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ECONOMIC AND SOCIAL COMMISSION FOR ASIA AND THE PACIFIC
Part Two of the Economic and Social Survey of Asia and the Pacific, 1999
Asia and the pacific into the Twenty-first century: information technology, globalization, Economic Security and development
V. ELECTRONIC COMMERCE
Trade, including both exports and imports, has played a central role in the development of many developing economies in the region. Over the last five years or so, between 15 and 20 per cent of world trade in goods and services originated in the developing ESCAP region. Also, for the majority of these economies, export and import ratios to GDP are significantly larger than the world average.1 In a worldwide context as well, trade has assumed an increasingly important role in driving economic progress: it is one of the major causes and signs of globalization. The dynamism which has characterized the trade sector over the past two decades, concomitant with the increasing liberalization of tariff and non-tariff barriers, is now being revolutionized and regenerated by the phenomenon of electronic commerce, particularly facilitated by the use of the Internet.
DEFINING ELECTRONIC COMMERCE
Electronic commerce, broadly defined, is the process of using electronic methods and procedures to conduct all forms of business activity. It encompasses the production, advertising, sale and distribution of products via telecommunication networks.2 Internet commerce is the term used to describe the fusion of electronic commerce and Internet technologies. From a business perspective, the objectives of electronic commerce and Internet commerce are the same: to improve effectiveness, efficiency, timeliness, quality, and accuracy of interactions between businesses and their trading partners or customers.3
Until very recently, the primary technology for business-to-business electronic commerce of large firms has been electronic data interchange (EDI). EDI uses a store and forward messaging technology, a process which parallels the exchange of electronic mail (e-mail) with the addition of structured message content and functionality to assure audit ability and assurance of delivery. Because EDI enables communications between the business systems of trading partners, messages are translated into highly structured formats, allowing both the sending and the receiving organizations to share a common and identical understanding of the content and context of the messages. Private, value-added networks (VANs) have been the primary carriers of EDI communications, using a variety of communications protocols. EDI technology has been available for over 20 years, but has been implemented by less than 2 per cent of the business community worldwide. The use of EDI in trade in selected countries of the region is reported in table V.1.
Table V.1. Use of electronic data interchange in trade in selected economies of the ESCAP region
Source: "Member countries: country status (October 1998)"
<http://www.asycuda.org/test/partners.htm> (9 February 1999) and
the paper by John M. Simon, "APEC customs initiatives on electronic commerce",
presented at the Expert Group Meeting of Trade Promotion Policy Experts,
Bangkok, December 1998.
Today, EDI is undergoing a transformation spurred by the rapidly increasing connectivity provided by the Internet and is itself an integral part of the sweeping wave of Internet commerce automation. The Internet is eroding the value added attributes of private networks, shifting the balance of supplier value added from the network itself to software and services. In fact, the failure of EDI in its traditional form to achieve greater penetration reflects the complexity and expense of integration with existing business systems owing to the lack of agreement on standards, combined with the continuing costs of an EDI server and VAN network support resources. EDI automates existing processes and its benefits were derived from time compression, cost reduction and improved accuracy. This is contrasted with Internet commerce, which can not only support transaction processing but also, in certain cases, bring greater flexibility to the work-flow and so support new or improved processes. As Internet commerce can actually add value to processes and optimize their effectiveness, its business potential is significantly greater than traditional EDI. Nevertheless, EDI will continue to be an important technology through the next five to ten years because of the investment already made in it and because it is a proven and secure means of inter-business communications.
While it is difficult to quantify with precision the number of Internet users, studies suggest that this number grew from 28 million in 1996 to 50 million in 1997 and estimates suggest that the number of users will be approaching 200 million by the year 2001. This increasing number of users and the expanding range of applications have led to a rapid growth in commercial interest and activity on the Internet. While the widespread and diffused nature of the Internet does not make it easy to quantify the economic value of electronic commerce conducted on it, estimates indicate that this rose from around $2.5 billion in 1996 to around $20 billion in 1998.4 Real-time or near-real-time connectivity across the boundaries of corporations and with consumers, ultimately enabling system-to-system interoperability between trading partners, is driving the increasing value of this new technology. Four types of economic activity are likely to feature in this new trading environment:
Building up the Internet. If, as some experts believe, one billion people may be connected to the Internet by 2005, then such an expansion should drive dramatic increases in expenditure on computers, software, services and communications investments.
Electronic commerce among businesses (business-to-business transactions). Businesses began using the Internet for commercial transactions with their business partners very recently. Early users already report significant productivity improvements from using electronic networks to create, buy, distribute, sell and service products and services.
Retail sale of tangible goods (business-to-consumer transactions). The Internet is also being used to order goods and services that are produced, stored and physically delivered. Sales of certain products such as computers, cars, books and flowers are growing rapidly. However, electronic commerce via the Internet may reach a limit for purchases of physical goods, or services that rely on physical proximity such as tourism, owing to the need of consumers actually to see the goods or services that they are buying.
Digital delivery of goods and services. Software programmes, newspapers, magazines and music compact discs no longer need to be packaged and delivered to stores, homes or news kiosks; they can be delivered electronically over the Internet. Airline ticket sales and securities transactions over the Internet are already occurring in large numbers. Other industries such as consulting services, entertainment, banking and insurance, education and health care face some hurdles but are also beginning to use the Internet to change the way in which they do business. Over time, the sale of goods and services electronically is likely to be the largest and most visible driver of the new digital economy. The expanded scope for this type of commercial transaction is perhaps the most notable contribution of Internet technology and the most challenging aspect from a policy perspective.
ELECTRONIC COMMERCE BENEFITS FOR BIG BUSINESS
Electronic commerce is growing fastest among big businesses. It is used for coordination between the purchasing operations of a company and its suppliers; by logistics planners and transportation companies that warehouse and move products; by sales organizations and wholesalers or retailers which sell the products; and in customer service and maintenance operations with the customer. The growth of business-to-business electronic commerce is being driven by lower purchasing costs, reductions in inventories, lower cycle times, more efficient and effective customer service, lower sales and marketing costs, and new sales opportunities.
The advantages for corporations that succeed at electronic commerce for business-to-business transactions are potentially enormous. There are billions of business-to-business financial transactions a year and hundreds of billions of customer service interactions. Most are candidates for increased automation, providing dramatic opportunities to improve management of the manufacturing supply chain, increase revenue, improve the quality and cost-effectiveness of service delivery, reduce administrative expenses and develop more effective planning processes. For business-to-business communication needs, Internet-enabled electronic commerce is all about leveraging emerging technology to support improved business process models through the automation of various processes. Some of the advantages of using ICT for various business processes are outlined below.
Marketing applications can be created over Internet channels to support many different processes between businesses and their customers.
Information for sales. Applications can deliver product information to the point of sale on request. A virtual channel can provide multiple layers (rich content) of multimedia product information.
Product marketing. Product marketing applications generally exploit the two-way communications of the Internet, establishing managed communications channels, with structured or unstructured content, between a company and its field personnel, channel partners or customers. The most sophisticated applications are work-flow-enabled and allow collaboration in developing product plans, specifications, forecasts and market feedback. Collaborative marketing applications can support interactions using structured or unstructured message files across organizational boundaries; e-mail bulletin boards and chat rooms are the earliest forms of such collaboration. Filtering and agent technologies are now being applied to collaboration applications to tailor content and schedule distribution.
Supply chain management. Applications can automate the collection of planning data from partners across supply chains for their planning processes.
Market intelligence publishing. Applications supporting the controlled electronic distribution of public and private information, often incorporating tools for management and retrieval of information content and/or work-flow management, are frequently referred to as "knowledge publishing" or "knowledge management" tools. Filtering and agent process management techniques are being used to tailor content and schedule of delivery in combination with a variety of search engines that vary in the level of qualitative and quantitative performance.
On-line promotion. Promotion management capabilities, including delivery of on-screen banner advertising, can be custom-tailored, based on current or past customer behaviour, attributes, knowledge of prior buying behaviour, or a combination of all three.
Sales and marketing electronic commerce applications create and manage virtual sales and marketing channels for businesses. They include the following processes.
Catalogue management. This process may be considered part of the marketing or sales processes and is also integral to procurement applications. Sales applications provide navigation of a supplier's catalogue for its customers' transacting business with the company. Procurement applications require support for multi-supplier catalogues and product comparisons. The ability to customize the look and feel of catalogues is an important differentiating characteristic.
Search and retrieval. Keyword searching is a baseline catalogue or knowledge publishing capability. Search engines may be integrated with standard product classification schemes, such as Dun & Bradstreet or the Thomas Register of American Manufacturers, to assist users in catalogue navigation by providing a common nomenclature which supports parametric searching, a capability which has increased value for products with multiple technical attributes. The most sophisticated catalogue systems add classification data to supplier stockkeeping unit descriptions to create uniform retrieval capabilities.
Spot market management. Specialized spot markets are emerging in both business-to-business and business-to-customer relationships to aggregate information from multiple sellers and to support transaction processing. The aggregation of content across suppliers delivers a value-added service to the buyer. Specialized tools are being provided to support buyers' analyses of products. These sites can either transact business or feed other sites with transaction capability.
Transaction processing, back office processing and legacy integration. The back-end processing capabilities of electronic commerce sales automation systems vary widely and may include generation/receipt of EDI and credit card transactions, electronic payments, bill presentation services and account reconciliation functions. Effective back-end integration requires real-time linkages to existing enterprise systems. The systems with the strongest back-end integration have real time transaction processing links to legacy, financial, sales and distribution, and manufacturing systems. They can confirm order numbers in real time, as well as confirm availability-to-promise and/or availability-to-deliver, shipping costs, delivery schedules and account status information.
Procurement and purchasing
A number of electronic commerce applications which support corporate purchasing management have emerged in the past year or two. These applications generally manage and present a multi-supplier catalogue for a buying organization and may also manage the work-flow required to generate and issue a purchase requisition. The most broadly functional systems include payment and account reconciliation capability as well as integrated tools to analyse purchasing trends and practices. Specialized areas of purchasing, such as travel requests, can be automated by application extensions available from certain suppliers.
Multi-supplier catalogue administration. The strategy by which a multi-supplier procurement catalogue is assembled and maintained can vary widely, from full data replication in a single, central catalogue to distributed supplier catalogues with replication of only the index information and embedded links to the remote catalogue pages.
Product classification and parametric search capabilities. In these, multi-supplier catalogue data replication strategies are combined with widely differentiated product classification and search capabilities. Features which determine the ways in which a buyer can find products and the speed of the search process include keyword text, parametric classification and graphic presentation of materials. The aggregation of the product catalogue data from multiple suppliers creates an opportunity to deliver value-added differentiation by making information from multiple suppliers available in user-friendly formats for comparative shopping, or by creating a uniform indexing scheme or nomenclature through which similar products can be identified and compared across suppliers.
Complete order processing and legacy integration. The level of integration between a buyer's own legacy purchasing systems, as well as his supplier's order entry systems, also differentiates ICT products. The underlying transaction processing infrastructure can allow large-scale processing, with the most advanced procurement systems supporting work-flow management as well as controlling purchasing approval processes and real-time inventory commitments by the seller's system.
Distribution and logistics
Applications are emerging which both support multi-modal transportation logistics and create new, virtual distribution channels for certain types of products.
Logistics. Internet applications are available which provide customer service functions for logistic processes, particularly advance shipping notices and shipment tracking. These functions may be integrated into sales and procurement applications. See box V.1 for information on such applications in the maritime shipping area.
Soft goods distribution. Internet applications are enabling the automated distribution of electronic products via the Internet, Intranet, Extranet and private networks. Depending on the physical size of the digital product, it may be sent or requested in conjunction with file transfer technology.5
Internet applications can automate a range of customer service functions using virtual channel self-service processes.
Help Desk. Knowledge bases of technical troubleshooting documents can be searched using a text search engine. These applications are already widely used by technology companies. Several customer information system suppliers have Web-enabled their expert systems for troubleshooting and Help Desk activities. A few suppliers that generally specialize in Help Desk automation are able to link individual customer self-service interactions with fee-for-service transaction capability.
Transaction status. Many electronic commerce suppliers provide limited customer service functions to support order or account status enquiries as part of sales-to-order and purchase-to-order applications. Similar query functions may be provided to track shipment status such as putting Web application linkages into the tracking systems of courier service providers. These applications generally require real-time transaction access to existing enterprise systems.
ELECTRONIC COMMERCE AND SMALL BUSINESS
While electronic commerce technologies are important for SMEs, evidence reveals that growth in electronic commerce remains predominantly limited to more technically advanced companies. Only 2 per cent of businesses worldwide currently use EDI, which is the backbone of electronic commerce. Almost 80 per cent of the EDI traffic exchanged today is generated by less than 20 per cent of companies. While it is true that these users represent a critical mass of EDI volume, they do not represent a critical mass of users.
Table V.2 outlines the main features, both attributes and limitations, of the most widely used electronic instruments for conducting trade transactions. The most pervasive instruments of electronic commerce for small business continue to be the telephone and the fax machine. Even these instruments are often out of reach for some poor and rural micro-enterprises. The annex to this chapter presents an interesting case study (the village phone programme of the Grameen Bank, Bangladesh) of a modality for encouraging access at least to the basic telephone for the rural poor, with possible future extensions to fax, ATMs and the Internet. For SMEs, the telephone allows goods and services to be advertised, purchased and paid for (in conjunction with a credit card). Selected services can even be distributed over the phone and then paid for through the phone bill. Examples include telephone banking, telephone directory enquiry and the like. Non-standard transactions which require negotiation can be conducted much more easily by interactive communication over the telephone than by mail. Similarly, fax offers speedy business communication and document transmission. It has replaced traditional mail services and the telex. There are, however, limitations to the use of the fax. Actual transactions can be concluded only on paper with physical delivery of products. Similarly, although in principle a number of commercial functions such as advertising, purchasing or the initiation of payments can be carried out by fax, it lacks the potential for transmission of voice and sophisticated images. Interactive communication is not possible, and complications in a transaction require an additional fax or telephone call. Higher-level applications such as telephone conferences require considerable upfront investment in equipment and bandwidth. Charges for long-distance and international calls vary dramatically across countries. This limits the use of the telephone for long-distance purposes by small businesses, especially those in developing countries.
For electronic commerce to be embraced by SMEs, it must meet criteria similar to those that led to the widespread adoption of the fax machine: low cost, ample benefits, simplicity of installation and universal use. The Internet is perceived to be the enabling technology that may make the use of electronic commerce more widespread. Internet applications offer clear cost advantages. Firms worldwide spent $60 billion in 1997 sending fax reports. This is expected to decrease dramatically, since Internet-based faxing can slash a firm's fax expenses by as much as 35 per cent, according to a study by Mercer Management Consulting.6 This is due to the fact that such faxes go over the Internet to a remote server near the intended recipient and the fax is sent from there using local phone lines and therefore costs as little as a local telephone call. It is also claimed that an Internet phone call can be up to 95 per cent cheaper than a traditional international call. This has ramifications for payment transactions too; telebanking charges are about half the normal transaction charges of a bank. Savings on the cost of purchase of electronic commerce tools, for example software on a diskette, can be at least one third when delivered through an Internet connection. Even advanced electronic commerce technologies such as EDI are within the reach of small businesses for the first time with the advent of the Internet.
In general, SMEs face difficulties in adjusting to a liberalized trading environment. They face higher barriers in terms of language and culture, large physical distances, access to business information, and differing business and administrative practices that the larger firms can easily cross. Internet-based electronic commerce could help them to overcome these barriers. Since traders will be using transaction formats that are internationally accepted and in a transparent manner, the possibilities for misinterpretation that arise from differences in culture and language are diminished. Similarly, as business and administrative processes are harmonized, the need to keep track of hundreds of practices is no longer a consideration. Finally, with electronic communication, data messages are transferred at near the speed of light; physical distances therefore, do not matter much.
The most significant business benefits for SMEs from the use of electronic commerce are described below.
Better service quality. The self-service model which underlies many forms of electronic commerce can improve the quality of the marketing, sales, support and procurement process of SMEs by delivering more accurate, more timely and more complete information to the point of sale, point of decision or point of support. Service can also be delivered over a broader geographic and temporal base worldwide, or "any time, anywhere".
Reduced service costs. The self-service Internet-based electronic commerce model is characterized by relatively low variable transaction costs, with increasing cost-effectiveness as the scale of activity increases. At higher volumes of activity, Internet commerce channels for sales and support services are likely to be low-cost channels.
Increased revenue. Extended geographic sales channels and improved service quality may lead directly to increased market share, improved competition among brands and greater revenue.
Reduced time to complete a business transaction. By communicating electronically, the time required to place and confirm an order can be compressed by hours or, in some cases, days or weeks. This shortens the lead time for product delivery. As a result, it may be possible to reduce parts or finished goods inventories or receive critical products more rapidly to gain a competitive advantage.
Reduced administrative costs. The cost of processing purchase requisitions, purchase orders and payments can be dramatically reduced, as can invoice and bill presentation costs. The accuracy of business transactions is improved, increasing customer satisfaction, reducing transaction, auditing and administrative expenses, as well as reducing the costs of expedited manufacturing and/or shipping to correct erroneous or late orders.
Improved return on capital. By shortening the "product turn" and payment cycles, enterprises can reduce the amount of material requirements and the time for which funds must be committed to pay for the production of inventory, materially lowering capital requirements.
Increased return on investment through better planning. More timely planning and information allows more efficient acquisition and scheduling of capital equipment, reducing unit costs, increasing the return on investment, and ensuring a better match between manufacturing capacity, production and market demand.
THE FUTURE: INTERNET COMMERCE
By 2001, it is expected that mature versions of Internet commerce applications will depend largely on the use of public key certificates. These will enable secure e-mail communication between most leading-edge organizations, business-to-business electronic trade, and access and payment for Internet consumers. Smart cards will be well established in all industrialized countries for corporate security and secure Internet access. All new personal computers will include smart card readers and support the new computer/smart card interface. Fingerprint and voice recognition technology will be established in high-value, leading-edge applications. Strong cryptography will be widely adopted, supported by the relaxation of export controls on the dispersion of this technology. Increases in processing power will make it possible to use bulk encryption for confidentiality at high speeds over host-to-host links. Leading-edge organizations will have enterprise-wide trust infrastructures based on public key cryptography and digital certificates and trusted third-party agreements will proliferate.
The range and depth of applications will also continue to expand. By 2005, it is expected that most e-mail traffic will be secure at application and network level; most supply chains will trade electronically; some leading-edge organizations will have been reengineered into virtual companies; consumer certificates will be in widespread use; smart cards will be in ubiquitous use worldwide for everything from Internet access and electronic commerce to ticketing in theatres and public transport; client personal computers and network computers will be marketed with built-in fingerprint scanners in the mouse or keyboard; and cryptography and the Internet trust model will be accepted facts. A workable framework for global trust infrastructure will begin to emerge, and trusted third-party licensing and data protection laws will have been harmonized internationally. There will be recognized policy standards for issuing or revoking certificates, and international laws on liability.
The development of the principles governing electronic commerce, as well as the specific technologies and their standards, is being undertaken through inter-organizational cooperation across national borders. However, in markets that depend on intellectual assets and know-how, products that take the market lead usually capture increasingly large shares. Those who have established the international de facto standards win. This is a strong incentive to adopt Internet commerce: countries and firms in the region should be geared from its inception to be at the forefront in order to have an influence on the standards adopted.
TRADE FACILITATION THROUGH ELECTRONIC COMMERCE
Trade facilitation is defined as a systematic approach to improving the efficiency and effectiveness of procedures, documentation and data exchange used in international trade transactions. Significant benefits can be achieved when the principles of trade facilitation and promotion are combined with electronic commerce, especially those that are Internet-enabled, to make international trade simpler, safer and more efficient. This is because trade facilitation and electronic commerce aim both to reduce costs and to increase competitiveness. Of course, facilitation must be balanced with control. Trade facilitation is supposed to make it easier for legitimate commerce to move across national boundaries without compromising the ability of governments to stop illegitimate commerce. The effective use of ICT, combined with harmonized and standardized procedures, is seen as the foundation for seamless global trade.
A concerted multilateral effort to simplify trade procedures through a framework that integrates, but also builds upon electronic commerce technologies, as well as best practices and standards available elsewhere, can bring important trade benefits for the countries of the region. Experience demonstrates that trade facilitation through electronic commerce is not an issue involving the exchange of gains and concessions, but one in which all gain: governments in terms of better controls, higher revenue intakes and more efficient administration; and traders, both large and small, in terms of reduced costs and delays, and thus more competitive import and export conditions. Such benefits can accrue, in particular, to developing countries and provide new trading opportunities for SMEs, but to realize these benefits requires cooperation at the regional and international level in order to develop the harmonized solutions necessary for traders to carry out international transactions in the most effective manner.
A series of proposals covering import, export and customs procedures that could be developed into a framework of action are outlined below.7
Introduction of automated customs clearance. The commercial and administrative advantages of automated, ICT-based interfaces between traders and administrations are well understood. Although employed by a growing number of countries (including many countries applying the ASYCUDA and ACIS (cargo tracking) systems developed and supplied by UNCTAD), ICT-based customs clearance has not yet been universally adopted (see table V.1).8 Box V.2 outlines the progress in this area for selected developing countries which are among the more advanced ones in the region.
Pre-arrival processing, post-clearance controls and audit. The administrations of member countries are increasingly introducing different forms of green channel rapid clearance procedures relying on pre-filed entries, that is, the pre-arrival processing of information (increasingly provided by electronic message), and clearance of goods based on supply of limited commercial information followed by post-clearance reconciliation; and alternatives to transaction-based interventions based on the auditing of companies or acceptance of periodic declarations for revenue or statistical purposes, including permission to retain documents at company premises without systematic presentation to customs or other bodies. It is difficult, for example, to justify systematic border checks of each consignment simply for the purpose of compiling trade statistics. Air freight often needs speedy clearance if the extra costs of such transport are not to be negated by delayed clearance. There would be merit in elaborating provisions that could progressively promote the wider introduction of these modern concepts and guide their development in a trade-enhancing and equitable manner.9
Authorized traders. The notion of authorized traders has no internationally accepted definition. However, some WTO member administrations are already developing this concept as a means of providing privileged import and export clearance facilities for certain companies. The benefits for such companies are the important links created between compliance, facilitation and simplification: compliant and efficient traders are rewarded with cheaper, simplified procedures. Benefits to government include better targeting and risk assessment, better use of limited resources and, as a result, higher levels of compliance. Whatever measures are introduced should allow companies of all sizes, including SMEs, to meet the criteria for authorized trader status. Also, the criteria used for granting such status should be broadly compatible amongst member governments so as to maximize the potential for companies to obtain overseas authorized status on the basis of a domestic authorization.
One stop clearance. Lack of coordination of different agencies concerned with import and export, and the resulting requirement of subjecting cargoes to multiple checks at different times and in different places, has been cited by traders as a major concern. The use of ICT-based information exchange between traders and government and between government agencies makes it more feasible to introduce some rationalization into the procedural aspects of such controls. In terms of coordinating the provision of information to different government agencies, pending the globally accepted formatting and use of electronic messaging, there will still probably be a need for the submission of import and export data in paper form.
Regional acceptance of the concept and design of the "single administrative document", based on the United Nations aligned document system, currently used by over 60 countries and the standard tool used by UNCTAD in its ASYCUDA programme to streamline customs procedures in developing countries, would be a significant harmonization measure. Integration into the single administrative document of elements of the World Customs Organization standard for a "single goods document" would also be a useful measure to ensure a product with global acceptability. Through this, national administrations would ensure, over time, a level of coordination and delegation of controls to customs authorities to enable all verifications (for example, health and safety data and certification, sanctions control, intellectual property rights verification, import licence checks, export subsidy verification) to be done once only.
Trade and transport interests would benefit in terms of reduced delay and reduced cost from a one-stop procedure, and they could organize compliance and cooperation much more efficiently. The use of a single interface with the administration would also make it easier for traders to align their computer networks with that of the receiving agency. Administrations would benefit through the optimal use of their customs personnel and databases, and from the reduction of fraud with better coordinated information between agencies.10 In some countries, this concept has been taken one step further and "one-stop clearance" has been achieved through the introduction of EDI in regulatory bodies dealing with international trade. An excellent example is the automation of textile quota and export garments system of the Philippines.
Remote filing and simplified clearance procedures. International traders have called for the introduction by individual administrations of systems permitting the filing of customs and other documents at a location different from the port of export or arrival of the goods. This benefits companies that can operate a centralized administrative facility. The possibility to have goods cleared (for export or import purposes) at inland premises rather than at the port of export or entry is another trade facilitation mechanism. Such systems are already in place in certain countries of the region. There are obvious cost and time savings for companies, especially for container and trailer transport cargo, when clearance can be effected at the point of loading or unloading rather than by separate opening or unloading at the port. One of the benefits to administrations of such systems is that pressure on port infrastructure is relieved.11
The seamless integrated transaction. The establishment of a reduced and harmonized data set is a precondition for the successful introduction of EDI-based communication between traders and government agencies. Automation of import and export data is of limited value if it simply computerizes excessive or bureaucratic requirements. In addition, an internationally agreed data set permits the establishment, over time, of integrated transactions between exporting and importing administrations, that is, arrangements where data collected at the point of export form the basis of the data set collected subsequently at the point of import. The seamless integrated transaction enables a single submission by the trader of data at the export point, bringing considerable cost and time savings. By enabling easy comparison of export and import data, it also permits far more effective governmental control over illegal activities such as systematic under-invoicing, which robs countries of legitimate revenue, especially developing countries whose tariffs tend to be higher. The seamless integrated transaction depends not only on common data sets but also on compatible EDI systems (trader-government and government-government), criteria for traders' participation, and a high level of mutual confidence between import and export administrations. This is probably easier to establish bilaterally, at least initially.12 It would seem advantageous that seamless integrated transactions should be progressively introduced at the regional level.13
Clearance times. A basic problem for international trade is delay in obtaining regulatory clearances, particularly in the absence of computerized procedures and where physical, transaction-based clearance remains the norm. In certain WTO agreements, this type of problem has been tackled by setting a normative time limit for administrative action: an import licensing agreement is a key example.14 Within the framework of regional trade facilitation, a similar solution could be considered: setting as a norm an absolute time limit for routine customs and other regulatory clearances, with suitable flexibility being provided both for exceptional circumstances and for goods that fall outside the scope of a routine clearance procedure. These would need to be defined. Electronic commerce technologies certainly help in realizing such goals. One of the best examples of a successful pilot in the region in this regard is the sectoral electronic commerce implementation for the automobile industry in India.15
Transparency. The transparency of import and export procedures, especially at the level of regulations and customs' administrative guidelines, is a major concern for international trade and one which disproportionately affects SMEs, which have fewer resources to obtain the requisite information. A single comprehensive database needs to be created that is accessible on the Internet, assembling all relevant laws, rules and procedures for importing and exporting. The foundation of this already exists in the WTO database for tariffs and in databases being developed by and within the regional groupings and, of course, within national trade databases. It will be necessary to evaluate the most efficient means of ensuring maximum transparency and availability to traders, especially SMEs, by exploiting existing national and international sources, avoiding duplication, and to the extent that more information is needed, ensuring that sufficiently detailed and comprehensive transparency requirements are established.
PROMOTION OF TRADE AND INVESTMENT THROUGH ELECTRONIC COMMERCE
Electronic commerce technologies can assist governments and enterprises in their trade and investment promotion activities, some examples of which are given below.
Matching of trade and investment opportunities. Systems that instantly match opportunities with company attributes and deliver information to target users have been developed to support trade and investment databases. Such systems are designed as management tools to match supplier companies with domestic and international buyers, track products and services, pinpoint companies engaged in a given product, locate them, and proactively push these opportunities. Linking enterprises by name, product or location to a number of opportunities through the use of personal computers and the Internet is one area in which ICT has made inroads for commerce, particularly for SMEs. Matching and transmitting such information increases value added. This can be done by trade associations, including chambers of commerce and industry, and sector-specific or function-specific organizations. It could be explored as an income-generating activity.16
Electronic catalogues and advertising through the Internet. Graphics have become a powerful tool to display products and services in a virtual manner. The term "electronic catalogue" is now used in parallel with electronic commerce. Line drawings, maps, plant layouts, garment sketches and so on can be dispatched and accessed anywhere in seconds. Companies project themselves in corporate annual reports, brochures, price lists, product descriptions, staff photographs, logos, maps, and audio and video clips, all of which persuade a viewer to take a decision. Various search engines are available which make it possible to perform speedy search and query functions from universal information sources.
For example, a programme operating in Bangladesh and the Philippines among other countries, PEOPLink, provides technical Internet assistance for income generation and international trade projects. Its basic tool kit for digital trade consists of cheap and simple equipment, software and procedures for use by organizations with limited financial and human resources. It also includes training modules and design concepts. A network of digitally capable grass-roots organizations promotes and markets a wide range of crafts and agricultural goods produced by marginalized producers such as women workers in isolated villages. The programme demonstrates that the cost-benefit ratio is weighed in favour of the target producers, given the low cost of technology and the high benefits from exports.
Virtual exhibition centres. ITC has provided developing countries with a Web site where the products of artisans are displayed in an electronic catalogue. This Virtual Exhibition Centre, which promotes the artisan sector in the world market, was established in close collaboration with national trade promotion organizations, chambers of commerce and other business organizations, and non-profit organizations promoting trade for developing countries. In each category, information is provided on selected products. The Virtual Exhibition Centre is also offered on CD-ROM. Similarly, gems and jewellery companies in Thailand have established various Web sites that are digital catalogues containing details of the products being offered, including descriptions, photographs, prices and e-mail order forms, and other useful browsing and purchasing tools. Video conferencing is used between Thai jewellery companies and buyers overseas to discuss and adjust design specifications, and to reduce the lead time for ordering production and delivery.
In all countries, national information centres will need to examine their range of potential services to include value-added data dissemination services to users and members by balancing the need to create their own databases as measured against potential access to other similar databases. Table V.3 shows the state of development of such trade information centres in the developing countries of the ESCAP region. Diversification of information sources would also encourage knowledge about different business cultures, and these sources should be taken from as wide an area as possible in the region and overseas using connectivity. Trade and investment centres would need to be phased into technology-dependent processes and understand the need to specialize in areas where they have a comparative edge, as it is expedient to access other centres for types of information beyond their scope.
Cooperation at the subregional level provides opportunities for economies of scale in approaching the issues involved in using electronic means to promote trade and investment. For example, the Pacific island countries are well placed to accomplish electronic commerce networking based on a cooperative approach. While institutional frameworks such as intergovernmental forums and regional organizations are available, national government institutions are in many instances less well developed. Given the small size of the economies involved, programmes which broker information from sources to the business communities of the Pacific island countries could be encouraged to increase networking in the trade and investment sector.
Table V.3. Trade information institutions in selected economies of the ESCAP region
Source: Compiled by the ESCAP secretariat from various sources.
CHALLENGES IN DEVELOPING POLICIES TO SUPPORT ELECTRONIC COMMERCE
Electronic commerce is attracting increasing attention from policy makers at the national, regional and international levels. It presents a number of challenges that are highly distinctive. First, the speed of development in electronic commerce and the speed of the changes that it brings strain the processes of traditional policy formulation. Second, the issues cut across a broad range of technical, legal, economic and institutional questions that have often been treated organizationally in separate ways by different entities. Third, policy makers are confronted with acutely different participation in electronic commerce and with participants having different levels of awareness of its implications and consequences. Both within and between countries, there are striking disparities in infrastructure development, as well as technical and economic access to the Internet. Fourth, electronic commerce is conducted on a global medium which requires international coordination and uniformity of approach in order for it to be exploited effectively and to its full potential. Finally, special attention is needed to ensure that all developing countries have the potential to benefit from these new processes.
ICT and electronic commerce can be expected to drive the trade component of economic growth for many years to come. Trade transactions conducted through the Internet and the World Wide Web will have enormous implications over the next few years for Asia's international competitiveness. New opportunities will emerge in the domestic and international markets, giving Asian firms the opportunity to be part of the global trading system and the potential to create tens of thousands of new jobs. At the same time, electronic commerce will provide new opportunities for overseas firms to access regional markets. It will also bring parts of the Asian service economy into the international trade sector for the first time. For many firms in the region, these developments will be unsettling and uncomfortable.17
To realize the potential of electronic commerce, however, governments and the private sector must work together to create a predictable legal framework, to ensure that the Internet is a safe business environment and to create human resource policies that endow workers and the populations at large with the skills necessary for jobs in the new digital economy. An appropriate trade policy response from the countries of the region is required. Such a trade policy response has certain domestic features, geared to the particular needs of countries, and regional and international policy elements to foster global trade. Features of regional and international electronic commerce policies could include:
Ensuring that the region can make a significant contribution to the legal and regulatory framework for the technological developments underpinning the international environment, particularly in negotiations to develop that environment
Developing principles for the conduct of cross-border electronic commerce to minimize the risk that countries develop fundamentally different approaches
Promoting liberalization of trade in services benefiting firms and countries in the region, especially the developing countries and the small business sector
Ensuring that the potential of electronic commerce is not diminished by a new generation of non-tariff barriers
Practical ways in which a national electronic commerce policy could assist firms, large and small, to operate successfully in international electronic commerce include:
Ensuring that a domestic regulatory and legal environment that supports a vigorous on-line economy is created in the countries of the region
Promoting such a domestic environment that is at least comparable with or better than the environments being created for on-line firms by the region's major trading partners
Ensuring the close integration of trade, economic, industrial and social policies
Increasing business awareness of electronic commerce and the opportunities that it offers on international markets
Consulting and fully involving industry and other stakeholders in the development of strategies to advance electronic commerce
REGIONAL AND INTERNATIONAL DIMENSIONS
There are a number of new standardization and legal issues that can only be resolved at the international level. In response to these, several intergovernmental organizations have established or are working on international instruments, standards or benchmarks aimed at simplifying documentation and information on exporting and importing and facilitating the development of electronic commerce. At the regional level, the work of ESCAP has been significant. Table V.4 lists the major international bodies and regional organizations undertaking such work, as well as their Web sites, and presents a more detailed review of the areas of work and technical assistance of these institutions. Three major issues being addressed at the international level are briefly outlined below.
The future of electronic commerce ultimately rests on the trust that the transacting parties place in the security of the transmission and content of their communications. Equally, it rests on their faith that these communications will be granted adequate recognition to assure their enforceability in any domestic or foreign jurisdiction. This security is required for the assets of the trading partners, as well as any network provider. The assets can be categorized as physical, for instance computer hardware; as personnel, people with access to the hardware; and actual information stored on the hardware, whether user data or software. Security is also an issue in regard to the creation of the electronic data message, data protection techniques applied to the data message, and its transmission to the recipient. Different levels of security have to be selected between different trading partners according to the vulnerability of their business processes. Six important threats for messaging are: a message may be duplicated, lost or replayed; a message may be intercepted and modified; a third party may pretend to be a valid message sender; the sender may claim he never sent a particular message (repudiation of message responsibility by its sender); the recipient may claim he never received a particular message (repudiation of message responsibility by its receiver); and a message may be read by a third party (unauthorized disclosure of message content).
It costs effort, money and transaction time to secure electronic communications. The solutions developed by the ECE Working Party on Facilitation of International Trade Procedures using the available UN/EDIFACT standards cover integrity, authentication, non-repudiation and confidentiality and are shown in figure V.1.18
Figure V.1 Electronic commerce related security countermeasures
Source: Economic Commission for Europe, "EDIFACT security implementation guidelines", (TRADE/WP.4/R.1026/Add.2), a paper presented to Working Party on Facilitation of International Trade Procedures, the Meetings of Experts on Data Elements and Automatic Data Interchange (GE.1), Forty-ninth session, 15-16 March 1994
In terms of the use of the Internet for electronic commerce, the additional security concerns are the following: no assured delivery (this is an inherent weakness of the Internet as it consists of a vast number of connected networks, and the path through the networks is not predictable); confidentiality (intermediaries can listen in on private communications); integrity or alteration of the message; impersonation of the sender or recipient; and availability (for example, a hacker taking up all resources on a server and preventing access by genuine users). Currently, neither the technical infrastructure nor the legal framework necessary to deal with these security concerns exists in most of the countries of the region. With the overwhelming choice of the Internet as the medium for inter-organizational communication, firms, organizations and countries have to opt for an individual enhanced security architecture. Available security products fall into two main categories: point tools, and trust management products and services.
Many private solution providers offer point tools that include access control, confidentiality and integrity, and audit and monitoring. These tools allow enterprises to take care of many of their security needs at the enterprise level. However, this is not enough. The concern for the policy maker is the availability of trust management products and services that will provide the foundation for trust for wide use of the Internet. Trusted third-party products and services have three components: cryptographic tool kits; other trust management products; and trust management services.
Cryptographic tool kits provide the essential building blocks for trust. The important applications of cryptography are digital signatures and encryption. Digital signatures can help to prove the origin of a data message (authentication) and verify whether a data message has been altered (integrity). Encryption can help, keeping the data message and communication confidential. There are various ways of signing a document electronically; electronic signatures based on public-key cryptography or dual-key cryptography are known as digital signatures. They employ an algorithm using two different but mathematically related keys. The so-called "private key" is used only by the person doing the signing, the signer, to create a digital signature, and the "public key" can verify the digital signatures created by the private key. While the private key is known only to the signer and must be kept secret, the public key must be available to those who need to verify the signer's digital signature. Although the public and private keys are mathematically related, it is not possible to discover the private key by knowing a given public key. The public key can therefore be publicized, for example through a public directory, without the risk of disclosure of the private key and its use to forge digital signatures.19
The verification process, however, does not necessarily establish the identity of the owner of the public key. Since a public and private key pair are simply a pair of numbers, a reliable mechanism is necessary to link a particular person or entity with the key pairing. This is done using trusted third parties, or certification authorities. Certification authorities play a crucial role in ensuring acceptability and legal recognition of digital signatures. To associate a key pair with a prospective signer, a certification authority issues a certificate, an electronic record which lists a public key, as well as other details, and confirms that the signer identified in the certificate holds the corresponding private key. A certificate may be invalidated because of misrepresentation of material facts, such as the identity of the signer. Also, it may be suspended or revoked by the certification authority if the private key is compromised, for example by the signer's loss of control of the private key. Not many firms in the region will want to implement certification products in-house but will prefer to buy trust management services from a third party. In order to promote trust in a certification authority, it can be certified by a central authority, which can be a governmental or other trustworthy authority supported by legislation. When certification authorities are certified or licensed, this is called having a "public key infrastructure". In several countries, the legal basis for the operation of certification authorities, including their duties and responsibilities, has been addressed in national laws on digital signatures.
Certification authorities need to be able to cross-certify each other across borders. There is thus a need to establish common international standards on mutual recognition of certification authorities and their digital certificates, and to establish a framework for sharing legal and commercial liability between them.
The developments in technology and the rapid acceptance of electronic commerce have, to a certain extent, outstripped the laws governing conventional business trading. That regulations and laws need to be modified or created to accommodate new and changing technology is not disputed. However, the process of enacting new laws or legislation is generally a long and slow process. The increased use of electronic means of communication, such as EDI, e-mail and the Internet, has raised concerns about their legal effect, validity and enforceability. In most countries of the region, the existing national laws do not contemplate the use of modern means of communication. National and international laws impose restrictions on the use of electronic communication techniques by requiring "written", "signed" or "original" documents. As electronic commerce is not restricted by national boundaries, its adoption requires that the legal ramifications are considered by all those interested in international trade and development.
Efforts are proceeding at national, regional and international levels to create a legal and technical environment for facilitating electronic commerce. Several national governments have been involved in enacting legislation and establishing a regulatory framework to remove any uncertainty that might exist from the use of electronic means of communication. Table V.5 summarizes the status of development of such laws in selected countries in the region. International organizations concerned with the harmonization of international trade laws and facilitation measures have been active in preparing model rules, regulations and guidelines and setting directions for future legislative reform. Private sector organizations have been busy arriving at a consensus on technical standards, and establishing infrastructure and required services. The objective of all these efforts is to create a favourable legal environment for electronic commerce.
Table V.5 Selected national actions in the region to amend laws and legislation for electronic commerce
Source: National Focal Points
of AFACT, November, 1998.
The legal issues raised by the use of electronic commerce include evidential, contractual and liability issues. The evidential issues of electronic commerce have two distinct aspects. The first considers the question of admissibility: whether an electronic document is admissible as evidence in court. The second considers the need to have trade data properly authenticated: the requirement to be "signed". Contractual issues are concerned with the impact that the use of electronic communication may have on traditional contract formation. Questions arise about when and where contracts are concluded. Within an EDI network, two major relationships exist: that between the service suppliers and the users, and that between the users themselves. These relationships inevitably lead to questions concerning the pattern and extent of commercial responsibility and liability. To these must be added certain other novel legal issues such as jurisdiction and conflict of laws, intellectual property and liability of intermediaries, crime prevention, data protection and privacy, payments for transactions and taxation on the Internet.20 The legal framework for electronic commerce can thus be divided into two areas: (a) a national legal framework, consistent with regional and international frameworks, which allows for documents transmitted using electronic communication to be legally binding; and (b) a contractual arrangement between trading partners to agree on terms under which EDI documents will be considered legally binding and acceptable.
The Model Law on Electronic Commerce of UNCITRAL, which was adopted by the United Nations General Assembly in 1996,21 covers several legal issues, some of which are given below.
Requirements of form (document). An electronic document has the same legal status as a written one if it is accessible so as to be usable for subsequent reference.
Requirements of form (signature). An electronic signature has the same legal value as a written signature if a reliable method is used to identify the person doing the signing and for approval of the information. UNCITRAL is presently working on a model law on electronic signatures.
Original. The legal requirement of an original is met by an electronic document if a reliable assurance exists as to the integrity of the information from the time it was first generated and this can be displayed.
Evidence. An electronic document is admissible in court as evidence. The court shall, when assessing the evidential weight of the electronic document, take into account the reliability of the method used for generating, storing and communicating the message and for maintaining the integrity of the document.
Formation of the contract. A contract entered into electronically is valid and enforceable.
Abuse of the electronic signature. A message is deemed to have been sent by the originator if it contains his electronic signature.
The main objective of the Model Law is to facilitate electronic trading by providing a set of internationally acceptable rules which can be used by governments in enacting legislation to overcome legal obstacles and uncertainties which may exist. It also provides individual traders with guidelines when they are preparing their contractual agreements. In addition to this framework, many of the legal issues discussed can be resolved by trading partners using a contract or interchange agreement which details the rights and duties of each partner and specifies actions to be taken if any problems occur when EDI is being used. The agreement also details the individual roles and legal responsibilities of the trading partners for transmitting, receiving and storing electronic messages. In the absence of clear legal rules and principles, an interchange agreement provides a company with a readily available solution for formalizing the EDI relationship between that company and its trading partners. The United Nations Model Interchange Agreement is particularly suitable for international trade. It has been developed taking into account the differing national legal systems and offers practical solutions for overcoming any difficulties that these might cause. It is intended to be sufficiently flexible to meet the requirements of all of the business sectors involved in international trade.22
Although the principles of conflicts of law should apply equally in cyberspace, difficulties arise because of the borderless nature of cyberspace and the lack of geography in determining place of performance and place of formation of contracts by electronic means across international boundaries. A "click" in one country can have an effect in another country, or in very many countries. The traditional rules of offer and acceptance are, for example, not directly applicable to offer and acceptance by electronic mail, which is fast, but not quite the same as instantaneous communication. Investigating and combating crime in a transient and intangible world without forensic evidence pose fresh challenges to law enforcement authorities. Some crimes may be so new as to escape the current penal statutes, for example denial of service and access code trafficking. Cryptography also enables criminals to encrypt incriminating evidence. With the increasing volume of data messages available and the greater ease with which they can be retrieved and mined, privacy and data protection become important issues. The leakage of trade secrets and sensitive financial information and the possibility of data mining will be of immediate concern to businesses participating in electronic commerce. Moreover, the European Union's directive on data protection, which came into force on 24 October 1998, may seriously affect trans-border flow of data to and from Europe.
There is concern about the potential for excessive taxation of the Internet. For example, the United States Government believes that no new discriminatory taxes should be imposed on Internet commerce. It also believes that no customs duties should be imposed on electronic transmissions. The application of existing taxation on commerce conducted over the Internet should be consistent with the established principles of international taxation, should be neutral with respect to other forms of commerce, should avoid inconsistent national tax jurisdictions and double taxation, and should be simple to administer and easy to understand.
However, intergovernmental cooperation is essential to define and agree to the principles of taxation for cross-border electronic commerce. These principles cover issues such as how the tax liability of on-line companies can be assessed; how on-line companies are to be audited; how international databases can be protected and controlled; how intellectual property will be protected; and how internationally agreed practices can be monitored and enforced. These issues are extremely complex. Take, for example, the tax liability of a German citizen travelling in the United States, ordering Asian spirits through the Internet for delivery to a holiday residence in France. In which national jurisdiction would the tax be paid and what would be the implications, if any, if payment was made anonymously using electronic cash? These issues are mainly of academic interest as long as trade over the Internet is relatively modest, but will become highly relevant to policy formulation as the value of Internet-based electronic commerce increases.
The scope of application of any international agreements will be highly dependent on complementary national policy initiatives. National strategies to support a growing role for electronic commerce have certain common elements, including the following:
(a) Assessment of the national information infrastructure (both physical and soft infrastructure), to examine all facets contributing to the increased use of electronic commerce, including policies, Internet connectivity and computer literacy;
(b) Maximization of the capabilities and services of existing institutions concerned with information and data gathering and dissemination, and targeting programmes to enhance the use of ICT, such as studies to examine greater participation of provincial or state-based enterprises into mainstream trade and investment promotion programmes;
(c) Designing of legal, institutional and regulatory reforms for the benefit of organizations which will serve as nodes or brokers between technology and users. The need for new orientations, the revision of rules, regulations or practices to remove barriers to the development of electronic commerce are central issues. The process of design of reforms should include the participation of the private sector and representatives of SMEs to ensure that their needs and constraints are considered.
The localization of electronic commerce in terms of facilitating its use by indigenous firms has not received the attention that it deserves in many countries in the region. For this to happen, it is necessary for policy makers to realize the possibilities that exist in opening up the Internet to a vernacular audience by localizing information technology. Examples in box V.3 from Thailand and India highlight some efforts to redress this problem.
Developing accepted standards for electronic commerce to facilitate and promote trade is not an easy process. These standards have to incorporate the best technology currently available and must meet the requirements of several components of the technology framework: developers, service providers and end users. However, they must also be flexible enough to allow for innovation and future requirements. Malaysia provides an example of the application of these guidelines. The document entitled "Electronic government information technology policy and standards" sets the policies and standards needed to cover all the components in the technology framework (see box V.4) and to ensure commonality among them.
Electronic commerce in general and EDI in particular thus differ from many other technologies in that organizations cannot implement them in isolation. In practice, this requires negotiation among enterprises and institutions in countries which may have little history of cooperative action and on issues which are technically challenging. For intraregional collaboration, AFACT is emerging as a useful body, especially among those countries which have initiated the adoption of EDI.23
The role of the government in representing a country in multilateral trade negotiations and in coordinating among different actors and sectors in an economy implies that it is in a privileged position to foster electronic commerce.24 Three major issues stand out for immediate attention by the government:
A vision to catalyse the introduction of microlevel efficiencies among firms and organizations in the conduct of international trade
Appropriate institutional mechanisms to monitor and coordinate trade facilitation developments, promote better business practices and foster mutual understanding and trust between the many partners in complex trade relationships
Pilot electronic commerce projects that will provide the scope for learning and sorting out problems, whether technical, organizational or legal, and provide the much-needed experience for rule making
In following through these issues in a practical manner, governments can base their approach on a generic strategic architecture that is at the heart of most of modern business practices.25 To facilitate the seamless flow of product from producer to consumer, as well as supporting this by integrated information and financial flows, is of the essence to any vision that governments adopt for electronic commerce. The goal for the government regulatory community is then to drastically reduce the transaction time for getting regulatory approvals of international trade transactions from days to hours. For an information system specialist, this would be an integrated international transaction based on a single submission of minimal, standardized data for both official and commercial purposes alike.26
Institutions for coordination
Within the new economic and technological context engendered by electronic commerce, there is a need to establish and support a national body dedicated to improving the ability of business, trade and administrative organizations to exchange products and relevant services effectively using simple, reengineered procedures, best practices, modern trading strategies and appropriate electronic commerce technologies. If a national trade facilitation body exists, a good option would be to have it deal with electronic commerce as well. If such a national body does not exist, a government or relevant ministry could establish one with both government and private sector representation dedicated to promoting electronic commerce. One of the important tasks of such a body is to identify the present state of electronic commerce in general and the use of EDI with internationally standardized formats in particular. In addition, sectors that are potential benefactors from UN/EDIFACT should be allowed and encouraged to participate in these activities. Through cooperation with present and future user groups, the national body for coordination can elaborate an implementation strategy and propose concrete measures on how the implementation process should be approached and carried out for each sector and industry. When this action plan is set into motion, it can monitor the progress made and be ready with a follow-up plan.
The activities of these coordination bodies cannot simply be limited to the national sphere. In order to make national electronic commerce activities efficient, they need to be supplemented with international initiatives. To the extent possible, these institutions need to participate in, or be associated with international standardization work carried out by the United Nations or other standardization bodies. Box V.5 illustrates this process and the associated national legislative changes for Singapore, one of the more advanced countries in the application of electronic commerce in the region.
The implementation of sophisticated applications of electronic commerce will depend on the will and capacity of certain key sectors to implement and use EDI. Customs authorities, the transport sector and financial institutions interact with all other sectors involved in international trade and their attitude towards EDI will largely determine the impact of electronic commerce in catalysing trade. Box V.6 enormous benefits which can be expected by ESCAP countries in using electronic commerce and in trade facilitation, particularly for SMEs, will, however, not be achieved without major international and regional cooperation on standards and without major national policy initiatives to encourage electronic commerce and reduce the security, legal and other barriers to its use.
The village phones programme of the grameen bank, bangladesh
In 1976, the Grameen Bank started to provide credit for and encourage savings by the poorest, landless families in rural Bangladesh. Today, after two decades of operation, its microcredit programme reaches 2.4 million very poor rural families in 38,000 villages, or just over half the villages in the country and roughly 13 per cent of the rural population. While this microcredit programme is now recognized as an effective weapon in the fight against poverty, microcredit alone is not sufficient to sustain the economic advancement of the rural poor, and in the late 1980s the Bank initiated complementary non-banking activities. By this time, an extensive network of borrowers had been established, consisting of groups of five members each clustered into 600,000 village centres and intensively supervised by Grameen Bank branch staff. This structure provided the basis for the diversification of activities into crop production, irrigation and acquaculture. In 1989, the Grameen Krishi (agriculture) Foundation and Grameen Fisheries Foundation were established. Non-banking activities later expanded into, inter alia, the promotion of hand-loom weaving, renewable energy, the marketing of rural products and the provision of telephone services. Each new initiative was incorporated into an existing organization or spun off into a new one. This became the Grameen family of organizations.
Thus, Grameen Telecom, one of the Grameen organizations incorporated as a non-profit-making company, is dedicated to bringing the information revolution to rural people in Bangladesh. Through Grameen Telecom, an opportunity has been created to demonstrate that universal access to rural telecommunication services in low income countries can be profitable without any subsidy. The conditions for this include involving the poor as entrepreneurial partners and being able to offer them appropriate configurations of mass-produced digital wireless technology at suitable terms for connectivity, financing, and technical and business support. The experience also demonstrates that owning and operating a modern communications service for poor rural people can be more profitable than, for instance, owning and operating a rickshaw, a hand loom or a sewing machine.
Origins of the programme
According to market research, there is a great potential for increasing telecommunications in Bangladesh as 6-8 million people are considered to be able to afford a telephone. The penetration rate of telephones in Bangladesh is only 0.4 per cent (one telephone for every 250 persons), which is one of the lowest rates in the ESCAP region. In addition, there is an almost total lack of rural telecommunications; 90 per cent of the existing network is dedicated to urban subscribers. Meeting the estimated demand for telephones by extending the government-owned fixed-line network throughout the country would take a long time and the government has very limited resources to devote to this task. Therefore, in the early 1990s, the government decided to invite the private sector to introduce mobile telephones into the country.
Out of this perception of a lack of telecommunication facilities in general and rural telephone systems in particular, a joint-venture company called GrameenPhone was created. A 51 per cent share is owned by Telenor A.S., the largest fixed-line telephone company of Norway and this company is also responsible for the management of GrameenPhone. Grameen Telecom owns 35 per cent of GrameenPhone. The other shareholders are Marubeni Corporation of Japan (9.5 per cent) and Gonophone of the United States (4.5 per cent). After a detailed evaluation process lasting more than a year, the Government of Bangladesh awarded GrameenPhone a nationwide digital cellular telephone licence in November 1996. (Two similar licences were awarded at the same time to other international consortia.) GrameenPhone is responsible for setting up a network involving a total investment of $150 million by the year 2000, and the network started operations on a limited scale in March 1997. The village phones programme appeared at the same time under the initiative of Grameen Telecom.
The village phones programme does not constitute an independent network. Grameen Telecom is a rural telecommunications service provider and it has an agreement with GrameenPhone to buy airtime in bulk and retail the time to village phones, after securing a small service charge. According to the existing business plan of GrameenPhone, around 10 per cent of total connections will belong to village phones, while 90 per cent will be for mobile phones by direct subscription that can be used anywhere within the country, and also outside if roaming facilities are separately secured. Village phones are different only because their primary function is to serve as payphones for specific villages. They consist of an ordinary mobile cellular phone, with separate billing. GrameenPhone does not bear any cost of collection from village phones, or deal with uncollected items; it gets paid in bulk by Grameen Telecom.
There are four private mobile phone operators in the country, but only GrameenPhone is setting up its own nationwide network. Other private operators depend on the public microwave long-distance telephone system. No private operator has been allowed an international gateway. Two other private telephone operators provide rural telephones by enhancing the coverage of the existing public network, which involves capital investment and the risk that returns from low-density demand for rural telephony may not be adequate. They therefore tend to concentrate their business in selected rural markets or growth centres and agro-towns.
The village phones programme is quite different from other ventures, particularly as its financial viability is ensured from the beginning. First, it is a very small part of a GSM mobile phone network, with a maximum of 10 per cent at full development. Second, the investment costs of such a system are much less than those for a fixed-line system. Third, such GSM networks are usually designed with excess capacity. This implies that subsidized village phones will utilize airtime which would otherwise not be used and so the programme does deny access to fully paid direct subscribers of GrameenPhone. Lastly, management costs of village phones are considerably reduced as Grameen Bank branch staff select operators, and deal with financing, bill collection and other operational work.
Objectives of the programme
Apart from being a shareholder of GrameenPhone, Grameen Telecom is primarily working with the vision of one cellular phone in each village of Bangladesh. Although there is a significant communication gap between cities and villages, rural Bangladesh is the source of food, fibre and other agricultural produce, and its artisans supply numerous non-food goods and services for urban consumption through millions of small and micro-enterprises. A phone in a village has far-reaching implications; it implies that more information of all sorts can flow in and out of the village easily and quickly. Thus, for example, with timely demand and price information, farmers' incomes will increase. Similarly, villagers can be better informed of prices of products that they buy from city-based traders. As a consequence, both prices received and prices paid by villagers should be to their benefit. A large number of workers migrate from the villages to the cities to seek employment and over 3 million Bangladeshis work abroad. Many of these migrants send money to their families in the villages. With access to a mobile phone in the vicinity, the cost in time and money of obtaining information on fund transfers will be lower and there will be less short-term borrowing at high cost as money will only be a phone call away. Village phones could save costs as villagers do not have to travel to towns to place telephone calls, meet relations or attend business meetings. Students in rural schools can be introduced to the information age in their village neighbourhood. Even when physical transport linkages are disrupted as a result of natural calamities, mobile phones will still work and provide vital communication links to help people to cope with emergencies.
At existing levels of income, there are villages where not one single family can afford to own an individual telephone. However, for the village as a whole, one village telephone is both financially feasible and could ensure access to telephone services for all villagers. The village phone programme is a solution to ensure universal access to the telephone in spite of poverty and low income. It has been estimated that with 40,000 village phones well spread out, each and every villager of the country would have access to a telephone within a walking distance of 10 to 15 minutes.
Thus, the objective is to finance the village phones programme by providing selected members of Grameen Bank with credit. They can purchase a phone under a lease-financing programme and then provide telephone services for all who wish to make calls in their village and enable them to receive incoming calls as well. The programme is likely to become the largest wireless payphone project in the world within a few years. Apart from village phone services for the poor, there are many potential sources of demand for telephone service in rural areas not directly involved with Grameen Bank activities, including health centres, schools, colleges, local businessmen and farmers. They can be direct subscribers to mobile phones provided by Grameen Telecom.
The village phones programme started in a small area on the outskirts of Dhaka and in the adjoining rural areas. It is now being expanded towards the south- east and work is proceeding to cover south-west Bangladesh under the network. Then, north-east districts will be included and lastly the north-west region. The fibre optic network of Bangladesh Railway along its track system, supplemented by microwave links set up by GrameenPhone, will complete the backbone transmission arrangement. The connections for mobile cellular phones will be ensured through more than 400 base transceiver stations. The main exchange and these base stations will complete the nationwide independent network by 2000. With the help of this GrameenPhone network, Grameen Telecom is planning to provide telephone services for 100 million rural inhabitants in 68,000 villages of Bangladesh through 40,000 village phone operators, who are members of Grameen Bank.
The village phones programme, like all other activities of Grameen Bank, is self-financing. Grameen Bank extends lease financing to the member selected to become the village phone operator. It is estimated that, over the next three years, $15 million will be required for the financing of village phones. This constitutes a marginal addition to the total lease programme of Grameen Bank. The administrative overheads of Grameen Telecom and Grameen Bank for the programme are met from a small service charge of 6.5 per cent on the monthly village phone bill and the amount collected is shared in the ratio of two to three by the two companies. As there is no intention of generating any profit, the service charge will be kept as low as possible while overhead costs are minimized as existing Bank staff carry out some administrative functions. On the other hand, village phone operators are able to increase their income. The distribution of the call charge paid by users of village phones is as follows:
Paid to network operator, GrameenPhone 43.5 per cent
Value-added tax paid to the government 6.5 per cent
Service charge of Grameen companies 6.5 per cent
Return to the village phone operator 43.5 per cent
The operators pay almost 50 per cent less to GrameenPhone than do other subscribers to the company. This is a heavily discounted price so that village phone operators are ensured a reasonable income. At the same time, GrameenPhone is not incurring any loss since the opportunity cost of the village phones programme is small; without village phones, the portion of its network going through the countryside would have spare capacity.
Cooperation between Grameen Bank and Grameen Telecom forms the basis of selection, ownership, management and maintenance of village phones. First, Grameen Telecom technical staff identify villages where adequate cellular phone signals are available and inform the concerned branch manager of Grameen Bank. Only villages with electricity are selected since, otherwise, recharging of mobile phone batteries, required daily, would be a problem. Also, the selected villages should be covered by Grameen Bank's regular programme. The branch manager then selects the borrower member to become the village phone operator for that particular village. Most village phone operators are women and the selection is made on the basis of certain practical guidelines. For example, the village phone operator should be a regular borrower from the Bank, and her repayment record must be excellent. She must have a regular source of income so that the expected earnings from the phone will constitute an additional but a minor share of her total income. This condition is necessary as this is a technology-based, completely new source of income for the rural poor and the demand for telephone use is not fully known. As the telephone cannot be handled by an illiterate person, the operator or an immediate member of her family (son, daughter or husband) must be literate enough to read numbers, follow instructions and calculate charges for airtime use. The location of the operator is also important; her house should be located in a central place in the village, easily accessible to neighbours.
The cost of the telephone is financed by Grameen Bank through a two-year loan, repaid in 100 weekly instalments of less than $5. Repayment follows the Bank principles of microcredit in all respects. At weekly meetings of the group, the operator pays the instalment for the loan and deposits her weekly collection from telephone users to her account. The monthly telephone bill is deducted from her account by the bank manager and the balance retained in her savings account. The branch manager collects payments of all the phones in the village and sends them to the Bank headquarters, which in turn sends on to Grameen Telecom the bulk amount for the airtime bill and its share of the overhead charge.
The repair and maintenance of the phones are the responsibility of Grameen Telecom. The operators remain in close touch with the technical staff through the phone for the purposes of signalling repairs and any complaint or enquiry relating to telephone use. Although there is no toll-free number, Grameen Telecom tries to maintain adequate contact with village phones. This is taken as part of its management work and the cost is met from the overhead charge. Such charges now amount to around $40 annually per village phone, and so do not yet meet the entire support costs of the programme. However, with the increase in the number of phones, as well as growth in airtime use, overhead charges should become adequate to meet these costs. It is estimated that 5,000 village phones (about 12 per cent of the target) and a 20 per cent increase in billing would be sufficient to guarantee this financing.
Impact of the utilization of village phones
Village phones have been a unique experience in many respects. So far, only around 200 villages enjoy such a facility. Some results of the programme that have been reported to date are recapitulated briefly below.
Strengthening community services. Operators of village phones are becoming more aware of their role in providing a service for the community. In cases of emergency, for example during recent floods, the village phones programme worked as a practical community information centre. Fellow villagers were allowed to call abroad on credit, and death messages were carried free of charge. Bangladeshis working abroad could call for information about their village. Also, villagers with access to telephones increasingly call their local council chiefs, Member of Parliament, police and other government functionaries with questions or complaints, thereby exercising their democratic rights.
Economic benefits. An independent study by the North/South Centre for Development Research, University of Bonn, Germany, carried out in 1998 made several interesting findings from a sample study of 50 village phones in two districts. A telephone was no longer considered a luxury item and did not serve the interest of rich farmers alone, since over a third of the calls were made by the village poor, and the same proportion of calls were for the purpose of seeking information on employment or on prices of goods. This implies that village phones serve an economic need and could favourably influence prices received and paid by farmers through improved information flows. In fact, the study found that the farm gate price of eggs increased by 20 per cent after farmers could gather retail prices at urban markets on a regular basis by telephone and then negotiate a better deal from traders. At the same time, marketing costs for traders have gone down; they visit the village only when they know (obviously after a telephone call) that adequate supplies are available to purchase.
Effect on the income of the village phone operator. Experience to date suggests that benefits to village phone operators are quite significant. Operating a phone is a good source of additional income, estimated at around $500 per annum. It is probable that telephone use will grow over time; it has doubled during the last 12 months in terms of the monthly bills paid for village phones when there was no change in airtime tariff. Thus, a 7 to 8 per cent growth in the net income of village phone operators can easily be expected in the long run.
Impact on health. The same study found that 17 per cent of all local calls were health-related. Under a child and maternity health care programme, UNFPA is planning to provide rural health clinics, village midwives etc., with mobile phones so that villagers can reach them through their village phone. It is expected that such telephones will lower maternal mortality rates.
Effects on modernization. An exposure to modern technology is helping the rural poor to give up their fear of new technologies. One obvious benefit that village phones give is the incentive to be literate; social workers will no longer have to induce people in villages to learn to read and write as this will happen naturally with exposure to technology. Village phones should be the gateway to the information age; the next step forward envisaged is the promotion of fax machines, e-mail and electronic fund transfers, all of which call for progressively higher levels of literacy. In addition, incentives for computer literacy in remote villages could lead to information-related employment and enterprise creation.
Impact on social conditions. It has already been observed that the status of phone operators in a village has been enhanced. As almost all village phone operators will be women, they become leaders in the promotion of a new technology. Such a pioneering role for women is something unprecedented in these tradition-bound villages. As Grameen Bank members are poor (often the poorest of the poor), the village phones programme will encourage more affluent villagers to approach poor village phone women operators to avail themselves of telephone services. This should assist in promoting greater social mobility.
Problems facing expansion of the programme and proposed solutions
So far, 200 village phones have been installed in villages close to Dhaka. The programme is being expanded in rural areas south of Dhaka where cell-to-cell signals are adequate. The Grameen Telecom target of 40,000 village phones will depend on GrameenPhone completing its plan to provide network coverage of the whole country by 2002.
Most of the villages where village phones have been supplied are located at the outer edge of the cell range for mobile phones; at present, all base transceiver stations are city-based. As a result, signals fluctuate, causing dropped calls, loss of revenue and customer dissatisfaction. To address this problem, external high-gain antennae have been tested and are being introduced. Fixed wireless terminals may be another solution for extended coverage with good quality reception. However, this would double the current cost of mobile cell phones. When the price of these terminals falls, this solution may be feasible. Masthead amplifiers used in base transceiver stations close to villages may be a solution from the network side.
Power for recharging batteries is another problem. Only 20 per cent of the 68,000 villages of Bangladesh have access to electricity. There are villages with network coverage but without electricity, and the number of such villages will increase as the programme moves farther away from Dhaka. Solar panels with batteries have been tested as an alternative source of power. However, any solution will increase the start-up cost for the village phone operator and affect the viability of the programme.
In the future, Grameen Telecom plans to introduce an information system covering prices, weather and other data relevant to the rural economy. The phone link would enable immediate access to such information. The network could also be utilized to set up electronic fund transfer mechanisms. ATMs will be able to transfer funds in all villages covered by Grameen Bank (38,000 at present) for very little cost. Thus, time-consuming and much more expensive money orders will no longer be necessary. A rickshaw-puller in Dhaka will be able to transfer part of his earnings on a daily basis to his wife in a remote village. The mobile phones will thus reduce the need for short-term high-cost borrowing, while increasing the purchasing power of the villagers.
Experience suggests that, in the villages, demand for telephone services is high and growing rapidly. Very soon, one telephone will not be enough and it will be possible to introduce fax machines and computers, including the Internet. To cope with this modern ICT equipment, the plan is to set up Grameen Telecom centres, at least 10,000 of them, all over rural Bangladesh. These centres would be small-scale telecommunications service enterprises. These, in turn, could lead to a significant growth of small-scale information enterprises offering data processing and management, computer training, software services, etc.
With the village phones programme, rural/urban distinctions can be reduced and poverty alleviation efforts strengthened. However, the growth of telecommunications service-based enterprises should not be stand-alone events. They are part of the logical development of a process which began with the microcredit operations of Grameen Bank. Thus, it would be not feasible for other countries to pick up only the rural telephony idea for replication when the rest of the basic institutional infrastructure is lacking.
Source: The information in this annex was provided by Shahed Latif, Managing Director, Grameen Telecom, Bangladesh.
1 Survey 1997, p. 88.
2 See, for example, the paper by Do Thuy Lan, "Trade facilitation needs and the role of electronic commerce" presented at the Seminar on Enhancing Integration of New Members into the ASEAN Process through Economic Cooperation and Trade Facilitation, Bangkok, 28 and 29 September 1998.
3 The UNCITRAL Model Law on Electronic Commerce, adopted by the General Assembly in its resolution 51/162 of 16 December 1996, does not define the meaning of electronic commerce as such. The Law is available at <http://www.un.or.at/uncitral/english/texts/electcom/ml-ec.htm> (3 February 1999). In its Guide to Enactment of the Model Law, UNCITRAL explains that in preparing the Model Law it had in mind a notion of EDI covering a wide variety of trade-related uses of EDI that might be referred to broadly under the heading of electronic commerce.
4 According to the International Data Corporation, the Internet economy will be worth more than $500 billion by 2002. See "IDC 1999 fact sheet: Internet market-place" <http://www.idcresearch.com/factsheets99/99Services/Internet/im_.htm> (4 February 1999).
5 StampMaster has announced that the United States Postal Service has given it permission to test its technology for delivering postage over the Internet. StampMaster's Internet postage system allows users to print electronic postage delivered over the Internet directly onto envelopes or labels using ordinary laser or ink jet printers. See Sandeep Junnarkar, "StampMaster to test Net postage", CNET News.com, 25 August 1998 <http://www.news.com/News/Item/0%2C4%2C25646%2C00.html?sas.mail> (27 January 1999).
6 Cost saving is only one of the benefits of Internet faxing. It can save time by allowing firms to send a document only once even if they are faxing to 50 or 100 trading partners. It also frees the fax machine to receive important documents. See "Faxing via the Internet provides significant savings", Mercer Management Consulting Fourth Quarter 1997 Briefs <http://mercermc.com/news/briefs1q98/faxtraff.html> (4 February 1999).
7 For more details, see the EU informal discussion paper dated 1 December 1998 to the WTO Council on Trade in Goods, on trade facilitation and border enforcement of intellectual property rights. Available at <http://europa.eu.int/comm/dg01/faci2.pdf> (3 February 1999).
8 ESCAP has assisted some of the customs administrations in the region in creating awareness of the issues relating to the introduction of electronic commerce in general and EDI in particular so as to facilitate international trade, as well as reengineering issues that need to be tackled before electronic commerce is introduced. In the conduct of the awareness programmes, the ESCAP training module on EDI, both for management and for technical personnel, has been used.
9 One regional economic cooperation activity undertaken by ESCAP was the modelling of trade transactions. India, Malaysia, the Philippines and Sri Lanka participated in this initiative.
10 ESCAP has provided Cambodia, Myanmar and Viet Nam with assistance in simplifying and redesigning their trade procedures and documents based on the United Nations aligned document system. This is to help these counties to maximize their benefits from integration into ASEAN. (See the papers by Do Thuy Lan, "Trade facilitation needs and the role of electronic commerce" and by Nguyen Cong Nong, "Report of Viet Nam customs" presented at the Seminar on Enhancing Integration of New Members into the ASEAN Process through Economic Cooperation and Trade Facilitation, Bangkok, 28 and 29 September 1998.)
11 ESCAP has introduced TraDESTM (trade documentation software) for countries that are in the early stage of trade facilitation and electronic commerce. Incorporating many of the trade facilitation recommendations, TraDESTM offers the best way to promote standards among the trading community. It also introduces them to electronic commerce, since these standard aligned documents can not only be printed, but also be sent by fax and e-mail (see the paper by T.S.A. de Silva, "Trade documentation alignment and development of trade documentation software of ESCAP for Sri Lanka: Sri Lanka trade facilitation programme" (SREC(10)/INF.1), presented at the Tenth Meeting of the Steering Group of the Committee for Regional Economic Cooperation, Bangkok, 9-11 September 1998).
12 Customs administrations in EU and the United States are currently developing a bilateral prototype operation of this nature, with significant business support. For details, see Eamonn Sheehy, "Global customs interaction" in Electronic Commerce Initiatives of ESCAP: Inter-networking through Electronic Commerce to Facilitate Intra-regional Trade in Asia, Studies in Trade and Investment No. 23 (ST/ESCAP/1721).
13 An attempt was made in the region through a collaborative effort of ESCAP and ASEB. Called the inter-networking project, it aimed to link the customs administrations in select countries that had implemented EDI with the end goal of ensuring that the export declaration would be the basis for the import declaration. Technical issues were understood and resolved.
14 The concept of drastic reduction in transaction time has been promoted by ESCAP as an important goal for the regulatory authorities dealing with international trade. See "Case studies on the introduction of electronic commerce to facilitate trade" (E/ESCAP/SREC(10)/1), presented at the Tenth Meeting of the Steering Group of the Committee for Regional Economic Cooperation, Bangkok, 9-11 September 1998.
15 See the paper by T.K. Pandey and S. Srinivasan, "Sectoral electronic commerce implementation for an automobile industry in India" (SREC(10)/INF.3), presented at the Tenth Meeting of the Steering Group of the Committee for Regional Economic Cooperation, Bangkok, 9-11 September 1998.
16 Coding and classification of goods and services has been a focus of the information-related functions of ITC. Its internationally used programme, COMREG, for company registers, incorporates information on company profile, location, products and services and other data elements that are universally used in the compilation of trade directories, matching services, yellow pages and company profiles. The Trade Point initiative of the Trade Point Development Centre of UNCTAD uses the "electronic trading opportunities" (ETO) matching system. Other types of electronic matching and company dissemination are in diskette and CD-ROM format and contain collected and processed information of governments, semi-autonomous bodies and private companies that expand the opportunities for firms to select trading and business partners. All these could be used.
17 See "Putting Australia on the new silk road: the role of trade policy in advancing electronic commerce", Australian Department of Foreign Affairs and Trade <http://dfat.gov.au/nsr/df/silk_exec.html> (4 February 1999) for further elaboration of these issues.
18 Based on the recommendations contained in the document "Security for UN/EDIFACT message transfer" (TRADE/WP.4/R.1026), prepared for the Economic Commission for Europe, Committee on the Development of Trade, Meetings of Experts on Data Elements and Automatic Data Interchange, March 1994. The security solutions recommended are based on version three and four of the EDIFACT syntax (ISO 9735).
19 See the Digital Signature Guidelines of the American Bar Association (1 August 1996), available at <http://scratch.abanet.org/ftp/pub/scitech/> (4 February 1999); and the 1996 UNCITRAL report entitled "Planning of future work on electronic commerce: digital signatures, certification authorities and related legal issues" (A/CN.9/WG.IV/WP.71), paras. 18-25, available at <http://www.un.or.at/uncitral/english/sessions/wg_ec/wp-71.htm> (3 February 1999).
20 A good starting point for looking at these legal dimensions in some detail is the UNCTAD document issued in May 1998 "Electronic commerce: legal considerations" (UNCTAD/SDTE/BFB/1), available at <http://www.unctad.org/en/pub/polist98.htm> (3 February 1999).
21 See footnote 3 for references to the text of this law.
22 The fact that there have been no lawsuits resulting from the use of EDI has several possible explanations. To implement EDI, considerable cooperation, as well as advanced coordination and testing, is required between trading partners. Therefore, misunderstandings are uncommon. EDI reduces or eliminates processing errors and those introduced from data rekeying, thus reducing the number of inaccuracies in end applications such as product ordering or order interpretation. Many corporate EDI relationships are formed between large organizations, or between a large organization and its suppliers. This trading relationship is often so important that it transcends any legal dispute which might otherwise occur over the interpretation of an individual contract. In other words, such trading partners avoid the necessity for legal dispute, preferring to settle their differences amicably.
23 For a good account of the possibilities in the future, see the paper by Tae Chang Choi, "Regional cooperation in electronic commerce", presented at the Expert Group Meeting of Trade Promotion Policy Experts, Bangkok, 2 and 3 December 1998.
24 The 1997 conclusion of the WTO negotiations to liberalize telecommunications services is a landmark agreement and market-opening initiative. For many countries, it has led to liberalization and for others it provides an opportunity to make binding commitments with respect to present and future telecommunication liberalization plans. Many countries are challenging, particularly in the short term, its revenue structure; for example, Sri Lanka is faced with making adjustments to cope with lower revenues resulting from the liberalization of its ICT sectors.
25 Strategic architecture is the high-level blueprint for the deployment of new functionalities, the acquisition of new competencies and the reconfiguration of the interface with customers. However, it is not a detailed plan. See G. Hamel and C.K. Prahalad, Competing for the Future (Boston, Harvard Business School Press, 1994), p. 117.
26 Such formulations were key recommendations of the third meeting of the ESCAP Network on Trade Facilitation, held back-to-back with the tenth ASEB meeting in Bangkok in June 1995. ASEB has recently been re-engineered. Renamed AFACT, it is taking a new shape and purpose and is expected to be fully operational from 1999. See Electronic Commerce Initiatives of ESCAP: Role of Electronic Commerce in Trade Facilitation, Studies in Trade and Investment No. 13 (ST/ESCAP/1557).