Embracing the Ecommerce Revolution in Asia and the Pacific

Jong Woo Kang Principal Economist Economic Research and Regional Cooperation Department Asian Development Bank

Workshop on Environmental Readiness for E-commerce: Economic, legal and institutional factors Shanghai, PRC

Key messages E-commerce revolution in Asia and the Pacific presents

vast economic potential

E-commerce market in the region remains highly heterogeneous in (i) economic factors and conditions, (ii) legal and institutional environment and (iii) social acceptance

The emergence of new technologies will significantly impact the e-commerce landscape

Border procedures and regulatory burdens should improve to foster cross-border e-commerce

Developing an e-commerce ecosystem requires a holistic approach and concerted efforts by all stakeholders

2

Evolution of E-commerce in Asia and the Pacific

3

Coverage of E-Commerce

4

E-commerce —Purchases and sales of

products (e.g., physical goods, digital products and services)

conducted over computer networks

—Comprises B2C, B2B, C2C, and B2G

B2B + B2C

—B2B and B2C are the two leading

segments in terms of size and relevance

B2C

Internet Retail

—Subset of B2C e-commerce that

excludes items such as auctions and online

reservations

—Data sources include EMarketer and Euromonitor International

B2B = business-to-business, B2C = business-to-consumer, B2G = business-to-government, C2C = consumer-to-consumer,

UNCTAD = United Nations Conference on Trade and Development.

Sources: Ecommerce Foundation (2016a), eMarketer (2017b), Euromonitor International (2018), and UNCTAD (2015).

Asia and the Pacific is the largest and fast growing e-commerce market

5

Note: Market size refers to the total goods and services sold through internet retail market. See Box 1.1 for the

definition of internet retailing. Asia and the Pacific comprises of Australia; Azerbaijan; Hong Kong, China; India;

Indonesia; Japan; Kazakhstan; Malaysia; New Zealand ; the People’s Republic of China; the Philippines; Singapore; the

Republic of Korea; Taipei,China; Thailand; Uzbekistan; and Viet Nam.

Source: Kshetri (2018) using data from Euromonitor International. Passport database.

Comparison of Internet Retailing Market Size, 2017-2021 (forecast)

0

20

40

60

80

100

0

200

400

600

800

1,000

1,200

Asia and thePacific

Europe LatinAmerica

Middle Eastand North

Africa

NorthAmerica

%

$ b

illio

n

2021 forecast (left) 2017 (left)

Growth rate, 2021 versus 2017 (right) Overall growth rate, 2021 versus 2017 (right)

It is also the largest as % of GDP

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GDP = gross domestic product.

Note: Business-to-Consumer (B2C) e-commerce covers any contract for the sale of goods and/or services, fully

or partially concluded by a technique for distance communication. Values refer to the total of goods and

services sold through B2C transactions as a percentage of GDP.

Source: Ecommerce Foundation (2016).

0.7

0.8

2.6

3.1

4.5

0 1 2 3 4 5

Middle East and North Africa

Latin America

Europe

North America

Asia andthe Pacific

Global E-commerce (% of GDP)

Regional E-commerce, 2015 (% of GDP)

1.3 1.6

2.0

2.4

3.1

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

2011 2012 2013 2014 2015

Yet Central Asia lags behind

7

Internet Retail Spending Per Capita—Central Asia, 2016 ($)

0

2

4

6

8

10

12

14

16

18

Azerbaijan Georgia Kazakhstan Pakistan Uzbekistan

Source: Kshetri (2018a) using data from Euromonitor International. Passport database.

Internet Retail and M-commerce Spending Per Capita

—East Asia, 2016 ($)

0

100

200

300

400

500

600

700

800

900

1,000

HKG JPN KOR PRC TAP

M-commerce Internet retailing

HKG = Hong Kong, China; JPN = Japan; KOR = Republic of Korea; PRC = People’s Republic of China; TAP = Taipei,China. Note: See Box 1.1 for definitions of internet retailing and m-commerce. Source: Kshetri (2018a) using data from Euromonitor International. Passport database.

Analytical Framework

8

Factors Affecting the Development of e-marketplace

9

ICT = information and communications technology.

Source: ADB compilation based on Kshetri (2007a, 2018a), North (1996), Parto (2005), Scott (1995, 2001), and World Bank (2016a).

● Affordability and access

to ICTs

● Bandwidth availability

● Availability of online

payment options

● Delivery infrastructures

● Economies of scale

Economic Social Acceptance and Awareness

Firm level ● Confidence, risk

aversion, and inertia

● Awareness, knowledge

and understanding of

e-commerce opportunities

Consumer level ● Awareness and

knowledge of e-

commerce benefits

● General and computer

literacy

● English proficiency

● Trust in e-commerce

vendors and postal

services

● Perception of

foreign

products/vendors

Environmental

readiness

for e-commerce

E-marketplace

development

Legal and Institutional

Normative institutions ● Importance of personal

relationships in

business

● Roles played by

industry bodies and

trade/professional

associations

Economic Legal and

Instituti

onal

Social

Acceptance and

Awareness

Regulative institutions ● Legislative measures

related to

e-commerce

● Measures making e-

commerce affordable and

accessible

● Policy initiatives that

directly facilitate e-

commerce activities

● Public-private

partnership

programs

Economic

environment

that affects

accessibility

and viability

of

e-commerce

activities

Internalized

norms that

affect

e-commerce-

related

behaviors of

individuals

and

organizational

decision-

makers

Social and

political

environment

that plays

roles in the

evolution of

the

legitimacy

of e-

commerce-

related

activities

Legitimacy to

participate in

e-commerce

Individual

readiness

for e-commerce

Current Status and Challenges

10

ICT Infrastructure

11

020406080

100120140160

Fixed-telephone

subscriptions

Mobile-cellular

telephonesubscriptions

Active mobile-broadband

subscriptions

Fixedbroadband

subscriptions

Householdswith a

computer

Householdswith internet

access at home

Individualsusing theinternet

Africa Arab states Asia and the Pacific CIS Europe The Americas

Source: International Telecommunication Union. Statistics. https://www.itu.int/en/ITU-D/Statistics/Pages/stat/default.aspx

Key ICT Indicators by Region, 2016 (per 100 inhabitants)

Number of Internet Users—Central Asia, 2016 (% of population)

0

10

20

30

40

50

60

70

80

90

AFG ARM AZE GEO KAZ KGZ PAK TAJ TKM

AFG = Afghanistan, ARM = Armenia, AZE = Azerbaijan, GEO = Georgia, KAZ = Kazakhstan, KGZ = Kyrgyz Republic, PAK = Pakistan, TAJ = Tajikistan, TKM = Turkmenistan. Source: International Telecommunication Union. ICT Facts and Figures 2017. https://www.itu.int/en/ITU-D/Statistics/Pages/facts/default.aspx (accessed 15 December 2017).

E-payment

12

Card Payment Transactions—Selected Asian Economies, 2016

($ per capita)

Source: Kshetri (2018a) using data from Euromonitor International. Passport database.

0

5,000

10,000

15,000

20,000

25,000

30,000

AUS HKG KOR SIN

Credit card transactions Card payment transactions

0

4,000

8,000

12,000

16,000

20,000

AUS HKG KOR SIN

a: High spending economies

0

100

200

300

400

500

PHI INO VIE IND

b: Low spending economies

Delivery Infrastructure

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0 20 40 60 80 100

Tonga

Mongolia

Lao PDR

Philippines

Maldives

Malaysia

Sri Lanka

Uzbekistan

Japan

Population with Access to Home Mail Delivery—

Selected Asian Economies, 2015 (% of population)

Source: Universal Postal Union. http://www.upu.int/en/ressources/statistiques-postales/resultats-2015.html

Legislation

Status of E-commerce Legislation—Asia and the Pacific, as of December 2017 (Number of economies)

Legislation exists Draft legislation No legislation No data

35

3 5

5

16

2

2

28

22

2

15 9

35

1

12

b. Consumer protection

c. Privacy and data protection d. Cybercrime

a. Electronic transactions

Sources: various international and local sources

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Uneven Opportunities: Gender Gap

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Gender Gap in Internet Access—Selected Asian Economies (% of males minus % of females)

-2 2 6 10 14 18 22

New Zealand (2012)Australia (2015)

Cambodia (2015)Thailand (2016)

Kazakhstan (2016)Singapore (2015)

Armenia (2015)Bangladesh (2013)

Malaysia (2016)Hong Kong, China (2015)

Japan (2015)Indonesia (2016)

Republic of Korea (2016)Azerbaijan (2016)

Pakistan (2016)Brunei Darussalam (2016)

Source: International Telecommunication Union. Gender ICT statistics. http://www.itu.int/en/ITU-D/Statistics/

Pages/stat/default.aspx

Key Opportunities

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Economic Benefits and Costs of Using E-commerce

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Benefits

Costs

Boosts efficiency and increases gross

domestic product

Allows economies to increase

participation in global value chains

Increases labor productivity and

supports job creation,

entrepreneurship, innovation, and

creativity

Leads to energy savings and lower

carbon emissions

Advances inclusive growth (benefitting

developing economies, rural areas,

women and the elderly, among others)

Requires social and physical capital

investment

Could lead to transfer pricing and

erosion of tax revenue

Potential to widen economic disparity

Potential to distort competition

Source: ADB compilation based on Anvari and Norouzi (2016); Bram and Gorton (2017); Ca’ Zorzi (2000); Carnegie Melon University (2009);

Cockfield et al. (2013); Hinojosa (2017); Mueller and Shoenmaker (2007); Organisation for Economic Co-operation and Development, United

Nations Conference for Trade and Development (UNCTAD), and World Trade Organization (2016); Palsson, Pattersson, and Hiselius (2017);

Savrul and Kılıç (2011); UNCTAD (2015, 2017b); and World Bank (2003, 2016b).

Enhancing Inclusiveness

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Rapid growth in internet and mobile phone access

Developments in e-payment

Improving logistics-related technologies and infrastructure to benefit the disadvantaged

E-commerce-enabling technologies in developing countries and LDCs

Improved access to advanced e-commerce-enabling technologies for SMEs

Emerging Technologies affecting E-Commerce Landscape

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Big Data Use in the People’s Republic of China to Boost Customer Retention and Spending

Collect data:

● Online shoppers

● Available products

● Purchasing habits of online shoppers

Use data:

● Identify customer groups

● Use machine learning to decide on product lines and promotions

Increase customer retention and spending:

● Segment customer groups

● Target offerings

Source: ADB based on Wang (2016)

1.3

0.6 0.4

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

2004 2006 2008 2010 2012 2014 2016E 2018E 2020E

Average Sensor Cost for the Internet of Things—Global ($ per unit)

Source: BI Intelligence (2014)

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Technology Examples of use Benefits of combining with 5G

IoT IoT can improve consumer experience, track

inventory in real-time and manage more

effectively (e.g., JD.com)

5G's faster data-transmission will make it easier to

transfer data created by IoT devices.

AI AI-enabled apps—such as Amazon and

Google assistant—can order products online,

track orders and perform other e-commerce

activities.

5G's faster data-transmission will allow quicker

access to additional information and help the AI

better understand the environment and context.

Blockchain Blockchain-based smart contracts can be

used by online vendors to automate order

fulfillment.

Blockchains have been used in supply chain

management systems and B2B e‐commerce

(e.g. the PRC’s JD.com).

5G can help feed information (e.g., from IoT

devices) required for a smart contract more

efficiently.

It can also provide better security.

AR/VR AR enabled apps allow a potential customer

to place real products in a virtual setting to

provide clear visualization of product use

(e.g., Lego and IKEA).

5G network’s higher bandwidth, reduced latency and greater uniformity (mobile connection’s consistency across locations) allows transmission

of complex worlds and sophisticated inputs that

require processing of huge amounts of data.

Emerging Technologies affecting E-Commerce Landscape

Source: ADB compilation based on Dave (2017), Harbet (2018), IDG (2018), and Xiao (2017).

Way Forward

21

22

To unlock the potential of digital trade and e-commerce, it is imperative to take on the following measures:

Institute legal, regulatory and institutional reforms

Intensify regional efforts to modernize and harmonize regulations

Enhance affordability of and access to ICT

E-commerce boosts efficiency, enhances market access for businesses and consumers, and generates spillover effects

Improve logistics and delivery infrastructure

Broaden the e-payment availability and options

Fostering Cross-Border E-Commerce

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Global cross-border B2C e-commerce to grow at 27% from 2014 to 2020 to reach almost $1 trillion.

Various efforts underway to reduce complex border crossing

procedures and regulatory burdens

- National Single Window (NSW)—a one stop-shop to speed up customs

clearance - Automated System for Customs Data (ASYCUDA) system developed by

UNCTAD - New Framework Agreement on the Facilitation of Cross-Border Paperless

Trade in Asia and the Pacific - International customs rules for cross-border e-commerce being developed

by WCO

Securing tax revenues while minimizing taxation costs are

crucial

Creating a Virtuous Cycle in E-marketplace Development

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Source: ADB compilation based on Albers‐Miller (1999), Ang et al. (2001), Levi (1998), and Zucker (1986).

Consumers Engage in ethical and responsible actions

Government agencies and trade associations

Create institution-based trust Supplement government role

E-commerce vendors and businesses Create trust

• Characteristic-based trust • Process-based trust Innovate

Social Willingness

to Participate in

The E-marketplace

Thank you!

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