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Digital Sectors of Pakistani, Chinese Economies ‘to Continue Upward Trajectory’

Pakistani e-commerce sector is estimated to touch $1b mark by 2020
by TR Pakistan

The digital sectors of Pakistani and Chinese economies are set to see major growth in the coming years, suggest separate studies released recently.

With China-Pakistan Economic Corridor (CPEC) well underway, growth in digital sectors of both countries is set to strengthen efforts for bilateral economic cooperation.

Citing trends under the prevailing policy environment, the 2017 annual report by Pakistan’s telecommunications regulator estimates that the size of the country’s e-commerce market is expected to grow up to $1 billion by 2020.

The Pakistan Telecommunication Authority (PTA) report states that an ‘e-commerce policy board’ set up the Ministry of Commerce will monitor progress and coordinate cross-institutional efforts to meet the target. It says the State Bank of Pakistan (SBP) has already devised and approved regulations for Payment System Operators (PSO) and Payment Service Providers (PSP), while the development of an e-commerce policy is also underway.

The PTA report identifies payment gateways as the most important aspect of the e-commerce ecosystem since it is needed to attract credible international players to the country’s e-commerce ecosystem.

It notes that private-sector entrepreneurs have already launched numerous e-commerce initiatives for consumers (B2C) that have, over time, become success stories. But for now Pakistani economy remains cash-driven, as mobile wallet (m-wallet) accounts are scarce and the number of debit-and-credit-card holders is small. However, the report highlights that the country is making good progress on the business-to-business (B2B) front, with the software industry aiming to reach exports worth $5 billion by 2020. Various medium-sized firms, mainly in software development and service outsourcing, have reported earnings over $500 million, it adds.

Read more: The Dawn of Pakistan’s Fintech Boom

However, these advances remain small steps as Pakistan’s IT sales still amount to only 0.0875 percent ($2.8 billion) of the $3,200-billion global market. But trends in online purchases by Pakistani consumers signal that this share can be improved significantly if the policy regime gets implemented fully.

E-commerce in Pakistan isn’t just limited to transactions in day-to-day products. Websites offering cars, property, and travel packages have also gained considerable popularity, showing that people are using the Internet to buy a wider range of goods. Some of these leading local portals are PakWheels, Zameen.com, Food Panda, Rozee.pk, and Daraz.pk. Chinese e-commerce giant Alibaba — the world’s largest e-commerce company — has already shown interest in the Pakistani market. It has recently signed a Memorandum of Understanding (MoU) with the Trade Development Authority of Pakistan (TDAP) to help boost small and medium enterprises.

The Chinese e-commerce market is now estimated to be larger than those of the United States, United Kingdom, France, Germany, and Japan combined, according to a report issued by McKinsey Global Institute (MGI).

It notes that as digital forces shake the status quo and restructure value chains, China’s economy is set to become even more competitive globally.

The MGI report has documented the volume of mobile payments in China at $790 billion in 2016, 11 times that of the United States in the same year.

It notes that China is in the global top three for venture capital investment in virtual reality, autonomous vehicles, 3D printing, robotics, drones, and artificial intelligence.

One-third of the world’s 262 unicorn companies (private startups valued at more than $1 billion) are Chinese, commanding 43 percent of the global value in the sector, the report says.

According to the report, a large and a young market that enables rapid commercialization of digital business models, a rich digital ecosystem expanding beyond a few giants, and a government allowing space for digital companies to experiment and investing in the sector as well as promoting use of digital technologies, are three key factors suggesting a huge upside for China.

The MGI report has also predicted that digital technology might shift and create between 10 and 45 percent of industry revenues in China by 2030.

Jeongmin Seong, the MGI senior fellow, says that digitization can make China’s economy more dynamic and enable more Chinese businesses to compete globally and even export ‘Made In China’ digital business models to rest of the economies.

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