Building capacity to help Africa trade better

DG Azevêdo: E-commerce can help to improve livelihoods and boost development


DG Azevêdo: E-commerce can help to improve livelihoods and boost development

DG Azevêdo: E-commerce can help to improve livelihoods and boost development
Photo credit: WTO

Speaking at the first Ministerial Meeting of the “Friends of E-Commerce for Development” on 25 April, Director-General Roberto Azevêdo said that many members want to set a path forward for discussions on e-commerce, with a view to ensuring that e-commerce supports growth and development in the years to come. “Engagement is high,” he said, but if members want to make progress, they will have to turn that engagement into “real proposals”.

Friends of E-commerce for Development ministerial meeting

Remarks by DG Azevêdo

Good morning. I am pleased to join you at this first Ministerial Meeting of the ‘Friends of E-Commerce for Development’[1].

I had the chance to address a meeting of the group at Ambassador-level in December last year. I’m glad to see this excellent initiative evolving today.

Your presence here in Geneva highlights your commitment to this conversation. It shows your desire to ensure that e-commerce contributes to further growth and development in your countries – and across the world.

And I think that this is a very timely debate.

E-commerce is changing the economic landscape – and the way we trade and live.

Research from PWC on purchasing habits in 25 countries, both developed and developing, showed that 54% of respondents already buy products online weekly or monthly.[2] In fact the numbers were even higher in some developing countries.

And the market is growing rapidly.

Between 2013 and 2015, the value of global online trade jumped from 16 trillion to 22 trillion dollars.[3]

This is significant because of the opportunities that it represents, especially for the smaller players.

For small and medium-sized enterprises, e-commerce can significantly lower the costs of doing business across borders.

It also provides a platform that allows producers to access the global marketplace, reach a broader network of buyers and, potentially, to participate in global value chains.

For consumers, it means access to a broader selection of products, from a wider range of suppliers, and at more competitive prices.

In this way, e-commerce can help to improve livelihoods, promote further inclusivity in the trading system, and boost development.

It is very positive that you are looking at how to make the most out of these opportunities.

However, there is still a long way to ensure that everyone can partake in these digital flows. In many places e-commerce is not yet a reality.

Four billion people in the developing world remain offline today.

This is an immediate challenge to us all.

And we should seek to put a particular focus where the need is the greatest. For example, only one in four people in Africa use the internet – and only one in seven people in LDCs.

E-commerce should not be something that widens the development gap. It should be a means of closing it.

And while being connected is a necessary condition, it is not enough.

E-commerce is not only about the clicks. It is also about the bricks. And that means infrastructure.

We need to ensure that the right infrastructure is in place, as well as appropriate policy, regulatory and payment systems to provide the trust which is essential in any transaction.

Any international initiative to unlock the potential of e-commerce for development will have to tackle these issues. It will have to help with providing support to improve capacity and infrastructure in those countries that need it the most.

We have a strong record of helping the most vulnerable to join trade flows.

Programs like the WTO Aid for Trade Initiative already do very important work to help build trade capacity in developing and least developed countries. UNCTAD’s ‘eTrade for All’ initiative is another positive example here – and we’ll be hearing much more about this over the next few days.

Reforms to the trading system can also make a big difference.

The WTO’s Trade Facilitation Agreement, the first global trade deal of the 21st century, will be particularly important. Under this agreement, trade costs could be reduced by 14.3% on average, and by significantly more in many developing countries. And the agreement provides for the necessary practical support to help members with their implementation. We are working with a range of donor members and partners to mobilise that support. 

Working together, we can find creative solutions to bridge gaps and help more people access the opportunities and benefits of e-commerce.

That’s why today’s meeting is so welcome.

This has to be a collective effort.

Many members – and not only the Friends of e-Commerce for Development – want to set a path forward for discussions on e-commerce, with a view to ensuring that e-commerce supports growth and development in the years to come.

Engagement is high. Many ideas have been put forward – by WTO members, by the private sector and by other stakeholders.

If we are going to advance, we have to turn that engagement into real proposals. We need to focus on specifics.

This week is an excellent opportunity to have discussions with the full range of stakeholders. But of course progress requires routine engagement.

We need to continue this work throughout the year. The WTO acts as a platform to have these discussions among all members that want to do so.

I will be there to help and facilitate this as much as I can – but, as always, it is for members to set the direction and the pace. It is up to you to drive this work forward, put proposals on the table, and build convergence behind them.

So there is a lot of work to do! I wish you a very successful event today.

Thank you.

[1] ‘Friends of E-Commerce for Development’ consists of Argentina, Chile, Colombia, Costa Rica, Kenya, Mexico, Nigeria, Pakistan, Sri Lanka and Uruguay

[2] https://www.pwc.com/gx/en/industries/retail-consumer/global-total-retail.html

[3] http://unctad.org/en/pages/newsdetails.aspx?OriginalVersionID=1438

“Financial inclusion” key to delivering full development potential of e-commerce

Speaking at a 13 March seminar on digital payments and financial inclusion, Director-General Roberto Azevêdo said underdeveloped financial and payment systems are hindering the use of electronic commerce as a tool for growth and development. With more than 200 million small firms in emerging economies worldwide lacking access to basic financial services, “e-commerce will not deliver its full potential if many are still financially excluded.” Extracts from his speech are available below:

This is another important initiative in your efforts to deepen members’ understanding of e-commerce issues.

And it is obvious that these issues are of interest to many Members, regardless of their level of development. There may be different challenges, opportunities or perspectives but it is clear to me that many of you want to better understand this phenomenon.

Of course this is not surprising. E-commerce presents significant opportunities for growth, development and job creation. It has already helped to lower trade barriers for businesses and consumers alike.

By reducing the costs associated with distance, e-commerce provides businesses with access to new market opportunities and global value chains. This is particularly important for small businesses, those located in rural areas, as well as land-locked and other geographically challenged countries.

And for consumers, it means access to a wider range of products and services suppliers – and at more competitive prices.

However, with 4 billion people still offline, the opportunities offered by e-commerce are still out of reach for many and its benefits remain unevenly distributed. While some countries have made significant headway in recent years, others are struggling to keep up.

If we want e-commerce to be an engine for inclusive growth and development, we must understand its challenges and address them in a way that ensures better access and better opportunities, particularly for those who are behind.

Underdeveloped financial and payment systems are one of these challenges. It is clear that traditional banking and payment methods are often ill-suited to the digital environment.

E-commerce will not deliver its full potential if many are still financially excluded. And while there has been progress toward financial inclusion, significant challenges remain. As you will know, an estimated 2 billion adults worldwide don’t have a basic bank account.

Financial exclusion affects not only individuals but businesses, and therefore trade, as well.

The World Bank has estimated that more than 200 million formal and informal micro, small and medium-sized enterprises in emerging economies lack access to basic financial services to thrive and grow. No wonder therefore that financial inclusion is becoming a priority for policymakers, regulators and development agencies globally. In fact it is identified as an enabler for 7 of the 17 Sustainable Development Goals.

Digital payments are actually an entry point for financial inclusion. Integrating digital payments into the economies of developing nations is crucial for broad economic growth and individual financial empowerment.

Technological advances, especially in mobile technology, have provided alternative solutions – and they have been advancing at a tremendous speed.

We have all heard of M-PESA, which became a world leader in mobile-money. It showed the potential of these solutions – and the potential of developing countries to leapfrog forward in their use of technology.

A couple of years ago it was easier to pay for a taxi with your phone in Nairobi than in New York – or Geneva. Now the developed world has caught up. Mobile money is everywhere.

New ideas and new solutions will continue to spread at a frenetic pace – and there’s no reason why developing countries can’t be at the forefront.

But we should be conscious as well that payment facilities are not credit facilities – and this is particularly important where cross-border transactions are concerned.

Traditionally in a trade transaction, the exporter is paid upon shipping and the importer only pays when the merchandise is delivered and its integrity is verified. It is the job of trade finance to bridge the gap between the two.

In contrast, with e-commerce, the importer pays cash in advance and then simply has to wait and trust that the goods will arrive in a timely fashion and function as expected.

Clearly, for many SMEs, this poses significant problems. With low cash flow and tight margins, such a financial arrangement is costly when inputs come from foreign suppliers. Moreover, consumers tend to opt for better known traditional suppliers, to the detriment of SMEs, even when their price is competitive. So, SMEs face significant challenges both as buyers and as suppliers.

Some e-platforms are providing solutions to deal with this – but that can come with strings attached, such as exclusivity to sell on that platform. The emerging “FinTech” sector is also stepping into this arena. But so far they only work for the top end of SMEs – those which have certified accounts, are registered, and so on. These are positive steps, but more could be done.

Awareness among smaller companies is also an issue. A recent survey by the Asian Development Bank found that 70% of SMEs were not aware of digital finance.

So, again, the challenge is to ensure that these evolving technologies work both to tackle financial inclusion and to close the digital divide – not widen it even further.

And this brings us to the broader and even more fundamental issue of connectivity.

Many economies face challenges from a lack of reliable infrastructure, poor internet access and affordability, and a wide range of other economic and regulatory barriers. These include weak legal and regulatory frameworks, inadequate privacy and consumer protection, low consumer trust, poor IT skills – and the list goes on. [...]

I think there is broad agreement that the development dimension of e-commerce needs to be part and parcel of our continuing conversations. This will be fundamental to allow all WTO Members to engage constructively and to ensure that e‑commerce works for inclusive growth and development.

However, it is also important to recognize that the challenges posed by e-commerce are many and complex – and not all of them are trade-related. Addressing them will require dialogue and cooperation amongst different actors as the issues involved cut across different areas of expertise.

Presentations from the FED Seminar on ePayments and Financial Inclusion are available here.


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