Lecture 3: Creating a Conducive E-commerce Environment

1.1 Creating a Conducive E-commerce Environment

Notes:

Creating a Conducive E-commerce Environment

1.2 Introduction

Notes:

After completing this lecture, participants will be able to:

 Identify key policy areas to create a conducive e-commerce environment at the national level;
 Understand the relevant actors and their functions at the international level; and
 Develop an action plan using the E-Matrix.
1.3 Identifying Key Policy Areas to Create a Conducive E-commerce Environment at the National Level

Notes: Identifying Key Policy Areas to Create a Conducive E-commerce Environment at the National Level

1.4 Answer the question

Correct Choice

X De minimis

X E-payment solutions

X Consumer protection for online transactions

Feedback:

All of the above policy areas are relevant to create a conducive e-commerce environment. Indeed, each issue is relevant
to at least one segment in the E-Matrix: for example, de minimis is relevant for “Cross-border delivery”, e-payment
solutions is relevant for “International e-payment”, and consumer protection for online transactions is relevant for
“After-sales”
1.5 Key policy areas to create a conducive e-commerce environment at national level

Notes:

As we have seen in lecture 2, there is a broad range of factors that play a role in shaping a country’s e-commerce
environment. Some of them are online and “new” to the e-commerce reality, while others are part of the “traditional”
issues of trade. All of them, however, deserve policy attention, as they are equally important to create a conducive e-
commerce environment.
This table summarizes the policy areas to consider for creating a conducive e-commerce environment nationally. The
following list is comprehensive, but not exhaustive:
Online
• Internet access, cost and speed
• Access to e-platforms and development of e-platforms
• E-payment solutions
• Data regulations
• E-signatures and e-contracts
• Online consumer protection
• Online fraud and cybercrime law
• Dispute settlement procedures for online transactions
• E-government and e-procurement
• Net neutrality, search neutrality
Offline
• Customs procedures
• De minimis rules
• Drawback of duties when returning goods
• Affordable logistics services for SMEs
• Access to finance
• Business registration
• IP rights and enforcement
• Access to support services
• ICT and electricity infrastructure
• Transport infrastructure
• Skills development

1.6 Developing a national e-commerce strategy

Notes:

Depending on your country’s situations and priorities, developing a national e-commerce strategy might be a useful tool
to align all of the relevant policy areas towards the same goal(s). What’s more, a clearly-articulated national e-
commerce strategy is paramount to disseminating awareness and knowledge regarding e-commerce, in order to ensure
that not just a select few players, but a wide variety of potential beneficiaries become aware of the aims and objectives
behind e-commerce.
In order to effectively develop a national e-commerce strategy, it is important to dedicate time and efforts to identify
the bottlenecks to e-commerce development. Such an assessment of your country’s situation will help you identify the
critical issues which will feed into the agenda-setting stage of the policy development cycle.
The graph below shows the five phases involved in the development of a national e-commerce strategy. Please note that
regularly monitoring your performance throughout the process will be necessary, given the rapidly evolving e-commerce
landscape.
1.7 Aspects to consider when formulating an e-commerce strategy

Notes:

Your e-commerce strategy should:

 Be focused on SMEs: This includes not just those SMEs that are obviously lagging behind in e-commerce, but also those
SMEs that are most likely to benefit from it as well.
 Focus on specific industries: A focus on specific industries is paramount to effectively promote inclusion in e-commerce.
For example, how could e-commerce be used in your country’s tourism industry?
 Distinguish between domestic and cross-border e-commerce: The requirements of cross-border trade are different
from those of domestic trade, and it is the same with e-commerce. As such, your e-commerce strategy should
distinguish between domestic and international efforts, as well as between B2B and B2C transactions.
 Incorporate ICT: Information and communication technologies (ICT) are a crucial part of e-commerce, and as such
should form an important part of any national e-commerce strategy. For example, how could social media or
alternative payment solutions be useful for your country’s e-commerce efforts?
 Ensure platform development: Ensure the availability and continued development, not only of commercial e-
commerce platforms, but also of delivery systems and payment solutions tailored to local needs, languages and
cultures.
 Consider the distribution of benefits and costs: Who will the major stakeholders be in your e-commerce strategy? How
will the benefits and costs be split between them? What are the fiscal implications and societal impacts of e-commerce
development in your country?
Click below to read more about two countries, India and Pakistan, who have successfully made efforts towards
deploying a national e-commerce strategy:
1.8 Answer the question

Correct Choice

To align the different policy areas related to e-commerce towards the same
goal(s).

To facilitate coordination among different national agencies and stakeholders.

To increase knowledge and awareness of the aims and objectives behind e-

commerce.

X All of the above.

Feedback:

A national e-commerce strategy facilitates coordination among the different policy areas involved in e-commerce,
facilitates the implementation of e-commerce measures among diverse agencies, and provides a clear objective to
follow.
1.9 Understand the Relevant Actors and their Functions at the International Level

Notes:

Understand the Relevant Actors and their Functions at the International Level

1.10 True or False?

Correct Choice

TRUE

X FALSE

Feedback:

This is false. Ensuring that a country’s e-commerce environment is harmonized with international arrangements (e.g.:
rules, guidelines, initiatives) is as important as making sure that a conducive domestic policy environment is in place. For
instance, while implementing a mechanism to validate e-signatures domestically is useful, as it facilitates domestic e-
commerce transactions, a mutual recognition agreement to harmonize the standards for these e-signatures
internationally will also be needed to facilitate cross-border e-commerce transactions.

1.11 A fourth layer: the international policy environment

Notes:

As we have seen in lecture 2, e-commerce involves various different actors across the three layers of the E-Matrix (which
are: Firm-level capabilities, Immediate business environment, and National environment). However, what we didn’t
introduce in lecture 2 was the fourth layer, which also plays a role in developing e-commerce: the international policy
environment.
The international policy environment layer is important for two main reasons:
1.Cross-border e-commerce is a form of cross-border trade. As such, a number of actors are involved in setting e-
commerce related rules at the international level, which are likely to have an impact on the sector.
2.At the international level, e-commerce related rules often require joint efforts by different countries and cannot be
replaced or tackled at the national level. For example, offering international payment solutions would require not just
common standards among the various countries participating in these solutions, but also a strong network
interoperability.
1.12 Actors in the E-matrix
1.13 International Organizations involved in e-commerce

Notes:

International organizations can have a role in facilitating cross-border e-commerce in three main areas:

1.Analyzing e-commerce trends

2.Negotiating and implementing international rules

3.Promoting e-commerce through capacity-building initiatives

Although a deep understanding of the different roles of major international organizations in e-commerce is not
necessary in order to successfully complete this course, it may nonetheless be useful for policymakers wishing to
contemplate possibilities for collaboration.

Click here if you would like to read more about the various roles and activities of international organizations in e-
commerce.
1.14 The eTrade for All Initiative

Notes:

The United Nations Conference on Trade and Development (UNCTAD) has recently launched an “eTrade for All”
initiative that aims to help developing countries and LDCs benefit from e-commerce. It will be a demand-driven
mechanism in which leading development partners cooperate with the private sector to pool capabilities and resources.
Through its knowledge-sharing platform, eTrade for All will make it easier for developing countries to navigate the
supply of technical and financial assistance from partnering institutions.
The eTrade for All initiative is founded on the understanding that a greater awareness of e-commerce will create
opportunities for SMEs to grow, become more productive and participate in global value chains. It focuses on 7 key
policy areas of particular relevance to e-commerce development.
E-commerce strategies
National assessments and e-commerce strategies are essential to identify strengths and weaknesses in e-commerce
readiness, and as a basis to formulate relevant policies in order to harness the power of e-commerce for economic
growth and social development.
ICT infrastructure
Affordable and reliable ICT infrastructure is of paramount importance to e-commerce. In particular, universal high-speed
broadband coverage, regular infrastructure upgrades and reduced artificial regulatory barriers should be pursued.
Payment solutions
Payment systems are rapidly evolving and are opening up new possibilities for consumers and corporate buyers.
However, in several countries, cash on delivery remains the preferred option. E-commerce users benefit from an
environment in which payments can be made safely and easily, using effective solutions involving banking and non-
banking operators, with greater interoperability and universal connectivity.
Trade logistics
An effective and competitive national and cross-border trade environment is vital to achieve effective e-commerce. As
such, effective trade logistics and cross-border facilitation measures are key for the smooth flow of goods-related e-
commerce.
E-commerce skills
In many countries, both enterprises and policymakers lack the ability and technical skills to properly harness e-
commerce, thus hampering its uptake. Developing up-to-date technical skills for e-commerce is thus paramount in the
effective development of an e-commerce framework.
Legal frameworks
Security and trust are fundamental to create certainty for both consumers and businesses, which is a necessary
precondition for an environment conducive to e-commerce. Ideally, legal and regulatory frameworks facilitating online
trade should strike a balance between trade development and compliance with domestic, regional and international
legal instruments. In today's online activities, laws and regulations related to consumer protection, data protection and
cybercrime are essential.
Access to financing
Several economies do not yet provide reliable financing solutions for early stage start-ups and growth-oriented
businesses in the e-commerce ecosystem. In order to facilitate the growth of e-commerce and e-trade in developing
countries, it is crucial to facilitate the evolution of a robust financial architecture that funds innovation and
entrepreneurship at all points across the e-commerce value-chain.

1.15 Types of international rules dealing with e-commerce

Notes:

Let’s focus on the main area of activity of international organizations when it comes to e-commerce: negotiating and
implementing international rules, whether they are “hard” or “soft”.

“Hard” law refers to rules that are binding and, therefore, enforceable. In the international context, international
agreements and customary law are considered to be “hard law.”

In the context of e-commerce, the rules set by the World Trade Organization (WTO) for international goods and services
trade apply, as do any binding commitments made by countries in the WTO. These are normally considered hard law as
they are subject to the WTO’s dispute settlement mechanism if they are not observed.

“Soft” law, for its part, refers to rules that guide actions or behaviours. Although not binding, such rules are useful for
the eventual setting of customary law. Despite not being formally enforceable, they should be obeyed and pressure to
comply with them might be felt as a government’s reputation might be at stake. Resolutions of the UN General
Assembly are an example of “soft law”.

An example of soft law would be the UNCITRAL Model Law on Electronic Commerce (1996), which includes a set of
internationally acceptable rules for governments to consider in order to increase legal predictability for e-commerce. It
is not enforceable, however, and it is up to each country to consider this model text law in their own national legislation
processes.

1.16 The Model Law on Electronic Commerce (MLEC)

Notes:

Date of adoption: 12 June 1996 (additional article 5 bis adopted in 1998)

The purpose of the MLEC is to enable and facilitate e-commerce by providing national legislators with internationally
acceptable rules aimed at removing legal obstacles and increasing legal predictability for e-commerce. It does this by
introducing the following principles:
1.Non-discrimination - this principle ensures that a document will not be denied legal effect, validity or enforceability
solely on the grounds that it is in electronic form.
2.Technological neutrality - this principle stipulates the adoption of provisions that are neutral with respect to
technology used. The aim is to accommodate any future technological development without any further legislative
work required, crucial in light of the rapid technological advances.
3.Functional equivalence - this principle mandates the identification of criteria under which electronic communications
may be considered equivalent to paper-based communications.

1.17 Answer the question

Correct Choice

World Customs Organisation (WCO), International policy environment

International Telecommunications Union (ITU),
Internet Corporation for Assigned Names and
Numbers (ICANN), United Nations Commission
on cross-border trade Law (UNCITRAL)

Ministry of Trade; The law and legal systems National environment

TISIs and TPOs Immediate business environment

Enterprises engaging in e-commerce Firm-level capabilities

Feedback:

United Nations Commission on cross-border trade Law (UNCITRAL)

Description: UNCITRAL focuses on legal reform and on the creation of model commercial laws that are both accessible
and predictable. Over the years, it has created a Model Law on Electronic Commerce (MLEC) (1996) and a Model Law on
Electronic Signatures (MLES) (2001). Its work also focuses on electronic contracting; online dispute settlement;
document dematerialization and the removal of legal barriers to the development of electronic commerce.

International policy environment

Internet Corporation for Assigned Names and Numbers (ICANN)

Description: ICANN is a private non-profit organisation that plays a multifaceted role with regard to e-commerce. First, it
ensures that websites are retrievable by ensuring the stability of the domain name system (a domain name is the
address that enables users to find a particular website). It also creates rules for the expansion of the domain name
database and for domain name conflict resolution, which usually involves trademarks. Finally, it is responsible for
strengthening the security of the “Domain Name System” (DNS), by developing, for instance, safer protocols, such as the
DNSSEC, which reduces the risk of fraud and identity theft.

International policy environment

World Customs Organisation (WCO)

Description: The WCO aims to enhance the efficiency of customs administrations. It plays a fundamental role in
stimulating the growth of cross-border trade in goods, as well as in fighting against illicit trade in fraudulent products.
The organisation recently created a working group on e-commerce, divided into four subgroups: trade facilitation,
security, revenue collection, and measurement and analysis.

International policy environment

International Telecommunications Union (ITU)

Description: The ITU is dedicated to the deployment and standardization of telecommunications infrastructure, which is
an enabler of e-commerce. It aims to foster access to ICT applications and services, especially in underserved and rural
areas, as well as to enhance infrastructure security.

International policy environment

Ministry of Trade

Description: A country’s Ministry of Trade, like other ministries which might be involved directly or indirectly with e-
commerce, is extremely important for private sector competitiveness, as it helps to establish the fundamental bases on
which the e-commerce market will operate in the national environment.

National environment
TISIs and TPOs

Description: TISIs and TPOs are in a crucial position to provide resources and competencies to firm wishing to engage in
e-commerce. As a part of the immediate business environment for SMEs, they are important interlocutors for
policymakers.

Immediate business environment

Enterprises engaging in e-commerce

Description: At the end of the day, successfully engaging in e-commerce requires a certain amount of capacity present in
enterprises themselves. Firms need to have the ability to manage the resources under their control in order to
successfully engage in e-commerce.

Firm-level capabilities

1.18 Developing an Action Plan Using the E-Matrix

Notes:

Developing an Action Plan Using the E-Matrix

1.19 Answer the question

Correct Choice

International rules, statistics and best practices

The specific situation in the country

X Both

Feedback:

Both international rules, statistics and best practices, as well as the country’s specific situation need to be taken into
account when considering e-commerce related policy changes. For example, let us imagine that the internet penetration
rate in a country is roughly 30 % and that about 10% of the population uses the Internet. Does this situation impede the
growth of e-commerce in the country? To find the answer, we need to know how other countries are doing in this
regard, which provides objective information on gaps and challenges. In this particular case, an internet penetration rate
of 30% is lower than the average penetration rate of developing countries (40%) and higher than the average of Least
Developed Countries (15%). Based on these statistics and the country’s specific situation, it becomes possible to decide
whether or not the internet penetration rate presents a challenge in e-commerce growth.
1.20 International statistics and indices

Notes:

The UNCTAD B2C E-commerce Index 2016 (covering 137 economies) provides an indication of the readiness of various
countries to engage in e-commerce. This preliminary assessment can serve as a first step to understanding the gaps and
challenges of a particular country with regard to engaging in e-commerce. The Index is made up of four indicators:
Internet use penetration, secure server per million inhabitants, credit card penetration and postal reliability score.
Take a look at this sample from the UNCTAD B2C E-commerce Index 2016. How do the various regions mentioned
compare with each other?
There are wide regional differences in score across of the indicators of the UNCTAD B2C E-commerce Index. Although
Africa has the lowest score across all indicators, e-commerce is rapidly developing on the continent and creative
solutions are emerging to leapfrog traditional business models. Mobile money solutions such as M-Pesa can partly offset
the low use of credit cards.
1.21 International statistics and indices - Cont.

Notes:

In order to complete a country status assessment for e-commerce, it is important to have indicators and data available.
Below are some examples of indicators relevant to each segment of the e-commerce process chain that may help you
compare different countries, thus allowing you to assess the e-commerce environment in your own country.

1.22 Incorporating the international policy environment into the E-Matrix action plan

Notes:

Although it was not discussed in the previous lecture, it is nonetheless important to integrate the international policy
environment into the E-Matrix, especially for cross-border e-commerce. This is because the international policy
environment involves policy coordination between countries, including any and all regional or international responses to
e-commerce issues, which are critical to creating a conducive e-commerce environment. Indeed, national measures
need to be harmonised to facilitate trade through cross-border e-commerce. Customs, for instance need to work
expeditiously on both sides of the border.
The list above provides some examples of measures for e-commerce at the international policy environment level.
However, it is by no means exhaustive. In order to fight cybercrime, for example, law enforcement should have
frameworks of cooperation with their peers in other countries to ensure that information can be quickly and easily
exchanged. Negotiating such framework harmonizations may involve several countries, as well as international
organisation.
1.23 Incorporating the international policy environment into the E-Matrix action plan

- Examples

Notes:

The Budapest Convention on Cybercrime is the first international treaty seeking to address Internet and computer crime
by harmonizing national laws. As the only binding international instrument on this issue, it serves as a guideline for any
country wishing to develop comprehensive national legislation against cybercrime. Click here to learn more about the
Budapest Convention: <http://www.coe.int/en/web/cybercrime/the-budapest-convention>
The Electronic Communications Convention (UNCTRAL) aims to facilitate the use of electronic communications in cross-
border trade by ensuring that contracts and communications exchanged or concluded electronically have the same
validity as their traditional paper-based equivalents. Click here to learn more about UNCTRAL:
<http://www.uncitral.org/uncitral/en/uncitral_texts/electronic_commerce/2005Convention.html>
The revised Kyoto Convention (WCO) is a blueprint for modern and efficient customs procedures in the 21st century.
United Nations guidelines on consumer protection give important legitimacy to the principles of consumer rights, as well
as practical support and guidance for developing national consumer protection legislation.Click here to learn more about
the revised Kyoto Convention: <http://www.wcoomd.org/en/topics/facilitation/instrument-and-
tools/conventions/pf_revised_kyoto_conv.aspx>
cross-border e-commerce initiatives can also be found in the context of regional integration
ØThe Asia-Pacific Economic Cooperation (APEC) has adopted its own e-readiness assessment, which consists of a guide
involving the government, business and several other stakeholders. Once the self-assessment exercise is completed, all
of the stakeholders involved agree upon a set of actions for implementation in order to improve the local business
environment for e-commerce. For more information on APEC’s e-readiness assessment guide, click here:
<http://publications.apec.org/publication-detail.php?pub_id=647>
Since 2017, the G20 has had a dedicated taskforce on digitalization. The policy recommendations from the business
community (B20) are focused around three main areas: global connectivity, industry 4.0, and artificial intelligence. For
more information on this G20 digitization taskforce, click here: <https://www.b20germany.org/priorities/digitalization/>
The European Union’s Single Digital Market Strategy aims to unify all of its Member States’ national digital markets. It
estimates that doing so will contribute an estimated €415 billion per year to the Union’s economy, while creating
hundreds of thousands of jobs. The strategy focuses on three policy areas: improving access to digital goods and
services; creating an environment in which digital networks and services can prosper; and digital technology as a driver
for growth. For more information on the European Union’s Single Digital Market Strategy, click here:
<https://ec.europa.eu/priorities/digital-single-market_en>

1.24 Incorporating the international policy environment into the E-Matrix action plan

- Examples

Notes:

The Budapest Convention on Cybercrime is the first international treaty seeking to address Internet and computer crime
by harmonizing national laws. As the only binding international instrument on this issue, it serves as a guideline for any
country wishing to develop comprehensive national legislation against cybercrime. Click here to learn more about the
Budapest Convention: <http://www.coe.int/en/web/cybercrime/the-budapest-convention>
The Electronic Communications Convention (UNCTRAL) aims to facilitate the use of electronic communications in cross-
border trade by ensuring that contracts and communications exchanged or concluded electronically have the same
validity as their traditional paper-based equivalents. Click here to learn more about UNCTRAL:
<http://www.uncitral.org/uncitral/en/uncitral_texts/electronic_commerce/2005Convention.html>
The revised Kyoto Convention (WCO) is a blueprint for modern and efficient customs procedures in the 21st century.
United Nations guidelines on consumer protection give important legitimacy to the principles of consumer rights, as well
as practical support and guidance for developing national consumer protection legislation.Click here to learn more about
the revised Kyoto Convention: <http://www.wcoomd.org/en/topics/facilitation/instrument-and-
tools/conventions/pf_revised_kyoto_conv.aspx>
cross-border e-commerce initiatives can also be found in the context of regional integration
ØThe Asia-Pacific Economic Cooperation (APEC) has adopted its own e-readiness assessment, which consists of a guide
involving the government, business and several other stakeholders. Once the self-assessment exercise is completed, all
of the stakeholders involved agree upon a set of actions for implementation in order to improve the local business
environment for e-commerce. For more information on APEC’s e-readiness assessment guide, click here:
<http://publications.apec.org/publication-detail.php?pub_id=647>
Since 2017, the G20 has had a dedicated taskforce on digitalization. The policy recommendations from the business
community (B20) are focused around three main areas: global connectivity, industry 4.0, and artificial intelligence. For
more information on this G20 digitization taskforce, click here: <https://www.b20germany.org/priorities/digitalization/>
The European Union’s Single Digital Market Strategy aims to unify all of its Member States’ national digital markets. It
estimates that doing so will contribute an estimated €415 billion per year to the Union’s economy, while creating
hundreds of thousands of jobs. The strategy focuses on three policy areas: improving access to digital goods and
services; creating an environment in which digital networks and services can prosper; and digital technology as a driver
for growth. For more information on the European Union’s Single Digital Market Strategy, click here:
<https://ec.europa.eu/priorities/digital-single-market_en>

1.25 Transforming the E-Matrix checklist into an action plan

Notes:

So, how can the E-Matrix be applied concretely in order to identify potential areas for policy action that take into
account both international practices and the domestic situation of the country in question? As an example, let’s take a
look at the “establishing an online business” section of the E-Matrix.
Simple business registration procedure
Understanding the issue / identifying the root cause of the problem (agenda-setting stage) Situation: some e-
commerce businesses do not officially register with the authorities.
Ask yourself the following questions:
What is the current business registration procedure? Are all companies required to be registered in the public
commercial register / local tax office? What are the requirements? Specific license and permit requirements may differ
across cities, municipalities, states and countries.
Does it represent a policy challenge for e-commerce? Is this issue specifically hampering e-commerce activity? If so,
how?
Crafting your Solutions
What can be done to improve the situation? Would simplifying the document requirements be a solution? How about
making the requirements more transparent? Or reducing registration costs? Could a “one-stop-shop” for business
registration be a solution? Or might simply shortening the time needed to register solve the problem?

Proposing Action plans Ø Simplify registration procedures

Ø Increase the transparency and availability of information
Ø Review the documentation requirements
Ø Implement an e-registration system
Implementers • Which are the government agencies involved?
Evaluation • Have you solved the problem? Do you have statistical evidence?
Regional initiative Ask yourself the following questions:
• Is there a way to cooperate and promote collaboration with other countries in the region? Is a forum required to
facilitate information exchanges among business-registering organizations in the region?
• What can be done to facilitate cross-border e-commerce transactions? For example, could an e-portal be
created to increase transparency on the registration of e-commerce businesses in the region?
International initiative Ask yourself: Has there been any international initiative in this area at the international level?
How could you get involved?

1.26 Answer the question

Feedback:

There might be a number of reasons for which you may or may not agree with your country’s position in UNCTAD’s
Index. Broadly speaking, the Index is useful as a preliminary assessment. However, more detailed analysis is required to
draw more specific conclusions. Your country’s rank here should thus not be perceived as absolute.

Indeed, while the e-commerce rank of the Index is built considering only four dimensions, many others factors also play
a role in e-commerce readiness, including language and marketing skills, as well as average Internet speed, among
others.
1.27 Key Points

Notes:

Remember:
 A national e-commerce strategy facilitates coordination among the different policy areas involved in e-commerce,
facilitates the implementation of e-commerce measures among diverse agencies, and provides a clear objective to
follow. As such, it is a highly useful policy tool to ensure the effective promotion of e-commerce in a country.
 Ensuring that a country’s e-commerce environment is harmonized with international arrangements (e.g.: rules,
guidelines, initiatives) is as important as making sure that a conducive domestic policy environment is in place. Indeed,
because cross-border e-commerce is a form of cross-border trade, there are a number of actors involved in setting e-
commerce related rules at the international level which are likely to have an impact on the sector, even at the
domestic level.
 Some indicators, such as the UNCTAD B2C E-commerce Index 2016, can be a useful first step towards a better
understanding of the circumstances in your country, and the eventual formulation a national e-commerce strategy.

1.28 Thank you for completing the lecture