E-commerce prospects for a young Pakistan
The preliminary results of population census stated that Pakistan’s population has increased to 207.8 million as compared to 132.4 million in 1998 census. The proportion of the male population has now increased in comparison with the female with the former making up 51 percent of the total. The census results also indicate that the urbanisation trend has surged in the country and 75.6 million people belong to urban areas where the leading province is Sindh, with 52 percent of its population in the province living in the cities.
Urban areas offer a greater number of opportunities to youth and women to participate in socio-economic and political activities. However, urban areas do not always demonstrate inclusivity and higher quality of life. Unplanned urbanisation may deteriorate the quality of life owing to congestion and environmental and health hazards. Provincial governments have to play guiding role and should not allow cities to remain haphazard abodes.
With the growing number of youth entering the labour force every year, cities will be expected to create more jobs. Population Reference Bureau (2017) indicates that there are 38.4 million youth ages 15-24 in Pakistan.
This youth bulge has increased the demand for education in the country as the number of universities and technical colleagues increased persistently over the time period. The efforts of the government in promoting the e-commerce and information and communication technologies can be regarded as a timely measure to attain maximum benefit from this supply of labour.
E-commerce led the start-up culture in urban areas of Pakistan, which is due to higher demand for latest gadgets from young age groups.
These start-ups have provided a base to connect the domestic market with the international markets. Apart from this, e-commerce is useful for consumers to purchase goods without spending unnecessary time in markets. E-commerce is also assisting the initiatives of micro-enterprises by providing them with a vast network for the sale of their goods.
The developments mentioned above are not without challenges. The youth in Pakistan demand a more efficient connectivity ecosystem that can help them penetrate in diversified markets, however, for e-commerce to increase value addition in the domestic markets, several difficulties need to be overcome. A timely action to overcome these can also result in increased retention of talent and curtailment of brain drain.
With a rising youth population which is educated, urbanised and fast getting connected online, the consumer protection issues need to be addressed on an expedient basis. There are issues in product delivery such as tracking of delivery and inventory management. There also seems to be no framework to save the consumer from the vague conditions for lease or payment in installments.
While the Competition Commission of Pakistan and Small and Medium Enterprises Development Authority have taken steps to organise some public events on highlighting hurdles faced by the e-commerce sector, most of the business community still has no idea about new developments in this sector
The internet penetration rate is still low as compared to peer economies. Over half of the transactions only take place in Karachi, Lahore and twin cities of Islamabad and Rawalpindi. We do not have any information if customers from other cities are ready to switch to online payments. A preliminary analysis of products exchanged online reveals the low range (and variety) of products available online. Most purchasers are found ordering low-cost mobile phones and electronic goods.
There is very less outreach for orientation of both government and potential customers. While the Competition Commission of Pakistan and Small and Medium Enterprises Development Authority have taken steps to organise some public events on highlighting issues faced by the e-commerce sector, the broad base of business community still has no idea regarding new developments in this sector.
There are multiple layers of taxes, tariffs and para-tariffs on IT products. Pakistan remains among the top five highest import tariff paying countries in the world on IT products. It is due to this reason that currently, 70 percent of IT products are being smuggled which includes mobiles, computers and accessories. This, of course, is a disincentive for local production of some of these accessories (but a proof of high demand for these products).
Effective implementation of Information Technology Agreement (ITA) may help in going forward and making rules faced by the telecom sector more transparent. There is a need to reduce the cost of digital technologies across the country through a reduction in tariffs and related taxes. This needs to be complemented with the promotion of fair competition between the online and offline solutions available. The reduced cost of accessing digital technologies will, in turn, prevent control and concentration exercised by a few in this sector.
The excessive regulation in this sector is leading to higher transactions costs for both businesses and consumers. It is recommended that Competition Commission of Pakistan and Securities and Exchange Commission of Pakistan make it a regular feature to conduct the Regulatory Impact Assessment — a systemic approach to evaluate the socio-economic impact of regulations faced by the business community and consumers. A delay in conducting such an assessment over longer time periods leads to hurting businesses and in turn government revenues.
Finally, any policy for e-commerce should have consumer protection as the starting point. This can be helped by a strong ombudsman office in this sector, which can ensure a level playing field for all participating in this sector. Perhaps having a large number of youth population online is one of the greatest opportunities for Pakistan and should not be missed.
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The opinions expressed in this article are the author's own and do not necessarily reflect the viewpoint or stance of SDPI.