Electronic Commerce - developing countries

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Electronic Commerce:Some implications for firms and workers in

developing countries

Compiled by Rohan WickremasingheDip Mgt., MIM (SL), MITD (SL), MBA (SGU), Dip B (BPUSL), AIB (SL)

The potential of eCommerce is no more a matter of debate. From the world of hype and fantasyit has moved into that of digital reality. Electronic commerce looms large on the horizons of tomorrow, and it promises to transform trade and industry in ways not yet imagined or comprehended. Its impact of course is expected to go far beyond commerce to affect the livesof millions of Internet users, consumers, workers and producers.For several developing countries it continues to be perceived as a double-faced blessingone promising and the other threatening. Since eCommerce already does a nd will continuemore and more to affect the eco nomic relations betw een and w ithin countr ies and com panies, it has to be seen as a matter of key policy consideration1. For the de veloping countries a nd their

firms, the biggest issue and fear is not the lack of knowledge and expertise in introducing andengaging in it, but more so of not. To d o so it is important to have a basic understanding andappreciation of its potential, the framework for its operation and the possib le impac t it couldhave on the econ omy, in genera l and firms and w orkers in particular.The objectives and structure of this paper attempt to tackle these issues. Section onedescribes eCommerce to day and its potential as w ell as the pres ent status of its d evelopm ent in theSouth. Section two raises the questions of technology and standards in the context of the‘info-structure’ that is the necessary ingredient for the growth of eCommerce. It discusses theneed in developing countries to establish the required legal and financial framework and to promo te the building of the required human resources fo r the prom otion of eCommerce. This isfollowed in Sect ion three by an assessment of the impact that eCommerce is having on firms indeveloping countries and raises some potential benefits and challenges that governments andfirms in the South should be aware of. In Section four, some policy issues for workers and

employment are outl ined, which the lack of sufficient data and research prevent from beingelaborated or analysed. The final part of the paper lists out the possible future research and policy agenda in this area, particularly for international agencies and especially for the ILO.

Understanding the Internet All sorts of electronic trading technologies have been hailed as purveyors of econom ictransformation: credit cards , automa tic teller mac hines, teleph one bank ing, electron ic datainterchange (EDI), etc. All these too are forms of electronic commerce, and all have changedtheir own markets in sometimes radical ways. However the Internet alone has the potentia l todeliver what the notion of electronic commerce had always implied. For the first time, in thehistory of trade and electronics, the Internet promises to give direct access and control over buying and selling transactions to just about everyone from the individual investor to the casualshopper. The Internet extends beyond the transaction itself to everything that comes before and

after, from m arketing an d produc t display to order-tracking and sometimes even delivery. Andunlike the comm ercial online services, which reserve their services for their subscrib ers andselected merchants, the Internet is open to everyone.

The Internet is basically a vast and ever increasing network of computers across theglobe that are interconne cted over e xisting telecommunication n etworks. S imply described , it is a, or the, network of networks.

The Internet has changed much in the tw o decades since it cam e into existence. It wasconceived in the era of tim e-sharing, b ut has surviv ed into the era of personal computers,

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client-server and peer-to-peer computing, and now the network computer. It started as the creation of asmall band of dedicated researchers, and has grown to be a comm ercial success with billions of dollars of annual investment. It is still evolving and changing. Although a network in name and geography, it is acreature of the computer, not the traditional network of the telephone or television industry. It will,therefore continue to change and evolve at the speed of the computer industry. It is now changing to provide suc h new ser vices as rea l time trans port, in order to support, for exa mple, audio a nd vide ostream s. The av ailability of perv asive n etwor king (i.e . the Internet) along with powerful affordablecomp uting and com munications in p ortable form (i.e., laptop computers, two-way pagers, PDAs, cellular phones), is making possible a new paradigm of restless computing and communications. This evolutionwill bring us more andmore new applications among them, Internet telephony, Internet on mobile telephone and,also Internet television. New modes of access and new forms of service will spawn newapplications, which in turn w ill drive further evolution of the net itself.

Economic dimensions of the Internet The ability of the Internet to bring tog ether distant p arts of the w orld in a glob al electronicmarket place and information exchange has a far-reaching and potentially beneficial impact on both developing and industrialised economies. Today, there are an estimated 148 millionInternet users, wi th recorded double-digi t growth rates in many emerging economies. It isestimated that the numbe r of persons connected to the Internet today well surpass 300 million,

closing the gap on the 700 m illion or so connected to the telephone.3 It is calculated that thereare some 4 3 million Internet ho sts4 world-wide, facilitating a dramatic increase in the volume of trade and econ omic inf ormatio n available online. The overall level of electronic commerce, or where the ISPs or Portals providing information will begin to provide all services, too.

business transaction s conduc ted via the In ternet and p rivate com mercial n etworks, wasestimated at US$ 8 to 9 billion in 1997. Researchers have forecasted that this figure co uld rise toas much as US$ 400 billion (or even over 1 trillion) by 2002, as businesses an d consum ersthroughout the world expand their online commercial activities.5

And where is it all going?This communication revolution is having a profound effect on the way the world will developand the way it will do business in the future. Some of the areas where ch anges are most like ly totake place are:

As networks grow, distance will no more be a major factor in costing comm unications.6 Companies will thus locate their digital productions wherever they access the best bargainsof skills and find best financial or tax arrangements. Giant corporations will emerge but so will sm all enterprises, able to offer similar services atlower costs (for developin g countries this will mean great opportunities, on the one hand,and greater dange r from the transnation als on the other). Middlemen and ag ents will probably be replaced by the ‘infomediaries’7 on the Intern et. Large manufacturers will also transform into service providers, thereby cutting off localservices on the one hand, as well as blurring the distinction between the goods andservices sector on the othe r. Successf ul comp anies will be those that us e digital tools a nd the Inter net.

As information proliferates, its access by the developing world will become easier-thoughits use may possibly becom e more d ependan t. All inform ation is ultim ately linked tosome technology (or ideology). In making use of it, reliance on the developed world aswell as greater control of intellectual property could lead to greater dependence but perhaps also to greater interdependence. Movements of natural persons could also decline, as eCommerce will provide localopportunities and networks in developing countries and themselves. English will (and already is) emerge as the language of the Internet and eCommerce.

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Understanding eCommerceECommerce has been simp ly defined a s conductin g business on-line. OE CD def ines electroniccommerce as a new way of conducting business qualifying it as business occurring over networks which use non-proprietary protocols that are established through an open standardsetting process such as the Internet8. This definition distinguishes it from the earlier EDI type

proprietary based netw orks or Intra nets that w ere not based on an open (and therefore not costeffective) inform ation in frastruc ture like the Inter net. In the World Trade Organisation (WTO)

Work Programme on Electron ic Commerce, it is understood to mean the production,distribution, marketing, sale or delivery of goods and services by electronic m eans.

Acommercial transaction can be divided into three main stages: the advertising andsearchingstage, the ordering and payment stage and the delivery stage. Any or all of thesemay be carriedout electronically and may therefore be covered by the concept of ‘electroniccommerce’ .4 DISSUSSION PAPERS NO 123

Broadly defined, electronic commerce encompasses all kinds of commercial transactions thatare concluded over an electronic medium or network, essentially, the Internet. E-commerce ismeant to cover three main areas of transaction, i.e. business-to-consumer (B2C), and businessto- business (B2B ) and business-to-gov ernment (B2 G).

This ranges from the use of email and instant chat on the Internet to EDI (Electronic Data Interchange)and automatedsupply chains. EDI has a role here both at the level of business to business as well as by governments in providingquicker and smoother trade transaction efficiencies for business by using EDI for customs clearance, trade procedures,etc. Business that is based on information technology and linked through a network for digital transmission andexchange. Network linked service centres that customers can access through the Internet for information, guidance,maintenance and services such as bookings, reservations, software support etc. Digital commerce is the term used todescribe goods, services and digitised transactions that are completed and supplied on-line Term referring totransactions and communication on a network and in real-time (i.e. connected together with little

or no loss of transaction time).

From a business point of view , eComm erce is not limited to the purch ase of a product. Itincludes, besides e-m ail and other com munic ation platform s, all inform ation or serv ices that acompany may of fer to its custom ers over the Internet, from pre-purch ase inform ation to aftersaleservice and suppo rt9. There are e ssentially two major u ses of eCommerce. The firs t one isto use it to reduce transaction costs by increasing efficiency in the use of time and procedures.10

Secondly, to use it both as a marketing tool to increase sales (and customer services) as well asto create new business th rough it -- for example, IT enabled business11, call-centres12, softwareand maintenance services as well as ‘digital com merce’13. It is thus a tool for both existing businesses as well as an opportunity for new business, bo th for existing compa nies as we ll as for new entrants. Alth ough the f uture of eCommerce ma y still be unpr edictable, it is importa nt tonote that possibly in a short span of time, all businesses will need to know how to make use of it-- much as most businesses had to learn to adapt to the phone and fax, only more so if trade

transaction and supply chains become digital and on-line.14

Ecommerce, however, is more than just electronics and com merce adde d together. Itrepresents an entirely new way of doing business over a medium that changes the very rules of doing business. It is therefore far more about strategy and business management than it is about technology. In orde r to und erstand eCom merc e and its implic ations fo r develo ping co untries it isimportant to see it from the perspective of the transactional aspects of eCommerce, those that represent the business betwee n the different players, as well as the framework aspects, those basic requirements that areneeded in developing countries for it to develop.

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ECommerce and developing countriesThere already exists a large development gap and differences between the North and South.Developing countries therefore fa ce a distinct c hallenge in order to realize the promises inherentin this new technological development. The task is two-fold:a. how to equip developing countries to benefit from and use the Internet as a tool for development; and

b. secondly, how to ensure and manage the growth and development of the Internet as a public good and utility that would also promote development. The former is adevelopmental challenge and requires investmen ts in the infrastructure of telecommunications, in the Information Technology (IT) industry to ensure the easy andaffordable availability of computers and software, and in training and Internet literacy.The latter is more of an international regime challenge which involves the growth andregulation of the Intern et and its facilitie s or at a globa l level.15

With Internet traffic having overtaken world telephone traffic, the world’s 13 biggest Internet access providers are allAmerican, with British Telecom, Europe’s biggest, bringing up the rear in 14 th place.(Data Communications, Paris, No.1., October 1998, quoted in Riches on the Information Highway , Le Monde Diplomatique, May, 1999). 17 US

domination of the world economy and its new technological revolution - that of communications, is now a predictablescenario. Several factors explain this advantage. They range from its long history of multi-channel television,low phone line costs, strong intellectual-property industry (movies, music, software), English language and theexperience with long-distance mail-order business (Cairncross, 1997).

The Internet is a social and economic fabric, ostensibly created by people for the sake of humancommunication and interaction. It provides new areas for cultural expression andexperimentation in a global socio-econom ic environmen t. Basically it allows for moreinteractive and innov ative way s for people to do wha t they do in ‘re al life’. Thus the Internet is but an extension of human ingenuity and creativity, “the most precise mirror of people as awhole that we’ve yet had (Lanier, 1998: 60). However, while the image of the Internet as amirror is accurate, it is still no t a mirror o f people as a whole. Th e fact that on ly an estim ated5-10% of the content o n the Intern et is of non-W estern origin while the d eveloping world population represents more than half of the world’s population indicates how far the Intern et isfrom true cultural and global diversity. This is a serious issue, in view of the potentialimportance of the Internet for all spheres of life everywhere, and because of the trend for thefacility to be increasingly dominated by a few countries and private companies.16

ECommerce today rem ains mo stly a US17

and Western based activity, thoughconnectiv ity has significantly improved in many parts of the developing world -- for example,nearly every capital city in Africa en joys some level of In ternet access today. Ho wever, thereare still significant disparities in the level of Internet penetration across regions, which can have profound implications for an indiv idual coun try’s ability to p articipate in th e global ele ctronicmarket place. Between low and high-income regions is evident from the chart below.18

Access to telecommunication is often measured by "teledensity" which gives the number of main telephone lines per 100 inhabitants. About a quarter of the world's countries have a teledensity of less than one and another 47 countriesonly have between 1.4 to 8.6 main telephone lines per 100 inhabitants. This should be compared with a teledensity of

between 27.8 and 68.3 for a group of 46 countries with the highest number of main telephone lines per 100 inhabitants

Developing countries (and their SMEs) lag far behind developed country markets in theavailability of the technical pre-requisites for conducting electronic commerce. The gaps in the

two main req uireme nts for Intern et, i.e. telephone and computer availability highlight thedifference. For example, 65 per cent of households in the wor ld have no telephone, whereas90 per cent of households in high income countries have a telephone19. The personal computer ratio per 100 inhabitants is 18 for high-income countries, 2.3 for medium-income and just0.1 for low-income20. Developed countries today have 312 ISPs (Internet Service Providers) per 10,000 people compared to just six ISPs per 10,000 people in developing countries21. In theUnited States, roughly one in three p ersons uses the Internet, com pared to only one in e very10,000 in South Asia. Teledensity (main lines per 100 inhabitants) is 48 for developedcountries, 10 for middle income and 1.5 for the least developed countries (LDCs). Furthermore,in developing countries telecommunications services are often unreliable, high cost or both.

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There are also enormous differences in access to telecommunications both betw een and w ithindeveloping countries. Fo r instance, w hile in developing countries a considerable proportion andsomet imes the majo rity of the po pulation live s in rural area s, over 80 pe r cent of the m aintelephone lines are located in urban areas.

Statistics show that the number of websites developed by commercial enterprises hasgrown from just 30 at the end of 1993, to 325,000 at the end of 1996 and to 12 million today22.The overall level of electronic commerce, or business transactions conducted via the Internetand private commercial networks, could rise to as much as US$ 400 billion or even over US$ 1 trillion, by 2002, as businesses and consumers throughout the world expand their onlinecommercial activities23. Grow th is not e xpecte d to be confined to the developed world alone andis predicted to be particula rly high for developing countries in Asia where the projections for 2001 are: for China - $850m ; for India - $160m; for Malaysia - $1000m; for Singapore -$800m; for Philippines - $200m; and for Indonesia - $200m. Whether these figures are just hypeor based on real data, and whether they consist of existing business and trade or are additional toit are key issues. Unfortunately, it is not possible to predict accurately the future growth and percent of world trade that will be conducted through eCom merce. It is, howev er, possible tosay that it will be an important and growing component of trade and figures and estimates citedabove, though speculative, illustrate the trend towards the growing importance and potential of eCommerce.

Strategies in developing countriesAttem pts in developing countries to develop eCommerce are underway in nearly everyeconomy, but eCommerce is still not considered a significant market driving force. Thosecurrently involved are either entrepreneurial risk-takers or larg er corpora te entities ded icated toa long-term investment. They are also mostly targeted at Western markets with little regard for regional harmonisation or interconnections between developing countries. They are mostly for business-to-business rather than b usiness-to-consumer transactions and have generated fewsuccess stories as yet wh ich have not been much pub licized better.

For developing c ountry governments to address these issues, it is important to distinguish between IT policy a nd prom otion and eCommerce str ategies. M any state initiatives seem to blur andconfuse this issue. Where as promotion o f the Information T echnology indu stry

fundam entally refers to developing both the hardware and software IT industry, it is importantto note that eCommerce is by no means limited to only that industry. EComm erce, besides ITand digital comm erce, in fact encomp asses all trade and com merce and the refore impacts theentire econom y. This is im portant to be ar in mind when fo rmulatin g plans for eCommerce indeveloping countries. As eCom merce grow s across the global econo my, it will becom e moreand more necessary for existing ind ustry and tra de to switc h too and u se the poten tial of thismedium to not just gro w but eve n to survive. Today this may not seem to be the case as it is stillsmall compared to world-wide trade and commerce but the writing is clear for the future.

Some framework issues for developing countriesFor several developing countries eCommerce remains a dream they would like to realise. Butneither are they convinced of the need to div ert scare resources to its development nor are they

sure of what the y need to d o to realize it. Th e answer to the first issue requires policy researchand sharing of examples of success between developing countries. International agencies musthelp them in both regards24. But it is important to emphasize that developing countries cannotafford to wait for complete and definitive answers. Global compet it ion and the new economyare not going to wait for any economy or industry. The compulsions of today and the fears of tomorrow impel developing countries to address the second issue of engaging and promotingeCommerce. To do so, they will need to address some of the following key issues.

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Info-structure including technology and standardsThe introduction and rapid spread of the Internet has established electronic commerce as animportant means of carrying out commercial transactions. In this context, electronic commerceis a result of the large techn ological ad vances tha t have bee n made in the last dec ade or so infacilitating telecommunications and transmitting information. The electronic commercerevolution, however, is dependent on several key preconditions. The first one is the widespread

availability of the Internet. For developing countries, access to modern telecommunicationsystems is perhap s the defining elem ent of electronic com merce. A w ell functioning, mod erntelecommunication infrastructure and a satisfactory distribution of electricity, along with accessto comp uter hardw are, softwa re and serv ers are the ba sic technica l requirem ents for electronictransactions. For eCommerce to be successful and grow, the hardware and physicalinfrastructure are not enough. What is required is an ‘info-structure’ meaning the framework and environment for eCommerce that includes the appropriate legal and financial framework,the political and business environment conducive to its development and the capacity or humanresource to deal in it.

Issues such as domain names, address management and certification authorities would affect trade and commerce.

Issues of technology and standards for eCommerce anddeveloping countries

As far as the fast emerging tech nologies and standard s for the Internet and ECommerce areconcerned, developin g countries have hard ly any say to day. Most of the de velopm ents intechnology and standards are taking place essentially in the private sector l aboratories of the North.

A truly global information infrastructure (GII) which makes possible the electronicexchange of information about products and services, buy and sell orders and financialtransactions is another pre-requisite to the development of global electronic commerce. TheInternational Telecommunications Union at Geneva is working towards this end. One of theITU's strategic goa ls is to develop standards for the Global Information Infrastructure (GII). TheITU's current standardisation work program covers a vast array of subjects including:

the overall a rchitecture o f the GII;

multim edia com munic ation system s; comm unication s ystem se curity; privacy tec hniques fo r multim edia term inals; a technica l framew ork for elec tronic com merce;

GII access is a necessary but not sufficient condition for the developme nt of electron iccommerce. It is essential to create a policy and regulatory environment that favours thedevelopment of ECommerce and harmonises national approaches in diverse areas includingtelecommunications, trade, com petition, intellec tual proper ty, privacy a nd security . The ITU is bringing various partners together to und ertake pilot p rojects in dev eloping co untries todemonstrate the benefits of electronic commerce to the user communities of these nations . Italso seeks to serve as a forum (through workshops, conferences, and seminars) to address policyissues related to electronic commerce in developing countries. Such initiatives need to be

replicated by several other internation al bodies tha t deal with tra de, industry and deve lopme nt.Involvement of the developing countries and assistance to them for improving their expertiseand infrastructure are some of the key requirements of the future.As matters of technology and standards get hopefully resolved at the international level by organisations such as the ITU, developm ent of com munic ation infrastru cture interna lly willremain particularly important and a major issue for developing countrie s. The key to this is thetelecom network of the coun tries concer ned. Proac tive and su pportive p olicies are ne cessary toreap the benefits of this emerging opportunity.Today the South is virtually excluded from standard setting and the technologicaldevelopm ents in the ICT sector by virtue of not having the experience and expertise in hightech

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information and communication technology. Standards and technology are both growingand changing so rapidly that keeping pace with them is an issue in itself. Developing countriesmay benefit by the market and international bodies/associations (The Internet Corporation for Assigned Names and Num bers (ICCAN), for example) setting and formulating standards. Butthe obvious danger is that if they have no say on these matters (no develo ping coun try isrepresented in ICCANN), they will be unab le to avert the possible advers e implic ations of theresulting standards for their economies.

2.2 Legal and financial framework Legal framework Electronic commerce has been in use for many years, under the auspices of many differenttechnologies, including telegraph, telex, fax, interactiv e telephon e, e-mail, priv ate dataexchanges (such as EDI, ATM transfers and wholesale funds transfers) and the Inte rnet.ECommerce embraces far more than just the Internet. When states consider le gislation tosupport eCommerce, they need to consider that they will affect trading practices in manydiverse communities and practices, m any of w hich ma tured long before the In ternet.There could be many things that developing countries might want to regulate on theInternet. These could include content s uch as pornography and incitement to racial hatred, aswell as consumer protection, the defence of intellectual-property rights and tax ation. These are

all issues on w hich these c ountries leg islate already . The existing rules and law s would andshould apply to the Internet and eCommerce. The problem is, however, how to regulate it. Thisis both a policy and research issue.So far as the development of eCommerce is concerned, the main issue that developingcountries need to address is how to make their legal framework conducive to eCommercetransactions. The UNCITRAL26 Model Law on electronic commerce is one such standa rdframewo rk for resolving the contrac tual issues an d obstacles related to eCommerce. Severaldeveloping cou ntries are considerin g adopting it or legislating directly themselves while severalalready have done so. The basic principle be ing follow ed is that of “e quivalenc e of treatm ent between paper and electronic communication. This is easiest and quickest done by adapting theexisting leg al system to an eCommerce enviro nment.

Financial framework issues

One of the main concerns of developing countries are the perceived dangers of foreignexchange outflow on account of eCommerce, i.e. through the purchase of goods abroad. A studyin this regard indicated the following:

This study app ears to indica te that the hig her the development of eCommerce within theregion/country, the higher w ill be the purchases from within. In order therefore to encourageeCommerce develo pment, banking procedures within developing countries need also to bealigned and m ade com patible w ith digital trad e transactions, so that consumers and buyers caneasily m ake purch ases locally through th e Internet.

A possible utilisation of the ‘bit tax’ concept could even be to levy a charge on all digital transactions for creating a global development fund.

On-line transactions could of course be between different sites located in different countries, but since it would

probably be the suppliers that would be targeted for taxation, they could locate their site in a tax haven.

Along with changes in contract and company law, eCommerce would also require afinancial and bank ing fram ework th at allows fo r electronic paym ents and tra nsfers. This w ould includerequirements for certification of documents, electronic signatures, confidentiality and privacy. Therefore developing countries will need to put in place both the electronic network (between financial institu tions) as w ell as the legal framework to allow for such transactions.Banking law s and re gulatio ns thus need to be adju sted to th e new form ats and requirements.

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Tariff and taxationThe most contentious problem with eCommerce arises when the transaction has taken place purely in a digitized format - i.e., where all parts of the transaction have been completed ‘online’in digital or computerized format and no goods have directly passed through a recognizedcustoms or domestic tax point. Where eCommerce has been used only to communicate and setup a transa ction and th e actual deliv ery is by reg ular mea ns, the existing tax and du ty

regulations and procedures continue to apply and can be monitored. For digital supplies the problem for the authorities is to monitor or even be aware that a transaction has taken place.One possible response would be to introduce the so-called “bit tax (i.e., a tax on the “bits of information zoo ming aroun d compute r networks).27 The basic problem with a ‘bit tax ’ is that itis indiscriminate. It taxes not just on-line transactions but all digital communications, from emailto information gathering. Also the question of valuation would be difficult to determine.More important, it is argued that such taxation will crush the development of eCommerce andstunt its growth. If implemented in some countries, it would simply drive business off-shore andon-line transactions would take place in a state or country where there is no such tax.28 So whatother option is there for governments? The unpleasant alternative is that, in coming years,governm ents will pro bably be fo rced to shift fu rther their exis ting tax base or find wa ys tomonitor and tax eComm erce transactions.

Taxation issues have a bearing on the very foundations and growth potential of anyeconom ic idea. In th e case o f eCom merc e, the ramifications are global and affect the v eryconcept and developm ent of eCom merce, as well as the p olicy that each develop ing countrywould need to adopt regarding its foreign trade and internal taxation. This is of importance asfor most developing countries, domestic taxes and import and export duties continue to be a primary source of revenue.

Building the human resourceElectronic commerce is changing the way we do business. We have moved from an industrialeconomy where machines d ominated pro ductivity, to an information -based econom y whereintellectual content is the domin ant source of value ad ded and w hich know s no geog raphic boundaries. In this new environment, education and continuous learning will be essential notonly for mana gers and wor kers but for all. As industry, commerce, and services are transformed

by technology, many skills need to be improved or acquired.If developing countries are to benefit from this new technological and economic boomthat the growth of eCommerce represents, they will need to have the most important component- the human resource, in place. Today’s knowledge revolution largely depends on intellectualcapital. Some developin g countries and som e sections of most de veloping countries h ave this inDeveloping countries like India, Jamaica, Singapore etc. have been witnessing a ‘brain-drain’ of their English speakingengineering and other graduates to the West mostly the US. Today opportunities of eCommerce and the new digitaleconomy are bringing back some of these now engineers-turned-entrepreneurs to their countries of birth to set up neweCommerce joint ventures. To integrate into the global economy, developing countries should not be wary of churningout more and more skilled personnel, even though dangers of losing them to other markets may exist.

abundance and opportunities of the new economy could provide them w ith excellen t results29.On the other hand, there are many that are far behind in this area and therefore need very proactive policies and investm ent in educ ation (espec ially technic al) to realise the potential.After all to be e-literate, citizens first need to be literate.

As eCommerce develops and the more advan ced stag es of commercial ex chang e (i.e.,contracting, paymen t reconciliatio n and aud iting.) are carried out electron ically, mo re specificskills are going to be required . Even for surfing the Internet for a product or service, basicfamilia rity with the computer and knowledge of the Internet is needed. Moreover, extensivelanguage knowledge (especially English) may be an additional requirement if foreign Internetsites are to be browsed . From w ebsite desig n, to electronic credit management and software and hardwaremaintenance - all require skills that may not be so easily available in severaldeveloping countries. C apacity building in the field of information technology, in theknowledge of the existence of a global market for such skills, is therefore crucial. The

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development of electronic commerce puts a premium on the development of education andtraining policies, to ensure that training institutions' curricula meet with the needs of industry.The training needs should firstly focus on activities in the area of human resourcedevelopment for electronic commerce, in particular through the training of trainers. Th ree maintargets could be focused upon initially, namely:

a. Policy makers and negotiators. b. Small and medium -sized enterprise managers and trade practitioners.c. Technicians and workers, including specialists in electronic data interchange and the Internet.

The areas to be covered could be:

Conceptual and quan titative analys es of the impact of electronic commerce ontrade and d evelopm ent. Organization of regional seminars to raise the level of awareness of developingcountries, trade and industry associations and labour unions about the possibilitiesand challenges of electronic commerce, as well as about the current state of specific debates (proposals for a global framework for electronic commerce,international negotiations and discussions being held in various institutions,especially the W TO).

Production and dissemination of training packages for electronic commerce and The use of modern interactive techniques, including CD-ROM and Internet-basedtechniques, as well as of distance learning packages, should be encouraged, takinginto account local cultural and language specificity.

Human resource development is however far more than just training. It is a continuouslearning process. For developing countries, the process shou ld begin w ith sensitisation as wellas web design and development of commercial applications. Governments should take theinitiative to then pass it on to the private sector. Here the state could pursue its efforts in building partnerships with civil society in order to offer proper training tools in the area of electronic commerce. Similarly international organisations such as UNCTAD, UNDP, WTO

The other being B2C (Business to Consumer) and B2G (Business to Government). B2C or retail eCommerce is the onewhere all the hype has come from as it is novel and touched people directly. Its success however has been rather marginal and even big and popular sites like amazon.com (books)and CDNOW.com (CD sales) are actuallylosing money. B2G is being considered a major possibility in the future once government procurement turns digital.

And ILO also have a responsibility to assist developing countries in this crucial area of advocacy andhuman resource development for this new technology. Several of these orga nisations are in fact workingtowards th is and there fore collabo ration and common programmes with developing countries would be beneficial for the world economy as a whole.

Investment and short-term optionsA climate conducive to investment in general is considered the best way to attract investmentinto the ICT sector in developing countries. A country open to electronic commerce and newinformation technologies is likely to attract additio nal interest fro m foreig n investors . Despite

the attraction of low production costs, com munications and distance ha ve previou slydiscouraged foreign companies from establishing in developing countries. ECommerce maylessen these physical constraints. Active promotion of electronic commerce might, therefore,make foreign firm s more in terested in investing in a variety of sectors, includingtelecommunications, Internet service provision, professional services and various areas of industrial production.

It is importa nt that deve loping cou ntries bear in m ind that massive investments and perfect technolo gical solu tions are not always necessary. Even existing networks can bereengineered and global services for the Internet and eCommerce web sites can be utilised for

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entry into the major supply chains may become m ore difficult for newcomers.

E-marketplaces and SMEsThe past couple of years have shown that large industrial corporations are suddenly enamouredwith creating e-marketplaces, or specialized websites dealing with the trading, both up-streamand down-stream, of their raw-materials and products. These are basically B 2B on-lin e marke ts

that attempt to bring together the benefits of online trading to specialized commodities. Some of the recent examples that show the wide range of this trend are as follows:

General Motors, Ford and DaimlerChrysler are creating the world’s largest emarketplace

by linking up their procurement needs on a single online trade exchange.These three alread y accoun t for some $200b n wort h of yea rly purc hases. Renault of France and Nissan and Toyota of Japan have also announced plans to participate. This eexchange

could involve literally tens of thousands of suppliers from across the globe.

Fifty of the world’s largest consumer product groups have joined together in an emarketplace being co-ordinated by the Grocery Manufacturers of America that is going to bring together rivals such as Procter & Gamble and Unilever , Nestlé and Kraft Foods.

Six of the biggest US health insurance companies are developing a health insurancewebsite tentatively called MedUnite to directly enrol and interact with patients anddoctors lest th ey be lost to th e new Inte rnet health-c are com panies app earing on th e net.For many of the new entrants, despite their excellent off-line creden tials, these are basically react ions to the new economy and for them to b e successf ul in this new game th ey will need to prepare for the new onl ine world by shunning several of their proprietary tradinghabits32. The comp anies in volved need to be ready and willing to bring suppliers and customers deep

into their business and purchase processes and to develop similar links with th ose of the ir partners 33. Alsothe lack of appropriate software applications for the wide and new types of emerging e-markets keepsthem in what one commentator refers to as an ‘e-commerce kindergarten’ which will mature only whenthere are new applications, architecture and a revamped vendor community supporting the full tradingcycle.

Acquisitions

Mergers and acquisitions will not remain in the realm of big-business and the North. Firms indeveloping countries too will be affected as new opportunities and relationships emerge in thedigital economy , both local and across bord ers. The obvious dan ger for developing co untryfirms is that the traffic may be one way with firms from the develop ed world taking them over.But this need not be so, as several Indian dot.coms (eCommerce comp anies) and entrepreneursare showing, arriving in the US Silicon Valley to start joint ventures and start-ups.ELECTRONIC COMMERCE IMPLICATIONS FOR FIRMS AND WORKERS IN DEVELOPING 19 Distribu tion and delivery benefitsStudies show that in develo ping countries delivery and transportation costs are a greater share of total cost of production than in developed countries. ECommerce and EDI-type automated procedures can therefore bring in efficiencies and better distribution. Firms in developingcountries need to use these processes as well as to enter the business of delivery servicesthemse lves. If they do not, the danger is that they could be swamped by the international

transport services an d courier co mpanies like Fede ral Expres s and UP S for who m busin ess is alreadyexpanding exponentially from eCommerce and the growing opportunities of smalldirect o rders ov er the In ternet.

Personalised direct marketingThe low costs o f direct ma rketing via th e Internet ha s created a h uge poten tial for person alised directmarketing. This allow s consume rs to order as per personal taste and requirements. In the US it is already ahuge and growing industry. It does though lead to problems and issues that go against the norms of brandand mass production on which most existing industry is based. For developing countries’ SMEs, this is avery unique opportunity to gain from this emerging

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market both in exports and in their own local economies, as they would have the advantage of small and relatively cheaper production bases to cater to individual needs. Some eCommercesites fro m Sin gapor e, Ma laysia a nd Ind ia are be ginnin g to offe r such s ervices .

B2G opportunitiesB2G or busines s to government is an area of eCommerce that is expected to develop and expand in the

future as governments begin to realise and utilise the efficiency, cost saving andtransparency that the Internet can bring. Such openings would be of great opportunity,especially for SM Es, who a re mostly unawar e and una ble to enter these supply chains presently.

There is a danger though that in some countries local political com pulsions an d bureau cratic procedures may prevent such possibi li ties for some time to come. There is also the threat thatonce this becomes the norm, those firms in developing countries (even if presently in suchsupply) that are unable to synchronise their procedur es and sup ply man ageme nt system s toeCommerce n orms se t by the proc ureme nt agencies , would los e out.

Internet enabled servicesFirms in developing countries have a competitive advantage for providing eServices (backoffice,call centres, data processing, etc.) as labour costs are lower solving the problem of

moving persons abroad. This area is booming in India where, for example, several airlinecompanies such as B ritish Airw ays and S wissair have located their booking services andaccount reconciliation services there. Malaysia, Singapore, Hong Kong , Philippines andJamaica are some of the other countries where similar IT-enabled services are being set up.Besides basic computing skills, the present status of eCommerce requires a good knowledge of English although s oon other Europea n languag es will also command a premium. Even thoughthis is good business as such, for the IT industry and service sector, developing country firmsshould also have strategies to go up higher in the value chain of the software and eCommerceindustry, i.e. by developing and running software, multi-media and IT services domestically aswell as for the glo bal mark et. Firms in developin g countries must strategize for this andsimultan eously upgrade the skills of their employees through specific HRD and training policies.

Death of distanceFor firms in developing countries, ECommerce can be the bridge to overcoming the drawback of distance from developed markets. ECommerce has the potential for providing world-wide presence for SMEs as the ma rket entry b arriers are low ered enab ling supplie rs to address marketsegments that were previously uneconomical an d unreach able. They can use the Internet to advertise their products at a global scale an d also set up ‘virtual shops’ at much cheaper cost than actual stores abroad. Of co urse maintenan ce, upgrading and marketing costs are high and also there are issues of security, payments and assured supply w hich need to be add ressed.

It needs also to be noted that the same technology can be used by transnationals for accessinglocal m arkets in develo ping co untries and thr eatenin g the firm s in their own d en. Setting up integ rated v irtual sho p-frontsVirtual shoppin g malls are now common and on several websites. But this is an idea that hasalso been very successfully tried by some developing country SM Es to great advantag e. It

provides the opportu nity to sell toge ther and ga in from a comm on platform much like what amall does, only much cheaper a nd certainly more ac cessible, pro viding an o pportunity that infact would not exist in the brick and mortar world for several of these every small businesses.One example of this is the Asian Sources Media Group (ASM), a publishing company based inHong Kong. The firm ’s Website serve s as a shop-front for m ore than 7,000 As ian suppliers,mostly small-to-medium-sized factories in Hong Kong, China, Taiwan and Korea, sellingeverything from cheap plastic toys to multimedia electronics. Before their inclusion in the ASMwebsite many of these factories did not even have a personal computer, let alone an Internetconnection. ASM provided what they needed, trained them in how to use it, and included them

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in its on-line cata logue of n early 200,0 00 produ cts. Within a year, the A SM sit e was generating morethan 50,000 inquires a q uarter, and is n ow runn ing at a pace nearly dou ble that. Since the inquiries gostraight to the suppliers, and subsequent negotiations take place directly between buyer and supplier, it isdifficult to calculate the volume of business generated, but customers have suddenly emerged in South America o r Eastern E urope for A sian firms that previou sly had little or no m eans of sellin g to those markets35.

Improving service provisioningConsum ers in developing countries may be able to get lower priced items or better services. The possibilities are enormous for firms and innovative new our alternative services can providemore business. As an example in the services area, Pak istan Telecommunications Ltd. the staterun monopoly, solv ed the problem of inaccurate telephone number listings in hard-copydirectories by setting u p a 24-ho ur on-line d irectory serv ice through the Internet. It is now planning to export this expertise.

Services innovation and eComm erceParticularly in the services and expo rt sectors, those firms have be en known to b e moresuccessful that innovate as a matter of competitive survival36. EComme rce provides the best platform for innovativeness. It combines the efficiencies of information technology and

software with the glo bal advan tages of the digital econo my. Th ere are seve ral exam ples indeveloping countries of success stories on account of this. For example Trade Point Beijing, set

Term used for the all service providing large portals that are emerging on the Internet.

up in 1995 by the Chinese local government, besides providing trade data also conve rted to being a ‘one-stop shop’ on fo reign trade to streamline access to the many governmentdepartm ents required to be contac ted for the pu rpose. Sim ilar focal poin ts linked electronic allyare being set up in India, Malaysia and Sri Lanka amongst other places.

Training and distance learning for firms and workersThe Internet has provided a unique medium for firms in developing countries to provide for theupgrading of their worker’s skills. This can help adapt the firms to the new economy. The problem to be surm ounted of course w ill be reliable com munic ation netw orks and a ppropriateteaching and learning skills.

Wither the middleman?One of the earliest expectations of eCommerce was that it would reduce the role of middlemen,intermediaries, agents, etc. who would gradually disappear. This was hailed as the process of ‘disintermediation’37 (produ cers selling d irectly to con sumers withou t the aid of in termed iaries). Time

has shown that in fact the old economy middlemen are being replaced by the new economy‘infomediaries’ 38 who will em erge as the new power-bro kers. Some ‘old econom y’ intermediaries are alsoadapting to the ch anged env ironment an d may y et survive by offerin g on-line services.

Developing co untry eCommerce p ortalsThe all-knowing portals are the rage on the Internet. These are websites o r services that offer a broad array of resources and services, such as e-mail, forums, search engines and on-lineshopping. In developing countries too several local portals have emerged. South America has

examples such as Yupi, Rio-o n-line, Star M edia and The Caribbean Home Page, all providingseveral services and links. Indonesia has Indobiz.com for business links, Nepal and SriLankahave government run sites and India has several such as Satyam -on-line, Info line, Mall o f Indiaetc. One ver y successf ul exam ple is Africa Online which started in 1994 in Boston, USA, and Nairobi, Kenya, to provide e xpatriate Africans with news of home. It current ly employs some250 people and has spread to several African countries. It receives 10 million hits per month,and has approximately 150,000 subscribers, comprised mostly of businesses.

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Some policy issues for workers and employment The new economy modelAll businesses associated with communications, information tech nology and eCommerce areencompassed in what is commonly called the "new economy". The implications of this model of econom ic growth a re a matte r of heated d ebate. Rece nt reversals in the so-far rising stock prices of technological companies as opposed to the declining values of the old economy

businesses prove that this model not only holds promise (at least for the west) for ushering in prosperity but could also bring about a period of uncharted and messy change. Sim ilarly, there

Defined in economic terms as an economy’s acceptance of a certain level of unemployment, usually between 5 and 6 per cent for a period of time. Euro-FIET, EuroCommerce and European Commission study quoted in InternationalLabour Organization, 1999, Human resource implications of globalization and restructuring in commerce, ILO, Geneva

are several views amongst economists about the fundamentals of the new economy model and how itrelates to established doctrines of economic theory. One such principle has been that inflation would rise if unemployment stayed below a 'natural level'39 . In the United States this is not holding good and thereforethe conclusion being talked of is either that eCommerce has helped reduce prices or that workers have notyet realised the impact and are therefore not yet actively demandin g a piece of the productivity gains.Further empirical evidence is required for either view.

What is clear is that the new “digital economy will have a major impact on the globaleconomy. National markets, especially in developing countries, may not yet be feeling thechanges but the waves of the new global competitive environment is likely to effect firms andworkers throughout the world. The impact of eCommerce for developing countries toda y ismostly in the interna tional trade se ctor. But eCommerce could soon hav e a vital impact on theservices sector, where the potential for offering digitized service and transactions is very high.

ECommerce and employment In view of the fact that eCommerce itself is an emerging phenomenon and its full impact on thenew and old economy remain s mostly in the realm of projections and estim ates, it is difficult tosay what the long term effects of eCommerce will be on employment. A study of the EuropeanCommission40 published in 1998 co nfirmed that at that time there was no certainty as to whatthe impact would be. Empirical studies are presently not available and the effect could vary

across sectors and regions. Sin ce supply chain management and opportunities in them for SMEsand developing countries are expected to be important, research to analyse the impact of eCommerce a t different stag es of the new chains wo uld be use ful.Some initial stu dies ap pear to indicate that wh ile, on the one hand, as the new economy expands new jo bs and new sk ills will b e requir ed and created , especia lly in the IT secto r, in the short-term eCommerce could have a negative impact on jobs as more and more services and skills go digital.

On the whole eCommerce enterprises require lesser numbers of worke rs. For exam pleone of the m ost fam ous of eCommerc e enterp rises, Amazon.com had only 614 employees for sales of $148 million in 1998, as against the largest U S book store, Barnes a nd Nob le, which hada sales force of 27 ,200 for sale s of $2.8 billion (converting to sales per em ployee of $ 267,000 in theformer compared to $103,000 for the latter). This impact can be negatively measured also in the sensewhere Federal Express, the world’s largest courier service, reported in 1999 that its

on-line customer service system represented a savings of 20,000 new recruitments!Whether this is true for whole economies is not yet established as employment levels inthe United States, the most successful country in eCommerce, are at the lowest level in decades.Also for developing countries, the emerging opportunities in the new web-enabled services suchas call centres and data entry seem to be highly labour-intensive.

Some implications of the new economy and eCommerce on workersGlobalization is expected to bring more foreign direct investment in developing countries.ECommerce and software development activities in most developing countries initially begun

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through such investment in joint ventures and through collaborations. Such investments do notalways mean start-up or greenfield enterprises. As eCommerce increase s in pace itscompulsions could result in greater acquisitions of existing firm s in developing cou ntries. Infact the norm in the new economy companies seems to almost be to acquire good existingsoftware and e-Commerce sta rt-ups (T he dot.c oms) rather th an start a fresh. S tudies show that acquiredfirms are more likely to lose jobs than non-acquired firm s are. Displaced wo rkers often end up with part-time jobs and lower earnings41. It is for this reason that several developing countries have placed conditions on

mergers and acq uisitions. For example, one of the main se ctors where mergers have been particularly volatile in therecent past has been telecommunications. Since telecommunications companies have changed from lumbering, low-growth giants into high-tech companies with exploding Internet and mobile businesses, they seem to have developedthe urge to merge. In 1999, nine of the top 10 deals in the world have been in telecommunications. This trend isextending to the developing countries also. Can developing countries p revent this, or should they attempt to is thequestion. If they try to stop it, the danger of being passed-on by multin ational ente rprises is of co urse the risk . Inreality, this perceived danger has rather promoted developing countries to enact favourable trade and foreign directinvestment policies42 though , of course , with ma tching co mpetition laws.

Similarly for existing firms in developing countries, e Commerce and the new digitaleconomy is bringing n ew com petition and standards o f perform ance that could resu lt intheir having to face global pressures of cost and efficiency that may well demandrestructuring and dow nsizing of staff.

The Internet is also revolutionising relationships and interaction between employees. Frome-mail to joint virtual training and global virtual conferences on the internet, sudd enlythere is a medium of communication through which workers become collaborators nomatter where they may physically be. All this can lead to a completely new form of employee participation and involv ement in manag ement a nd decisio n makin g, be it aSME or a large organization.

ECommerce and the Internet is leading to more flexible working hours. Though many of the workers, such as home-based mothers and the young computer whiz-kids may favour such hours (offered to them as ‘f lexit ime’), trade unions tend to not favour suchdevelopm ents as they tend to erode labour agreements and existing legislation onworking hou rs.

Quite obviously the highest premium on skills is and will continue to be on computer engineers, system analysts and data entry operators. These jobs will continue to expandand comm and much higher salaries than other workers.

As eCommerce and the new econom y grow, ne w jobs w ill be genera ted also in m ultimedia,network ing, telecom and new comm unication te chnolog ies and pro ducts, as w ellas the new professions of web management that are appearing.

There will be a much greater need for in-house training of existing workers so that they become e-literate. This is something that enterprises and deve loping cou ntries need tofocus on.

Over-all there will be an impact on trade unionism also. Not only will several of the large

enterprises see changes in size and performance in the new economy, the terms of employment may also need to be re-negotiated. Moreover, much of the benefits of eCommerce is expected to first be realised by the SMEs where traditionally trade unionmembership levels are m uch lower.

ECommerce and the informal sector in developing countriesThe informal sector 43, though mostly unregistered and not adequately monitored or researched,usually provides the largest employment in developing countries. According to the ILO44, therehas been a steady growth of this sector in almost all developing countries. In several of these

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areas of employment, the Internet is already having an impact, such as on tourism and travelservices, food and restaurants, ha ndicrafts an d souven irs. On the on e hand, it cou ld lead togreater popularity of these places and products for developing countries and therefore providemore employm ent, while, on the other it could divert som e of the trade and servic es toeCom merc e firm s on the Internet.

ECommerce by its very nature is creating another type of informal sector out-sourcedhome-based computing and micro-enterprises offering web-enabled services. For multinationalcompanies eCommerce has dramatica lly increased the possibilitie s of indirectly using skills inthe developing countries. The whole gamut of call centre typ e out-sourced digital service s are based on this very concept of locating and utilising cheaper skills. Developing countries sta nd togain in promoting such services.

While it is difficult to say what is and what will ultimately be the relationship between theinformal sector and eCommerce and the digital econom y, there is no doubt that an im pact therewill be. For the ILO and fo r developing countries especially this is an important area of policyresearch and must be studied.

Towards a future research and policy agendaThe intent of this p aper is to esta blish a preliminary analysis of s ome of the issues inv olved ineCommerce and its impact on firms and workers in the developing world. Based on this it seeksto provide a fo undation on which further wo rk can be in itiated to develop a research and policyagenda. To do t his, it is necessary to outline some of the existing myths and dilemmas of eCommerce and the new eco nomy that ha ve a bearing on the growth of eCommerce for developing countr ies and their firm s and w orkers. First let us look at some of the myths aboutthe ICT (Information and Communication Technology) industry.

.Some myths and dilemmas The myth The reality

1. That one needs to have total country-wide internet access before the benefits can accrue in developing countries.

In fact for most developing countries, resourceswill determine that intermediate partial andfocused strategies would be required and suchinitiatives have proved successful.

2. That privatisation is the only key to telecom growth Competition not privatisation necessarily is thekey to better service and growth.

3. That you need the latest of technology in your telecomsystems. Technology changes so fast that in any case thismay not be feasible so adapting existinginfrastructure may be more practical.

4. That computer literacy is essential to use the Internet. It is useful but not essential. IT services ongovernment networks, like land-records, licences,

weather and agricultural information etc., can beutilised even by illiterate peoples in developing countries.

5. That you need software engineering graduates to start anyweb based services. For web-designing and network management yes,

but not for web-enabled services like call centres, medical transcription, etc.

6. That you must be proficient in the local language to beable to offer eCommerce and IT services in that country.Whereas web-sites and other web-services may

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have their front-end designed in the locallanguage, the back-end services like maintenance,software, technical support do not need to be andare in fact in computer language or English basedmedium.

7. That eCommerce will eventually lead to a ‘friction-free’economy in which transaction costs disappear, as do the

intermediaries of today. Though it is a fact that transition costs arereducing, value-chains and profit taking canassume different models and middle-men of todaycan be replaced or change to the ‘infomediaries’of tomorrow.

8. That the choice is between either the market or agovernment controlled initiative, for promoting andspreading eCommerce in developing countries.In fact there is no choice between the two. For itssuccess in developing countries, both thegovernment and the private sector need pro-activeinvolvement.

In the area of policy research on ICTs there can be dysfunction and issues of controversy

and debate that could have a bearing on the strategies of governa nce. Some d ilemmas a reenumera ted here more as ex amples rather than a priority listing of the major issues. Fu tureresearch in the area of eCommerce and its imp act in deve loping cou ntries need to be seen insuch perspective:

The supply-chain dilemmaMost organisatio ns and stud ies are of the v iew that the principle beneficiaries of eCommercewill be the small and medium enterprise s (SMEs). The reasons for this include the attractivenessof a relatively inexpensive medium (the Internet) for reducing transaction and inform ation costswhich the larger firms have already been doing with IT and ED I: flexibility of the SME s inadapting to the new emerging business models of eCommerce; and most of a ll being able to jointhe global eCommerce based supply chains. As B2B already is and will be, expected to be themain area of growth for eCommerce, the last is probably the most significant of factors. The

dilemma is that this very benefit could make the SMEs ever more dependants on larger firmsand multinationals thus limiting the other benefits of the new opportunities for them.

The cultural dilemmaAll firms and workers across the globe have a sense of their own societal and organisationalculture. Individually, our cultural values provide an unconscious w orld view into wh ich we aresocialized and which w e use to socialize others 45. Organisational culture determines impacts onhow companies perform and behave in the market place. Most importantly, communicationstyles vary across the globe and have a bearing on successful trade relat ions between firms46.With eCommerce and the Web, a new global digital culture and new forms of communicationare emerging. Firms, especially SMEs, will consequently need to suddenly adapt to this newculture and yet attem pt to retain the ir own spe cial styles and culture that m ake for their uniqueness and innovativeness.

Dilemma of democracy: control vs. freedom on the net Democracies are founded on the principle of freedom of expression and choice. In fac t, it is thisvery special recognition of the individuals right to free expression, free choice of employmentand business that is the basis of individual enterprise and entrepreneurship. This has been the backbone of free-market enterprise and innovations well as the hallmark of success of eCommerce. Yet the same Internet that provides the highw ay for the new economy can also bethe high-road for new crime, new cyber terrorism and what are referred to as the ‘gigabyteguerrillas’. Where do governmen ts draw the line betwee n freedom and contro l on the Intern et?

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And if they try to, will it stifle the new economy? In the developing countries, for example,India stands ou t as a very successfu l exam ple in the digital economy. As the world’s largestdemocracy it does not attempt to police the Internet. China, some of the Middle East states, evenSingapore and Malaysia still have very strict censorship law s in place. Will these effect futuregrowth?

The dilemma of the informal sector and labour codesFor developing countries the informal sector is one of the main growth areas. For eCommerce,

some of the expa nsion in developing countries will come in the informal sector. By definitionthese informal working arrangements encompass employment situations and labour relations,which not only differ but often infringe upon established rules. How could internationalagencies and governments react to this? The main difference of course between the existinginformal sector and eCommerce based employment is going to be the level of skill and higher remuneration. Therefore the need to impose labour codes may not be so strong. Moreover sincethe awareness and e ducation le vels will also be high, sen sitising the new know ledge wo rker tohis or her rights should be a relatively easier task. The spill-over effect of eCommerce to the restof the informal sector could also lead to some improved situations there too.

Issues for a policy and research agenda

Good governance has been on the international development agenda ever since the early 90’s.International and bilateral donors have insisted that their deve loping cou ntry partne rs follow thisstandard which tho ugh not clearly defined, imp lies that there m ust be transp arency ingovernment decision making, clear procedures and civic participation in the process.Policy on eCom merce s hould be th e results of broad and open national debates. Bodieslike the ILO must open up the debate on eCommerce and its implications for labour andemployment to further open discussion and research. Civil society , trade and industryassociations, labour unions, NGOs all must be invited to participate in the debate.Related to this are the initiatives that have been taken up in severa l governm ents of the S outhfor the promotion of Internet and eCommerce in their countries and the partnerships with tradeand industry tha t are emerging. These need to be strengthened and here the InternationalAgencies have a role in promoting such partnerships, providing studies and models anddisseminating ‘be st practise’ examples for the developing cou ntries to emulate or con sider.

Some suggestions for future action and research

Governments and international organisations should collect and analyse data relevant to thestudy of electronic commerce in order to effectively measure its economic and socialimpa ct.

Empirical data on the actual impact of eCommerce across sectors and regions is lacking andas suggested earlier, studies on the impact on employment at different stages of the neweCommerce g lobal supp ly chains w ould be m ost relevan t.

Labour is an issue of both social and economic relevance therefore ILO has an importantresponsib ility here. For ex ample, it m ay be nece ssary to rev iew existin g labour law s to

see if there are existing barriers for workers to be able to share in the new and differentemployment generated by electron ic commerce. It would also have to be seen how far theexisting rules and laws would and should apply to the Internet and eCommerce. The problem is also how to regulate. This is both a policy and research issue.

International development organisations should study the potentia l impact o f electroniccommerce on eme rging econ omies a nd the least developed countries in an effort to assistin the economic development process in those nations. Involvement of the developingcountries and assistance to them fo r improv ing their expertise and infrastructure are some

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of the key requirements of the future.

International organisations such as UNCTAD, UNDP, W TO and ILO also have aresponsib ility to assist the developing countries in the area of advocacy and humanresource development for this new technology. Collaboration and common programm eswith developing countries would be beneficial for the world economy as a whole.

Govern ments and international agencies should continue to promote both formal and nonformalskills-development programs. For eCommerce this means both eWareness andeLiteracy programmes. There will be a mu ch greater need for in-house training of existing workers so that they become e-literate. This is something that enterprises anddeveloping counties need to focus on

The relationship between the informal sector and the digital economy needs to be further examin ed. For the IL O and fo r developin g countries especially th is could be an importantarea of policy research.

The Interne t is a me dium of com munication th rough which workers can becomecollaborators. All this can lead to a completely new form of employee participation and

involvement in management and decision making, be it an SMEs or a large organization.The ILO could further study such possibilities and promote it in developing countries.

ConclusionThe benefits of eCommerce should accrue to those trying to escape economic marginalizationdue to geographic, financial, technological or educational handicaps. A strong rationale for eCommerce development arises from the South’s desire to close the gap between tho se withabund ant info rmatio n at han d and th e "infor matio n poor ."

As governments develop initiatives and policies in support of eCommerce, theeffectiveness of specific actions should be measured by the extent of improvement in:Both these points will have a bearing on the telecom policy and some state monopolies in it that continue tosurvive in some countries.

cost effectiveness and efficiency [in commerce] as measured by how quickly information,goods an d services c an be deliv ered to con sumers ; comm unications options for c onsum ers that offer in novative w ays of doin g business ; increased scope and reach of communication and hence service delivery.47

The premise here is that in promoting business on-line, governments will facilitate thedelivery of information, goods and services. This will then deliver more traffic acros s datanetworks which, in turn, will serve to pro vide the rev enues an d investm ent rationale needed toencourage further infra structure development.

In the new economy too the world is continuing to be divided. Only this time the havesand the have-nots are divided between those connected and those not. Just like with every other

technological advancement, the benefits may go mostly to some parts of society. Developingcountry governments will need to address this issue in the context of their own development plans and programmes. Increasing access to the medium will obviously be an area of focus.Meanwhile the developin g world and espec ially the firm s and enter prises there m ust jump on to theeCom merce tra in to ensure that they too are pa rt of the journey. There app ears to be no harm infollowing focused strategies of growth to ensure that those sectors and areas that canmaxim ise their return s and those that have th e comp etitive adva ntage - take it.

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