Replication of AliBaba e-commerce in rural Pakistan
By Dr Abdul Saboor
E-Commerce is the emerging and rapidly growing economic sector all over the world. Pakistan might not be an exception as there is great potential of booming of E-Commerce in its rural economy. In total physical retail stores, merely half percent is being operated through E-Commerce. United Nations E-commerce index measures the readiness of various countries to engage in online business and commerce. As per 2016 statistics, Pakistan is 105th among 137 countries on this Index. Its position has been dropped as compared to the level of 86th position in 2014. This calls for an urgent need to address E-Commerce issues on modern lines. The rational trick is to replicate the workable and leading E-Commerce ideas of the world in rural Pakistan. E-Commerce provides a level playing field for all kinds of businesses to be vibrant and vigorous. It has a variety of spillover effects in other sectors of the economy. As for instance, online ride-sharing Apps have generated employment opportunities and increased the spectrum of customer choice. One can witness the enhanced sales of products through E-Commerce.
History of E-Commerce can be traced back from the 1960s when businesses started Electronic Data Interchange (EDI) to share business documents. The E-commerce so emerged allowed exchanging goods and services electronically without any barrier of time and distance. The key types of this E-Commerce include Business to Customer (B2C), Business to Business (B2B), Customer to Business (C2B), Customer to Customer (C2C), Government to Business (G2B), Business to Government (B2G), Customer to Government (C2G) and Government to Government (G2G). In the domain of these diversified categories of E-Commerce and among the marvelous success stories, AliBaba has set an unmatchable breakthrough in the very Eastern Culture. The technical beauty of this E-Commerce Model lies in its potential of replicability across regions and sectors all over the world in general and Asia in particular. Pakistan may be a right candidate for replication of Alibaba strategies of E-Commerce in rural areas. There is already a Memorandum of Understanding (MoU) between Government of Pakistan and Alibaba Group for promoting Pakistan’s exports abroad through well established E-Commerce system. But the requisite efforts and initiatives are not visible in the planning and policy operations.
There is great scope and potential of various types of E-commerce initiatives in the agrarian set-up of Pakistan keeping the major crops, fruits, vegetable and livestock into consideration. In line with the transitional development of Alibaba, some workable strategies may be separately designed for each sector. A great deal of employment may be generated particularly of the women folk in the rural areas of Pakistan through the replication of Alibaba’s Model of E-Commerce. Studies show that E-Commerce provides charming incentives for E-tailers to participate in public affairs because they are interested in making connections with the government officials through E-Commerce associations. An Action Plan may be articulated to streamline the Alibaba’s imported versions of E-Commerce all across China Pakistan Economic Corridor (CPEC).
Alibaba E-Commerce model is the best suitable option as an online marketplace for agriculture products. This is a sort of hybrid model that accepts online orders. Business people can directly interact with farmers to help them place orders for the products they need. Alibaba may also provide post-sale support to farmers and helps suppliers by providing ‘demand forecasts’ based on their data. There is another plus point that Alibaba is registered in stock exchange markets and having cross border business operations. It has a potential of transformative impact on rural society. This is also good for enhancing the rural economy for domestic consumption driven rather than effortlessly focusing on export-led agriculture growth. Alibaba also provides incentive in terms of Pay Per Click (PPC) so as to build the business of suppliers. It may be replicated in rural Pakistan so that E-Commerce can be adopted in the country in full spirit.
It is imperative to identify the areas of interest for mobilizing E-Commerce in rural Pakistan. Both backward and forward linkages need to be taken into consideration for prioritizing the areas of commerce and business. In the backward market linkages, seeds, fertilizers and pesticides are important at private level. But at public level, e-commercialization of water and extension related advisory services should be promoted. In case of private sector, we will have to focus on B2B and C2C dimensions of E-Commerce while in the domain of public sector, G2B, G2C, B2G and C2G deliberations are important for having win-win situation among government, consumers and producers. Similarly, in forward market linkages, major crops, specific fruits and vegetables can be launched for E-business through public and private enterprises. As for instance, at the public level, the procurement of wheat in Pakistan can be transparently managed through E-Commerce by avoiding political influences. A gradual and systematic processing would be the hallmark of success of replication of Alibaba E-Commerce Model in rural Pakistan.
Pakistani shoppers operating in online markets are confronting many complex issues in the purchase of commodities as well as in the functioning of IT. It is very difficult to bring payments directly in their own accounts. Besides technological failure in the financial system, institutional development, requisite legislations and subsequent regulatory arrangements are missing for the promotion of E-Commerce. Our illiterate farmers are having lack of knowledge about technologies associated to E-Commerce. The prevalence of informal economy might be the key hurdle which could be addressed through various fiscal measures on the part of government. Similarly, the oddity of political economy may close the door of E-Commerce for deserving candidates and thus the sector suffer from inefficiency and ineffectiveness. A major proportion of payments for E-Commerce transactions in Pakistan is through ‘cash on delivery’ system. There is quite a nominal use of credit or debit cards. The renowned payment system providers do not properly operate in Pakistan. There might be financial and capacity related issues which should be settled through holistic approaches. Legal constraints and the ones associated to judicial system cannot be ignored for smooth functioning of E-Commerce business in rural Pakistan.
In this way, growth of E-Commerce in Pakistan is linked to various strategies and public policy options. There is need of provision and facilitation of ICTs in rural areas along with standard internet providers that could ensure flow of e-trade 24 hours without any interruption. Farming community and potential entrepreneurs in non-farming sector may be trained for ICTs and tools of E-Commerce. Pakistan should join Information Technology Agreement (ITA) of WTO which calls for elimination of tariffs on various kinds of IT products. Women e-entrepreneurs should specially be trained and facilitated for setting-up E-Commerce interfaces through providing interest free credit. Besides relaxation of GST in E-Commerce, an income tax exemption system needs to be announced initially for five year for the entrepreneurs who are interested in setting up E-Trade companies. We should not consider this incentive as a loss of revenue rather a good chunk of non-tax payers might be entering into formal markets by using e-wallets and credit cards. When E-Commerce industry would get flourished, tax system can be revived. We will have to build consumers’ trust in electronic payments through standard surveillance system and legal shelters.
In order to triangulate Alibaba E-Commerce in the rural economy of Pakistan, we will have to focus on a basket of Public Policies. We will have to focus on both the micro and macro dimensions of policies. At micro level, for the stimulation of B2B, B2C, C2C and C2B scenarios of E-Commerce, a dual incentive system needs to be farmed for tax rebate on one hand and financial/technical subsidy on the other hand.
At macro level, fiscal and monetary arrangements need to be managed in such a way that a competiveness of all kinds of E-Markets could emerged with minimum possible dead-weight loss. Meso level policies are related to legal and regulatory mechanism associated to the promotion of E-Commerce business in Rural Pakistan. Mega dimension of Public Policy reflects the bilateral and multilateral coordination between countries as for instance between China and Pakistan in the framework of joint E-Commerce Policy for expanding domestic, regional and international markets.
On the basis of this philosophical discussion, it is fairly claimed that there is huge potential of mobilising E-Commerce both in the factor and product markets of the rural economy of Pakistan. A holistic public policy basket needs to be designed to create a level play field for smooth functioning of B2B, B2C, B2G, C2C, C2B, C2G, G2G, G2B and G2C domains of E-Commerce. For each of these domains, a separate market strategy would have to be designed. Strategic planning is promptly required to address all the physical, infrastructural, technological, regulatory and institutional constraints that may come in the way of boosting online shopping. The success of any mega project like CPEC lies with the mobilization of E-Commerce in the true line of E-Marketing strategies of Alibaba across its route. A pilot project of Taobao kind of village may be initiated in some selected rural areas of Pakistan by taking farming community and traders on board. A Chamber of E-Commerce can also be established in some rural areas. Down the road, the additional benefit may be availed in terms of materialization of SDGs via developing a competitive edge in rural E-Markets.
Dr Abdul Saboor is Professor of Economics Dean, Faculty of Social Sciences at PMAS Arid Agriculture University, Rawalpindi