Today's Editorial

26 June 2017

Global e-commerce


Source: By Amitendu Palit: The Financial Express


Focus on the land and sea corridors in China’s One-Belt-One-Road (OBOR) has overlooked a vital aspect of connectivity that the initiative aspires: digital connectivity. This could be the biggest force of continental cross-border connections generated by OBOR with various implications. Unlike land corridors that require political understanding among countries and can encounter territorial issues, digital connectivity can progress seamlessly. China is utilising the large digital infrastructure deficit in many parts of the OBOR space to its advantage in this respect.

OBOR has landlocked areas constrained in capacities to access data and information due to lack of proximity to underground submarine optic fibre cables. These capacities are further constrained by outdated telecom infrastructure. The deficiencies result in relatively limited access to high-range cellular phone services and internet. Only 19% of Tajiks, for example, use the internet, with the proportions being roughly the same for Nepal and Cambodia. Those for Turkmenistan and Afghanistan are at even lower levels of 15% and 9%. In South Asian coastal countries like Bangladesh and Pakistan, too, internet users are less than one-fifth of national populations, underlining the desperation for investments in digital connection capacities. Generous Chinese funding through OBOR projects comes as a great relief in this regard.

Chinese telecom service providers have dug deep in several OBOR countries, most notably Pakistan, where China Mobile Pakistan (Zong) has invested extensively and would benefit from the conclusion of the China-Pakistan optical fibre cable project. China Telecom and its subsidiary China Comservice are laying optical cables and building telecom infrastructure in Eurasia, the Mekong region, and Africa, while China Unicom is similarly engaged in Central Asia, Southeast Asia, Africa and Latin America. These state-owned Chinese telecom enterprises are working on a well-defined strategy of building digital infrastructure in regions and countries that would feature in a seamless digital connectivity production network across Asia, Europe and Africa.

Segments of the network began coming up well before China unleashed OBOR on the world with Chinese telecom companies active in South Asia, Central Asia and Africa for several years now. Obtaining political legitimacy and strategic consent for more Chinese investments in these countries and the neighbourhood were therefore not a concern even after the world woke up to the prospects of China laying out a Sino-centric regional order through OBOR.

The bigger commercial prospect for China in making OBOR a digitally connected geography is in the opportunities it visualises for its companies in the e-commerce terrain of the initiative. Hardly any other OBOR country has e-commerce service providers comparable to the depth and spread of Alibaba and, or even Tencent, from China. Many parts of OBOR, so far, have remained out of reach of the global e-commerce boom because of their digital deficiencies. Once such deficits are taken care off, Chinese e-commerce companies should be well positioned able to crack a pan-continental market brimming with prospects. This would be a part of the global e-commerce game where Chinese businesses would have head starts over American counterparts. Amazon, Walmart, EBay and other US online businesses would find it exceedingly difficult to navigate online business in countries and regions that are strategically bound to China by gratitude that Chinese investments would bring.

Digital connectivity is progressing fast along OBOR with Chinese companies, consultants and technology solution providers rapidly laying out the hardware for sharing information through data. It shouldn’t be too late before Chinese e-commerce companies begin moving in. What that would mean is a radical readjustment of the global e-commerce space with far-reaching ramifications.

The first significant impact of Chinese ownership of digital communication in chunks of the OBOR geography would be to split the global e-commerce turf wide open into a US-China contestation. Till now, the US has been the undisputed leader in this industry owning more than half of the top global online businesses. The scenario could change over the next decade or so. The OBOR e-commerce basket, vast, untapped, and unexplored, can provide Chinese companies the growth space they are searching for acquiring sizes as big as their US counterparts.

Polarisation of global e-commerce among US and Chinese businesses creates the prospect of digital exchanges becoming a powerful sphere of expanding future strategic influence. As B2C operations expand, and more future Amazons begin competing with potential Alibabas, most markets would not be big enough to accommodate both variants. It would be interesting to see how far host country choices on foreign e-commerce providers reflect their broader geo-strategic loyalties. Some countries, even within the OBOR, could be ‘pragmatic’ enough to open up their digital infrastructure and markets reared by Chinese funds and companies to other country businesses.

Another major implication of OBOR and the digital connectivity it encompasses is the problems it can create for efforts to arrive at global e-commerce rules. The WTO has lately begun moving in this direction. While most countries support the move, some like India apprehend lack of domestic e-commerce regulations in most developing countries could lead to a situation where multilateral online business rules get shaped significantly by US or Chinese business interests, depending on the relative strategic influence they are able to exert on WTO members. This was waiting to happen and OBOR would hasten the tendency. India’s problems with OBOR are clearly not limited to sovereignty.