|Latin America II 2000
|E-Business – “Promises to Keep and Miles to Go…”
|Vice-President, Worldwide Sales
Two hundred years ago, the industrial revolution was widely expected to end poverty. That didn’t happen. Today, the Internet and its offspring, e-Business, are widely touted as the new panacea. There seems to be a pervasive and naively optimistic worldview community that the Internet is the “silver bullet” that solves many of the economic, structural and social shortcomings of developing countries. Clearly, the potential of the Internet as an agent of change is enormous: commerce, communications, education, worker and enterprise productivity, and business efficiency all stand to benefit. But will the Internet be the platform that enables developing countries to leapfrog into the 21st century? Can Brazil truly be the next Finland? After all, I was recently told, “who had ever heard of Finland before telecommunications and the Internet?” Although the Internet and e-Business might be facilitators, they are not preconditions fundamental to economic growth and national well being. Instead, the Internet and e-Business will benefit by improvements in the national infrastructure. Such improvements are in fact the conditions precedent to robust and sustainable economic growth.
What are the conditions that are fundamental for Brazil or any other developing nation to mimic, say, Finland and its remarkable success story? In no particular order, they include broad political freedom and accountable governance; efficient national fiscal institutions and practices; widespread literacy and efficient communications; a completely transparent and responsible judiciary; and finally, a national commitment to the commonweal (including universal public education, health care, social security, etc.). If knowledge is power then information is its fuel. The Internet promises to democratise the availability of information. The “digital divide” – the gap between those who possess and use PCs and enjoy internet access and those who don’t – left unaddressed, will have a negative impact on economic development. Universal access in telecommunications, which is a fundamental aim of most governments, should be extended to include universal Internet access. The youthful but mushrooming “Internet revolution,” which started in the mid-1990s, promises to change the internal socio-economic and political structures of virtually every nation. The process of “globalisation” has also been fostered and accelerated by the rapid expansion of the Internet. Although ‘global’, the 80-20 rule still applies to the Internet in the sense that 80% of the users are in developed countries while 20% are in developing countries. A similar situation exists for the Internet applications. Recent estimates indicate the U.S. has a substantial lead in deploying and effectively using e-Commerce for both business to business (B2B) and business to consumer (B2C) services. Europe lags behind the U.S. by a couple of years and developing countries lag by at least 5 years. According to the latest estimates, curent-ly there are an estimated 7 million Internet users in Latin America. “Almost 70% of all – internet users are located in Brazil, Argentina, Mexico and Chile.” In a region of 34 countries with a population of 450 million there is an average of only 65,000 Internet users per country. As expected, user distribution is highly skewed. Almost 70% of all users are located in Brazil, Argentina, Mexico and Chile – with Brazil alone accounting for one-half of the total. These statistics would suggest that Brazil and perhaps Mexico can support a robust e-Business sector. However, a successful pan-regional e-Business sector is dependent on “smoothing out” the user distribution as well as increasing the size of the addressable market (the addressable market being the number of users-individuals, households and small/medium enterprises – with internet access and disposable income). Although lacking, the basic infrastructure required for developing and deploying nationwide Internet (IP) backbones is slowly catching up. The reasons developing countries are behind include the lack of public sector money, reliance on private sector to build the infrastructure, and the lack of vision, planning, direction and/or incentives to ensure such development. Consequently, Internet access is still limited to large cities creating still another digital divide between the urban population centres and rural communities. In 1999, total teledensity (the number of wired or wireless lines per 100 people) in Latin America was only 12%. It is expected to almost double by 2005. Meanwhile, PC penetration in the region was a meager 2% last year although it is forecast to rise to 12% over the next five years. Although estimates vary widely, there are probably 10 million Internet users in Latin America going to 24 million by 2003 and perhaps double that number by 2005. GDP/person in Latin America was US$ 3,762 and is expected to jump by 25% to US$ 4,801 by 2005. These are significant and meaningful advances. But are the 2005 projections (much less today’s reality) sufficient to conclude that the Internet and e-Business represent a sea change in the economic prospects of Latin America? From a macroeconomic perspective, teledensity, PC penetration and personal disposable income must increase dramatically for the Internet and e-Business in Latin America to become a mainstream engine of growth rather than an upper and middle class privilege. There’s little doubt that the convergence of multiple media (broadcast television, cable, telecommunications, etc.) will propel the internet as a form of “infotainment” as represented by the entry of AOL, Disney, Time Warner, Telefonica, Televisa and others into this market space. But an advertising revenue-based infotainment business model alone will not be the engine that pulls developing countries into the future. The e-Commerce market, in particular the business to business e-Transactions, is huge (its value is estimated to be about US$ 40 billion next year). Estimates for business to consumer e-Transactions on the other hand remain conservative and indicate that its growth will be relatively slow. However, there are many issues that hinder the growth of the e-Com-merce market in developing countries. For instance, all but the largest companies in developing nations often lack the necessary technical, human and financial resources. A culture of using credit cards is not prevalent in most developing countries. Few developing countries provide business security or have credit rating facilities for customers and suppliers. Delivery infrastructure is a major problem. DHL and FedEx-like services are non-existent or are unable to provide cost-efficient and reliable delivery systems in developing countries. conclusion The costs and expertise necessary for the acquisition of new technologies as well as their installation, maintenance and full exploitation in the education sector is beyond the reach of many developing countries. Often, these education systems lack many basic teaching and learning resources. Nevertheless, there has been a growing trend in many developing countries to introduce these technologies into the education system at every level. Information technology can facilitate teaching and learning but technology by itself cannot, and probably should not, supplant the central role of traditional teaching. Word processing packages, for example, can be used to improve the accuracy and readability of student work. Presentation packages can enhance the style and presentation of student work. Using the Internet, students can explore, investigate, simulate and experiment. Self-paced, student-specific tutorials can help reinforce and supplement lessons. Obviously, the Internet can be used to access information and various on-line resources. Finally, the technology will be used for communication between and among individual students and foster collaborative learning, information sharing and working in teams. The Internet and e-Business will take-off in Latin America once the infrastructure and macroeconomic enablers discussed above are implemented. The Internet is not the ‘silver bullet’. But it can certainly be one of the ‘legs of the stool’ upon which developing countries can create a new future.