The impact and opportunities of e-commerce for trade and development

The world is increasingly going digital. This creates both opportunities and challenges, calling for changes to existing policies and the adoption of new policies in many areas. Many countries are poorly prepared.

One striking way that digitalization is impacting our economies is through growth in e-commerce. According to UNCTAD’s latest estimates, global e-commerce sales in 2018 amounted to $25.6 trillion, up 8% over 2017.

A growing share of e-commerce involves cross-border sales and therefore contributes to international trade. For example, the share of the 1.45 billion online shoppers worldwide that made cross-border purchases rose from 17% in 2016 to 23% in 2018.

The value of e-commerce and contactless payments has been accentuated by the current COVID-19 crisis, provoking actions by governments.

Much of this digital innovation is taking place in Africa. In Senegal, the Ministry of Trade and SMEs is partnering with the private sector to facilitate the delivery of essential goods and services through e-commerce. In Uganda, the Ministry of ICT has made a call to develop digital solutions in the fight against COVID-19 to support health systems and public service delivery.

Platforms have also been put in place, linking informal operators to established marketplaces and helping out-of-reach households access market vendors, using local transport solutions.

Digital solutions help reduce the spread of the virus by minimizing the need for face-to-face interactions, and at the same time keeping some businesses from closing shop.

This deepening in the digital shift has wide implications for trade and development. It is influencing the behavior of people, businesses and governments, helping drive an unprecedented transformation of how goods and services are developed, produced, sold, distributed and consumed.

Local firms in developing countries can benefit from being able to use services offered by global platforms. E-commerce platforms may, for example, provide export opportunities to small firms, enabling them to reach beyond small domestic markets. Using existing payment and e-commerce platforms can enable them to boost their sales, especially if they cater to certain niche markets.

While all parts of the world are affected by the shift towards online commerce, many developing countries are still held back by limited digital readiness. While the majority of the populations of developed countries now shop online, that is not yet the case in most developing countries.

In sub-Saharan Africa, for example, Kenya, Mauritius, Namibia and South Africa are the only countries where this share exceeds 8%. And in most other sub-Saharan African countries it is below 5%.

Ensuring affordable and reliable connectivity remains a major challenge in many African economies, especially in rural and remote areas, and requires attention.

Digital divides, differences in readiness and the high concentration of market power all point to the need for policies and regulations that will help create a fairer distribution of gains from the ongoing process of digital transformation and increased reliance on e-commerce.

Digitalization affects different countries in different ways, and individual governments require policy space to regulate the digital economy in order to fulfill various legitimate public policy objectives.

Original source: UNCTAD
Published on 22 June 2020