Region's e-commerce lags behind

24 March 2011

Central banks hold back development of e-commerce

While the global e-commerce market is worth $7 trillion, only a fraction of this amount comes from the Middle East.

Poor infrastructure, lack of trust in payment systems, missing legislation and slow shipping systems are holding the sector back. Services like online payment portal Paypal still do not exist in the region. Perhaps the biggest obstacle to online finance systems is the central banks in the region.

“Allowing online payments will kill the banks. Central banks work for the commercial banks, which have traditionally been very slow to respond,” says Hany Sonbaty, managing director at Egypt-based venture capitalist firm Sawari Ventures, while speaking at the Arabnet Digital Summit in Beirut.

The sector requires a lot of infrastructure investment. “E-commerce requires the right infrastructure with secure networks. Regulations are needed to ensure that information is properly dealt with and has a legal value,” says Imad Hobballah, acting chairman of the Lebanese Telecommunications Regulatory Authority (TRA).

According to Jordan-based research firm Arab Advisors, Saudi Arabia has the biggest e-commerce market with $3bn-worth of online transactions in the business-to-customer transactions in 2010. Both Egypt and the UAE spent about $1bn and Jordanians spent $200m.

“The number is not insignificant when taking into consideration the income of the people,” says Jawad Abbassi, chairman of Arab Advisors. “The problem is most of the beneficiaries of these transactions are outside the region or are globalised companies,” he adds.

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