Episode Six: E-Commerce and the Road to the Arab Digital Common Market – Part One

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Date: 02 - 05 - 2019

Dr.. NS. Ali Mohamed El Khoury

Trade is at the heart of the economy, and it is one of the oldest human professions. It symbolizes the place – that is, the market – in which buying, selling and negotiating takes place.

It is that profession or industry that developed from the concept of barter between goods, products and services, until the entry of money as a modern means of commercial exchange, which represents the economic value of the product or service. In this article, and within the framework of a series of articles related to the components of the digital economy, we will discuss one of its most important pillars, which is e-commerce.

Trade is at the heart of the economy, and it is one of the oldest human professions. It symbolizes the place – that is, the market – in which buying, selling and negotiating takes place. It is that profession or industry that developed from the concept of barter between goods, products and services, until the entry of money as a modern means of commercial exchange, which represents the economic value of the product or service. In this article, and within the framework of a series of articles related to the components of the digital economy, we will discuss one of its most important pillars, which is e-commerce.

Until recently, markets were the geographical location in which the seller or product, whether an individual or a company, was practically located. In order for the seller to sell his products, he waits on his site for the customer to come to buy, and sometimes the seller moves to the site of the customer’s presence to offer him his goods and services.

With the development of electronic communications in the early fifties, other tools for communication between people appeared, especially the telephone, fax, and then electronic data interchange systems (EDI) as means of communication, negotiations, agreement and contracting in business, but this method was often limited to transactions between companies.

With the adoption of legislation and laws for these commercial channels, which have become regulating relations and the rights of the parties, many institutions, such as banks and banks, have begun to provide their services to activate these commercial mechanisms and move from exchanging paper documents to exchanging them electronically, especially since commercial operations usually require the exchange of many information such as: (Details: The commodity or product and its requirements, date of supply, technical specifications, price value, payment terms, and legal requirements such as certificate of origin, bill of lading, insurance, etc.).

Communication technology in this first stage has contributed to reducing costs, saving time, raising the competitive advantage, and reducing; In many cases, it even reduced the need for the actual presence between the seller and the buyer, and contributed to expanding the size of the market and the opportunities available to sellers. This achievement was a revolution in the ability of humans to trade, import and export, which greatly helped to enhance commercial exchanges and trade in general, especially cross-border ones.

With the advent of the Internet, the star of digital technology emerged, and trade was with a new date and a new revolution in the concept of commerce and the concept of the market, which removed geographical barriers and borders, and paved the way for the concept of the virtual world with one market in a small village. Contrary to what prevailed in the past, the market was limited in its location and the available volume of dealers who pass by it, but with the electronic market, its limits theoretically are the population of the world, so it is possible to purchase any product or service from anywhere in the world, through simple steps, and complete Pay with different and easy electronic options, and access to this market only requires a mobile phone or an internet-connected device. In other words, the market is now available to us in our pockets!

The fundamental change brought about by electronic commerce is that it enabled the customer to access markets anywhere and everywhere in the world,

There is no longer a need to travel or rely on traditional communication systems, which were limited to a limited category of companies,

But we are now dealing with a unique case that enabled the customer (the ordinary individual) to review the products he wants and choose from a wide variety of similar products,

It can also get to know the opinions of dealers and their evaluations of the seller and the goods in all transparency.

It is interesting that in exchange for giving unprecedented opportunities to manufacturers and traders to present their products to a huge base of dealers, it made their evaluation and comparison between them and their competitors a public, transparent and revealing procedure.

This is actually in the interest of the customer, who, with the continuation of this competition, will enjoy better quality and competitive prices, and sometimes offers, discounts, and better terms in order to win the battle to attract the customer.

In light of all this, how can we today describe the Arab market for e-commerce, and compare it with the global reality?

According to international statistics, the volume of electronic commerce globally, especially between companies and individuals (Business-2-Customer – B2C), amounted to about 2.6 trillion dollars in 2017, and it is believed that it approached the barrier of 3 trillion dollars at the end of last year,

Note that these statistics do not include airline sales and hotel reservations, although they constitute a very large base of electronic commerce. Global e-commerce studies expect that (B2C) trade will exceed $5 trillion within 3 years, with the continued expansion of this technology, the advancement of security standards, and the increasing confidence of customers.

If we compare these numbers with the Arab countries, we will find that the volume of electronic commerce (B2C) in the Arab region is approximately $30 billion; That is about 1% of the value of global e-commerce with individuals.

Looking at the Arab population census index, which constitutes 5% of the global population, it becomes clear with it a large gap that may reflect the opportunity available for the growth of these electronic markets in the Arab region. Assuming that the proportion of e-commerce in the Arab region is equal to its proportion of the global population,

That is, the rise of its e-commerce to 5% of the value of global e-commerce, which means that the Arab countries lose about 120 billion dollars annually, and it represents a lost opportunity that can be converted from a trade gap to an opportunity and an economic advantage that contributes to the promotion of Arab productive sectors.

On the other hand, the volume of global electronic commerce between companies and institutions (Business-2-Business – B2B) exceeded the eight trillion dollar barrier by the end of 2018, which is three times the volume of trade with individuals (B2C).

Although this sector of trade between companies is considered the most developed, economists consider that there are still greater opportunities for growth in the future due to the potential of some new technologies such as blockchain, artificial intelligence and big data that have not yet appeared that can contribute to the growth of this trade to new heights. New.

Similar to the logic of “the unmeasurable cannot be managed,” we are faced with a challenge in which it is difficult to know the position of e-commerce (B2B) in the Arab region, in light of the lack of any accurate Arab statistics on this important sector. Complementing the same logic, “what cannot be managed cannot be developed,” and with the absence of objective indicators on the state of e-commerce between companies in the Arab region (B2B), it is not possible to assess or monitor what can be developed in business growth.

This prompts us here to invite Arab statistical institutions to include and publish the results of Arab countries in this field, which would contribute to improving and addressing what is short and stimulating investments and the growth of this strategic commercial sector.

Dr.. NS. Ali Mohamed El Khoury

Advisor to the Council of Arab Economic Unity and President of the Arab Federation for Digital Economy