Leadership is Key to E-commerce Expansion in the Developing World

By Charlene Porter
Washington File Staff Writer

Washington -- The economic growth potential of the information technologies (IT) industry is the "last ticket on the development train," according to an international economist who is advising governments around the world on how to pursue opportunities in electronic commerce (e-commerce).

Catherine Mann, co-author of the new book "Global Electronic Commerce: A Policy Primer," has found "a real sense of urgency" among policymakers on every continent to promote electronic commerce and IT development. In a Washington briefing February 8, this international economist discussed what governments need to do to create the proper environment to attract IT investment and allow the industry to thrive.

"Technology is global," in today's business environment, Mann said, "application is local." She emphasized the importance of policymakers' responsibilities to enable e-commerce and IT expansion to occur.

The pay-offs can be extraordinary, said Mann, a senior fellow at the Washington-based Institute for International Economics, with previous experience at the President's Council of Economic Advisors, the U.S. Federal Reserve and the World Bank. The potential for IT-driven economic expansion is projected to run into the trillions of dollars for developing world nations, Mann said.

"The pie is growing," Mann said. Policymakers in nations on the verge of IT development must be convinced that "their share is big," Mann continued, and justifies the systemic changes necessary to create a favorable business climate for e-commerce.

Mann identified the elements of what she described as an infrastructure that will work to encourage competition and expansion in IT, recommending policy approaches for legal systems, telecommunications regulation and financial transactions.

Without these infrastructure elements, Mann said, "you don't have electronic commerce."

Monopolistic control of a national telecommunications system is one barrier to IT development, Mann said, and urged regulators to create a business structure where competitors can enter the marketplace.

Citing a case she observed in Morocco where a monopoly was allowed to dominate the telecommunications sector, Mann said expansion of IT was inhibited because "the price is too high, and performance is crummy." She maintained that if independent Internet service providers (ISPs) are allowed to enter the marketplace, better service and lower prices emerge from the more competitive atmosphere. Improved service and prices lead more consumers to seek Internet access which, in turn, improves the environment for expansion of electronic commerce.

Creating a financial regulatory system that allows confidential, expeditious transactions of funds across borders is another key element in building an infrastructure in which electronic commerce can thrive, Mann told her audience at the New America Foundation, a policy research organization.

She said the transfer of money must move at the same pace as information, data and transactions, all of which have been dramatically accelerated because of IT capabilities. Based upon her experience in countries such as Mexico, El Salvador, South Korea, Vietnam, Singapore, Taiwan, Sri Lanka and others, Mann concludes that many national financial systems do not operate at the pace which e-commerce requires.

The Asian financial crisis that erupted in 1997 revealed only "the tip of the iceberg" in the capability of many national banks to clear transactions in an expeditious fashion, Mann said.

Part of this problem rests in the failure of many banking systems to adopt the technological advancements that speed transactions in those nations where e-commerce is already thriving. Mann said banks need to use computers in their accounting and maintain connections to the Internet to achieve capabilities for high-speed transactions.

Establishing efficiency in the distribution channels through which goods move to complete a transaction is another element in creating the e-commerce infrastructure Mann describes. This author-economist said the capability of a business to begin delivery of a product within 24 hours after completion of an electronic transaction is a "critical component" in this infrastructure.

Pervasive national commitment to rule of law is the final, and perhaps most important, element in this infrastructure. Mann said U.S. progression into e-commerce has been supported by an established body of business and contract law that gave entrepreneurs confidence that cyberspace transactions would be conducted within the same legal framework. In contrast, Mann said some nations are working to develop specific laws to govern e-commerce. She said this is a futile effort if practices of contract law, fair enforcement and impartial justice are not already well established.

Mann acknowledged that great uncertainty still exists in the rapidly expanding field of e-commerce. Many questions still surround issues such as individual privacy, taxation and free speech. Mann said, "We don't have answers" to many of these questions now.

But policymakers should not allow those uncertainties to restrain their pursuit of e-commerce opportunities, Mann said. "Don't delay reforms where the road is clear," Mann advised.

While she counsels developing world governments on how to exploit their opportunities in e-commerce, Mann also cautions U.S.-based IT companies seeking to expand into other countries that the evolution of the sector will not unfold in those countries as it did in America. "The world does not look like the United States," Mann said. IT companies must realize that, she said, and recognize that they'll find "opportunities as well as pitfalls."

Distributed by the Office of International Information Programs, U.S. Department of State.
Web site: http://usinfo.state.gov

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