World Bank-Alibaba report expects e-commerce can flourish in developing countries to create jobs

25 / 11 / 2019

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E-commerce can flourish in developing countries and in rural areas and be a powerful instrument to create employment for semi-skilled workers, women and other groups, according to a new joint research released by the World Bank and Alibaba Group.

The report, E-Commerce Development: Experience from China, is based on a combination of statistical data collected for China as a whole, as well as data from a specially commissioned survey of Taobao Villages, rural villages in China heavily engaged in e-commerce. It reviews the patterns and evolution of e-commerce in China and the specific government policies and private sector initiatives, identifies the preconditions needed for its successful development, and examines the links between e-commerce development and household welfare improvements.

According to the report, e-commerce has the potential to overcome market barriers and connect consumers and businesses. It can create jobs directly as well as through logistics services and other parts of the wider e-commerce ecosystem, improve household consumption and reduce inequality by bringing to people in rural areas the convenience, variety, and low prices enjoyed by urban dwellers, and contribute to economic growth by lowering the asymmetry of information and increasing economic efficiency.

“China’s experience shows that developing countries can harness digital technology and e-commerce to create jobs and improve people’s lives,” said Victoria Kwakwa, World Bank Vice President for East Asia and the Pacific, “We hope this report will contribute to discussions on ways to support inclusive growth through digital technology and e-commerce.”

China has one of the largest and fastest-growing e-commerce markets in the world, accounting for more than 40 percent of the total value of e-commerce transactions worldwide. More than 5 percent of total employment in China is in e-commerce. Online purchases have become part of daily life for many Chinese households.

“The rapid development and prosperity of rural e-commerce in China has proved that innovative business started by grass-roots entrepreneurs in rural areas of developing countries can thrive via the e-commerce platform under the right conditions,” said Wen Jia, Partner and President of the Public Affairs of Alibaba Group.

The report finds a positive association between e-commerce and household welfare improvement in rural China. In Taobao Villages, households that participate in e-commerce have incomes 80 percent higher than households that do not participate. E-shop workers have wage levels equal to or higher than workers in urban private industries. Women and younger, better educated households are strong beneficiaries of e-commerce in China.

The report also identifies the risks and challenges that need to be tackled in e-commerce development. These range from regulatory challenges, such as how to regulate platform providers to ensure a level playing field for comparable digital services, protect consumers, and ensure fairness between online and physical vendors to special online risks from cyber security, privacy, fraudulent or defective/counterfeit products, technical concerns regarding electronic payment, and risks stemming from imbalances in competition among platform providers.

The report highlights three enabling factors for e-commerce development: investments in training and skills building to increase human capital; proper infrastructure and logistics; and a conducive business environment.

“The achievements China has made in e-commerce can be explained by the country’s substantial investment in infrastructure over decades and the rapid improvement of its business climate in recent years,” said Gong Sen, Executive Vice-President of China Center for International Knowledge on Development which co-hosted the launch.