Ukraine” AND “IBS” found the site with the first hit on Yahoo but did not locate the sites in the first 100 hits of AOL or MSN. However, the first hit, Estate2000, an apartment-renting firm, contained a link to the sites. This indicates the sites are not registered well with search engines. Further evidence of this is in the site visit count observed by the author. The author was visitor 1345 to the business services site and 1109 to the web development site, counts that are less than expected.

Reshaping the Organization’s Corporate Culture – Evidence to support a budgeting process in future years toward e-business initiatives was not present. Even though it was found that a technical staff was available for development, no formal e-business planning process was observed e-Commerce Readiness Assessment.

Evidence to support the basic IT infrastructure being ready to support e-commerce was also not present. Even though it was found that a basic infrastructure with respect to availability of hardware and software is present, the speed, reliability, price, and interoperability/interconnection of the basic infrastructure is not sufficient for ecommerce. Since IBS customers are primarily located in Western Europe and the United States ample evidence of sufficient Internet usage was found. However, it is observed that

Internet usage within Ukraine is insufficient to support e-commerce – Evidence to support Ukraine being positioned for the digital economy was not present.  Ultimately the value of the site is in the business it generates. By the company’s own admission, the sites have generated many inquiries but little to no business. Also, the sites do use secure transactions for credit cards and their state on the site that they respect the privacy of their clients. However, no statement is made on the privacy of client information collected on the sites and the site counter indicated the author was visitor number 1300, this indicates potential issues with regard to trust and return visits by clients.

Before 2000, IBS offered web development services as it was discovered during the Y2K risk assessment that there is a large web development talent pool available in Kyiv that is very reasonably priced and motivated to work. Given the weak business climate in Ukraine these services are targeted to United States and other developed countries companies. Originally IBS offered fixed fee contracts for development projects. Problems with managing projects remotely and incomplete user requirements drove IBS to switch to providing developers on an hourly basis working under direct control of the contracting client.

IBS is able to offer developers at a very attractive rate, approximately $15.00 per hour United States Dollars, USD. The new approach has been more successful and IBS has several developers under contract to outside companies. IBS markets itself through word of mouth and its web sites. Word of mouth is through business gatherings in Kyiv and a good word from clients to potential clients. Web marketing is through three web sites, one for each of the major business areas. The web sites can be found at: www.ibs-websolutions.com, www.ibsukraine.com and www.energy_solutions_llc.com.

Barbados

Often called “Little England” or “Island in the Sun,” Barbados is the easternmost island in the Caribbean archipelago. It belongs to a chain of islands known as the Lesser Antilles. The island is 166 square miles (430 square kilometers) in size—nearly 2.5 times the size of Washington, D.C. From the central highland area, the terrain slopes gradually to the sea and is interrupted by only a few hilly areas.

Barbados has no rivers; instead, rainwater percolates through the soil to form underground wells, which are used for drinking water. The rainwater also forms channels that run to the ocean. A thin layer of topsoil covers the thick layer of coral that underlies most of the island. The soil is very fertile, making the island lush with flowering trees, shrubs, and tropical flowers. Three-fourths of Barbados is suitable for cultivation. Barrier reefs that surround the island make it particularly rich in marine life. Natural resources include fish, sugarcane, tropical fruits, cotton, crude oil, and natural gas.

The population of Barbados is approximately 278,000 and is growing only slightly. Although the birthrate is steady, emigration holds net growth to less than 1 percent. With about 1,670 persons per square mile (645 per square kilometer), Barbados’s high population density makes it seem like a city-country. Around 60 percent of the population lives in urban centers stretching along the western side of the island, which is more sheltered from storms.

The capital city of Bridgetown is the largest urban area and serves as a “downtown” for the entire island. Urban, commercial areas are referred to as town areas rather than cities. An estimated 90 percent of the population is black, mostly of African origin. An additional 6 percent is of mixed heritage and 4 percent is white. East Indian and Middle Eastern groups comprise a small percentage. The people of Barbados are called Barbadians, but they are often referred to as Bajans (CultureGrams, 2005).

Barbados has one of the highest standards of living in the Caribbean. Women earn a comparable share of the nation’s income. Tourism, light manufacturing, and the sugar industry are primary sources of foreign exchange. Tourism has been the largest industry and employer in Barbados for more than 20 years. The country exports sugar, rum, and textiles. It trades with the United States, other Caribbean nations, the United Kingdom, and Canada. Barbados is an active member of the Caribbean Community and Common Market (CARICOM). The currency is the Barbadian dollar (BBD), which is pegged to the U.S. dollar at a fixed 2-1 ratio.

At 49 landlines and 39 cellular connections per 100 inhabitants in 2002, telephone density is high by Caribbean standards. Cable & Wireless (C&W) had a monopoly on internal telecommunications services from 1991 to 2004. The company inherited a well-developed telecoms infrastructure when it acquired a majority interest for just US$25m at the height of the island’s economic crisis, and made further investments in fiber-optic cable for both domestic and overseas links. Competition in cellular telecoms was introduced in February 2004, when three cell-phone operators entered the market alongside C&W, and new licenses for landline and international services are to be awarded in 2005.

Internet services are provided by C&W and by independent operators. Local telephone calls have been covered by a flat-rate monthly fee, encouraging a high level of Internet usage, and the Edutech 2000 project aims to give all school students Internet access. LowTax.Net features the current flow of e-commerce in Barbados in their website. It deemed that:

Government officials from Caricom member states met in Barbados in October, 2004, and agreed that members should commit to an “aggressive and focused” strategy to accelerate the development of information technology across the region. The strategy calls on Caricom to adopt a fresh approach to ICT policy and regulation, capacity building, research and innovation, and to ensure more support is forthcoming for publicly-funded ICT programs.

The representatives also agreed to work towards the development of low-cost, high bandwidth internet access throughout the region. The strategy urges national and regional organizations in Caricom Member States to prepare “with the utmost emergency” projects relating to disaster preparedness, Caricom Single Market and Economy (CSME) trade facilitation, skill development and entrepreneurship, e-government projects and wireless access connectivity projects.  The members have approved an ICT action plan which will result in specific actions undertaken immediately with additional targets due to be met by the third quarter of 2005.

Barbados Prime Minister Keith Mitchell emphasized the need for progress in his 2004 Budget speech, saying: ” We need to accelerate our e-government program with a view to streamlining of processes, increase employee productivity, and permit greater interaction with the public and the provision of services 24 hours a day. One such critical, new initiative will be the Barbados Integrated Portal Project, an initiative by the Data Processing Department to provide a new electronic gateway to the services, information and knowledge contained in the public sector.

The Government portal, which is one of the key pillars of electronic government, will now be implemented in phases. A pilot phase has been implemented primarily to demonstrate the concept, to evaluate the benefits and functionality of a portal. On completion, the portal will enhance Government’s operations making it more effective and efficient while providing the public easier access to its services 24 hours a day. One of the first services that will be provided on-line to the public will be the renewal of driver licenses. It is the intension of the Data Processing Department to have this facility in place in early 2005.”

“To drive the e-government program, Government will establish a new entity entitled the Central Information Management Agency which will incorporate the Data Processing Department, and will be responsible for the development of ICT strategies, policies and programs geared at delivering governmental services through the use of information and communication technology. The new Program will make possible:

  • The development of a high-speed wide-area-network linking all major
    government offices to speed up the flow of information between
    government agencies.
  • The outfitting of our Post Offices to accommodate bill payments,
    including drivers licenses, land taxes etc.
  • All courts will be connected electronically.
  • User forms like passport applications; liquor license applications;
    income tax forms and all other user forms will be accessible on-line.
  • Legal fraternity will be able to conduct searches in the land registry
    database to speed up the time taken to have searches completed.
  • Government economic reports and other information will be made
    accessible on-line.

Barbados has been developing an informatics industry over the last 15 years and sees e-commerce as one of its most important future development opportunities, based on the existing pool of skilled labor and advanced infrastructure.

The Information Society of Barbados has identified three opportunities for e-commerce in Barbados: local to local, local to international, and international to international through local facilities. The island currently has around 16,000 users and aims to dramatically expand upon this figure. Barbados’ major objective in e-commerce is to establish the island in the hosting of e-commerce activities for corporations around the world. Internet gaming is also on Barbados’ agenda. With these goals in mind the government will implement the necessary legislation to enable e-commerce to become a thriving industry.

In August, 2000, the Barbadian Government passed an Electronics Transactions Act. The main aim of the new policy is to prepare a legal framework for the recognition of digital transactions and to put them on a legal footing equivalent to that of paper-based transactions. Key areas addressed by the Act are record-keeping, security, and contracts. Amendments will be made to other laws that are affected by the new Bill, such as the Evidence Act and the Interpretation Act, which will incorporate digital documents as well as written.

The Act made Barbados the third Caribbean country (after Bermuda and the Cayman Islands) to possess digital signature legislation. It enables customers to securely enter into digital signature agreements and to accept electronic records and documents. However, notices such as evictions, electricity cut-offs and cessation of health insurances will continue to be paper-based communications. There are also plans to introduce legislation that would protect consumers’ privacy.

In November 2002, The Central Bank of Barbados unveiled new guidelines for electronic banking, designed – according to Governor, Dr Marion Williams – to provide guidance on the promotion of secure online banking activities, while at the same time maintaining the flexibility to accommodate future technologies. Dr Williams revealed that the Central Bank had been working with commercial banks in the jurisdiction over the last year, in order to develop suitable ways in which to advance electronic banking in Barbados. ‘What we have done here is to provide general guidelines so that they can choose what kind of system they want,’ she explained, adding that: ‘The guidelines are general since the Central Bank of Barbados is of the view that setting too detailed requirements in the area of electronic banking could lead to their becoming rapidly outdated’.

However the Bank’s report revealed that the jurisdiction is not quite ready for the widespread introduction of internet banking services, suggesting that it may be a further two to three years before local commercial banks are ready for retail e-banking, arguing that: ‘A further education of both the private and public sector on the benefits of using some of these more ‘sophisticated’ banking services may be warranted before there can be a surge in the use of electronic banking, or before there is a general acceptance of electronic banking.’

The Electronic Banking Guidelines also observed a certain lack of interest in the provision of e-commerce facilities by the Barbadian private sector: ‘Most commercial entities in Barbados have not effectively acknowledged the need for e-commerce and, in some cases, may have determined it is not cost-effective to offer such services,’ the Central Bank revealed.

In January, 2005, First Caribbean International Bank claimed to be the first bank to launch internet and telephone banking services to its customers across all the countries in its network. The new services will give all First Caribbean customers the ability to view their balances across all types of accounts, including checking, savings, loans and time deposits, in any location across the bank’s regional network.

 Part-owned by Barclays Bank PLC, the bank has an asset base worth some US$9 billion, and operates in 26 Caribbean islands including Anguilla, Antigua, The Bahamas, Barbados, Belize, The British Virgin Islands, The Cayman Islands, Dominica, Grenada, Jamaica, St Kitts & Nevis, St Lucia, St Maarten, St Vincent and the Grenadines and The Turks & Caicos Islands. The bank has invested $50 million in a state-of-the-art technology platform and expects to be able to offer internet and telephone service wire transfers and bill payments later in 2005.

The IT industry seems to be going upwards in Barbados but one problem has been identified by the Organization for Economic Cooperation and Development (OECD) about Barbados’ taxing schemes being harmful to global competition. The Paris-based international organization in 2002 concluded that Barbados was a tax haven. But Philip Nicholls, president of the Canada Barbados Business Association, blasted OECD for its rating in an investment guide put out by the Barbados government. “One of the premises (upon which) OECD claims to be acting, namely that a tax haven is one which encourages illegal activities … is one that is (of) concern not only to the members of the OECD, but to jurisdictions like Barbados, which have jealously guarded their reputation as an upright and clean jurisdiction” (Electric Commerce News, 14 May 2001).

However, NexTrade, a Clearwater, Fla.-based electronic communications network, set up software development operation in Barbados largely because of the tax incentives. In fact, one pride of Barbados is the Pryces (Barbados) Ltd. which invests in emerging growth high technology companies in optical networking, telecom, e-commerce and broadband media.

Conclusion

Generally, the e-commerce and the IT industry as a whole continues to rise upwards in the five featured countries. Although cultures and their current government policies seem to hamper the full potential of these industries to rise equally with their first world counterparts, it is quite astonishing that their leaders are realizing the importance of e-commerce as a new trend in global trade. By country, technology, regulations, laws, cultures social issues, economics, vendors, competitors and consumers all have an impact on the use of the Internet. Security, privacy, censorship and taxation definitely play pivotal roles in the continued quest for these developing countries to become fit to compete in the era of globalization.

As all countries, particularly third world countries, will continue to have competitive problems with regards to the development of a local infrastructure dedicated to electronically extending the reach of its citizens and firms, as well as the development of modern technology infrastructure to support the use of the Internet, which is necessary to be aligned with their first world counterparts. One of the challenges that developed countries, such as the US and the United Kingdom, is that their infrastructure is old and is being updated. A number of the third world countries should only install new equipment and, given the funds, they should maximize their resources to benefit well in this industry.

Thus, e-commerce has become important for countries that already possess the environments and capabilities to utilize the Internet. A restructuring of all channels of distribution is occurring world-wide, benefiting not just industrialized nations, but developing ones as well, providing the basis of a new economic development tool for their citizens and their firms.

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[1] http://www.nua.com/surveys/how_many_online/africa.html

[2] The second phase of the WSIS took place in Tunis from 16 to 18 November 2005. The first phase took place

in Geneva from 10 to 12 December 2003.

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