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Internet slow to make inroads into businessDespite forecasts that the number of Thai Internet users, together with e-commerce revenue, will surge in the next few years, surveys show that Thai small and medium sized enterprises, the backbone of local business, are still reluctant to capitalise on Net commerce because of high costs, lack of knowledge and security concerns. Charoen Kittikanya
While Thailand has made a start over the past two years to enter the world of e-commerce, analysts say the local technology penetration is still around two years behind that of the United States. Over the next three to four years, the US is expected to lead the world to a more advanced stage of e-commerce, further developing online market exchanges and information sharing which synchronise and maximise end-to-end business processes. According to a survey conducted at the end of last year by the business economics department at Thammasat University, in the business-to-business segment (B2B), Thai small and medium-sized enterprises, which represent the majority of Thai businesses, are still reluctant to capitalise on Internet commerce. The survey, which canvassed 175 local SMEs, also found that most SMEs in Thailand had little e-commerce experience. High costs, lack of knowledge and understanding and the fear of losing trade secrets are cited as the main reasons for the low e-commerce penetration. But awareness of the value of e-commerce is high among Thai business, particularly large enterprises in the construction, auto vehicle, farm products and electric appliances industries.
Lehman Brothers, one of the world's leading investment bankers, points out short-term challenges for Thailand in developing e-commerce include comparatively low credit card penetration, primitive infrastructure and distribution systems which may restrict the dispatch of products purchased over the Internet and curb efficient inventory management, limited PC ownership and Internet access and security concerns. In developed markets, credit cards are the most common way of completing B2C transactions. But in Thailand, there are currently only about 1.9 million card-holders, or just 3% of the population. Recent surveys have found that the majority of Net users, estimated at 1 million, were students who had no credit cards. To go online, a monthly income of at least 20,000 baht is required of applicants. Prof Srisadki Charmonman, chairman KSC Group, said the 5% transaction fee imposed on credit card use also limits the ability of Thais to pay on their credit cards. US banks, by comparison, charge only 1.5% for credit-card transactions made online. Some analysts argue the local reluctance to go online is not just about technology but a lack of ``trust" from consumers. 'The technology is there, the bandwidth is there, and the infrastructure is there. This is set to enable rapid e-business growth,' said Brian Hollingworth, director of global risk management solutions at PricewaterhouseCoopers. ''But it will not succeed without the development of the single word, trust," he said. According to PricewaterhouseCoopers, security is the top concern of consumers in Thailand and worldwide, as they are wary about scams and the business practices and reliability of online traders. Their research shows that trust in e-business on each transaction is dictated primarily by the buyer's previous experience, the reputation of the seller and product brand, the buyer's experience in navigating the Net and the quality of the web site's presentation and technology. According to another report on the Internet by US investment house, Goldman Sachs, advertisers themselves also remain reluctant to allocate budgets to online advertising. This reluctance has "more to do with whether the online audience has reached critical mass to warrant the expenditure" the report says.
Half of the advertising revenues in Asia next year would be derived from Australia, South Korea and Taiwan. But analysts agree Thailand and the Asian region have huge potential for growth in e-commerce. The National Electronics and Computer Technology Centre (Nectec) recorded strong growth in Thailand's international bandwidth on the Internet. As at early June, the total international bandwidth jumped to 203.75 Mbps compared with just 118.25 Mbps at the end of December last year. International Data Corp predicts that the number of Internet users in Thailand will double from 1.2 million this year, and grow by 40% a year until 2004. Similarly, e-commerce revenues are expected to jump from $90 million this year to $2.3 billion in 2004. But the survey by the Commerce Ministry took a stronger view, predicting Thailand's electronic commerce would grow to 23.04 billion baht in 2000, 24.17 billion baht in 2001 and 25.36 billion baht in 2002. The survey said over 22.09 billion baht was transacted through electronic commerce during 1998 and 1999, but over 80% of the transactions arose domestically. Service businesses made up the greatest value of local e-commerce, followed by farm products, non-metal products, wholesale and retail industries and electric appliances. Lehman Brothers forecasts growth in the Asia-Pacific would continue to accelerate sharply and projects that the number of Internet users in Asia will grow annually by 31% over the next two years, led by South Korea, Japan and China, far outpacing growth in the US Lehman Brothers also forecasts Asian e-commerce revenues to grow 92% a year over the next two years. Thailand's e-commerce growth is underpinned by new Internet technology, economic recovery and rising income levels, increasing PC penetration, increasing wireless internet access, the proliferation of locally sourced e-commerce sites and deregulation of telecom markets. SG Securities Research forecasts PC penetration in Thailand would grow to 1.4 million people this year, 1.7 million in 2001, 2 million in 2002 and 2.5 million in 2003, compared with around 1.2 million personal computer users recorded last year. The emergence of wireless application protocol (WAP), which converges communications and digital technologies, is also expected to play a driving force in boosting consumer e-commerce in the future. According to SG Securities Research, mobile phone growth is expected to reach three million units this year, seven million in 2001, 4.4 million in 2002, and 5.1 million in 2003, compared with 2.5 million in 1999. Numerous estimates put the number of Internet-enabled handsets at 500 million by 2003, providing a large and vibrant market for new mobile applications and services. Deregulation of telecom markets is also a major boost to e-commerce. Like other countries in the region, Thailand is now in the process of deregulating the Internet and telecommunications market.
Prof Srisakdi said once the market is deregulated, local ISPs will be eligible to outsource international bandwidth without going through Communications Authority of Thailand (CAT) services. The market will then see a substantial reduction in the price of international bandwidth, he said. "The prices we pay for a current 4 Mpbs will be equivalent to those of 155 Mpbs once the market's liberalised," he said. He explained ISP's would pay about 100,000 baht for satellite discs and a small amount to connect to the Internet. As a consequence, Internet fees will be reduced to as low as 5-7 baht per hour, he said. But some industry analysts predict domestic telecom and Internet liberalisation might be delayed for over a year, stalling Thailand's e-commerce growth. |
Despite the never-ending buzz words about the value of Internet commerce, with analysts and economists arguing it is the key to revitalising the country's sagging economy, Thailand is still in the early stages of tapping the full potential of the information technology revolution.
As for the business-to-consumer side (B2C), the survey said there are some obstacles that may initially slow the growth of e-commerce's advance in Thailand, but in the medium term, Internet services will begin to make inroads into traditional commerce.
Revenue from online advertising in Asia, excluding Japan, is expected to rise to US$1.5 billion by 2001, compared with $250 million in 1999. In the United States, some $3.5 billion in online advertising revenue was recorded last year.
A new telecom law requires the establishment of the National Telecommunications Commission by October 8 this year.© Copyright The Post Publishing Public Co., Ltd. 2000
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