United Nations reviews eCommerce (and Spam) Year in Developed and Developing World

E-business continues to grow vigorously in developed countries, but divergences are surfacing among developing countries, says the United Nations Conference on Trade and Development's "E-commerce and Development Report 2003". More and more governments and businesses in the developing world are nonetheless beginning to eliminate obstacles to the adoption of information and communications technologies (ICT). While the immediate effects are not necessarily dramatic, the report predicts that improvements in the e-business environment should eventually result in productivity gains in these economies.

At the same time, many other developing countries still face difficulties in identifying and realising the potential benefits of ICT and the Internet for their economic development.

In terms of internet use, developing countries continue to grow faster than developed countries: at the end of 2002, they accounted for 32% of the world´s 591 million internet users, up from 28% the previous year, and could well represent 50% by 2008. These estimates, although far from ideal, provide a reasonably good indication of whether the foundations of a "digital economy" exist in a given country. Countries where such foundations do exist - whose governments have pushed the development of the information society early on (such as Japan, Malaysia, Singapore and the US) - have benefited from ICT much earlier, the report finds.

But for developing countries to catch up with ICT developments globally, they must be committed at the highest political level, must pay attention to implementation issues and must strike the proper balance between the roles of the public and private sector in ICT development.

As to what the spread of ICT will mean for national economic performance, the report concludes that it has a positive impact on all factors affecting productivity and underpins growth in several countries where the technology really penetrated. Systematic empirical evidence on developing countries is still not abundant, but many useful lessons can be drawn from available experience. Governments should, for example, encourage greater understanding of best practices in the use of ICT so that the best possible choices can be made. They should implement policies to facilitate greater access to low-cost, high-bandwidth internet connections and the use of affordable software.

In Latin America, the volume of B2B e-commerce is driven essentially by developments in Argentina, Mexico and, most of all, Brazil, where the value of all B2B online transactions was approaching the $12-billion mark in the first quarter of this year. The 30 largest Brazilian companies account for 90% of the country´s B2B e-commerce, and therefore for a significant share of the region as a whole.

On the retail side, or business-to-consumer (B2C) e-commerce, among the high-income market economies the share of internet users buying online is highest in the Nordic countries, the UK and the US. Internet retail sales remain a small though growing part of total retail sales. While more and more consumers are using the Web to get information on high-value products that they ultimately purchase offline, for some products, such as software, books, entertainment bookings and travel-related services, online sales are becoming very significant in these markets.

Among the developing regions, Asia-Pacific represents about 10% of global B2C online sales, the vast majority of them generated by Japan, Australia and the Republic of Korea. For China's large and fast-growing internet population, lack of trust and the very limited availability of credit cards are two commonly quoted obstacles to buying online. Few reliable data are available on Africa, but South Africa accounts for the lion's share of e-commerce on the continent.

Broadband networks are now accessible to almost 320 million households, mostly but not exclusively in high-income market economies. Growth in the number of subscribers, however, has not kept pace. Estimates of the number of broadband users worldwide vary between 55-and-100 million people, more than 75% of whom reside in just six countries. The Republic of Korea leads the world in per capita terms, with more than 21 subscribers per 100 inhabitants. Broadband is progressing fast in several other countries as well.

In most countries, where broadband penetration remains below the 10% mark and prices are still fairly high, UNCTAD is predicting that the short-term impact of this technology on most business operations will remain limited.

No broadband application has so far emerged with an impact on the functioning of markets or on the management of companies that is substantially different from the effects of earlier commercial applications of the internet. This is not to say that broadband will have no impact on businesses. Businesses buy much more online content than consumers, and broadband makes such content more accessible, easier to use, and therefore more saleable, especially to small and medium-size enterprises (SMEs). Broadband allows several users to share an internet connection, which can reduce the cost of every individual connection - an important consideration for SMEs, which account for a high percentage of ICT entrepreneurs in developing countries.

Another aspect of the everyday experience that e-business now represents for more and more people is security. Many internet users, however, take the Web for granted, expecting it to pose as little risk as water or electricity. Unfortunately, such levels of security and reliability are not yet available, as the UNCTAD report makes clear.

Internet security problems can take multiple forms, ranging from spam, viruses, Web squatting, fraud and copyright violation to privacy infringement, harassment, denial of service and unauthorized entry into corporate or personal computers and networks (and theft or manipulation of the information stored in them). Some of these problems have acquired serious dimensions; spam is now proliferating at an alarming rate. By year-end, an estimated 50% of all e-mails circulating on the Internet could be unsolicited. The cost - in terms of wasted IT resources or lost user productivity - could be as high as $20.5 billion worldwide.

Several developing countries were among those most targeted by digital attacks last year; developing countries in general are the leading victims of attacks against government online systems, although such attacks are less frequent than those against businesses. Their most important effect may be that the media attention they attract helps undermine public confidence in the internet in those countries where awareness of and trust in the internet is less advanced.

Associated Link: E-commerce and Development Report 2003

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