H.E. Dr. Eng. Ali Al-Khouri, Advisor, Arab Economic Unity Council League of Arab States Chairman of Arab Federation for Digital Economy, participated in the conference of eCommerce and global eShopping platforms. The participation is to discuss the impact of global eCommerce platforms on the Arab countries’ markets, and to develop a vision of the future to develop Arabic eCommerce.
And the conference is of great importance, under the urgent need for the Arab region to build comprehensive economic knowledge, and also to participate in protecting national economies, achieve the requirements of sustainable development, formulate tracks for the economies, and to develop strategies of economic and investment competitiveness.
Al-Khouri also emphasized, within his speech at the conference, that the world is changing with an amazing speed, and that one of the most important engines of change is digital transformation, explaining that digitization, which means merging digital technologies into economic and social activities, has become a global practice that occurs at different paces and speeds, its objectives vary among cost reduction, stimulating innovation, services development, operation efficiency, improving data accessibility, and knowledge establishment.
He also explained that organizations or countries’ failure with digitization, today simply means “losing and being out of the game” of this digital era, pointing to the recent collapse of Thomas Cook as a good example of such statement, in addition to closing seven thousand retail stores in the United States in the first six months this year, due to many causes, among them is internet competition, and that businesses digital transformation and concepts of eCommerce are pushing towards a globalized model that would change the traditional rules and regulations.
Al-Khouri also reviewed through his speech a number of charts and indicators for the eCommerce in the Arab region, and he stated: “Despite the slow pace of global economic growth between only 2% and 3% – in most of the countries – the average growth of international eCommerce is around 24%, and electronic B2C commerce is expected to reach 3.2 Trillion US Dollars by 2020, also electronic B2B commerce is expected to reach 6.7 Trillion US Dollars which is almost 8% of the world GDP, some other statistics also say that electronic B2B commerce is expected to reach 8 Trillion US Dollars.”
He explained that the electronic markets will have more than two billion customers online around the globe by 2020, and this number is exponentially increasing. He emphasized that middle east and north Africa is considered one of the fastest growing regions in eCommerce, with growth rate of 25%, with around 100 Million digital buyer in the Arab region, and eCommerce in the middle east is valued between 69 to 70 Billion US Dollars nowadays, and for electronic B2C commerce, it’s between 30 to 35 Billion US Dollars, while there is no accurate data for electronic B2B commerce for the Arab companies, it is assumed to be of size close to that of B2C.
He added that although the global average for electronic B2B commerce is three times that of B2C, the Arab countries are still behind in this sector of eCommerce, as the reports state that pan-Arab eCommerce has increased by 3% between 2014-2020, estimating the electronic B2B commerce in middle east and north Africa around 22 Billion US Dollars, and is expected to reach 26 Billion US Dollars by 2020.
Al-Khouri emphasized that Arab eCommerce generally represents 1.5% of the total GDP, compared to the global average of 4%, this shows an opportunity in the expected growth for Arab eCommerce in the coming ten years, which is estimated to exceed 500 Billion US Dollars, according to a study published by Arab Economic Unity Council in 2017, this means great area of opportunity for growth, as well as large and promising investments in the Arabic Market.
The Arab Economic Unity Council advisor has put a framework of 11 pillars to understand eCommerce engines and to utilize the region’s potential, which need the attention of decision and policy makers, to develop and support eCommerce in the Arab region.
And Al-Khouri went on the first pillar saying: “The first pillar represents developing a national strategy to put the legal and regulatory framework, and the executive policies, to promote the growth of eCommerce, and to handle challenges and gaps, with consideration to foreign investments in eCommerce platforms, to guarantee fair competition in local markets. China is a good example in developing such strategies, as it managed to increase eCommerce size to more than 1.33 Trillion US Dollars in 2018, and China would have not done that just by chance.”
He explained that the second pillar is concerned with encouraging and stimulating eCommerce businesses, pointing to the example of Malaysia and Indonesia announcing many incentives to support eCommerce and startups working in its field, the stimulus programs of the two countries include tax waivers and opportunities for investment funding.
He added that the third pillar is about digital training and learning programs that focus on handling the lack of experience and skills, and on the growth requirements of the current work force. He also explained how the United States, India, and China have handled all the gaps they had through educational programs and establishing electronic universities and institutes, aiming at raising the collective cultural awareness, and ratios of innovation and productivity, as well as encouraging entrepreneurship.
He pointed to the fourth pillar that represents the importance for the governments to head towards developing plans for strategic investments in eCommerce platforms and establishments, these investments can be considered as accelerators for practicing eCommerce. As we can see can see many countries led by the US & China are investing heavily in in technology companies, where Amazon and Ali Baba today dominate with 80% of the market share of eCommerce, and we can never expect those companies would have reached such numbers without any kind of support from their governments.
He emphasized that the fifth pillar is about the importance of the governments role to support and fund Small and Medium Enterprises (SMEs) and startups, due to the large number of job opportunities those companies can avail in societies. He pointed to the fact that Indonesian government expects that eCommerce would contribute with 26 million job opportunities by 2022, where in Estonia, SMEs contribute with around 66% of its exports, and 75% of job opportunities. Also, EU countries sponsor digital transformation projects in SMEs, and as per official statistics, small and micro businesses in EU contribute to around 66% of the job opportunities.
And the sixth pillar relates to the availability of the fundamental systems and infrastructure essential for eCommerce, like the services of e-payment and logistics, where 70 to 80% of digital buyers in Arab countries prefer cash on delivery options, and this is one of the major challenges that will hinder eCommerce on the long run, this would take the governments to a must have set of special policies and regulations to increase the society trust in digital financial systems. Besides, freight and delivery services remain as a main part of the success of eCommerce companies. Although, logistics services are not considered as an industrial sector in the Arab region, and the governments are required to focus on developing this sector as it is considered a backbone and the main engine for economic and industrial growth, as per Dr. Al-Khouri in his speech.
And he carried on: “The eGovernment programs like eProcurement, avail unique chances to utilize eCommerce. And as per Organisation for Economic Co-operation and Development (OECD), 1% of government procurement, if goes through eProcurement systems, will represent savings of up to 43 Billion Euros a year for its member countries.”
Al-Khouri said that governments have to update the laws of consumer protection, to ensure levels of protection for eCommerce that at least would match those of traditional trading transactions, pointing to that EU has developed a set of regulations to ensure high level of consumer protection and satisfaction, and also allocated a budget of around 200 Million Euros through 2014-2020, emphasizing the importance of the element of trust, which is considered one of the most significant obstacles for eCommerce in the middle east and Africa, as per an international report published on 2018.
He explained that the eighth pillar is represented by the importance of reducing the custom procedures, especially those related to cross-border trade, pointing to what South Korea, one of the main trade pillars in the global economy, have done in the same context, where it have launched a lot of initiatives to develop the management of border entry points, as well as customs regulations, so the imports clearance process would take around one and a half hour, while exports clearance would take less than two minutes. Also, the EU has launched a lot of initiatives to reduce and improve the procedures, aiming at a strategic objective to increase exports among member countries by 66%.
He emphasized that cross-border eCommerce in the countries of eastern Asia reached 53%, compared to less than 3% among the Arab countries, which means that for every more two US Dollars spent in foreign trade of Asia, one US Dollar of them is pent in eCommerce. It is also important to be attentive to the fact that current customs procedures and regulations, worldwide in general, and the Arab in particular, were originally designed for large industrial shipments, and now, there is an urgent need for simplifying clearance procedure of eCommerce shipments, and with clear and precise taxes and custom tariffs, especially for shipments of small value.
He added that the tenth pillar is about the need of the support from governments towards national products and services that are on eCommerce platforms, and to ensure a competition of equal opportunity for them with international market players, especially that usually international corporates dominate the local eCommerce through acquisitions. And Singapore is considered an excellent example, especially with its efforts that raised its exports by 175% of its GDP, compared to 205 in the US. Another example is the support of the Philippines government for local players in digital market, despite the large competition of international players.
And he pointed to the eleventh pillar, which relates to guaranteeing internet accessibility, through reliable and secure high-speed connectivity, and at reasonable prices, especially that internet connectivity is the cornerstone of eCommerce development. Therefore, the internet should be looked at as the principal tool of economic growth. He emphasized that although the internet infrastructure is not the same for each Arab country, the widespread reality is that it is still very expensive, stating that this field needs specific policies, to push the companies towards digital transformation, and to support Arab countries’ economies to reach new levels of development.
Al-Khouri concluded his speech saying: “eCommerce has become the major development engine for local and global economies, where it represents a new economic model, which its applications can have a positive impact on the macro economy at a national level.” He pointed to the fact that policy makers still look at eCommerce as a mere platform for buying and selling, and this is just a small part that they see of the big picture, and that eCommerce if handled as a strategic file, it can contribute to stimulating economic growth and support national economies. He added that without deeper understanding of the engines of eCommerce, it won’t be possible to support the increase and spread of eCommerce and improving it in the Arab countries, with the speed witnessed today for technological development, and the increase of digital buyers numbers ̶ like a snowball ̶ in Arab countries, and that eCommerce potential is simply … huge.