Promotion of e-readiness is all the rage. Internet-based business to business (B2B) applications are promoted as tools to enable producer firms in developing countries to reduce costs and enter global markets. However, evidence is emerging that policy makers and development agencies are too optimistic about the poverty-busting potential of information and communication technologies (ICTs).

Research from the Institute of Development Studies and the London School of Economics critically examines the expectations and assumptions behind the drive to encourage investment in ICTs. Based on research on e-marketplaces in the garments and horticulture sectors and interviews with firms in Bangladesh, Kenya and South Africa, it produces evidence that whilst e-commerce can enhance relationships between existing trading partners it is doing little to forge new commercial linkages. The main effect of the use of the Internet is to make communication with existing trading partners cheaper and quicker.

Garments and horticulture are important for employment and export-led growth in many developing countries. Both produce a mix of ‘difficult to standardise’ and more easily standardised products. They depend on a range of services to ensure quality, timeliness of delivery and payment. Business relationships are built through personal and inter-firm networks. They are largely based on complex commitments involving complex information that cannot be provided easily by using e-marketplace systems.

The researchers found that:

• Very few transactions are completed in cyberspace: only a tiny percentage of e-marketplaces provide facilities for payment on-line.
• Not only do most of these sites not accept any liability for transactions, they also do very little to build trust between potential trading parties
• A quarter of firms surveyed had registered with on-line Bulletin Boards – e-marketplace ‘dating’ agencies for firms seeking new trading partners – but had been mostly disappointed.
• Very few transactions are completed in cyberspace: only a tiny percentage of sites provide facilities for payment on-line.
• The primary B2B e-commerce application is email – widely used to co-ordinate production schedules, provide dispatch information and to send digital images to verify product quality. This is becoming essential for doing business with buyers and suppliers.
• Some closed Internet auctions run by global buyers such as Wal-Mart are involving developing country producers.
• Use of the Web is constrained everywhere by inadequate and costly domestic telecommunication infrastructures and slow connection speeds.

The research thus finds that scope for donor governments to provide technical assistance to help producers in developing countries to participate in B2B e-commerce developments may be limited:

• 'Top-down' government policies promoting `e-readiness' will be unsuccessful unless much greater effort is given to examining how Internet applications are actually used and the circumstances around the implementation of new technologies.
• Whilst capacity building for B2B e-commerce is important, it needs to focus on the way firms are using the Internet in practice to pursue their business.
• Provision of cost-effective and reliable access to telecommunication and Internet services is essential. These services do not need to be sophisticated.
• The current emphasis of B2B e-commerce policy on developing legal frameworks and information technology infrastructures for on-line trading (digital signatures, electronic trust services and high bandwidth) is misplaced.

Policymakers, firms and development assistance agencies should support ‘bottom-up’ approaches that are based on realistic assessments of B2B e-commerce opportunities and obstacles and build solutions which are both region- and chain-specific.

Source(s):
‘The reality of e-commerce with developing countries’ by John Humphrey, Robin Mansell, Daniel Paré and Hubert Schmitz , March 2003 Full document.

Funded by: Department for International Development, UK

id21 Research Highlight: 26 March 2004

Further Information:
John Humphrey and Hubert Schmitz
Institute of Development Studies
University of Sussex
Brighton BN1 9RE
UK

Tel: 44 (0) 1273 606261
Fax: 44 (0) 1273 621202/691647
Contact the contributor: J.Humphrey@ids.ac.uk

Institute of Development Studies (IDS), UK

Robin Mansell
Department of Media and Communications
London School of Economics
Houghton Street
London WC2A 2AE
UK

Tel: 44 (0) 207 955 6380
Fax: 44 (0)
Contact the contributor: R.E.Mansell@lse.ac.uk;

London School of Economics, UK

Daniel Paré
Department of Communication
University of Ottawa
554 King Edward Ave.,
Ottawa, Ontario  K1N 6N5
Canada

Contact the contributor: dpar2@uottawa.ca

University of Ottawa, Canada

Other related links:
'India’s Information Technology Act hinders the development of e-commerce'

'Making technology work: how e-commerce can help South Africa’s small furniture producers'

A guide to e-commerece from Martin P. Catherwood library

'Good prospects for IT industry in 2003' - UNCTAD Press release

e-commerce times