Economic Mid-Year 2001

Low user base
stalls growth

Charoen Kittikanya

E-COMMERCE

Thiland's e-commerce business is still in its if infancy and its expansion is moving at a slow pace, due largely to a lack of commitment from the government to put in place the necessary legislative framework, tackle the monopoly in the Internet businessand overcome the lack of co-operation between state agencies

Despite steady growth in the number of Internet users, Thailand's electronic commerce business has moved at a snail's pace, due mainly to a lack of political, commitment and shortcomings in bureaucratic co-operation.

E-commerce and Internet initiatives , ives hatched by previous govemments have yet to make any concrete , progress under the leadership of the current government, even though it is led by telecom tycoon Thaksin Shinawatra, while the information technoIogy policy promoted by his Thai Rak , Thai Party lias yet to materialise.

"The expansion of e-commerce in our country is moving at a very slow pace, mainly due to a lack of clear commitment from the government to speed up the e-commerce related Iaws, and tackle the monopoly in the Internet business," said Somkiat ' Tangkitvanich, a research specialist with Thailand Development and Research Institute (TDRI).

"All the impediments remain unaddressed, despite the fact that governments has been in office nearly six months. It's a bit disappointing.

"The Thai Rak Thai Party's information technology policy sets out seven key elements to be developed with a commitment to reshaping the country into an "electronic society".

The first element is to develop basic infrastructure to boost the use of IT in
the country as a whole. The govemment plans to stimulate the development of networking infrastructure such as fibre-optic cable, broadband communication and the Intemet to facilitate widespread use among the population, giving them equai access to new technology and the Internet.

It will support the emergence of new network service providers to stimulate competition in the market, so that the public can benefit from improved but cheaper services.

The laying down of an e commerce infrastructure, along with the development of suitable taxation measures, including a four-year tax exemption for e-commerce companies to jump start the business, forms the second plank of the party's plan.

The government has a policy to offer tax exemptions and Board of Investment incentives to Internet start-up companies, so they can build their business during the first four years of their existence, that is, until they are strong enough to go it alone.

It also plans to set up a new bank to support e-commerce.

Apart from infrastructure and e-commerce development, the government will also pay more attention to creating sufficient IT human reseurces in the country. It plans to produce 5,000 programmers and train at least 3,000 network engineers each year.

Educating the public to create greater IT knowledge and literacy is also in the plan. The party has highlighted the Internet as a key medium to speed the learning process.

It has announced a goal of increasing the local Net population to 10 million users within four years. The adoption of IT to improve government services is another central element.

The party proposes the pooling of information by government agencies, and transforming governmentservice provisions under the "onestop-service" concept. As well, the party would set up a new organisation, which could even be an IT Ministry, to oversee IT development and take care of pooling information from every ministry.

The new body would act as a single command centre for the government, allowing the prime minister and al ministers to access the information they need from a computer screen, thus enabling them to make decisions more efficiently.

The government, meanwhile, also plans to develop the microelectronics industry by providing a free-trade zone for the sector.

It will also establish a free-trade zone to promote an open purchasing source for local software developers.

Lastly, Thai Rak Thai has said it would concentrate on the adoption of IT applications to improve trade, industry, education and public health.

However, the most ambitious of the government's IT policies is the rural Internet project.

The Interior Ministry has started tendering for Internet equipment worth 68 million baht as part of its plan to complete its nationwide district Internet project, connecting the lnternet to 7,000 districts in 76 provinces by 2003.

The government plans to link 1,000 districts in 76 provinces this year, and expand to 6,000 districts next year.

"The policy sounds good, but it needs speedy implementation," said Srisakdi Charmonman, KSC Group chairman. "Although the Internet has been in Thailand for more than four years, Thailand's e-commerce business is currently still a toddler. Infrastructure is still poor, the number of credit cards is still limited, payment concerns remain. The industry needs government-led incentives to-boost its growth.

" The growth projections for the value of e-commerce vary, with estimates up to US$90 million (40.7 bil, lion baht), according to the International Data Corp, to 24.17 billion baht from the Ministry of Commerce.

IDC expects e-commerce revenues in Thailand to jump to $2.3 billion in 2004.

The Thai dot.com industry put in a disappointingly lacklustre performance last year.

The fundamental barrier remains: a relatively small Internet user base, estimated at about 2.3 million nationwide.

Based on a TDRI forecast of Net users from 2001 to 2004 and an average annual economic growth rate of 2% to 6%, the country will have 2.7 million to 3.2 million Net subscribers at the end of 2004, or 4.3% to 4 9% of the population.

Advertisement-based revenue remains marginal in the industry, at less than 1% of the 44 billion baht spent on advertising last year in Thailand.

But in a wider context, it is undeniable that e-commerce has been stalled because of political wrangling and a lack of co-operation among state agencies.

Thailand has already missed the October 2000 deadline it set for liberalising the telecom market for local competitors and for setting up a new regulatory body.

The Telecommunications Act and the selection of the National Telecommunications Commission (NTC), the powerful independent regulator to supervise the country's telecom business, including the Internet, are still pending approval in the Senate.

The Senate recently rejected all 14 nominees for the seven-membel NTC, and recommended that the government either instruct the selection committee to propose new nominees or scrap the committee altogether.

The original NTC selection process was plagued by allegations of vested interests, with most of the proposed members having uncomfortably close ties to the industry.

The regulatory vacuum has led to wrangling between the Telephone Organisation of Thailand, which has full capacity to provide Internet services and related businesses, and the Communications Authority of Thailand, which owns the licences of Internet service providers.

The TOT has been relentlessly attempting to enter the Internet business, even vowing to give free Internet access to its fixed-line subscribers, leaving it at loggerheads for months with the CAT, which asserts that it holds a monopoly on international connections, and thus on Internet services.

Sparring is likely to continue until the NTC is put in place, while the plan initiated by a previous government to free all Internet service providers (ISPs) from the control of the CAT in exchange for licences has yet to be substantiated.

The decision is aimed at making it more flexible for ISPs to raise funds to expand and improve their operations.

No decision has been made by the Transport and Communications Ministry, despite ISPs being willing to pay for the shares.

Implementation of essential e-commerce laws has also been frustratingly slow.

Thc first electronic commerce law on transactions and signatures, which was two separate draft laws before being combined by the Council of State prior to being proposed to Parliament, is still pending in the Senate.

And the draft Universal Access Law to create an equitable information society by promoting universal access to IT is now under consideration by the Council of State. Other laws relating to data protection, computer crime and electronic funds transfer are still in the drafting stage.