It is, therefore, time for Pakistan to take a closer and more intrusive look at the emerging world on its East. The private sector should take the lead in this respect. And for starters, they could use their emerging business relations with the Chinese business community in connection with the CPEC project to enter these Eastern markets through China and on way also learn the ropes from their Chinese business partnerson how to handle this market via e-commerce.
According to projections in the OECD Development Centre's Update on the Economic Outlook for China, India and Southeast Asia are expected to remain stable in the near term.
The economies of China, India plus the ten ASEAN countries are expected to see average growth of 5.3% in both 2018 and 2019, with the highest rates in Cambodia, Lao PDR and Myanmar (the CLM countries), Viet Nam and the Philippines.
The region stands to show continued strong growth in the near term if domestic and external risks are properly managed, said Mario Pezzini, Director of the OECD Development Centre and Special Advisor to the OECD Secretary-General on Development, while launching the Update at the OECD headquarters in Paris on July 13, 2018.
A special chapter of the Update addresses the challenges and opportunities facing the region in developing cross-border e-commerce. The region is already a major player in e-commerce, and should continue to contribute to the sector's global growth in the future.
The use of information and communications technology (ICT), ICT infrastructure, transportation and logistics, payment systems, and legal and regulatory frameworks will all affect such future growth.
Cross-border e-commerce is an increasingly important form of economic activity. These interactions and transactions can take place between governments, businesses and consumers. The cross-border business-to-business (B2B) and business-to-consumer (B2C) transactions in the regional market look set to drastically reshape trade and business in the region.
E-commerce growth in Asia has been the fastest in the world, with China leading the region. China is the world's largest B2C e-commerce market and among the frontrunners of cross-border e-commerce. Cross-border B2B e-commerce has been growing steadily since the 1990s. Growth accelerated in the 21st century with the expansion and deepening of global value chains (GVCs). While B2B still dominates cross-border e-commerce, international B2C e-commerce has been growing faster than B2B transactions. While the e-commerce market remains smaller than traditional markets, further growth in e-commerce is expected in the future in the region and globally.
From 2015 to 2021, the region's total (B2B and B2C) e-commerce market revenue is expected to increase from about USD 320 billion to more than USD 900 billion. The regional market also accounts for a disproportionate share of Internet and e-commerce users, a trend that is expected to continue. The region accounted for 50% of the world's Internet population in 2015. The region will host about 60% of total Internet users and a large number of e-commerce users by the end of 2021, thanks to its growing population and Internet penetration rate.
The scale of e-commerce in the region and the potential for its further development are the result of multiple factors, including levels of ICT use, the development of ICT infrastructure, transportation infrastructure and logistics capabilities, the use of e-payment systems, and the legal and regulatory environment. The percentage of the population using the Internet has risen steadily across the region in recent years, although significant differences still exist between countries.
In high-income countries like Singapore and Brunei Darussalam, as well as in middle-income Malaysia, the figure is higher than in other countries in the region. Involvement in GVCs and second mover advantages have helped firms in the region to become relatively quick adopters of the new technologies needed to participate in cross border e-commerce. Businesses in the region - particularly those in China, Indonesia, Malaysia and Thailand - have relatively high rates of technology use, though engagement in e-commerce also varies within countries in the region, with smaller firms less likely to take part.
Growth rates in the region: China's growth rate surpassed the government's target, while India managed to navigate quite well the growth obstacles tied to lagged demonetisation effects and the sales tax reform.
Strong economic growth in the region is projected to continue in 2018 and 2019. This prognosis is backed by generally robust domestic demand. Central banks have been raising their policy rates, largely on concerns related to inflation and exchange rates, but they have used other instruments to keep market liquidity ample.
External demand is likely to be relatively reserved, in light of new tariff measures of some economies. Optimism in capital markets has softened, but the economies' external positions have remained mostly stable so far.
Current account balances have improved in a number of the region's economies, while foreign direct investment (FDI) inflows show an even more encouraging picture. Inflation has picked up in some countries, and the build -up of price pressures has prompted some central banks to take a more proactive stance, although the prevailing rates are still within tolerance bands.
The countries of the region must cope with the following challenges to maintain growth: the impact of rising interest rates in advanced economies, in particular the United States, the implementation of planned infrastructure projects and the acceleration of regional integration amidst rising protectionism.
• China's GDP growth is projected to moderate to 6.7% in 2018 and to 6.4% in 2019. Household consumption is expected to maintain a relatively steady expansion rate on the back of robust real disposable income growth. A potential source of downside risk is escalating trade tensions, leading to tariffs on an increasing number of goods. This could hurt exports and potentially spill over to investment by export-oriented firms. Recent data show that China's GDP grew by 6.8% in Q1 2018, marginally lower than the 6.9% in Q1 2017.
• India's economic growth is poised to rise to 7.4% in 2018 and 7.5% in 2019. Private spending should benefit from rising credit growth. Improvements in revenue intake should also help the government expand spending coverage. The issues related to banks' non-performing assets will require careful attention.
• Overall, the external positions of regional economies have remained stable so far. Current account balances have improved in a number of economies in the region. FDI data show an even more encouraging picture. Overall risk perception in the region, as suggested by the credit default swap spreads, has risen since mid-January 2018, although the spreads indicate that the degree of concern is still relatively limited.
• Monetary authorities in the region have started raising policy rates, mainly on the grounds of rising inflation and weakening of some local currencies. However, they have also used the mandated reserve requirement ratio for banks to keep the system liquid, presumably to isolate the direct monetary policy impact on exchange rates, inflation and domestic credit flows. Headline inflation in several regional countries has been climbing since the end of 2017, propelled partly by the rise in global oil prices and the strengthening of the US dollar. Local currencies like the Philippine peso, Indonesian rupiah and Indian rupee have depreciated this year.
• Overall, the fiscal positions of regional economies are relatively sound. The fiscal policy direction, however, is mixed. Revenue performances (i.e. revenue-to GDP ratio) diverged across the region from 2016 to 2017. While the revenue ratios of Cambodia, the Philippines, Singapore and Viet Nam have either improved or remained stable, the ratios of Brunei Darussalam, China, India, Indonesia, Lao PDR, Malaysia and Thailand have deteriorated.
A few prominent issues highlighted in this report are:
• the impact of rising interest rates in advanced economies, in particular the United States;
• the implementation of infrastructure projects; and
• the acceleration of regional integration amidst rising protectionism.
The impact of rising interest rates in advanced economies, in particular the United States, on the region requires careful attention. Although the risk is benign at this point, the potential that it can trigger substantial capital outflows cannot be set aside, considering the recent broadening of domestic inflation pressures, weakening of currencies in the region and growing credit risk perception.
The risk that domestic demand could be dampened because of higher domestic borrowing costs is another concern. Some central banks in the region have recently raised policy rates in response to the currency weakness and inflation build-up, which can be partly associated with the monetary policy of the United States.