Data Protection and Transaction Security

Transaction security pertains to three important components and related issues, namely:

● Transaction Privacy, which means that transactions must be held private and intact, with

unauthorized users unable to understand the message content;

● Transaction Confidentiality, implying that traces of transactions must be dislodged from the

public network and that absolutely no intermediary is permitted to hold copies of the transaction

unless authorized to do so; and

● Transaction Integrity, which pertains to the importance of protecting transactions from

unlawful interference-i.e., transactions must be kept unaltered and unmodified.

In an open network like the Internet, it seems difficult to ensure these. There are, however,

technological solutions that seek to address these security concerns. These solutions usually

come in the form of authorization schemes, i.e., programs that make sure that only authorized

users can gain access to information resources such as user accounts, files, and databases.

Typical examples of authorization schemes are: password protection, encrypted smart cards,

biometrics (e.g., fingerprinting, iris-scanning), and firewalls. A firewall is a system of

cryptographic methods supported by perimeter guards to ensure the safe arrival and storage

of information and its protection from internal and external threats. The most common data and

transaction and data security scheme is encryption, which involves a set of secret codes that

defends sensitive information crossing over online public channels. It makes information

indecipherable except to those with a decryption/decoding key.

Strengthening Consumer Protection

Among the more common trust-related issues

that SMEs take note of in considering whether to engage in e-commerce are:

where and how payment takes place (whether real or virtual); when settlement

takes place (before, during or after the transaction); who settles; whether the transaction

is B2B or B2C; and whether settlement can be traced. Generally, however,

among e-commerce users in developing countries, including SMEs, there is very

low willingness to provide sensitive financial information over the Internet. On the

other hand, consumers have reservations about transacting with SMEs through the

Internet due to the lack of a clear policy on returns and use of data. To address this

concern, government can encourage companies/ SMEs to make their privacy policy

explicit in their Web sites.

Network Infrastructure and Localization of Content

A developed national information

infrastructure is a necessary, though not a sufficient, condition for e-commerce

uptake of SMEs. Without reliable and inexpensive telecommunications and

other information services, SMEs will not be able to go online. An important strategy

in this regard is the construction of “telecenters” or electronic community centers

that would serve as a community-shared access and connectivity platform especially

in the rural areas (e.g., an electronic agri-information center which provides market

information to farmers in rural areas). These telecenters can also be a venue for

capacity building, skills enhancement, training, communications and content development.

65 Government can also adopt agglomerative approaches to Internet use to

reduce costs (e.g., export aggregators, such as B2B or B2C portals/exchanges for

SMEs, which will facilitate trading with fellow SMEs and with other companies in the

international market).

E-Government

Government should be the lead-user of e-commerce if various business

and private-sector related activities are to be prompted to move online. In effect,

government becomes a positive influence. E-government can take the form of various

online transactions such as company registration, taxation, applications for a variety

of employee- and business-related requirements, and the like.

Awareness Campaign

Evidence suggests that SMEs have insufficient knowledge

of information technology and e-commerce. Many SMEs have identified their lack

of knowledge of technology as one of the main barriers to using e-commerce. Government

and private sector partnerships can engage in a campaign to disseminate information

to SMEs about e-commerce policies, best practices, success stories, and opportunities and obstacles relating to the use of ICTs and e-commerce. These awareness

campaigns could include free training courses and workshops on e-commerce,

security and privacy, awards programs, and information centers to assist SMEs.

Ultimately, this information campaign should come in the form of an overall e-commerce

development strategy for the economy, focusing on its various innovative applications

for SMEs.

E-SME Development

The market ultimately drives e-commerce development, but

it is the private sector that fuels it. Government can provide incentives to encourage

widespread e-commerce use by SMEs. An “e-SME development program” in

which various sectors can provide technical assistance to SMEs to promote ecommerce

uptake, can also be developed. Banks, financial lending and training

institutions, and corporations should be encouraged to develop “SME desks” that

will address the specific needs of SMEs. In particular, steps should be taken to:

● provide incentives to individuals to become entrepreneurs by lowering borrowing

rates;

● provide incentives to SMEs that intend to use e-commerce in their business

operations;

● broaden credit extension facilities to SMEs in order for them to use ICT and ecommerce;

and

● offer discounts on business solution software packages and software licenses.

Moreover, big businesses and corporations should be encouraged to transfer technology

to SMEs by offering them free training in ICT and e-commerce.

2. Quality and speed of distribution logistics (i.e., roads and bridges)

Roads and bridges, especially in developing countries, still form part of the e-commerce

infrastructure. Very few goods are delivered over the information infrastructure

or the Internet (the exceptions are music and software). Most of the goods

purchased over the Internet are still delivered the conventional way (i.e., physical

delivery). Hence, poor roads and bridges, inefficient transport systems, coupled

with the high cost of international parcel services and bureaucratic customs clearance

processes, are major obstacles in the uptake of e-commerce in developing

countries. Government should therefore create a policy environment that will:

● encourage investments in the national physical and transport infrastructure; and

● provide for electronic customs clearance processing to streamline the bureaucracy

and allow for more transparent, predictable and efficient customs operations.

Both of these will contribute to the reduction of distribution and logistics costs.

How can government intervene in the promotion and development of e-commerce

among SMEs?

The following are the more relevant areas for government intervention with respect

to SME uptake of e-commerce:

1. Telecoms pricing and performance

One of the aims of telecommunications policy and legislation should be to ensure

that the public has access to basic telecommunications services at a reasonable

cost. The goal should ultimately be universal access or widespread access to

reliable information and communication services at a reasonable cost and its availability

at a reasonable distance.

To enhance the quality of telecommunications services, policies should encourage:

● open access, which refers to the absence of non-competitive practices by

network providers;

● open architecture, which pertains to the design of a system that facilitates

interconnection among different systems and services currently and as they

develop over time; and

● flexible access, which pertains to interconnected and interoperable networks

of telecommunications, broadcasting, and electronic publishing, where the format

will be digital and the bandwidth will be adjusted according to the demands

of the user and the character of communications

Are existing legal systems sufficient to protect those engaged in e-commerce?

Unfortunately, the existing legal systems in most developing countries are not sufficient
to protect those engaged in e-commerce. For instance, with respect to contracts, existing
laws were conceived at a time when the word “writing,” “document” and “signature”
referred to things in paper form. On the other hand, in today’s electronic business
transactions paper is not used for record-keeping or entering into contracts.
Another important and common legal issue faced by many developing countries is
uncertainty regarding whether the courts will accept electronic contracts or documents
and/or electronic signatures as evidence. One view is that the issue of admissibility
of electronically generated evidence will not be resolved unless a law
specifically referring to it is passed. This gap in existing legal systems has caused
the emergence of at least two divergent views: one bordering on the conservative
interpretation of the word “document” as to exclude non-paper-based ones; and
the other involving a liberal construction, which allows electronic counterparts of
documents.
In the ASEAN region, only three countries-Singapore (Singapore Electronic Transactions
Act), Malaysia (Cyberlaws), and the Philippines (Philippine E-commerce
Act)-have a legal framework for e-commerce. These frameworks provide for the
legal recognition of electronic documents and signatures and penalize common
crimes and offenses committed in cyberspace.

How can government use e-commerce?

Government can use e-commerce in the following ways:
● E-procurement. Government agencies should be able to trade electronically
with all suppliers using open standards-through ‘agency enablement’ programs,
‘supplier enablement’ programs, and e-procurement information systems.
● Customs clearance. With the computerization of customs processes and operations
(i.e., electronic submission, processing and electronic payment; and
automated systems for data entry to integrate customs tables, codes and preassessment),
one can expect more predictable and more precise information
on clearing time and delivery shipments, and increased legitimate revenues.
● Tax administration. This includes a system for electronic processing and transmission
of tax return information, online issuances of tax clearances, permits,
and licenses, and an electronic process registration of businesses and new
taxpayers, among others.
More often than not, the e-commerce initiatives of government are a barometer
indicating whether or not the infrastructure supports e-commerce use by private
firms. This means that if government is unable to engage in e-procurement, secure
records online, or have customs fees remitted electronically, then the private
sector will also have difficulties in e-commerce uptake. Virtually, the benefits
from e-commerce accrue to the government, as the experiences of some
countries reflect

What is a favorable policy environment for e-commerce?

Among the public policy issues in electronic commerce that governments should
take heed of are:
● “bridging the digital divide” or promoting access to inexpensive and easy access
to information networks;
● legal recognition of e-commerce transactions;
● consumer protection from fraud;
● protection of consumers’ right to privacy;
● legal protection against cracking (or unauthorized access to computer systems);
and
● protection of intellectual property.
Measures to address these issues must be included in any country’s policy and legal
framework for e-commerce. It is important that government adopt policies, laws and
incentives that focus on promoting trust and confidence among e-commerce participants
and developing a national framework that is compatible with international norms
on e-commerce (covering for instance, contract enforcement, consumer protection,
liability assignment, privacy protection, intellectual property rights, cross-border trade,
and improvement of delivery infrastructure, among other

What is the role of government in the development of e-commerce in developing countries?

While it is generally agreed that the private sector should take the lead role in the
development and use of e-commerce, the government plays an instrumental role
in encouraging e-commerce growth through concrete practicable measures such
as:
1. Creating a favorable policy environment for e-commerce; and
2. Becoming a leading-edge user of e-commerce and its applications in its operations,
and a provider to citizens of e-government services, to encourage its
mass use.

The Case of the Grameen Village Phone Network

The Grameen Village Phone Network is a classic example of women’s empowerment in
Bangladesh. Operators of the village phones are all poor women (who have been selected
for their clean and strong credit record). These village phones are regularly visited by
members of male-dominated villages. Notably, the women entrepreneurs (village operators)
enjoy wider discretion in expending their profits from their phone services than with their
household income.

The Case of the Guyanan Weavers’ Cooperative

The Guyanan Weavers’ Cooperative is an organization founded by 300 women from the
Wapishana and Macushi tribes in Guyana, northern South America. The cooperative
revived the ancient art of hammock weaving using 19th century accounts and illustrations
of the hammocks made by European travelers and the cultivation of cotton on small family
plots and hand-weaving. The organization then hired someone to create a Web site,
which was instrumental in bringing their wares online. Not long after, in the mid-1990s, the
group of weavers (the Rupununi Weavers Society) was able to sell hammocks to Queen
Elizabeth, Prince Philip, the Smithsonian Institute, and the British Museum. Since 1998, they
have sold about 20 hammocks through the Internet at $1,000 per piece. This case also
shows that SMEs have great potential to compete in markets for high-end, bespoke
products despite the low sales volume

E-commerce at Work in the Service Sector

Offshore data processing centers, which provide data transcription and “back office”
functions to service enterprises such as insurance companies, airlines, credit card companies
and banks, among others, are prevalent in developing countries and even in lowwage
developed countries. In fact, customer support call centers of dot-coms and other
ICT/e-commerce companies are considered one of the fastest growing components of
offshore services in these countries.
India and the Philippines pride themselves in being the major locations of offshore data entry
and computer programming in Asia, with India having established a sophisticated software
development capability with highly skilled personnel to support it.

How is e-commerce useful to developing country entrepreneurs?

There are at least five ways by which the Internet and e-commerce are useful for
developing country entrepreneurs:
1. It facilitates the access of artisans and SMEs to world markets.
2. It facilitates the promotion and development of tourism of developing countries
in a global scale.
3. It facilitates the marketing of agricultural and tropical products in the global market.

4. It provides avenues for firms in poorer countries to enter into B2B and B2G supply
chains.
5. It assists service-providing enterprises in developing countries by allowing them to
operate more efficiently and directly provide specific services to customers globally.

Developing country SMEs in the services sector have expanded their market with
the increased ability to transact directly with overseas or international customers
and to advertise their services. This is especially true for small operators of tourismrelated
services. Tourism boards lend assistance in compiling lists of service providers
by category in their Web sites.
In addition, for SMEs in developing countries the Internet is a quick, easy, reliable
and inexpensive means for acquiring online technical support and software tools and
applications, lodging technical inquiries, requesting repairs, and ordering replacement
parts or new tooling.
The Internet is also instrumental in enabling SMEs in developing countries to join
discussion groups with their peers across the globe who are engaged in the same
business, and thereby share information, experiences and even solutions to specific
technical problems. This is valuable especially to entrepreneurs who are geographically
isolated from peers in the same business

Empowering the Agricultural Sector through B2C E-Commerce

The International Federation for Alternative Trade (IFAT) is a collective effort to empower the
agricultural sector of developing countries. It is composed of 100 organizations (including 70
organizations in developing countries) in 42 countries. Members of the organization collectively
market about $200-400 million annually in handicrafts and agricultural products from
lower income countries. In addition, IFAT provides assistance to developing country producers
in terms of logistical support, quality control, packing and export.

E-COMMERCE IN DEVELOPING COUNTRIES

How important is e-commerce to SMEs in developing countries? How big is
the SME e-business market?
For SMEs in developing countries e-commerce poses the advantages of reduced
information search costs and transactions costs (i.e., improving efficiency of operations-
reducing time for payment, credit processing, and the like). Surveys show
that information on the following is most valuable to SMEs: customers and markets,
product design, process technology, and financing source and terms. The
Internet and other ICTs facilitate access to this information.43 In addition, the Internet
allows automatic packaging and distribution of information (including customized
information) to specific target groups.
However, there is doubt regarding whether there is enough information on the Web
that is relevant and valuable for the average SME in a developing country that
would make investment in Internet access feasible. Underlying this is the fact that
most SMEs in developing countries cater to local markets and therefore rely heavily
on local content and information. For this reason, there is a need to substantially
increase the amount and quality of local content (including local language content)
on the Internet to make it useful especially to low-income entrepreneurs.

eMarketer estimates that SME e-business revenues will increase: from $6.53 billion
to $28.53 billion in Eastern Europe, Africa and the Middle East combined; $127.25
billion in 2003 to $502.69 billion by 2005 in the Asia-Pacific region; $23.51 billion in
2003 to $89.81 billion by 2005 in Latin America; from $340.41 billion in 2003 to
$971.47 billion by 2005 in Western Europe; and from $384.36 billion in 2003 to
$1.18 trillion by 2005 in Northern America.

A Case of Creative Positioning of an E-Business Strategy

Dawson’s Antiques is a 23-year-old small antique business. With the emergence of online
auction sites, the owner, Linda Dawson, foresaw the need not only to accommodate the
Internet in their business strategy but also to take advantage of it in order to survive as a
business. This came with the recognition that many of her clients were exposed to a wide
range of antiques from competitors at online auction sites at prices lower than she was
charging.
Meanwhile, Sotheby’s, then a growing online auction site (and now one of the largest online
auction sites), realized the merit of increasing its auction inventory to attract a bigger
audience on the Internet. It revised its Internet strategy by opening its Web site, sothebys.com,
to smaller dealers and auction sites instead of competing directly with its competitors in the
online auction business. With this approach, Sotheby experienced an exponential growth in
its inventory, which attracted a bigger market.
Dawson’s enlistment in Sotheby’s was instrumental in expanding its client base. To make
things easier, Sotheby’s not only provided the Web site for its members (Dawson’s included)

How are business relationships transformed through e-commerce?

E-commerce transforms old economy relationships (vertical/linear relationships) to
new economy relationships characterized by end-to-end relationship management
solutions (integrated or extended relationships).