PART ONE

SUMMARY AND RECOMMENDATIONS

Part One: Summary and Recommendations

I. ORGANIZATION OF THE MEETING

The rapid diffusion of the Internet throughout the world has accelerated the introduction of e-commerce. It has already become a widespread way of doing business. It is gaining impetus worldwide and the impact is being felt in all sectors, especially in the financial and services sector of the economy. Nonetheless, the majority of developing countries, especially local small and medium enterprises (SMEs), still lag behind global information technology revolution and lack the ability to take advantage of electronic commerce (e-commerce) as a channel to conduct businesses. Taking into account the SMEs role as a backbone for economic development in many countries of the Asian and Pacific region, the fact is posing unavoidable challenge to their economic development. This circumstance provides a rationale for the need to enable developing countries to enhance their capability in using e-commerce through economic and technical cooperation among ESCAP member countries and to reap the benefits of e-commerce. In order for e-commerce to flourish, government and business sector should cooperate wherever possible to develop integrated platforms for e-commerce. The role of government is to promote and facilitate the development and uptake of e-commerce by providing a favourable environment including legal and regulatory aspects, building trust and confidence among e-commerce participants, and becoming a leading-edge user to catalyze and encourage greater use of electronic means. On the other hand, enterprises should play a pivotal role in developing e-commerce technology, applications, practices and services. Most of developing countries, however, are behind in e-commerce sector and this issue must be a complicated and tough issue for them. Therefore, the wide spread of awareness on e-commerce potential and the establishment of fundamental system concerned with e-commerce should be provided by government in these countries. Bearing those perspective in mind, the ESCAP, with the generous assistance provided by the Ministry of Commerce, Industry and Energy of the Republic of Korea, organized the Regional Consultative Meeting on Initiatives for E-Commerce Capacity Building of Small and Medium Enterprises at Seoul from 13 to 15 November 2002. The Meeting took place in collaboration with the Korea Institute for Electronic Commerce (KIEC), the Republic of Korea. The Meeting was aimed at discussing successful cases in e-commerce, and also addressing a range of issues including network security, compatible legal system, consumer protection, physical infrastructure and so on.

A. Objectives
(a) To exchange experiences and share best practices on promotional measures of small and medium enterprise e-commerce, particularly by referring to benchmark case study of e-commerce-advanced countries; To provide opportunities to assist formulating effective e-commerce strategies in the developing countries through suggesting modality and policy recommendations; To build a common agenda to develop a regional network for future cooperation on e-commerce initiatives; To identify specific skills development and training needs to implement and improve e-commerce transaction system;

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Initiatives for E-Commerce Capacity-Building of Small and Medium Enterprises

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To suggest a new frontier of emerging business and market in the Asian and Pacific region, contributing to facilitating greater participation of SMEs in e-commerce, and to expanding national investment in this sector.

B. Attendance
The Meeting was attended by government officials or senior staffs of public organization, who were responsible for setting up e-commerce policy framework from following nine countries: China, India, Indonesia, Kazakhstan, Mongolia, Pakistan, Philippines, Sri Lanka and Uzbekistan. In terms of criteria for selected countries, in order to avoid duplication, Mekong-area and Pacific island countries were excluded from the list since the existing e-business-related projects for those countries were in progress. Consideration was primarily given to both of economies in transition and other Asian nations to have potential to conduct e-commerce.

C. Opening session
The Meeting was opened by Mr Jong-Kap Kim, Director General, Industrial Policy Bureau, Ministry of Commerce, Industry and Energy, the Republic of Korea. In his congratulatory remarks, Mr Kim welcomed all the participants and delivered his statement. His emphasized that e-commerce had become a global phenomenon, emerging as a new business pattern, and, along with the expansion of the Internet, e-commerce was also growing exponentially in the 21st century. By reducing the costs of information and transactions, e-commerce makes it possible to find new suppliers, to re-organize the workplace, and to gain access to previously untapped markets. He mentioned that the policies and case studies of different countries would be a good reference source for other countries in facilitating e-commerce. And that was why this Meeting which covered such policies and cases would therefore be a meaningful opportunity to learn from one another, and come up with new ideas for e-commerce cooperation. Besides, he pointed out that the Government of the Republic of Korea had been concentrating its efforts on establishing a nationwide high-speed broadband communication network by 2000, upgrading the information technology (IT) infrastructure and improving related laws and systems. He concluded his statement adding that the Republic of Korea has become a global test-bed for e-business (electronic business) solutions and an increasing number of world companies were planning to advance into the Republic of Korea. Mr B.P. Dhungana, Chief of Investment and Enterprise Development Section, Trade and Investment Division of ESCAP, communicated the Message of Mr Kim Hak-Su, Executive Secretary of ESCAP, and welcomed all the participants of the Meeting. He expressed his appreciation to the government of the Republic of Korea for the excellent host facilities and for having provided general financial assistance to ESCAP to undertake the Meeting. He also thanked Mr Jong-Kap Kim, Director-General for Industrial Policy Bureau, Ministry of Commerce, Industry and Energy, the Republic of Korea, for having inaugurated the Meeting despite his busy schedule. He further thanked Mr Deuk-Jin Jung, President of the Korea Institute for Electronic Commerce (KIEC) whose cooperation proved vital in organizing the event at Seoul. In addition, he expressed his gratitude to Mr Hiroyoshi Watanabe, Director for International Cooperation, Commerce and Information Policy Bureau, Ministry of Economy, Trade and Industry, Japan, who gladly join the Meeting.

Part One: Summary and Recommendations

He mentioned that today the world economy is experiencing a trade and technological revolution with rapid growth in Internet, thriving e-commerce and many other changes that were transforming the way business and trade were conducted. E-commerce had become a driving force for the globalization of the world economy. As a result, many enterprises in developing countries had become integral parts of global networks of production supply chains that increasingly utilize e-commerce methods. In particular, e-commerce gave small and medium enterprises the ability to access international markets that used to be difficult to enter due to high transaction costs and other market access barriers. However, he pointed out that there were many obstacles to overcome in order to realize the full potential of e-commerce. International difference in taxation, trade procedures, and technology standards are some examples of such obstacles. Issues like protecting consumer privacy and intellectual property rights also can be problems. Besides, e-commerce covers a wide range of issues such as awareness building, legal framework, infrastructure and access, human resources, distribution, e-payment (electronic payment), etc. In this sense, he emphasized that international cooperation and regional networks in e-commerce sector were getting more important. The United Nations had established its ICT Task Force to ensure that the benefits of ICT were available to all member countries. In the same context, the ESCAP had been playing an active role in creating an environment conducive to the development of e-commerce in the Asian and Pacific region. He committed that, in line with the findings of study mission and recommendations from this Meeting, the ESCAP also would support diverse cooperation initiatives and spare no efforts in facilitating e-commerce by SMEs in the region.

II. CONSIDERATION OF ISSUES

After the inaugural session, there was a discussion on the contribution of e-commerce and ICT to economic and social development. The main content of the discussion was as follows: (a) The participants expressed their agreement on the enormous potential of e-commerce and ICT to expand business opportunities, reduce costs, increase of efficiency, improve the quality of life, and facilitate the greater participation of small and medium business in global commerce. Experiences gained in many developed and some developing countries show that e-commerce and ICT in general have had a significant impact on enterprises and society as a whole. It was pointed out that e-commerce had become a driving force for the globalization of the world economy, and, therefore, countries that were not capable of taking advantage of e-commerce were likely to lag behind in competitiveness process. Several developing countries of Asian and Pacific region are still only beginning to tap into the great potential benefits offered by e-commerce and ICT. As a consequence, the gap in e-commerce and ICT applications between developed and developing countries remained wide. Whether e-commerce will increase or reduce the capacity of developing countries to narrow the multiple gaps that separate them from the industrialized world will largely, even though not exclusively, depend on the environment in which the benefits take place and the attitudes of actors implementing them. The challenge is, therefore, to harness the internet and other forms of ICT to ensure that their potential is indeed used to create economic opportunities, thus

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Initiatives for E-Commerce Capacity-Building of Small and Medium Enterprises

helping to create competitive business environment and providing a useful basis for implementing solutions to several other social ills. In addition, there were presentations on national experiences of both participating countries and e-commerce-advanced countries. The participants of the regional consultative meeting reviewed the state of development of e-commerce and ICT, obstacles faced by developing countries and strategies that could be used to promote e-commerce and ICT. (a) Representatives of nine developing countries from the government or public organization involved in e-commerce policy setting made their presentations on the current status and prospect of e-commerce in each country, and government policies for promoting e-commerce market. They also suggested recommendations for creating a more favourable cooperation network in the Asian and Pacific region, both at the national and regional level. There were also presentations by resource persons on benchmark case study of e-commerceadvanced economies: Hong Kong, China; Germany and Ireland. The presentations made and lessons learned from national experiences implied that the government could play a critical role in implementing and adopting e-commerce of SMEs, but which should be positive intervention with the market such as regulations for quick adoption by traders, increasing recognition among consumers, development of telecommunication infrastructure, financial subsidization to relevant enterprises and so on. It was also noted that of major importance for the success of e-commerce are continuous evaluation and redesign of business process, companys willingness to change and putting customers interest and priorities in foremost concern as the customer-oriented models. Both of the presentations of the Government of Japan and the Republic of Korea introduced their e-commerce promotion policies to participants in the light of sharing best practices and exchanging experiences in e-commerce sector. The Japanese presentation provided information on outline of e-Japan Priority Policy Program 2002 and details of IT-related Policies that it is currently conducting. The presentation also covered the status of e-commerce practices by SMEs in Japan. On the other hand, the presentations dealt with the Republic of Koreas ICT infrastructure and e-commerce market situation, its policy direction to fully promote e-commerce as a means of structural innovation and industrial competitiveness improvement. The presentation also dealt with various measures enacted to preserve the privacy, security and protection of the e-commerce transacted businesses.

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III. CONCLUSIONS AND RECOMMENDATIONS

The ESCAP secretariat and all participating countries expressed its appreciation to the Ministry of Commerce, Industry and Energy (MOCIE) of the Government of Republic of Korea for its generous financial support and the KIEC for its cooperation in hosting the Meeting at Seoul, the Republic of Korea. The participants from 11 countries noted that the regional consultative meeting was useful and professionally rewarding in establishing a clear understanding among participants of how e-commerce could develop in the Asian and Pacific region and for creating a greater awareness of major issues and trends shaping e-commerce promotion for SMEs in countries of Asia and the Pacific. They also agreed that the Meeting was helpful in recognizing the importance of pursuing new cooperative measures in e-commerce sector in response to information and communication technologies revolution in the context of dramatically changing environment. The participants also expressed the appreciation that the organization

Part One: Summary and Recommendations

of the Meeting in the Republic of Korea had provided an opportunity to gain first hand knowledge and experience of the Republic of Korea in promoting e-commerce for SMEs. It was recognized that the Meeting contributed to the identification of the critical issues in policy areas for which actions at the national and international levels were needed. It also suggested the specific measures that were most likely to create an enabling environment for e-commerce in developing countries and reviewed current experiences of some developed and developing countries in that regard.

A. Elements of national e-commerce strategies

The participants expressed their views on a wide range of issues regarding the development of e-commerce, especially as they related to developing countries and SMEs. The Meeting also identified key elements of participatory, comprehensive national e-commerce strategies. The following is the summary of the main points discussed and on which there were general consensus. 1. Awareness building (a) In several developing countries of Asia and the Pacific, there is still low level of awareness about different aspects of e-commerce and ICT application. This lack of awareness prevails at all levels including government and enterprise decision-makers, and consumers. Therefore, awareness raising is crucial for all stakeholders, especially for SMEs. Awareness building can be accomplished in a variety of ways such as appropriate curriculum in the education system, training by government and at company level and exchange of information and ideas through workshops and conferences. General public awareness campaigns can also be conducted through the mass media. However, the sensitization and creating awareness should also be augmented through various governmental institutions and agencies and resources should be allocated for such sensitization measures. 2. Infrastructure and access (a) Reforming the domestic telecommunications sector has proved effective in improving access to and the quality of telecommunication services. In many developing countries, the sector is still under the public sector. This often results in expensive, inefficient and poor-quality telecommunication services. Hence, there is a need to open up the domestic telecommunications market to private sector and allow competition, including that from foreign suppliers. The short-term loss of revenue is usually outweighed by the long-term gains resulting from a more competitive, efficient and high-quality telecommunications market. The experience of the last decade shows conclusively that effective reform must include three key elements: private-sector participation, market competition and the functioning of effective regulatory body within an efficient market-oriented framework. A key priority for developing countries to consider in the area of infrastructure and access is to ensure that their enterprises and households have access to the Internet at a reasonable cost and quality at a faster speed. However, the Internet remains beyond the reach of the majority of the population in various developing countries of the region. It was recommended that an assessment survey especially for promoting e-commerce for SMEs should be undertaken. A number of initiatives to broaden the use of information technology and especially the Internet were discussed, including provision of free Internet access in public schools, universities and other public locations, and establishing and subsidizing community access centres. In this

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Initiatives for E-Commerce Capacity-Building of Small and Medium Enterprises

context demonstration projects at local levels especially in the rural areas, was thought to be of greatest benefit. (e) E-strategies relating to telecommunications, infrastructure and access needs to be developed and implemented taking into account all segments of society to minimize digital exclusion. For rural areas where private investment in telecommunication development would not be profitable, Government funding or other forms of subsidies was considered to be necessary in terms of long-term development goals. 3. Legal and regulatory framework (a) The need for a legal and policy infrastructure that is supportive of and conducive to the e-commerce activities constitutes one of the main issues that policy makers should address when defining an e-commerce strategy. Legislation should aim at providing legal security and predictability, technological and commercial neutrality and removing barriers to access, use and the free movement of e-commerce. Thus, it is paramount to ensure that electronic transactions online are legally valid, binding and enforceable. National policy priorities need to be reflected in the legal framework to maximize certainty and encourage confidence and use. The legal framework, a key element in the enabling environment, affects market participation. Therefore, the process and sequencing of reform was emphasized. Participants stressed the importance of carrying out a broad public consultation and debate with all stakeholders before preparing e-commerce legislation to ensure fairness and an equitable balance between different interests at stake. It was emphasized that the importance for developing countries to consider their own special needs when adopting any new e-commerce legislation. In doing so, the international character of e-commerce and the desirability of regional harmonization and compatibility of regulations should be taken into consideration. It was also emphasized that some arrangements for jurisdiction for dispute settlement among countries regarding business transaction through e-commerce be made. The Meeting identified a number of important legal issues such as alternative online dispute resolution, electronic contracting, consumer protection, privacy and data protection, cyber-crime, taxation, customs, jurisdiction, import and distribution, and intellectual property rights including digital rights management. Participants stressed the importance for developing countries in participating in the current international debate. The need for technical assistance to developing countries in adopting their national law to accommodate e-commerce was viewed by many participants as a priority. Requests were addressed to the international community for enhancing their activities in these areas. 4. Human resources (a) The Meeting noted that there should be a commitment from the highest levels of government to develop the human resources needed to meet the challenges of the e-business environment. As a matter of fact, human resources development is regarded as one of the most challenging bottlenecks for developing countries to successfully engage in an e-commerce especially for SMEs. In many developing countries, the rate of literacy is low and levels of education are insufficient to fully meet the organizational work changes required for efficient utilization of e-commerce and ICTs.

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Part One: Summary and Recommendations

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The participants recognized that in order to address the literacy and education shortcomings, governments, in cooperation with the private sector, should invest in education and training and formulate appropriate HRD policies, in order to fully benefit from e-commerce and ICTs. They should adapt their educational system and school curricula to fully take into account the requirements of e-commerce and ICT applications. The participants also noted that the availability of specialized ICT skills in developing countries could be instrumental in attracting ICT companies from developed countries to set up ICT enterprises or subsidiaries in the developing countries. In this context, it was urged that ESCAP and other regional organizations should hold training and retaining programmes in e-commerce, including the training on the legal aspects of using e-commerce. 5. Government and business relations

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In order for e-commerce to flourish, government and business sector should cooperate wherever possible to develop integrated platforms for e-commerce. The role of government is to promote and facilitate the development and uptake of e-commerce by providing a favourable environment including legal and regulatory aspects, building trust and confidence among e-commerce participants, and becoming a leading-edge user to catalyze and encourage greater use of electronic means. On the other hand, enterprises should play a pivotal role in developing e-commerce technology, applications, practices and services. Most of developing countries, however, are behind in e-commerce sector and this issue must be a complicated and tough issue for them. Therefore, the wide spread of awareness on e-commerce potential and the establishment of fundamental system concerned with e-commerce should be provided by government in those countries. Furthermore, the government should play a leading role in creating institutional infrastructure and facilities for promoting technical skills required for widening the use of information technology in general and e-commerce in particular. The Government should try to popularize e-commerce practices, by promoting the use of national and local languages.

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B. Regional cooperation for e-commerce development

(a) The international community could play a supportive role in efforts to develop and implement national e-commerce strategies especially targeting the weaker economies such as least developed countries and economies in particular. Global initiatives that have recently emerged, such as the Digital Opportunity Task Force of the Group of Eight (G8) or the United Nations Information and Communication Technologies Task Force, have included the topic of national e-strategies in their plans of action, aiming at reducing the digital divide as a key element of global efforts to reduce poverty. The importance of linking these efforts with those of other international organizations in the area of e-commerce and ICT development was stressed. It was also highlighted that regional networks are important to exchange experiences among countries sharing similar challenges and socio-economic background. Participants felt that there were some constraints that ICTs could not address, so that action taken at the international level to harness the development potential of the new technologies had to be complemented by action on other fronts including for example maximizing market access for developing countries exports.

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Initiatives for E-Commerce Capacity-Building of Small and Medium Enterprises

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It was suggested that ESCAP and other regional organizations should attempt to initiate measures for promoting the harmonization of e-commerce and other ICT use and trade facilitation measures.

C. General conclusions
(a) It was pointed out that the international organizations and regional bodies such as ESCAP could initiate activities to assess the priority needs of weaker economies related to the promotion of information technologies by SMEs especially the e-commerce techniques. In this context, it was pointed out that familiarization of best practices through national and regional seminars, study visits etc. would be highly useful. It was also suggested that the developing countries needed to be appraised about the ways and means of promoting international marketing especially of exports through e-commerce techniques. In this context ESCAP and other regional organizations were requested to provide technical assistance both for public agencies as well as the private entrepreneurs through national business associations and chambers of commerce and industry. The Meeting noted that while different e-strategies could be applied to developing countries in general, there was no single set of e-strategies that could fit the conditions and requirements of all developing countries. In particular, the successful application of e-strategies had to be tailor-made to fit the economic, social and political environment of each country, leveraging the emerging body of international good practice and bearing in mind issues such as harmonization and interoperability. E-strategies were to be considered in a complementary manner and as packages of measures. Implementing only a few e-strategies could be insufficient since areas where no action was taken would undermine the effectiveness of those strategies that were put in place. Thus all areas including legal issues, awareness, human resources, infrastructure and access, e-payments, distribution, trade facilitation, etc. have to be considered together and developed in parallel. The government may play an important role in ensuring that stakeholders are fully involved by providing a framework. E-commerce and ICT development is a multidimensional issue and the design and implementation of effective e-strategies requires the involvement of all stakeholders, including high-level government representatives, business organizations, civil society and consumers. Notwithstanding the important role of the government in initiating and implementing e-strategies, in the final analysis much of the required business investments rest with the private sector. Experience shows that the private sector has been the most innovative and the major driving force behind e-commerce and ICT development. In general, the modalities of application of technology to business activities are more efficiently decided by the market. However, an e-strategy that ensures mutually supportive public intervention with private sector initiative is the only viable one. Follow-up actions of this Meeting should include a more focused meeting dealing with issues on e-commerce and the best practice for promoting e-commerce for SMEs by targeting specific sectors especially dealing with exports. Efforts should also be made to assess e-commerce needs of local business. It was recommended that a web site be created by ESCAP to inform about the latest development in e-commerce technologies. In this context, it should also explore the possibilities of setting up the repository of documents dealing with e-commerce technologies.

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