E-commerce can spur growth, boost trade in South Asia

Online sales accounted for a mere 1.6 and 0.7% of total retail sales in India and Bangladesh

E-commerce can become a driver of growth across South Asia and boost trade between the region's countries, but its potential remains largely untapped, says a new World Bank report.

Launched in Delhi on 16 December, the report Unleashing E-Commerce for South Asian Integration notes that although e-commerce has grown significantly in South Asia, online sales accounted for a mere 1.6 and 0.7% of total retail sales in India and Bangladesh, compared to 15% in China and around 14% globally. Increasing the use of e-commerce by consumers and firms in South Asia could potentially help increase competition and firm productivity, and encourage diversification of production and exports, the report adds.

"E-commerce can boost a range of economic indicators across South Asia, from entrepreneurship and job growth to higher GDP rates and overall productivity," said Sanjay Kathuria, World Bank Lead Economist and co-author of the report. "By unleashing its online trade potential, South Asia can better integrate into international value chains, increase its market access, and strengthen commercial linkages between countries across the region."

A survey of over 2,200 firms in South Asia showed that the top concerns on cross-border e-commerce sales included e-commerce related logistics, e-commerce and digital regulations, and connectivity and information technology infrastructure. These barriers are significantly higher when trading with other South Asian countries. The main international e-partners of firms in South Asia are China, the United Kingdom, and the United States, and not other South Asian countries.

Small and medium enterprises in the region reported that removing regulatory and logistical challenges to e-commerce would increase their exports, employment, and productivity by as much as 20-30%. To overcome these hurdles, the report proposes reforms in areas such as payments, delivery, market access regulations, consumer protection, and data privacy, at the national, regional, and global levels.

"Some practical steps to strengthen online transactions include leveraging the reputation of large e-commerce platforms to offer consumer protection, return and redress, and data security as an initial substitute for robust contractual and consumer protection mechanisms, and permitting cross-border e-commerce payments," said Arti Grover, World Bank Senior Economist and co-author of the report. The report also suggests an incremental approach to taking these steps, if necessary, in order to build confidence.

"While cross-border trade within South Asia represents only 5% of the region's total trade, e-commerce has the potential to stimulate regional trade by bridging the gap between buyers and sellers on different sides of national borders," said Viviana Perego, World Bank Agriculture Economist and co-author of the report. "And apart from firms, consumers in South Asia stand to gain significantly from the potential reduction in costs and availability of a greater variety of e-traded goods and services."

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