Boosting commonwealth trade in a digital world

July 25, 2021

Covid-19 has accelerated digital engagement. It has catalysed technological changes and revamped how sectors and regions do business. Pakistan must catch up

Boosting commonwealth trade in a digital world

The Covid-19 pandemic has had severe and long-lasting economic consequences for every country in addition to the challenge to public health through the spread of the disease itself. Pakistan’s economy was expected to touch 2.5 percent growth in 2020; however, due to the pandemic Pakistan is one of the top five major commonwealth economies that have experienced the largest decline in merchandise exports. Pakistan ranks 116th out of 152 countries on the e-commerce index.

The biennial flagship report of the Commonwealth Secretariat launched in London on July 13 has established that due to the pandemic, Commonwealth countries have lost as much as $345 billion worth of trade in 2020, including $60 billion in intra-Commonwealth trade.

Pakistan’s service exports have bounced back during the pandemic. By September 2020, Pakistan’s exports in the services sector had already rebounded to December 2019 levels (despite falling by 20 percent in April 2020), the report highlights.

During the pandemic, the garment manufacturing sector has been severely affected in most Commonwealth countries including Pakistan. The adverse impacts on the garment industry have had major implications for garment sector workers, particularly women, who comprise most factory workers in key Commonwealth garment manufacturing countries (including Bangladesh, India, Lesotho, Pakistan and Sri Lanka).

Covid-19 has accelerated digital engagement.TheCovid-19 crisis has brought about years of change in the way companies in all sectors and regions do business. According to the McKinsey Global Survey published in October 5, 2020, consumers have moved dramatically during pandemic towards online channels and companies, and industries have responded in turn. The survey results confirm the rapid shift towards interacting with customers through digital channels. They also show that rates of adoption are years ahead of where they were when previous surveys were conducted.

Twilio, a leading provider of toll-free messaging in the United States, has concluded in its survey that decades-long digital transformation roadmaps got compressed into days and weeks in order to respond to the realities. Businesses in every industry had to figure out how to reach their customers – whether those customers are shoppers, patients, students, businesses or even employees – essentially overnight.

Digital technologies have been instrumental in mitigating some of the economic losses caused by the pandemic, especially by sustaining some trade in services from education to healthcare, says Baroness Patricia Scotland, the Commonwealth secretary general.

The Commonwealth report says that developed Commonwealth economies and a few developing members are currently better prepared to support online commerce. Twelve Commonwealth countries recorded values above the world average on the e-commerce index, including all six developed members (four of which rank in the top twenty globally) and some developing members (Singapore, Malaysia, Mauritius, India, South Africa and Jamaica). However, a few African and Asian members rank lower on this index.

Pakistan ranks 116th out of 152 countries on UNCTAD’s (United Nations Conference on Trade and Development) latest B2C (business-to-consumer) e-commerce index and its score on the index (32.5) is well below the world average (54.9). Just 7 percent of internet users in the country participate in online shopping. These individuals account for just 1.7 percent of the total population.

The term business-to-consumer (B2C) refers to the process of selling products and services directly between a business and consumers who are the end-users of its products or services. Most companies that sell directly to consumers can be referred to as B2C companies.

“A key obstacle to e-commerce adoption in Pakistan is a lack of access to digital technologies, including the internet. Access to these technologies is spread unevenly within the country and, in some cases, is inferior compared to levels of access in neighbours”, says Dr Salamat Ali, a UK-based trade economist.

Attention also needs to be paid to eliminating barriers to entering and competing effectively in e-commerce markets, both domestically and abroad, Dr Ali adds. Interventions to address existing obstacles in Pakistan, according to him, should focus on making broadband internet more affordable; enhancing the speed of internet connectivity by expanding internet infrastructure; improving digital skills; and implementing targetted interventions to overcome cultural barriers to e-commerce adoption, including by promoting trust in e-commerce platforms and online transactions.

Intra-Commonwealth exports are expected to surpass $700 billion by 2022. To reach this threshold, countries will need to leverage digital technologies, utilise bilateral and regional trade agreements, promote services cooperation
and improve connectivity to boost their trade.

As Pakistan is one of the top five economies that had the largest decline in exports, it can not only take its share back but also increase it by advancing technological progress, including through the adoption or adaptation of frontier technologies. There is evidence to suggest that technological change can boost trade in developing countries such as Pakistan by up to 2.5 percent per annum by 2030.

“Effectively adopting and adapting frontier technologies to grow industries and expand digital trade will require significant improvements to Pakistan’s digital infrastructure, capabilities and workforce skills as well as greater investment in digitalisation. Pakistan will also need to develop forward-looking science, technology and innovation policies and ensure that these are aligned with existing and future industrial policies and strategies”, Dr Salamat Ali suggests.

Pakistan can also look to engage in efforts to develop and harmonise rules and standards for digital trade through bilateral or regional trade deals and initiatives at the World Trade Organisation, he states. This will help Pakistan align e-commerce rules and harmonise digital economy regulations with other countries and make it easier for entrepreneurs and businesses in the country to engage in cross-border digital trade, according to Dr Ali.

E-commerce giant Amazon has added Pakistan to its sellers list making Pakistani entrepreneurs eligible to sell on the platform. Pakistani manufacturers would gain access to a worldwide e-commerce platform with Amazon and it would open up a new chapter for the supply chain where Pakistani manufacturers will be able to sell directly to customers.

Amazon is an ecosystem of independent e-commerce dependent on both small and large sellers. Amazon, directly and indirectly, impacts people and businesses around the globe. Nearly 60 percent or so sales on Amazon are by small- and medium-sized businesses.

“That’s a huge opportunity for Pakistani SMEs especially for those that are manufacturing products in Pakistan. We can include indigenous products as well as traditional crafted products etc. The government should team up with the private sector to create Amazon sales hubs where local SMEs and individuals can join up to sell their products through the B2C sales channels that offers”, says Fouad Bajwa, an internet governance and trade expert.

There is a need to further develop the ecosystem of digital infrastructure underpinning e-commerce activity in Pakistan through continued investment in digital technologies and telecommunications services supporting digital connectivity, Dr Ali adds.

Similarly, the development of suitable payment platforms can help facilitate e-commerce transactions. “The development of financial technology (FinTech), such as mobile money solutions, can play a central role in enabling cashless transactions and facilitating e-commerce activity in Pakistan”, he concludes.

The author is a staff member. He can be reached at [email protected]

Boosting commonwealth trade in a digital world