putting ‘e’ into competitiveness: dimensions of digital networks for developing countries
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Putting ‘E’ into Competitiveness:
Dimensions of Digital Networks for
Developing Countries
Discussion Paper for the
Executive Forum 2004
by Alwyn Didar Singh and Elizabeth Young1
August 2004
International Trade Centre Geneva
1 Alwyn Didar Singh is an International expert in ICT and e-Commerce and has been working with ITC as also
the Executive Forum since 1999. Elizabeth Young interned at the Executive Forum secretariat over the summer
of 2004 and provided valuable data, ideas and assistance with the writing of this paper. Several members of the
Executive Forum network also provided inputs and comments for this paper.
Preface It is today widely recognised that there would be significant benefits all round if
people and enterprises of developing and emerging economies are able to take full advantage of the Internet and other information and communication technologies. What is not fully appreciated is that such usage of the ICT
technologies is not limited to the ICT sector in business and in fact has far greater impact when used across the board for all sectors and processes. It is in
doing so that enterprises can truly attempt to become competitive in the digital age. Putting ‘e’ into competitiveness itself should therefore be an ‘e-vision’ for the developing world.
This paper is an attempt to explain and place this idea for debate and
consideration. Its structure and contents are geared towards this end. Besides being an opinion that is relevant as a stand-alone concept, the idea was
also to make the paper relevant to four of the sessions that will be debated at the Executive Forum 2004 at Montreux:
1. The need for sector level orientation 2. Making export clusters work
3. Focusing on the services sector 4. The ‘border gear’ of export strategy: Assessing best practise
This paper though general in its concentration on ‘e’ as it applies to all sectors
and business activity, does deal with IT and e-Commerce as a sector; it also touches on examples of best practice in so far as export clusters are concerned as in several developing countries, IT exports have been and are continuing to be
assembled and developed through a geographically concentrated cluster approach (e.g. The STPI2 incubator experiment in India). It also focuses on the
services sector as one of the principal successes of e-competitiveness is the BPO3 sector and finally it is about export strategy of how to make developing countries and their enterprises more e-competitive.
In doing so this essay would also address the central theme of this Executive
Forum, which is "Competition through partnership". In fact this paper itself is an exercise in ‘PPP’ or public private partnership. Based on the existing network of the Executive Forum, ITC asked for volunteers to contribute their views to this
topic. Several experts and practitioners, both from the private and public sectors have given their views and comments as also contributed their ideas and
experiences to the issues and conclusions that have been presented here. While discussing the different angles this paper could take, the network members
decided to rather focus on the following three issues
1. To re-visit the Executive Forum 20004 which had focused on export development in the digital economy and see whether some of the focus
2 Software Technology Parks of India 3 Business Process Outsourcing 4 The publication prepared after the Forum is available in PDA format on the ITC website under Executive
Forum. The website address is www.intracen.org/execforum/ef2000/publication2000.htm.
and ideas that had been recommended at that time have actually held over the last 3 – 4 years.
2. Outline (briefly) the work of the e-Trade Bridge programme and some of the tools and conclusions regarding ‘what works and what does not’
that are coming out from there5. 3. And lastly look at the future scenario and present the following
question/scenario for debate to developing country strategy makers:
“Without 'e' where U may not B”.
Alwyn Didar Singh
August 2004
5 Details on the ITC website
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Contents Page
1. Understanding Global Competitiveness and e-Competitiveness
1.1. Understanding Global Competitiveness
1.2. e-Competitiveness
2. A Review of Best Practice: Executive forum 2000 to today
2.1. E-competitiveness EF2000 to 2004 and beyond
2.2. E-Trade: "what works and what does not"
2.3. Lessons for e-competitiveness learnt at the micro, meso
and macro levels
3. Key Elements in "E-competency" for Developing Countries and
their SMEs
3.1. What needs to be done?
3.2. How will it be done?
4. Emerging Dimensions of E-competitiveness
4.1. Compulsions of security and FDI
4.2. Opportunities and issues of BPO
4.3. Interventions for e-competitiveness in BPO
5. E-competitiveness through Public Private Partnerships
5.1. Understanding Partnership in the digital economy
5.2. Roles of the Public and Private sector
6. Conclusions
6.1. The Proposition
6.2. Issues/Challenges
6.3. Focus of the debate/Questions for strategy –makers
Principal References
Annex
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10
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15
19
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22
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1. Understanding Global Competitiveness and e-Competitiveness
Without an e-vision, SMEs will not have a long-term
perspective for their business; without e-competitiveness of
that business, SMEs may have no business at all.
1.1 Understanding Global Competitiveness
Globalization is becoming an irreversible force, spurred by technological
advances, diminishing trade barriers, and decreasing transportation and
communication costs. An essential feature of globalization is the recent
developments in information and communications technologies (ICT) and e-
commerce. There is now clear evidence that enterprises can benefit considerably
from e-commerce, so the issue is particularly relevant to developing economies.
However, in addition to creating new opportunities for developing countries to
increase their competitiveness, globalization simultaneously creates a host of
new risks. Although countries can potentially gain from ICT, obstacles such as
lack of infrastructure and access stand in the way.
In order to participate in a globalized world, developing countries must
emphasize business competitiveness. The World Economic Forum acknowledges
that sound macroeconomic policies, with stable political, legal, and social
institutions foster the potential for national economic growth and
competitiveness.6 However, they also emphasize that wealth is actually created
at the microeconomic level. Only when firms are able to create valuable goods
and services efficiently can a nation support high wages and sustained
investment. In order to assess the competitiveness of national economies (and
countries), the World Economic Forum focuses on the macroeconomic
environment, the quality of public institutions, and technological progress.
The World Economic Forum notes that the origin and therefore levels of
technological process differs across countries. For countries on the frontier of
technology, innovation is the source of technological improvements. However,
6 The Global Competitiveness Report 2003-2004, The World Economic Forum,
3
many developing countries must achieve technological improvements through
innovation as well as copying or adopting developments created by the more
advanced economies.
There are no exact figures/data on actual transactions and usage of e-commerce
and ICT for developing countries, however Internet usage (a prerequisite for e-
commerce) is estimated at less than 4% in the developing world. This is very low
compared to industrialized countries, where upwards of one third of the
population uses the Internet.7 The reasons for this are several and include both
hard and soft or policy related issues. Despite these obstacles, developing
countries must acknowledge the potential e-commerce presents, and attempt to
create digital niches. This will allow them to utilize technology and “e” to become
globally competitive.
As eCommerce growth becomes more and more significant, developing countries
must not only address and appreciate its potential of growth for trade and
industry but also as a means of survival in the new world of Internet-based trade
and business. Ability to do so will depend on several factors, most important of
which will be infrastructure, both physical (the telecommunication or ICT
network), as well as the financial and legal framework, including a business and
trade environment conducive to e-Commerce and e-Trade. It will also depend on
the availability and price of hardware (computers, routers, switches etc.) and
software, as well as the human resource and education standards and the ICT
related policies of the country. These factors are important at all levels as are the
issues being discussed here. In other words, the importance of ‘e’ and
competence in it is something that impacts at all the three levels, ie. Global,
national and enterprise level.
The premise of this paper is that by ‘putting’ ‘e’ into their competitiveness by
applying the correct policy framework and ensuring ICT infrastructure and
access, developing companies will be able to take advantage of the opportunities
the digital economy presents.
7 Issues in Brief, UNCTAD, Volume 1, 2003.
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1.2 E–Competitiveness
While on the one hand ICT and e-Commerce offer tremendous business and
development opportunities for developing and transition economies they also
impose special responsibilities on their policy makers to create incentives and a
milieu for the private sector to perform in new ways, to promote the WTO rules-
based business environment, and to establish conditions enabling their countries
to access and connect with the digital economy.
The benefits derived from the appropriate use of Internet technology in terms of
improving the effectiveness and efficiency of international trade are now so
compelling that developing and transition economies may no longer be able to
sustain a competitive edge without becoming e-competitive.
There is an increasingly complex role of E in development issues, specifically in
business and trade development. There are innumerable ‘e’ related issues for
enterprises and governments. How important is ‘e’? How large is the impact of
‘e’? What is the impact of ‘e’ on my existing business processes and
governmental rules and regulations? Which of these should be changed now and
which can await further technological developments and changes in ICT
technologies? What is the relationship between ‘e’ and development? Which of
the ‘e’ issues are relevant for developing economies and which are not?
It is not the mandate of this paper to raise and address all such ‘e’ issues. The
focus of this paper is on e-Competitiveness i.e. having and using ‘e’ for business
and trade competitiveness for SMEs in developing and transition economies. And
it is in this context that it will address some of the relevant issues such as,
What is E? What is its definition in the context of this paper?
How important is E for business and for trade development?
Is it a global, national or enterprise level issue?
What are the Key Factors which will help to identify what works and what
does not work with respect to the E for competitiveness?
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The rationale in this paper is that the expansion of E in a country should have a
direct effect on competitiveness. This, in turn, should have an impact on trade
and business growth and therefore on overall development. Since overall
development is a much larger subject beyond the scope of this paper, here we
shall focus specifically on E in competitiveness based on the assumption that
competitiveness alone can ensure survival and the overall development of an
economy.
Competitiveness is a synthesis of the strengths and weakness in the performance
of an enterprise, and the compulsions and constrains of the market environment
it functions within. International competitiveness is the global dynamic of that
combination. It is the premise of this paper that in the context of the growing
importance of ‘e’, such competitiveness necessarily implies a proficiency and
capability in e-Business and e-Trade.
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2. A Review of Best Practice: Executive Forum 2000 to today
Much has happened since e-commerce presented itself as a serious business
phenomenon on the global stage somewhere around 1998. Ever since then many
developing countries have been seeking to find their place in the new digital
world. Some of them have been rather successful and many not so. While we
look at this as a matter of strategy we have to also see what that was about the
e-competitiveness of some countries or some ideas that made them more
successful than others. Before doing that however it would be interesting to look
at some of the concepts, claims and predictions relating to e-Commerce and the
digital economy that were made in the late 90s and place them in the
perspective of today’s reality.
Quite appropriately and timely too, the principal theme of the Executive Forum
2000 was the digital economy8. The statement below places the principal
arguments made at that time and examines the actuality that the last three to
four years has placed before the global economy in general and for developing
countries in particular.
2.1 E-competitiveness EF2000 to 2004 and beyond…
What we said would
happen9 (EF 2000)
……and what actually did and what we still
need to do
Digital distance
1. The concept and need for
universal access should be reconsidered: focus on getting
internet access at the level of village, post offices and community centres.
For many developing countries even limited
access in rural areas remains a distant dream. Though there have been significant examples of
success such as the development and expansion of mobile technologies that help the rural areas in the developing world to reap the
benefits of "e". Example: Fishermen using SMS to get market prices in Philippines, e-Chaupal in
8 Report of the Executive Forum 2000 available at www.intracen.org/execforum/ef2000/publication2000.htm 9 Issues as culled out from the report and the e-Briefs featured therein.
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India
2. E-trade has the potential for catalysing South-South trade
and providing links to the developed world.
No substantial gains for South-South e-trade appear to have come about. In order for e-
trade to develop, there has to be a strong support network. Building the support network in the developing world will improve South-
South e-trade.
E-commerce and
technology
3. The developing world is
excluded from technological developments in the ICT sector
because they do not have the expertise and experience in this area of the digital
economy.
True for 2000 but not so for 2004 when in
several ICT areas the developments themselves are taking place in some developing countries
(China, India etc.). For basic ICT usage there is a lack of trainers to train the managers to increase the efficiency and effectiveness of the
enterprises. E-nabling SMEs component of programmes such as the e-Trade Bridge
Programme address this shortcoming.
4. Developing countries that
encourage e-commerce and maintain a climate conducive to investment are likely to
attract foreign investors in IT-related sectors.
This has come true for countries such as India,
Singapore, Philippines etc. Maintaining a conducive climate for investment is important for the economy as a whole. ICT strategy of the
country should be integrated with the country's development strategy.
5. There is a growing acceptance of e-commerce and
confidence in the reliability and acceptance of online transactions.
After a downward trend over 2001 and 2002, e-commerce confidence is returning though
security is still a hurdle for the potential e-traders.
B2B or B2C?
6. B2C commerce is largely
restricted to developed countries, and it will take time
for developing countries to create infrastructure and
consumer base to support B2C e-commerce.
Mostly a correct statement in the context of
volumes and success of B2C in the developed world though there have been some significant
success stories in developing countries too. Underdeveloped support network continues to
create an impediment for B2C e-commerce.
7. B2B is a better option for developing countries, and the B2B share of the e-commerce
market is expected to exceed 80% in 2000.
B2B continues to be the dominant mode for e-Trade from developing countries particularly now in the BPO sector (out-sourcing).
8. Digital signatures will bring about billions of dollars in
overall savings from reduced transaction costs, increasing the momentum of B2B
Grossly over-stated statement. In fact for B2B there is lesser requirement for digital signatures
as the transactions are between known parties backed by off-line contacts and contracts. There are very few countries having a legislation that
recognizes digital signatures.
9. Advertising is the key to
B2C: give away free products/service on website,
Advertising models failed badly over 2000-2002
but are now again emerging as a workable model in many cases.
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accumulate large following,
and charge for placing advertisements on your website.
E-Commerce to M-commerce
10. M-commerce may become important, with a predicted
rise in the number of mobile phones and mobile web
surfers. Possibility of developing m-commerce services instead of traditional
land-based phone services. For developing countries, the main
issue is infrastructure and the establishment of mobile networks.
Mobile networks and cell phone usage has grown beyond expectations even in developing
countries. However other than some stray cases of m-commerce success stories, overall it has
not proved its potential yet, mainly because the data and transactional usages are not yet popular. There are of course some success
stories of SMS being used for e-Commerce.
11. Web-based alliances will play the key strategic role in
the future.
Sounded good in 2000 but still far from realisation in the context of e-Trade. Alliances
and partnerships help enterprises meet their strategic objectives and hence management
should consider this option as well.
12. In the short term it is
expected that e-commerce will have a negative impact on jobs as more services and skills go
digital.
In the context of BPO or outsourcing/off-
shoring ICT has actually created many jobs and opportunities in the developing world.
E-commerce and the large
enterprise
13. Transition to e-commerce
may be slow in developing countries where businesses are
family-owned and very traditional in approaches towards change.
Still holds good as a general statement but a lot
of change is actually happening across developing countries where SMEs and large
enterprises are in fact implementing some form of e-commerce, however limited. Majority of the web sites however exist for advertising
purposes.
14. Once e-commerce
becomes more pervasive it will be the greatest force bearing
down on traditional management practices in the South.
Held true.
SMEs
15. SME’s will be the biggest winners in e-trade because the internet reduces marketing,
transaction, and interaction costs that normally make up a
significant part of their budget.
Held true, though adaptation of e-Trade has been varied across countries and regions. SMEs now have a chance to win by adapting e-Trade
practices. However among the SME community awareness should be increased and training
should be given to the SME managers. For this purpose the capacities should be built within
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the trade support institutions.
Electronic finance
16. Electronic finance will
provide developing companies with a strong and
comparatively cheap support to their integration into world trade.
Not such an obvious fact as e-Finance adoption
has been slow in many developing countries who continue to rely on global e-services
offered mainly from the US, thus adding to the transactional costs.
17. Infrastructure difficulties (such as low level of
telecommunications) in developing countries can be
overcome by concentrating e-Commerce at limited locations.
Last few years have shown that geographically limited ICT services and backbone can be very
useful for specific and strategic development of software exports, BPOs and e-Commerce.
18. E-payments can now allow for rapid, cheap, and secure transactions.
True where available
19. There are still legal issues that developing countries need
to deal with: legal framework, digital signatures and
encryption.
Many developing countries have still not enacted e-commerce laws and facilitating
agencies.
Info structure
20. Since developing countries cannot attract large investments needed for the
telecommunications infrastructure in their entire
country, they should concentrate on areas in which e-commerce is likely to bring
the biggest benefits (geographic and sectoral).
(Same as at No. 17) Developing countries should build ICT strategies in conformity to their development and export strategies.
21. Countries need to adopt a legal framework similar to
UNCITRAL standard.
Yes (same as No.19) There are many developing countries working towards that
objective. However having the legislation in place is not sufficient unless it is implemented.
E-trade taxation
22. The national tax system
should treat e-commerce transaction in a manner equivalent to traditional, offline
commerce.
No country has as yet introduced any national
e-commerce tax.
23. Attempts to levy tax on
internet transactions will cripple the growth of e-
commerce. E-commerce should not be the target of new and discriminatory taxes.
Not yet implemented or tried anywhere as
technologically still not possible to track e-commerce transactions.
24. Developing countries should take a position on the
Many have but the issue is still not resolved and is rather on a back-burner at the WTO.
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present “standstill” agreed in
WTO for the non-levy of custom tariffs and digital transactions.
Predictions then and now
“BACK in 1999, at the height of the internet frenzy, Forrester, a research
company, forecast that online retail sales in America could reach $100
billion by 2002. When the bubble burst a year later, lots of crazy
predictions went the same way as many dotcom firms. But if online sales
of cars, food and travel are added to the official figures, then Forrester's
forecast, which once looked so wild, has turned out to be only about a
year late. The growth continues. The 200m Americans who now have
web access are likely to spend more than $120 billion online this year.
And that is only part of the story. E-commerce has not only grown into a
huge thing in its own right, it has done so in a way that will change every kind of business, offline as well as online…..”
The Economist May 15th, 2004, A Survey of e-commerce, ‘E-commerce takes off’
2.2 E-Trade: "what works and what does not"
The analysis above has shown that quite predictably the digital economy has
grown and developed in ways and usage that most experts could not have
predicted. Yet there are several aspects of the recommendations that were made
four years ago that hold true to this day. Most of these actually relate to the
importance of this new phenomenon and the need for developing countries to get
up to speed in using this technology. Their competitiveness will come from the
level of their expertise and innovation in using this tool.
Ultimately ICT is a tool. A highly advanced and powerful tool that is changing the
marketplace and at the same time providing solutions to adapt to and gain from
that change. Learning to use and adapt these tools will determine the level of
success that countries and SMEs will have in this new economy.
Several development agencies have been working on teaching countries and
SMEs to plan and use this tool to their benefit. For example the International
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Trade Centre has been promoting e-Trade for the last five years though several
initiatives including the e-Trade Bridge Programme. This programme offers a
portfolio of information, events, and training and advisory services to national
governments and trade support institutions to help them encourage and make
real the e-Trade ambitions of SMEs. From earlier use of e-tools for trade
development the spotlight has shifted to e-tools for e-Trade development. In
recent studies on the e-Trade preparedness of some 15 developing countries and
economies in transition, an analysis of what works and what doesn’t was
analysed on the basis of key factors that determine such e-preparedness. These
factors which range from legal and financial frameworks; to availability of e-
professionals for e-Commerce; to trade support and telecom infrastructure etc.
are seen as operating at three levels i.e. Micro or enterprise level, meso or trade
support level and macro or policy level. This research has shown that that these
are key factors for e-Trade that need to be put in place for an integrated and
consolidated development of e-Trade and e-Business. While countries work at
this, SMEs can and should develop intermediate strategies that can work around
the gaps and find solutions and opportunities even in an emergent environment
that can be exploited for gainful result. Some of the lessons learnt through this
exercise are enumerated here:
2.3 Lessons for e-competitiveness learnt at the micro, meso and macro
levels
To be competitive in marketing themselves on the web, SMEs must use
the best technologies available and as far as practicable in order to show
their leading edge image and competence to the global market
For their own networks and supply and communication needs they should
use the most appropriate technology suited to their environment and
needs
SMEs must update or hire requisite skills when they begin using new
technologies
Though not always a pre-condition to e-trade and export, ensuring
seamless and reliable transactions are a must for e-trade
Competitiveness and special promotions are important issues for
developing country enterprises entering the area of e-trade
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Trade Promotion Agencies have an extremely important role in developing
and transition economies and must ensure that they are adequately
qualified to promote the right services for SMEs
Different services such as call centres, BPO services, software, digital
products and services, all require different connectivity and speed options
which must be competitively catered for by the ISP providers
Competition must be encouraged to ensure the lowering of internet access
cost
Clearly enumerated e-strategies are a must for developing and transition
economies where government has an important promotional role in
ensuring an e-enabling environment
Introducing e-government promotes not only an e-environment, but is a
business opportunity for the IT sector. It also motivates government
employees to learn to use computers and software.
Besides the requirement of an e-commerce law, the fact of having one
ensures a positive signal for promoting e-trade
Setting up a legal framework is not enough without ensuring its
enforceability
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3 Key Elements in "E-competency" for Developing Countries and
their SMEs
3.1 What needs to be done?
For several developing countries and economies in transition these essential
‘factors of e-production’, so to speak, are not necessarily in place or are in
limited supply. In order to take active part in the new economy as well as to be
prepared for the adaptation and use of e-Business for old economy transactions,
especially for international trade and commerce, these countries and their
enterprises need to come up to speed and become e-competent.
The key to competitiveness in e-Trade is having a sound business model behind
it. "E" is not the thing to do but it is a way of doing things. E-Commerce
strategies must complement not replace traditional commerce strategies This
theme has been emphasized by the e-Trade Bridge Programme and in the
interaction between the network members for this paper.
Levels of e-Competitiveness
E-Commerce or e-competitiveness is not a static or frozen concept and in effect
operates and develops at several levels. Enterprises therefore need to become
‘competent’ progressively at different levels. For example in research done in the
Philippines10 by one of the network members (Luz Suplico), it was found that, the
most common use of electronic commerce is simply to communicate by email.
Since buyers are using the Internet to communicate, this is also the level of
electronic commerce adoption of the exporters. It appeared therefore that this
was the optimal level for most firms in developing countries. According to the
APEC definition, this is simply entry level electronic commerce. The next level is
when enterprises create their own website and place themselves on the Internet.
In most cases, again the research by network members has shown that
10 Extracts/finding from Professor Luz T. Suplico’s research dissertation (unpublished) on ‘Factors Affecting the
Electronic Commerce Readiness of Holiday Decoration Exporting Firms’, De La Salle University, Philippines
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enterprises in developing countries set up essentially catalogue or information
websites (and in many cases do not bother to even update them). The third or
next level is making such websites inter-actives so that prospective partners and
customers can actually get on-line information; the fourth level is transactional
where actual digital transactions and supply integration linked with the ERP or
MIS of the enterprise takes place automatically. This highest level of e-
Commerce is what makes the enterprises fully e-competent and by definition, e-
competitive in the digital economy. Unfortunately however the fourth level
requires e-enabled ‘e’ environment for the country or economy as a whole as it
would require several other matching facilities for example – digital signatures
and certification agencies; a legal framework that recognizes web-transactions as
contracts; on-line payments through e-banking facility etc.
While the above levels of e-Commerce track the steps enterprises need to take,
a clearer understanding or perspective e-Commerce and e-competency in it can
also be seen from11
a) A communications perspective: Delivering information, services, payments
etc. via the net.
b) An interface perspective: Interface between persons and businesses
interacting, transacting and exchanging.
c) A business process perspective: Within and with the outside world,
businesses digitising their processes for on-line and automated
interactions over a network, and finally
d) An on-line perspective: Being the environment, the market and the entire
info-structure on which the Internet and e-Commerce work, interrelate
and develop.
The nature of the product, whether it is information intensive or not, whether it
is tangible or not, affects the level of electronic commerce adoption. Again the
lesson here too is that e-competitiveness is a combination of factors and
processes that depend on the perspective or objective of the enterprise and its
market and therefore the growing importance and impact of the digital economy
11 Awad (2002: P3-4) modified by Singh (2003)
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perforce places an economic compulsion on SMEs in developing countries to
perform e-competitively in that environment.
3.2 How will it be done?
The above mentioned steps are what developing countries and their SMEs need
to take in order to go from basic e-readiness/e-preparedness to advanced e-
competitivity. According to Rao (another EF Network member) some stages or
barriers which would need to be surmounted are:
1. Restrictive: These are the traditional practises and processes prevalent
in developing economies that play the role of suppressing e-initiatives and
would need to be overcome.
2. Emerging: These are the initial initiatives or usage of the Internet that
enterprises gingerly try out. These include the conducting of market
research on the Net, basic computer usage in their enterprises such as for
word processing and accounts etc.
3. Enabled: The next stage where enterprises actually start using basic
email, set up Web sites; and put in place a rudimentary
information/communication policy.
4. E-Capable: Here the enterprise establishes an Intranet for its own data
mining and MIS, it starts online transactions and uses some SMS services,
and possibly becomes a member of one or more digital e-marketplaces.
5. E-Competitive: This is the final or fully developed and integrated stage
where the enterprise establishes for itself a Business model re-oriented to
the Internet/Intranet/Extranet, it uses wireless media and Business
Information tools extensively.
In order to move to each next stage, e-competitiveness must be handled from
both internal and external levels. The enterprise needs to address the internal
issues such as employee training and skills and re-engineering its products and
processes. Externally, the customer facing requirements (CRM) and partner or
supplier facing digital compatibility must be made e-competent. For each of
these, different components and ingredients need to be tackled. These include
the factors discussed earlier and would again involve macro, meso and micro
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issues such as content (micro), collaboration (meso), infrastructure (meso and
macro) and business-culture change (micro and meso), etc.
E-Competitiveness and e-Commerce strategies
There are several ways that such e-competency can and is coming about in
developing countries. For example the push factors in e-competitiveness is one
such way. This is e-competitiveness that is importer/buyer-driven. This means
that exporters in developing countries are likely to undertake strategies that will
enhance their electronic competitiveness if their importers require or ‘push’ them
to do so. This is happening in many cases where the buyers demand a certain
level of e-competency in e-commerce from their suppliers or assist or enable
them to become part of their existing supply chains. Failure to do so obviously
leads to loss of business. Conversely, the pull factors could also be used as
strategy. This is when e-competent enterprises offer their buyers and customers
cheaper more efficient services and processes that make both more e-
competitive thereby ‘pulling’ in more business. An example is BPO or out-
sourcing.
While on the one hand strategy-makers push for e-competitiveness for their
enterprises, on the other hand it must also be realized that e-competency must
be matched with basic competitiveness and trading expertise and processes. For
instance in the prevailing export process the developed country buyer’s
continued use of third party intermediaries, such as buying agents, shows that
electronic commerce adoption among exporters and importers does not
necessarily result in disintermediation as the services of the buying agents
cannot be substituted by online intermediaries. On the other hand the exporters’
use of Internet to communicate validates the transaction cost theory that argues
that the firm will always maximize its profit by reducing costs.
This profit-maximizing level for electronic commerce adoption for most of the
exporting firms in developing countries appears to be at the rudimentary Level 1.
This therefore leads to the conclusion that Governments should recognize that
this maybe is the optimal state for most SMEs and should realign electronic
commerce strategies, which are suited to this sector. It may not be important
therefore to prepare strategies for electronic payments for exporting firms. What
17
may be more important is to assist them for example, in their trade fair
participation efforts, as these seem to be the venue to meet existing and new
buyers.
Governments and Trade Promotion Agencies need to recognize that online
promotion could complement the firm’s (offline) efforts to promote its products
such as trade fair participation, buyer-seller meets, advertisements, sales
promotion and publicity. Thus, a two-pronged strategy for the SME sector can be
undertaken. Electronic commerce and existing and conventional ways of doing
business, such as trade fair participation, can complement each other.
Daniel Paré, another Network member has come to a similar conclusion. He
points out that in a number of sectors, a large volume of global trade is
conducted through explicitly co-ordinated value chains. In garments and
horticulture/agriculture, for example, large retailers only source products from
new suppliers after conducting extensive audits of a supplier’s production, quality
and management systems. Frequently, such certification and quality control
services are contracted out to local buying agents or to local branches of global
sourcing and quality assurance firms. These global sourcing agents are
responsible for identifying vendors, placing orders, tracking production, and
acting as quality and compliance assurors. Sourcing agents play a central role in
co-ordination and quality control in highly co-ordinated international value
chains. The complexity of the information at their disposal is such that it cannot
be identified by simply surfing through corporate Web-sites of potential buyers
and suppliers.
Thus the conclusion here too is that many traditional ‘trade’ processes and
practices are not going to be replaced by less satisfactory digital information and
connectivity which not doubt could have separate though useful supportive and
more complementary processes and practices.
E-Marketplaces as strategy
When considering strategies for reaping digital benefits, the message frequently
18
conveyed is that these ICTs should be implemented as quickly as possible in the
direction of some abstract model of how e-Commerce manifests itself. The
concept that is usually called upon when delivering this message is the notion of
B2B e-marketplaces. The Executive Forum 2000 had showcased the emerging
trend of the e-marketplaces - specialized websites/portals dealing with the
trading, both up-stream and down-stream, of their raw-materials and products.
These are basically B2B online markets that attempt to bring together the
benefits of online trading to specialized commodities.
According to Paré (2004) the commonly held view of B2B e-marketplaces is
rooted in the idea that these on-line trading spaces are neutral Internet-based
intermediaries with the potential to offer uniform benefits across industry
sectors, and countries. This very favourable vision risks blending two conflicting
interests i.e. the potential of the SME to buy and sell on-line with information
exchanges that support trading activities on- and off-line. This can lead to
inflated expectations about the potential for cost savings and a discounting of the
new costs that firms may experience from participating in e-business activities.
Research has shown that for example, the implied meaning of term ‘e-
marketplace’ (i.e. price discovery, online transactions) obscures the fact that
many so-called B2B e-marketplaces:
do not enable firms to make decisions about whether to buy or sell on-
line;
do not support the electronic processing of purchases and sales on-line;
and
do not support many-to-many online transactions.
This leads to the conclusion that that e-marketplaces though potentially a very
positive opportunity for SMEs in the digital world, need not necessarily result in
exploiting or promoting their e-competitiveness
19
4. Emerging Dimensions of E-competitiveness Strategy
In today’s globalized world the very concepts and factors of competitiveness are
themselves changing. Many given economic truism are constantly being
challenged and new features of global competitiveness emerging. The dot.com
crash altered many predications of the digital economy. The slow recovery now
being seen in the developed economies of the US and Europe is by the latest
reports leading to a new phenomenon being referred to as the ‘job-less
recovery’12. Even with economic recovery the new labour market is shaped by
global competition, spurred by the rise of cheap manufacturers and out-sourcing
opportunities in China, India, Eastern Europe and other developing countries as
also the price-depleting effects of the Internet and e-tailing. In this section the
paper looks at two of the important aspects of e-competitiveness that are today
part of the changing horizon i.e. the effects and impact of the digital economy on
FDI and Out-Sourcing.
4.1 Compulsions of security and FDI
In looking at the future, one has also to take a holistic view in the context of the
movement of Foreign Director Investment (FDI) and technology. Many
developing countries are still dependent upon obtaining these to kick-start their
economy and obtain the technology so very necessary to be competitive. This is
equally applicable to the ICT sector as any other business area. The changing
world of globalization is directing FDI to certain areas and preventing it from
flowing to other areas. One of the important concerns that have emerged after
9/11 is that of security13. Though many MNCs14 may not openly admit it, they are
beginning to rethink the sending of their funds and personnel to areas not
considered very “secure”.
The dramatic decrease of global FDI flows in recent years has garnered
international attention. Global FDI flows fell to an estimated $575 billion in 2003,
12 Newsweek Aug 23, 2004, ‘A Heavier Burden’, by R. Foroohar and T. Emerson, 13 The September 11, terrorist attacks in the US now symbolic of the new security phenomenon across the globe. 14 Multi-national and Trans-national Corporations.
20
which is down 12% from 2002 and almost 60% lower than the peak year in
2000.15 This downturn has been attributed to numerous factors, such as falling
stock markets (which has lead to a decrease in the number of cross-border
mergers and acquisitions) and weak economic growth.16 However, many
investors and international investment location experts remain optimistic about
the prospects for global FDI flows in the upcoming years. For example, 77% of
experts surveyed by UNCTAD predict an improvement in the overall investment
environment for 2004-2005.17
These optimistic projections overlook security concerns that threaten to thwart
FDI recovery in certain regions. Although global FDI flows may experience a net
recovery, FDI inflow to perceived security risk regions might actually decrease.
For example, growing security concerns in the Middle East and North Africa
(MENA) and Nepal are reflected in poor FDI figures.
Research has shown that FDI flows in the MENA region is not on pace with global
FDI trends. The MENA region is only responsible for 0.9% of global flows of FDI
and 4% of FDI flowing to the developing world. In addition, the oil rich Gulf co-
operation council (GCC) countries only receive 0.1% of global FDI and only
7.88% of the region’s total FDI inflows in 2002.18 Private investment in the
region as a share of total investment is around 40-45%. This figure is lower than
Africa and low when compared to 75-80% in Latin America and East Asia.19 At
the country level, the flows of FDI remain a small part of the respective
economies, both in terms of the gross fixed capital formation (5% on average)
and the gross domestic product (14% on average).20
Some Middle Eastern countries have taken steps to counter the FDI downturn in
their region. For example, Saudi Arabia passed the Foreign Investment Act (FIA)
in 2000 to create a climate more conducive to foreign investment. The FIA also
established the Saudi Arabian General Investment Authority (SAGIA), a body
15 Ashleigh Lezard, “Investor opinion split on FDI location trends.” FDI Magazine (FT Business), June 2, 2004. 16 “World Investment Report 2003”, UNCTAD, p. 3. 17 “Net Take-Off Predicted for FDI.” UNCTAD, March 14, 2004. 18 Mobilising Investment for Development in the MENA Region, Organisation for Economic Co-Operation and
Development, 11-12 February 2004. 19 Id. 20 Id.
21
given sole responsibility for approving foreign investment projects. SAGIA is
looking to the US, Japan, France, the UK, Syria, India, and Germany as potential
investors.21 Despite these attempts to reach out to foreign investors through
favourable legislation, FDI in Saudi Arabia continues to suffer due to the
perceived security threats in the region. A Financial Times survey indicates that
investor motives are less driven by specific policy towards foreign investment,
and more by the overall business climate of the country.22 Security concerns are
a crucial part of the overall environment for investors, and attacks on a Western
residential compound in Saudi Arabia last May received ample media attention
and precipitated dialogue about the safety of foreign investors in the Middle East.
These attacks even resulted in the American ambassador in Saudi Arabia
encouraging Americans to leave the country.
The negative repercussions of security concerns are reflected in recent FDI
figures for Saudi Arabia. The country posted a net loss of foreign direct
investment of US $350 million in 2002 (See Table 1 at Annex 1).23 Saudi Arabia
obtains the largest portion of their FDI from the United States, the United
Kingdom, and the United Arab Emirates. The top three investors are Hilton
Hotels, Group Casino, and Chevron Phillips.24 With respect to security, only a
small number of investment projects are being cancelled or delayed. However,
an increase in the scope and the intensity of the attacks could dampen long-term
growth prospects in the affected countries and bias investment location decisions
towards countries with lower security risks.
Similarly, FDI in Nepal has suffered due to growing security threats in the
country. Nepal receives 40% of FDI from India, followed by the United States,
British Virgin Islands, Norway, Japan, Republic of Korea, Canada, and Hong
Kong. The major area of FDI is manufacturing, followed by services (particularly
tourism). However, the amount of FDI in Nepal is insignificant when compared
with that received by other developing countries in South Asia (See Table 2 at
21 Economist Intelligence Unit. 22 See Ashleigh Lezard. 23 World Investment Report 2003: FDI Policies for Development: National and International Perspectives,
UNCTAD. 24 FDI Magazine, Financial Times Business.
22
Annex 1). 25 In particular, the Maoist insurgency has been a source of concern.
The insurgency began in 1996 when members of the Communist Party of Nepal
went underground to stage a popular revolt. The government denounced the
insurgents as “terrorists” and declared a state of emergency from November
2001 to August 2002. Foreign investors cited concern over “law and order” in
Nepal, and a continuation of conflict will certainly jeopardize the country’s ability
to attract FDI. Recent attacks on foreign firms have led to a large scale departure
of foreign nationals.
UNCTAD has ranked the countries predicted to be the top FDI locations in 2004-
2005.26 Asia-Pacific attracts the most optimism of all regions in terms of future
FDI prospects, with India, China, and Thailand in the lead. In North America and
Western Europe the top three locations predicted for FDI are the United
Kingdom, France, and Canada. South Africa is the most attractive destination in
Africa, with Angola and Tanzania in second place. Poland and Czech Republic are
predicted to attract the most FDI in Central and Eastern Europe, while Russia and
Romania share the number three spot. For the period 2004-2005, 77% of the
experts are predicting an improvement in the overall investment environment.
However, the FDI rebound will be concentrated in regions and countries where
there are fewer security risks. The UNCTAD predictions do not include the MENA
countries and Nepal as potential FDI attractions. Instead, the FDI is going to
countries with stable governments and low security risks. Although an FDI
recovery is in sight, security risk countries will have a difficult time reaping the
benefits. The implication for strategy makers is obvious – they must build-in the
realities of security compulsions into their strategies and possibly look for
alternative blends in promoting trade and industry in their economies. One of the
most promising such opportunity for developing countries is discussed below.
4.2 Opportunities and issues of BPO27
The brief analysis above has set the stage for relating this issue to another very
important development in the global economy that is in many ways the epitome
25 Investment Guide to Nepal, UNCTAD, Jan, 2003. 26 Prospects for FDI Flows, Transnational Corporation Strategies and Promotion Policies: 2004-2007,
UNCTAD XI, 13-18 June 2004. 27 Business Process Outsourcing (BPO)
23
of e-competitiveness for developing countries, i.e. BPO. One response of the
MNCs to the changing security environment has been in the past, a higher
movement of persons from developing countries to developed countries (to work
in those economies and reduce the risk of MNC personnel travelling to insecure
locations), another we are now witnessing is a greater level of outsourcing or off-
shoring (as it is referred to in the US) to relatively safe environments but in any
case requiring lesser physical interaction and physical re-location of developed
countries employees. There are of course several implications of this
phenomenon and the one most sensitive and written about being the transfer of
jobs from developed economies to developing countries such as India,
Philippines, Brazil etc. Today outsourcing or BPO has become the whipping boy of
several political pundits in the West. What does this scenario hold for developing
countries in the future? Will their e-competitiveness in the area continue to draw
more business or not? Will there be other alternatives such as further growth of
digital supply chains and e-market places? What are the emerging e-strategies
and responses that developing countries need to think of? These are some of the
questions that need to be raised for debate.
Business process outsourcing (BPO) is a new buzzword that has been a hot topic
of controversy in the past year. BPO is the outsourcing of business processes in
administration, finance, human resources, distribution logistics, manufacturing
services, sales, and customer care in geographic locations where the IT-intensive
services cost less. Currently, distribution and logistics comprise the largest share
of the BPO market (29%), followed by human resources (25%) and payment
services (16%).28
Essentially, BPO is about competitiveness and IT and the Internet provide the
technology and platform for digitizable services to be provided from the most
competitive location. For developing countries it is a major ‘e’ opportunity that
they are and can be competitive at. BPO provides developing country firms
opportunities to access new markets by enabling them to benefit from29:
their comparative advantage in low cost labour;
28 E-Commerce and Development Report 2002 UNCTAD, p. 239. 29 Paré, 2004
24
the global shortage in IT workers;
relatively low start-up costs;
industry development that is not heavily dependent on a transport
and logistics infrastructure;
spill-over effects in terms of ICT capabilities development in other
industry sectors; and
new opportunities for foreign direct investment and partnerships
with new trading partners.
As an example to illustrate this point, a recent cost competitiveness survey in the
Asia Pacific done by IDC, an Internet and IT research company, the following
highlights emerged. (This survey was done on the basis of standardised factors
relevant for the BPO area and as perceived by MNCs.)
Table No. 1: Statement of comparative costs in IT- enabled services
Country Workforce Market Access Local Market Infra-structure Cosmopolitan Cost base
New Zealand 2 2 - 2 3 2
Malaysia 1 2 - 2 2 2
Japan 1 2 1 3 1 3
Hong Kong 1 2 2 2 2 2
India 3 2 2 2 3 1
Ratings are on a scale of 1 to 3, with 1 being the lowest and 3 the highest. Source: IDC, NASSCOM
The competitiveness of India followed by Malaysia and then Hong Kong,
highlights the strong commercial compulsions for out-sourcing.
It must be noted that BPO services and exports are not necessarily dependent on
software expertise and an existing software and IT industry. Software requires
advanced technical training and education in computer hardware and software,
programmes and applications. In contrast, the skills needed for IT-enabled
services focus on how to use different ICT configurations rather than on
understanding the intricacies of how specific ICTs work (see Table 2 below). This
therefore requires more of managerial skills rather than technological expertise
and therefore is an opportunity that several developing countries can and are
using and developing.
25
Table 2: Examples of IT-Enabled Business Process Outsourcing Services
Customer Interaction Services
Back-Office Transaction Processing
Finance & Accounting Services
Human Resources Services
Knowledge Services
Customer
Service Voicemail
Marketing Services
Telesales
Order Processing
Customer Support
Warranty Administration
Customer
Feedback
Credit/Debit
Card Processing
Collections & Receivables
Direct & Indirect Procurement
Transport Administration
Logistics & Dispatch
Warehouse
Management
Billing
Services
Accounts Payable
Accounts
Receivables
General Accounting
Auditing & Compliance
Payroll
Services
Healthcare Administration
Benefits Planning & Processing
Retirement investment
Administration & Relocation Services
Data Mining
Catalogue/Content Management
Web Analytics
Source: E-Business Strategies. BPO Basics: What Every Manager Needs to Know. www.ebstrategy.com/BPO/basics/default.htm
There are two other features of BPO that are relevant for this debate. One is that
unlike most software related IT work, BPO services once set up usually run with
limited need for continuous communication and supervision of the out-sourcing
enterprise. This obviously reduces the physical movement of experts and
managers between countries.
The other feature is that whereas in software development and exports it is IT
firms that are the dominant clients for outsourcing services, a much wider
spectrum of industries (e.g. travel, banking, healthcare) are engaged in sourcing
IT-enabled services from developing countries. Again this is leading to a much
wider set of options at both ends of the spectrum i.e. at the developed country
business or economy level as also at the developing country IT-enabled
enterprise provider level. Options and opportunities here are limited only by the
marketing of the e-competitiveness of the latter.
26
Most people think of India when they hear the term BPO, but in reality BPO is
growing in a number of developing countries due to recent ICT developments30.
This growth is matched by an increasing demand from companies located in the
United States and Europe to cut costs by outsourcing non-core business
functions to the developing world. However, some predict that political backlash
against outsourcing in the United States will erode the increasing BPO market.
This reaction has unfortunately peaked and become an election issue in the on-
going US elections31. This negative perception of outsourcing is reflected in
recent legislation in the United States which attempts to ban Government funds
going to enterprises that out-source or provide for multifarious conditions and
restrictions on call centres and other out-sourced services. Such legislative
efforts are being made at both the Federal and the state level, where 36 states
have introduced more than 100 bills to restrict overseas outsourcing.
Although public perception against outsourcing in the United States is fanned by
populist election-year rhetoric and promises of protectionist measures, the global
market for BPO will not be significantly impacted. First, the proposed state and
federal legislation to restrict outsourcing may violate the US constitution and
jeopardize US obligations under international trade agreements. For example,
the Thomas-Voinovich Amendment, banning certain government overseas
contracts, may violate United States trade obligations under the World Trade
Organizations Government Procurement Agreement (GPA) because the GPA
prohibits member countries from discriminating against domestic firms on the
basis of “the country of production of the good or service being supplied.” 32 In
addition, various state laws offering preferential treatment for in-state interests
may violate the United States Constitution.
Second, backlash against outsourcing is inadvertently helping the BPO industry in
India and other developing countries by providing free publicity for outsourcing
companies. Enterprises in several developing countries are actually experiencing
30 Countries offering outsourced services include among others: Bangladesh, Brazil, Cambodia, China, Costa
Rica, Ghana, the Philippines, Russia, Thailand, and Venezuela. 31 In a July 29 speech to the Democratic National Convention, Senator John Edwards vowed to get rid of tax cuts
for companies who are outsourcing American jobs. Edwards Speaks to the Convention, The New York Times,
July 29, 2004. 32 Exporting the Law, National Foundation for American Policy, April 2004.
27
more enquiries and offers. For example, some smaller outsourcing companies in
Bangalore, India reached deals due to media exposure created by the
controversy. 33
Third, the slowing of the US economy caused an increasing number of companies
to outsource to India to maintain their margins.34 Business based on outsourcing
is highly dependent on the volatility of foreign markets, but the recession in the
US will not significantly affect IT-enabled services because they are indispensable
back-office processes.
The current global off-shoring market was estimated to be $32 billion in size in
2001.35 This worldwide market has surged 23% annually since 1999, and
estimates for future growth range from $300 billion by 200436 to $585 billion by
200537. The backlash against BPO in the United States will not have any
significant impact on this global market, and figures demonstrate that the
sentiments are already beginning to wane. For example, India’s second largest
software and services outsourcing company Infosys Technologies is posting a
39.2% increase in quarterly profits. Infosys derives almost two-thirds of its
earnings from companies in the United States, which indicates that the public
backlash does not have far-reaching commercial implications.
The bottom line here is that BPO or out-sourcing /off-shoring is a compulsion of
e-competitiveness that has resulted in a unique opportunity for developing
countries. If they can maintain their e-competitiveness along with quality and
price, no amount of legislation will stop the market-driven movement of e-
business. Amongst its various benefits to both parties, the one additional benefit
is also that it simultaneously reduces physical security concerns with regard to
FDI and technology transfer.
33 Saritha Rai, India Sees Backlash Fading Over Boom in Outsourcing, The New York Times. July 14, 2002. 34 E-Commerce and Development Report 2002 UNCTAD, p. 241. 35 McKinsey & Company. 36 Gartner. 37 Goldman Sachs.
28
4.3 Interventions required for e-competitiveness in BPO services
Much of the publicity and projections of the potential for BPO to offer developing
countries a means of participating on more equal terms in the global markets
downplay the complexities associated with creating sustainable outsourcing
industries38. Establishing a viable global presence in this sector is dependent, in
part, on recognising differences in the configuration of obstacles to be addressed
for different outsourcing activities, and the types of opportunities they offer.
While software development and other IT-enabled services rely on the Internet
as the primary distribution channel, the policies and strategies needed to nurture
these two industries are not the same. This suggests that policy-makers need to
distinguish between these two sectors when devising and implementing
strategies to facilitate the growth of one or the other industry.
From a strategy point of view it would be useful to analyse and suggest the
interventions and support that BPOs require from the angle of the key factors of
e-preparedness that have been noted in earlier ITC work for the WSIS from the
micro, meso, macro theme referred to in Section 2.2 above. The matrix below
seeks to place these in perspective from the context of challenges/opportunities
afforded by BPOs and strategies aimed at its promotion and how that fits into the
'E' and competitiveness concept.
38 Paré, 2004
29
Matrix to show the importance of Framework issues for BPO services
Intervention Level
Key Factors BPO / IT enabled services
Micro Level (Enterprise
level environment)
Attitude, culture and use of IT in Industry
The level of IT competence is not as required for software or other high-end IT services however individual enterprise level commitments are important to achieve e-competitiveness
e-Professionals availability & e-Trade capabilities
Limited e-capabilities sufficient for the specific BPO service required. E-Trade capabilities again limited to the specific IT enabled service.
e-Business environment including for e-trade
e-Business environment helpful though not crucial for the B2B type transactions that BPOs are.
Meso Level (e-Trade support
level)
Trade Promotional Agencies
Very important role of TPOs and IT/BPO Associations to lobby for the right policy environment and other issues such as service tax, training needs, political and diplomatic support for any backlash as recently noticed from some developed economies etc.
ICT Infrastructure
Sufficient direct connectivity, satellite or broad-band required. Overall country level Internet and connectivity not an issue for the B2B connectivity and transactions.
HR Framework
Essentially most BPO / IT Enabled services / Call-centres require the language skills and specific service skill, not high-level IT skills or education. Therefore mostly government does not need to create separate IT HR infrastructure.
Macro Level (Policy
Framework)
Policy & strategy at national level Strong policy and administrative support needed.
e-Government initiatives Not relevant except where e-Government service itself involved.
Legal & regulatory framework Certainly required as legal issues can and may arise.
This analysis essentially points to two conclusions,
1) that the key factors for ‘e’ are of variable importance but together contribute
to the e-competitiveness of enterprises and their environment; and
2) that micro, meso and macro factors all interrelate and their real synergy
comes about only through collaboration and partnerships between the various
stakeholders.
It is this second conclusion that the next section would comment upon.
30
5. E-competitiveness through Public Private Partnerships
Today there is a lot of hype associated with the very idea of PPP i.e. public-
private partnership. It is meant to be the panacea of so much that ails the
economy including issues such as the digital divide. It is neither within the scope
nor the objective of this paper to comment on this as a concept or an ideal.
However since PPP is a principal theme in this year’s Executive Forum, it would
be of advantage to see in what manner it applies to e-competitiveness. From a
theoretical or logical point of view, suffice it would be to say that the digital world
itself is based on the concept of a network or a series of partnerships.
5.1 Understanding Partnership in the digital economy
Mishra (2000)39 defined partnership at the conference, Solidarity2000
Partnerships, as follows: ‘The partnership mode potentially allows two
organizations to understand each other’s qualities and limitations, support one
another and to create synergy in order to pursue a common vision and
objectives.’ Though this term ‘partnership’ can have many definitions, for the
purpose of this paper it has been used in a broad sense that encompasses this
very concept of a synergetic relationship that pursues the common objective of
e-preparedness and e-competitiveness.
No matter how partnership is defined, what is important is the balance between
what the partner (enterprise) expects and what it feels it is obtaining. In the
digital age, the balance is no longer between two partners: there is a true global
interaction between governments, consumers and competitors – groups that are
demanding, influential and creating expectations.
In the context of e-Commerce, the first real encounter and stage of PPP between
the private sector and government was the introduction of Electronic data
interchange (EDI) for trade related transactions. In the mid-nineties as EDI
began to become a necessity for exports, developing countries and their
enterprises were compelled to jointly introduce and use this facility. Neither party
could have done it on its own. For many developing countries this in fact set the
39 See www.solidarity2000.dk/develass/princip/mishra.htm.
31
stage for a series of other collaborations and initiatives in IT and e-Commerce
that followed.
ITM Europe as quoted in ITC’s recent book on PPP in IT40, in its chapter on
partnerships in the digital age, notes that the focus areas for effective
partnerships include globalization, international trade knowledge, strategic and
commercial business understanding, an ICT research and development
environment, public support and infrastructure, ICT skills, and basic
entrepreneurial competences. It highlights the four major types of partnerships:
basic, standard, extended and strategic. It notes that partnerships have enabled
government institutions to attract private companies to pour investments into
the ICT sector and to undertake crucial research and development (R&D) efforts.
It also points out that government and trade associations play a major role in
facilitating the business community’s search for effective partners.
Alliances, which include public-private partnerships, are increasingly linked
to core competencies and often have a long-term focus.
The digital divide can be overcome only through public-private
partnerships. Furthermore, the industrialized countries have an obligation
to support latecomers to the digital economy.
The digital economy itself cannot continue to prosper without partnerships.
5.2 Roles of the Public and private sectors
For transition and developing economies there could be two levels of partnership
between the private and public sectors for the growth of the ICT sector. The first
concerns the activities of the public/government sector in providing an overall
ICT support framework and the second relates to specific support measures that
the public sector could design to assist small and medium-sized enterprises
(SMEs) in their export endeavours.
To promote their country’s entry into, or progress in, the digital economy, the
public and private sectors must have a shared vision. The public sector must
40 International Trade Centre UNCTAD/WTO, 2003, Effective public-private partnership in the information
technology sector: How to enhance business and trade capacities, Geneva: ITC
32
provide the necessary enabling environment, of which a favourable policy and
legal framework is an important component. For its part, the private sector must
generate the drive to push the economy onward, including the pursuit of trade
opportunities in ICT products and services.
Each sector has its own strengths and weaknesses. It is crucial for both to be
flexible in their relationships with each other. Each have entrenched attitudes to
ways of doing things in general and in regard to each other. To succeed in a
partnership and to move forward in the ICT world, they require a radical change
in mindsets. Whatever the situation in each country, the two parties must consult
each other to arrive at a realistic strategy, strong policies and effective
programmes of action. The consultative mechanism must provide focal points for
this consultation. For the public sector, this should be a lead government
department and, for the private sector, a representative body that has the trust
and the support of all ICT players. They could meet in an umbrella committee or
council.
In section 2 of this paper we had discussed the micro, meso and macro level key
factors for e-Trade preparedness. An analysis of these factors from the point of
view of principal player or responsibility for the concerned factor would indicate
that some lies in the lap of the enterprises, some with trade support
organisations and some with government. For example, the attitude towards and
use of IT in industry is a micro level factor and purely dependent on the
enterprises themselves. E-Trade promotional initiatives including awareness
building and training are meso level factors that TPOs must promote along with
the industry. And similarly legal and financial frameworks are dependant on the
macro level environment and initiative of the government. The principal lesson
from the research under this programme threw up the conclusion that each of
these factors is equally important to e-preparedness and therefore e-
competitiveness. This in itself is the logic and rationale of the need for public-
private partnership for e-competitiveness. Best practise examples have shown
that such a partnership that addresses all the factors itself makes it possible to
practise successfully at all!
33
6. Conclusions
The only thing predictable about Globalization is that it is and will remain
unpredictable, as no one has full control over it or on the direction and
impact it will have on a country or a business.
The reality of globalization in the digital age is that power has shifted from the
ICT industry to the consumer. However, making the organization accessible to
the global market through various networks, the World Wide Web and the
enormous number of Internet search engines, creates a new dimension. By
entering the global market in this way, the SMEs will lose full control of their
business and the power of decision making will move to the consumers. To
operate successfully therefore the compulsions of e-competitiveness are both
obvious and imperative.
At the policy/governance level in most developing countries the fears of social
impact and cultural colonialism through the Internet have fast receded to those
of being not just left behind but left-out. The general belief that has emerged in
developing countries is that without adequate access to the Internet, they cannot
hope to be globally competitive. Therefore in many developing countries a ‘digital
rush’ is on to create and broaden the Internet links in and around their nations.
The hope is that in doing so, their economies too will begin to react and respond
to the benefits of e-commerce and the Internet so that economic growth and
over-all development can be further fostered and sustained. Research has shown
that mere infrastructure is not enough and there are several key factors that
must be simultaneously addressed by strategy-makers in order to be e-
competitive.
There is no simple strategy or solution that can be applied or used across all
economies, especially when the candidates are developing or in transition. The
situation in such countries is both many-sided and changing rapidly. The ICT
technologies, Internet and e-Commerce impact at different levels and therefore
must be understood at diverse dimension. They are technologically information
34
intensive and operate simultaneously at both the micro-economic (enterprise)
level as well as the macro-economic (societal/national) level41
Ultimately the picture that has emerged in the research and network dialogue is
that several of the developing countries lack the proper policies and strategies
for ICTs and electronic commerce initiatives. Many realise it, many state that it is
their intention to gain from its potential but not addressing this issue in an
organised and focused manner results in their preparedness and success in the
digital economy being restricted by their own lack of policy convergence. E-
competitiveness and e-competency are essential for their SMEs. This is now
established. The issue is in getting there.
Section 2 of this monograph has outlined the necessary factors of the framework
in which SMEs need to operate. E-Competitiveness can only work if it is
‘seamless’, i.e. All the factors, processes and systems are integrated or else the
weakest interface will break the digital chain. To add to the complicated nature of
this digital scenario it needs be noted that the factors or key indicators
themselves are dynamic and change with the changing market environment and
budding expertise of the SMEs in the digital world.
6.1 The Proposition
The theory is that the greater networking and e-competency there is within the
public sector and the private sector, the greater efficiencies will be created for
business and trade. In short, e-competitiveness and e-partnerships will lead to
greater international competitiveness for the country as a whole. Why?
First, e-competency in the TPOs and government will result in a favourable e-
environment and the streamlining of procedures that the business community
is required to follow (e.g. trade procedures and documentation) for
improvement in their e-Trade capabilities and performance. PPP in e-
competitiveness can serve as a win-win for all partners.
41 UNCTAD, 2000.
35
Second, enterprises (SMEs) focusing on e-competitiveness will automatically
improve their transaction capabilities as also their internal processes and
external marketing skills.
Third, e-competitiveness will stimulate the business community to acquire e-
competency not just in their existing business but assist them in looking for
new opportunities (such as BPO) where e-competitiveness is the key to
success.
6.2 Issues/Challenges
However e-competitiveness for developing countries and their enterprises will
require a major paradigm shift in the way governments and SMEs currently
operate. Many national strategy-makers and administrations have been slow to
embrace e-Commerce and the need to be e-competent in it. Such inertia is a
significant long-term constraint to export development (indeed, to overall
development).
The issue or question that arises therefore is:
Without ‘e’ where is it that you may not B?
This applies across the board to country level strategies as well as SMEs in
developing countries. Businesses with an appropriate strategy which gives them
a fair competitiveness based on negotiating power, have the potential of
becoming more efficient or more effective with e-, and sometimes are even
capable of implementing strategies which they could not implement at all without
e-, thus becoming even more competitive on domestic markets as well as
international (trade) markets.
E-competitiveness in the digital economy should, accordingly, become an
objective high on the priority list of developing and transition economies.
Immediate and comprehensive action is required.
36
6.3 Focus of the debate/Questions for strategy-makers
1. Is e-competitiveness, in practice, an essential factor in long term export
competitiveness at the national level?
2. What are the principal constraints to e-competitiveness and e-competency for
enterprises and governments?
3. What are relevant approaches to overcoming these constraints? What is the
roadmap for evolving down the e-competitiveness journey that you can make
for your own country?
4. What is best practice and is it relevant for you (your enterprise/economy)?
37
Principal References
Awad, Elias, 2002, Electronic Commerce, Prentis-Hall, New Jersey, USA
Bandyopadhyay, S. 2001, Competitive Strategies for Internet Marketers in Emerging Markets. Competitiveness Review, 11 (2), 16-24
ITC Executive Forum 2000, e-Briefs, at www.intracen.org/execforum2000
International Trade Centre UNCTAD/WTO, 2003, Effective public-private partnership in the information technology sector: How to enhance business and trade capacities, Geneva: ITC
McConnell International. 2000. Risk e-business: Seizing the opportunity of global e-readiness. August: www.mcconnellinternational.com
Mishra, C., 2000, Solidarity2000 Partnerships, at www.solidarity2000.dk/develass/princip/mishra.htm
Paré, D. J., 2004, Electronic Commerce and Developing Countries: There’s no
leap-frogging, only difficult slogging, WTO Policy Brief, Commonwealth Secretariat [In Press]
Rai, Saritha, India Sees Backlash Fading Over Boom in Outsourcing, The New York Times. July 14, 2002
Singh, A. Didar, 2001, A Rainbow Technology for a Rainbow People: E-Business Capacity Development for the CARICOM, Commonwealth Secretariat, London
Singh, A. Didar, 2003, ICT, Competitiveness and Trade Development: What
Works and What Does Not, Discussion Paper for the World Summit on Information Society, ITC, Geneva
Singh, Nirvikar, 2001, Electronic Commerce: Economics and Strategy, University of California, Santa Cruz
UNCTAD, 2000, Building Confidence: Electronic Commerce and Development,
UNCTAD, Geneva UNCTAD. 2002, E-commerce strategies for development: The basic elements of
an enabling environment for e-commerce. TD/B/COM.3/EM.15/2: Geneva, May 3
UNCTAD, World Investment Report 2003: FDI Policies for Development: National and International Perspectives, UNCTAD
UNESCAP, 2003, Regional Road Map Towards an Information Society in Asia and the Pacific, UNESCAP, Bangkok
World Economic Forum, The Global Competitiveness Report 2003-2004, at www.worldecomicforum.org
38
Annex
Table 1: FDI inflows, by host region and economy, 1990-200242
Host
Region
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
Bahrain -183 619 869 -275 208 431 2048 329 180 454 364 81 218
Iran -362 23 9 208 2 17 26 53 24 35 39 50 37
Iraq 0 -3 8 1 0 2 1 1 7 -7 -3 -6 -9
Jordan 38 -12 41 -34 3 13 16 361 310 158 787 100 56
Kuwait -6 1 -35 13 0 7 347 20 59 72 16 -147 7
Lebanon 6 2 18 7 23 35 80 150 200 250 298 249 257
Qatar 5 43 40 72 132 94 339 418 347 113 252 296 326
Saudi
Arabia
1864 160 -79 1369 350 -
1877
-
1129
3044 4289 -780 -
1884
20 -350
UAE -116 26 130 401 62 400 301 232 258 -985 -515 257 95
Yemen -131 283 718 903 16 -218 -60 -139 -226 -328 6 136 64
Morocco 165 317 424 491 551 332 322 1188 417 1376 423 2808 428
Botswana 96 -8 -2 -287 -14 70 71 100 90 37 54 26 37
Ghana 15 20 23 125 233 107 120 82 56 267 115 89 50
Namibia 30 120 118 55 98 153 129 84 77 111 153 275 181
Nigeria 588 712 897 1345 1959 1079 1593 1539 1051 1005 930 1104 1281
Senegal 57 -7 22 -1 67 35 7 176 71 136 63 32 83
S Africa -78 248 4 10 380 1241 818 3817 561 1502 888 6789 754
Table 2: FDI Flows to South Asia, 1996-200143
Country 1996-2000 1999 2000 2001
Afghanistan 1.1 6.0 0.2 2.1
Bangladesh 160.2 178.0 279.8 78.1
Bhutan 0.2 0.2 0.3 0.2
India 2652.8 2168.0 2319.0 3403.0
Maldives 11.5 12.3 13.0 12.3
Nepal 11.6 4.4 -0.5 19.3
Pakistan 594.6 529.7 305.1 385.4
Sri Lanka 230.2 201.1 178.0 172.0
South Asia 21798.3 19690.9 11055.5 13240.1
42 World Investment Report 2003: FDI Policies for Development: National and International Perspectives,
UNCTAD 43 Investment Guide to Nepal, UNCTAD, Jan, 2003.