CAIRO: In 1956, a report by Simon Kuznets described the unique context of pre-industrial systems like Egypt’s evolving economy alongside more developed ones in Europe and North America that had already undergone the industrial transition. He said these countries are essentially “trying to carry out, in a 20th-century political and social context, what is essentially a 19th-century economic revolution.
It is almost 2010 and Egypt may have industrialized, but it’s still trying to catch up, this time in the sector of e-commerce.
According to a report compiled by the Ministry of Communications and Information Technology (MCIT), Egyptians’ internet use is significantly lower than other countries of like socioeconomic standing.
Omar Soudodi, general manager of Souq.com Egypt, an online market and auction site in the Middle East, described the disparity as a “tremendous growth opportunity for internet service providers (ISPs).
The report found that internet use had penetrated only 16.7 percent of the Egyptian population as of last year. Of the 60 percent of large Egyptian enterprises utilizing the internet for business, almost 80 percent of them only send and receive emails. Of these, only 26 percent are making any attempt to leverage the internet to deliver products or services online.
Other than the low percentage of internet use by both individuals and businesses, Souq.com identified several other challenges to taking advantage of the internet as a tool for financial services. Low numbers of credit card users, the dearth of alternative electronic payment facilities, and general mistrust of e-commerce security and other IT based approaches to financial transactions were all named as culprits.
Soudodi expressed optimism that Egyptians need simply to be exposed to the technology, saying that “a much larger portion of the population is yet to be introduced to a broad range of online services.
He also opined that a business model is needed to reduce the retarding factors, although offered no insight of what such a model would entail.
“Although the public sector has taken important provisions to move ministries and other government organizations onto the internet, small and medium businesses (SMEs) and micro-businesses are widely seen as the growth engine for Egypt to move towards an information economy, said Soudodi.
“Egyptian small businesses make up the majority of Egypt’s private sector and must be empowered to take full advantage of the sales and growth potential that the internet offers, helping them to increase national GDP and move towards an information economy.
Soudodi cheered on Souq.com for its pioneering role in bringing Egyptian customers online. “Souq.com has excelled in delivering successful e-commerce/online shopping services across the Arab world by building the core functions that increase service usage and adoption.
“In Egypt, we are looking at different approaches to overcome the unique challenges such as low credit card penetration while simplifying online purchases and payments for Egyptians, giving users complete peace of mind throughout the entire purchase cycle, he said.
Speakers at the Euromoney conference in September, such as MCIT Minister ­Tarek Kamel, named e-commerce as one of the most promising sectors in Egyptian finance, mostly for its potential to individualize the banking process and cater to the needs of SMEs, correctly identified by Soudodi as a key driver of Egypt’s economic growth.
Microfinance, another buzzword among emerging financial markets worldwide, has the potential to benefit individuals and businesses operating at a scale too small to be well served by the current financial set-up.
Egypt’s hesitancy to adopt online financial transactions allow for observation of other markets’ experience with e-commerce. However, numerous studies have identified benefits. Research conducted in the US as long ago as 1998 found e-commerce enabled improved customer service, lower marketing and distribution costs and reduced operation costs.
E-commerce can improve person-to-business interaction as well as business-to-business interaction. A report compiled in 2002 by Ratnasingan et al., warns against businesses adopting the tools of e-commerce simply to stay competitive, without fully utilizing its potential as a tool for greater efficiency and productivity.
Should Egyptian consumers and businesses begin to adopt e-commerce services, they would likely benefit from other markets having already worked out potential kinks. As stated a half century ago by Simon Kuznets, “Egypt faces several great obstacles. But, also like them, it is offered many opportunities which were denied to the forerunners.
