E-commerce can spur growth in South Asia

Launched in New Delhi on Monday, the report – Unleashing E-Commerce for South Asian Integration – said e-commerce has the potential to stimulate economic growth across South Asia and boost trade between the countries of the region but its potential remains largely untapped.  

The report pointed out that although e-commerce has grown significantly in South Asia, online sales accounted for a mere 1.6 and 0.7 percent of total retail sales in India and Bangladesh, compared to 15 percent in China and around 14 percent globally.

Increasing the use of e-commerce by consumers and firms in South Asia could potentially help increase competition and firm productivity and encourage diversification of production and exports, the report said.

“E-commerce can boost a range of economic indicators across South Asia, from entrepreneurship and job growth to higher GDP rates and overall productivity,” said Sanjay Kathuria, lead economist of the WB and a co-author of the report.

“While cross-border trade within South Asia represents only 5 percent of the region’s total trade, e-commerce has the potential to stimulate regional trade by bridging the gap between buyers and sellers on different sides of national borders,” said Viviana Perego, agriculture economist of the WB and a co-author of the report.

The report said while Indians and Pakistanis make substantial use of online connectivity, other countries like Bangladesh and Nepal fare worse than many African nations along most e-commerce indicators. Besides, pervasive lack of mutual trust among South Asian countries hurts trade and negates the benefits of geographical and cultural proximity, said the report.

“By unleashing its online trade potential, South Asia can better integrate into international value chains, increase its market access, and strengthen commercial linkages between countries across the region.”

A survey of more than 2,200 firms showed the top concerns on cross-border e-commerce sales included e-commerce related logistics, e-commerce and digital regulations and connectivity and information technology infrastructure.

These barriers are significantly higher when trading with other South Asian countries. These hurdles may have consequences for market access for small firms with limited digital and logistical skills, according to the report.

It pointed out that the main international e-partners of firms in South Asia are China, the United Kingdom, and the United States, not other South Asian countries.

Small and medium enterprises in South Asia reported that removing regulatory and logistical challenges to e-commerce would increase their exports, employment, and productivity by as much as 20–30 percent.

To overcome these hurdles, the report proposes reforms in areas such as payments, delivery, market access regulations, consumer protection, and data privacy, at the national, regional, and global levels.

“Some practical steps to strengthen online transactions include leveraging the reputation of large e-commerce platforms to offer consumer protection, return and redress and data security as an initial substitute for robust contractual and consumer protection mechanisms and permitting cross-border e-commerce payments,” said Arti Grover, senior economist of the WB and co-author of the report.

The report also suggests an incremental approach to taking these steps, if necessary, in order to build confidence.

 “And apart from firms, consumers in South Asia stand to gain significantly from the potential reduction in costs and availability of a greater variety of e-traded goods and services,” said the report.

According to the report, e-commerce is dramatically changing the way goods and services are transacted regionally, nationally, and globally. The internet seamlessly connects buyers and sellers otherwise separated by geographical distances and logistical barriers and makes transactions convenient, fast, and efficient.

In 2017, a total of $2.3 trillion was spent globally by retail consumers, almost 25 percent more than in 2016. This figure is expected to grow to more than $4 trillion by 2020, reaching more than 15 percent of total retail spending, from around 10 percent in 2015, the report said.