Determining the E-Future of the South: Risks and Opportunities

Magda M. ISMAIL <>
Ministry of Communication and Information Technology / Internet Society of Egypt


This paper aims to evaluate the role of international agreements and activities in shaping the global framework for electronic commerce. The paper aims to evaluate the risks of not adopting electronic commerce and the opportunities e-commerce presents to developing countries in Africa and the Middle East. It comes as a result of a train of thought that was initiated by a paper submitted at the INET '99 conference. The author presented a paper that discussed deterrents and impediments to electronic commerce in light of globalization with a view to analyzing this issue from a developing world perspective. Ten priority areas stemmed from this research. In this paper, the author attempts to go a step forward and to send a warning signal to the developing world community. The challenges and barriers are very well understood and have been researched by many. Priority action items and action plans have been devised and presented in many forums. Now is the time for action. This paper serves as a "fire alarm," the bells of which should remain ringing in the reader's mind. E-commerce brings risks and opportunities. However, if one chooses to ignore the opportunities, the risks will become a reality. It is not a phenomenon that one can ignore. Therefore, there is no choice but to move in one direction -- to facilitate and enable the environment and adopt this tool that has the potential to open new markets and new horizons for developing countries.



"Electronic commerce is by definition global. Whether the action is domestic or regional, private or public sector -- all electronic commerce policies and activities will have limited impact unless they facilitate a global approach." (OECD Ministerial Conference Conclusions, 1998)

"A particular challenge at this stage is to ensure that the discussion truly involves all parties and all countries (especially) developing countries." (Paul Timmers, European Commission, 1999)

"It is important that developing countries and those in transition follow closely the international debate, and ensure that their own policies assist the growth of e-commerce." (Peter O'Brien, E-commerce and Development, UNCTAD Regional Meetings, October 1999)

The advent of the new millennium promises restructuring of national and global economies -- introducing non-traditional means of trade coupled with non-traditional approaches in dealing with emerging technologies and global information infrastructures. Electronic commerce has arrived at the end of the 20th century -- compelling economists, politicians, lawyers, bankers, etc., to rethink and reengineer work methods, policies, laws, and standards. It is a concept and technology that raises many issues currently being discussed in numerous international forums. These issues vary from technological standards to financial and regulatory issues to legal issues and market access issues.

Key players/organizations operating in global e-commerce are undergoing a period of evolution and fine-tuning to establish a robust, proactive electronic commerce environment. International agencies have been convening to resolve controversial issues and investigate many uncertainties that have arisen due to the unpredictable e-explosion that is taking place in the world. E-commerce, an interdisciplinary concept, has stimulated questions in the areas of law, intellectual property rights, trade and services, economic development at large, and -- most importantly -- jurisdiction.

This paper aims to evaluate international agendas from international agencies and regional groupings that have taken the mandate to provide global frameworks for electronic commerce. The most active in this respect are the World Trade Organization (WTO), U.N. Commission on International Trade Law (UNCITRAL), World Intellectual Property Organization (WIPO), Organization for Economic Cooperation and Development (OECD), and U.N. Conference on Trade and Development (UNCTAD). The argument that will be brought forward is that electronic commerce could become another North-South issue without input or consideration of developing country issues.

How can these issues be approached, discussed, and resolved?

There is a role for private sector alliances and forums in putting developing country issues on the international "e-commerce table." Amongst the private sector forums that have been very active in this area are the Global Information Infrastructure Alliance (GIIC), Business Industry Advisory Committee (BIAC), Alliance for Global Business (AGB), Global Business Dialogue (GBD), and the International Chamber of Commerce (ICC). These organizations have had a strong influence on global positions with regards to electronic commerce. Have their positions been constructive toward a truly global e-commerce marketplace, or are they simply representing their own interests?

An attempt will be made to address these questions by bringing to light the issues that arise for developing countries. Evidence will be provided from these organizations, in addition to cases from Africa and the Middle East.

This paper does not attempt to present a comprehensive overview of current world activities in e-commerce. Significant bodies and organizations have been selected that are viewed to have an impact on the future of e-commerce both globally and within respective national economies. The paper might have a somewhat critical perspective towards efforts of multiple organizations, groupings, and private sector bodies. This is constructive criticism in an effort to reach an ideal scenario agreeable to all parties involved -- in this case nations of the world at large. The efforts conducted by the aforementioned organizations are to be strongly applauded.

Although electronic commerce in its broadest definition preceded the Internet, it has become a mainstream issue thriving on the Internet transport, and a general ease of use. It is for this reason that the term "e-commerce" from here onward, will be defined within the realm of Internet commerce.

Repercussions and risks for the developing world

Electronic commerce poses specific questions that are characteristic to the developing world. It is for this reason that the developing world adds a specific agenda of action to the existing international agenda. Africa and the Middle East suffer from very specific issues that need to be integrated into world agenda and agreements taking place. Following are major deterrents to electronic commerce in the developing world:

  1. Lack of awareness and education
  2. Small market size of Internet users
  3. Nonexistent e-commerce infrastructure
  4. Weak telecommunications infrastructure
  5. Primitive financial infrastructure
  6. Inefficient and non-technologically adept legal system
  7. Lack of a strong government role and national champion
  8. High information technology and telecommunication cost/pricing structure
  9. Social and psychological factors (lack of trust, resistance to change, generation gap)
  10. Potential language barrier

The challenges and barriers are very well understood and have been researched by many. Priority action items and action plans have been devised and presented in many forums. Following are critical risks if African and Middle Eastern nations do not adopt or move forward to resolve the above-mentioned barriers:

Risk of marginalization and opportunity of better business

E-commerce promises a better business: reduced costs, exposure to new markets, potential profits; but in the same vein, it imposes a threat to the countries of the developing world, introducing the danger of widening the gap between the North and South. Internet startups are being formed at a rapid pace in mature markets with strong telecommunications infrastructures and users that trust, use and are aware of the technology - a pace that does not allow a developing economy to catch up in due time. As the Chief Financial Officer of Cisco says, "It's no longer about the big beating the small, it's about the fast beating the slow." This risk is the most critical of all and serves as an umbrella to the following risks and opportunities to be discussed.

Risk of obsoleteness and opportunity of upgrading standards

Electronic commerce and the advent of information technology as a whole has compelled businesses both in the developed and the developing world to adhere and abide by higher standards of business processes and work-flows. In order to engage in the electronic market, one must have a personal computer, be connected to the Internet and able to present his company's information in electronic format in Internet time. This revolutionary age has enforced new standards. Countries that are "ready" will adhere faster than others, which need to be educated, aware and skilled, let alone able to afford the technology. Moreover, national telecommunications operators who have assumed the monopolistic roles of providing basic telecommunications services in the developing world must rethink their strategic directions and offer new services to the community. The liberalization of telecommunications services is finally changing the minds of the decisionmakers in these companies. Therefore, these national operators are repositioning their companies and modifying their organizational and functional structures. New standards are emerging that determine the way business is to be conducted worldwide. The delivery and connectivity standard is becoming more significant. This standard establishes that any participant in the manufacturing network must install electronic architecture, which permits just-in-time linkages with other participants and can address real-time modifications.

Companies that do not comply with these electronic standards will eventually be excluded from the world market. The daily "official journal" of the European Union, which publishes tender announcements, was abolished as of January 1999. All information is now only available on the Internet. This forces any entity that would like to access this information to be connected. Hence, in the words of UNCTAD's consultant, Peter O'Brien, "Any failure of developing countries and economies in transition firms to meet these standards could not only result in the loss of export opportunities, but also, perhaps, to a failure to compete with imports."

Risk of loss of Internet market share and opportunity of gaining it: small and medium enterprises

Small and medium (as well as micro) enterprises (SME) in the developing world usually operate within specific and rather limited markets. E-commerce opens opportunities for any company to operate and market its products nearly anywhere on the globe. Companies that do not operate in the global Internet market run the risk of losing the chance to gain more market share. In the same vein, they have an opportunity to market their products to a much larger world market. Locally made products in Egypt, for example, such  as papyrus and souvenirs, are produced in China and sold in the Egyptian market itself and in other countries of the world. Companies can compete almost anywhere. This is a double-edged sword, allowing the opportunity for non-local companies to move into local markets. Local companies run the risk of losing existing (export) sales to other companies that have been able to market and promote their products much more effectively. SMEs run the risk of losing business both at home and in international markets. Even in the developed world, smaller firms (10-99 employees) are only half as likely to posses their own website as medium sized enterprises (100-250 employees). The situation is worse in the developing world. In Egypt, 97 percent of businesses are small to medium in size. Egypt has 1.6 million enterprises in total (excluding the agricultural sector); 98 percent of these enterprises are small, medium and micro -- with 92 percent being micro (containing 1-4 persons). These micro enterprises are mostly owned by illiterate employers who do not posses a computer. As with most technology issues, the lack of awareness is a rooted cause for the lack of adoption of information technology in the developing world.

Therefore, the loss of market share by local companies, and more specifically SMEs, is a threat to these businesses in Africa and the Middle East.

Risk of loss of foreign direct investment (FDI) and opportunity of gaining FDI

This issue is strongly related with the risk of not upgrading to international standards. There is a strong risk involved if countries do not prepare themselves on a national level to be technologically adept. This means that the proper telecommunications and information infrastructure should be in place. Adequate and sufficient cyberlaws should be added to existing laws, and laws that create an environment of trust for foreign investors should exist or be developed. Laws that facilitate import and export of services and products should be established. Countries need to demonstrate that they comply with existing intellectual property rights issues. An investor will only invest in a new country when the existing environment is stable. Countries that demonstrate efficiency in this respect will attract investors, leading to further economic wealth. This section highlights the fact that there is a risk of loss of trust in nations that continue to exist without the integration of information technology into their work processes and furnish a generally trustworthy business environment.

Risk of brain drain and opportunity of brain gain

This fear does not lie within the realm of electronic commerce alone, but within the domain of information technology as a whole. Five thousand of the Egyptian workforce work in the area of software development and information technology (IT). This number varies drastically with the country's total population of over 65 million. Not withstanding, there will be a shortage of 1.2 million IT workers in the United States alone by the year 2002. Many of the existing people working in this sector have immigrated to the U.S. seeking higher paying jobs and better living standards. This automatically represents a threat of brain drain to the country. With the escalating and explosive business activities in e-commerce in the United States and the developed world, it is envisioned that this demand will increase and absorb skilled workforce in other countries of the world, including developing countries. On the other hand, if these countries are well prepared, they could capitalize on this demand and train skilled professionals that would satisfy local demand and export the surplus to other countries. This "exported workforce" would be an additional source of national income to the country. In the words of an African ICT expert, Mike Jensen, "the only effective response to the human resource development problem is to make sure training and capacity building is high on the agenda of every country and organization." The newly established Egyptian Ministry of Communications and Information Technology (the first of its kind in the Arab world) has incorporated in its national plan the objective of training 5000 new professionals per year in the field of IT. It has similar plans for capacity building for the youth and children as well as training of government professionals.

North-South reflections

The developed world is much more organized and systematic in approaching electronic commerce issues than are Africa and the Middle East. E-commerce stemmed from the developed world and its success is strongly related to developed information and telecommunications infrastructures (besides other factors). Africa and the Middle East are not organized into regional groupings and have not developed concrete positions regarding their views on many issues discussed worldwide.

Furthermore, the business groupings that have taken place in global agendas being set forth represent mostly the interests of developed countries.

Moreover, very few nations of this region have been signatories to the international agreements by the various organizations -- WIPO treaties, WTO (agreement on basic telecommunications and General Agreement on Trade Services), Information Technology Agreement (ITA). The general limited participation of the Middle East and African region in global forums on information technology and telecommunication isolates these countries from concurrent developments taking place and from exposure to the opportunities and risks involved.

UNCTAD has been a strong proponent of helping to formulate required action items and agendas for the developing world at large and for Africa. However, it does not have the mandate to dictate these agendas in the respective nations. Excellent, well thought out recommendations have been made, but they are generally not implemented or are implemented very slowly. This process needs to be expedited and catalyzed as much as possible.

North principles

This section highlights principles cited by the business and by developed countries that are somewhat different from the existing situation and views of developing countries. This section serves to indicate that different principles exist and should be reconciled before setting forward a truly global framework for electronic commerce.


The aim of this paper was to highlight the fact that the developing world must participate and have a voice in world activities that are taking place now and have been taking place for the past five years. It cannot afford to be counted out of the global team that is working ardently on shaping the future framework of electronic commerce. If the reader is to leave with one message, that would be that developing countries must act immediately to:

  1. Understand the global and national economic and social impact of e-commerce
  2. Understand the risks involved in not becoming part of the electronic world market
  3. Participate in world agreements that are currently being shaped and will continue to do so in the coming years
  4. Research and develop national positions for the current controversial issues related to electronic commerce
  5. Change local policies to adapt to this new electronic environment, both in the local and private sector. Government participation is vital in the developing world
  6. Build human capacity to absorb the rapidly changing global environment that is infused with the information age.
  7. Integrate the use of information technology in the learning-place and the workplace (public and private sector).

No resolution of the issues in this paper will be set forth. Many recommendations were made in several international forums. More questions will be asked, including:


  1. Conference Conclusions. OECD Ministerial Conference: "A Borderless World: Realizing the Potential of Global Electronic Commerce," Ottawa, 7-9 October, 1998.
  2. A Global Action Plan for Electronic Commerce prepared by Business with Recommendations from Governments. OECD Ministerial Conference: "A Borderless World: Realizing the Potential of Global Electronic Commerce," Ottawa, 7-9 October, 1998.
  3. E-commerce and Development: Can E-commerce be an engine for the integration of developing countries in the global economy? UNCTAD Regional Meetings on Electronic Commerce and Development, Nairobi, 7-8 October 1999).
  4. El-Nawawy, Mohamed and Ismail, Magda. "Overcoming Deterrents and Impediments of Electronic Commerce in Developing Countries in Light of Globalization: Egypt a Case in Point." INET'99, June 1999.
  5. Egyptian Ministry of Communication and Information Technology, National Plan, January 2000.