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ECA Innovation and Competitiveness Workshop e-Business for MSME Competitiveness February 18, 2004 Jim Hanna Lead Operations Officer & eBusiness Advisor.

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Presentation on theme: "ECA Innovation and Competitiveness Workshop e-Business for MSME Competitiveness February 18, 2004 Jim Hanna Lead Operations Officer & eBusiness Advisor."— Presentation transcript:

1 ECA Innovation and Competitiveness Workshop e-Business for MSME Competitiveness February 18, 2004 Jim Hanna Lead Operations Officer & eBusiness Advisor Latin America & Caribbean Region The World BankGroup The World Bank Group Working for a World Free of Poverty e-Business as innovation Contributions to development Accelerating e-business adoption

2 2 E-business is a major business innovation that most firms will have to adopt. ICT and Economic Growth: Evidence from OECD Countries, Industries & Firms, OECD, 2003 e-Business…more than PCs and wires Most economic benefits of e-business begin with: Transactions – front office relational & product innovation to improve market reach and product range Customer development & e-marketing solutions E-business solutions to buy & sell services via Internet Customer service and support solutions Integration –back office process & organizational innovation to improve production and management Product design and production solutions Procurement and supply chain management Finance, online banking and accounting solutions eLearning solutions to upgrade employee skills

3 3 Contributing to productivity & growth A micro view Net Impact Study Canada: The International Experience 1/ Canadian eBusiness Initiative, May 2003 Key business innovation impacts Lower customer service costs Sales and marketing efficiency Increased worker efficiency Reduced materials costs Improved inventory management Lower distn or shipping cost New customer acquisition ___________________________________ 1/ Source: The Canadian e-Business Initiative (CeBI) and the OECD ICT Database Eurostat Survey measuring the Information Economy, 2002. Total survey size was 1,668 small (to 100 employees) and medium (100-250 employees) firms in Canada, the US and EU. Results reflect 1-2 years implementation periods. Front Office Back Office

4 4 Reducing transaction costs, expanding opportunity Chile Programa Ventanilla Empresa 2002-2003 Simplified and Internet-enabled New business registration - tax administration, trademarks & patents, health Export procedures - customs, transport permits, public health certificates Labor regulations - labor ministry work permits, severance, contractor certification Selected by 1,200 entrepreneurs themselves in focus groups Cost-shared among 17 government participating institutions Implementation costs already paid for in public budget savings – business savings to be calculated eBusiness agencies development services programs MIN. ECONOMYS Information & bidding on public services Contracting for more than 100 public services SERCOTECs Supports small business management Facilitates new business opportunities Encourages business networks Access to training and consulting services PROCHILEs VideoNegocios and Inter-PYME Export market information & assessments Export management support and training

5 5 Business W omens cakes & desserts baking network Producing & delivering to families in 8 provinces of Peru Goods purchased mainly by Peruvian expatriates E-business functions Web-based marketing, ordering and payment Business growth 4-5 orders per month to 50 orders per day, now with a client base of 500 customers Employment Full-time for 14 mamas Wages & profitability Twice minimum wage, 30% margins Non-monetary benefits...settles a conflict between finding a job or being with our children …a way for women to become comfortable with technology …right here in Peru, we are part of the globalization process María del Carmen Vucetich, Proprietor Advancing the MDG to reduce poverty Peru Tortas Peru - the virtual cake network expanding market outreach and income

6 6 e-Business market trends LA e-business markets - est. $6.5 billion in 2002, of which Brazil $3.7 billion Argentina – most advanced infrastructure but in deep recession depressing investment Brazil & Mexico - largest LA markets for hardware, software, internet access services, e-business revenues Chile - most developed technology infrastructure and highest Internet penetration in region, small market (16 million people) LA markets small in relation to OECD – nearly $1 trillion in B2B e-business in 2002 No sign of major expansion a la Korea, where total B2B revenues nearly doubled over 2001-03 to over $170 billion eBusiness transactions and integration rates are not following trends in Internet access rates, even in market leader Chile, Rates are markedly lower than in digitally advanced countries e-Business remains mainly a large-firm activity operating in upper socio-economic income segments 90% of Brazils e-business generated by 30 largest firms Only 2% of Mexican SMEs engaged in e-business transactions

7 7 ESW & CAS exercises From Natural Resources to the Knowledge Economy – increasing growth and job quality Flagship Report (2002) Chile and Colombia CAS (2002) Closing the Gap in Education and Technology Flagship Report (2003) Argentina & Chile New Economy Study (2003) Brazil and Mexico CAS Reports (2003) e-Readiness assessments (infoDEV) Bolivia Honduras & Nicaragua (Bank) Costa Rica Jamaica Panama & T&T Telecom reform & connectivity project finance Bolivia Rural Telecommunications Chile Community Telecenters (infoDEV) El Salvador Mobile Telphony Honduras Solar Power Rural Telecenters Nicaragua Telecommunications Reform Venezuela Movilnet Supporting ebusiness innovation LAC e-Business project finance & piloting Ecuador Power, Communications & Rural Services Reforms (Bank, MicroNet component) Mexico E-business for Small Business Development Project (Bank, free-standing project) NOVICA e-business portal for artisans (IFC) Peru – Connecting Small-Scale Coffee Farmers and Consumers via Internet (infoDEV) LAC e-Business for Small Business Competitiveness Initiative (2004) Research on good practices programs GDLN e-Business series LAC & advanced countries En Breve dissemination series web

8 8 Building e-business leadership Policy reforms Promote coordinated regulatory reforms and digital adoption across government agencies Program designs Decentralize program focus on end-users at regional and local levels Encourage sectoral & inter-sectoral collaboration Implementation Minimize expansion of public entities utilizing outsourcing Facilitating private intermediary market delivery capacity – consulting, trade associations, banks, training institutes, etc. Monitoring & evaluation Regular national, sectoral & regional data collection, surveys, analysis & dissemination Refocus impact indicators on innovation & productivity- oriented benchmarks ICT skills & e-Learning new market outreach B2B relationships trust & security The ECs eBusiness Support Network Supporting member countries national programs of the EU eBusiness Action Plan 2005 Policy analysis, workshops and summits on ICT & e-business skills Economic analysis of e-business Methodologies in e-business measurement Legal environment for e-business B2B Internet trading platofrms Competitiveness of the ICT sector Regular benchmarking of progress and constraints to e-business adoption Outsource contractor for member state firm- levels surveys and analysis Web-based tools, such as eBusiness Lex on legal issues in doing e-business

9 9 Continuing policy reforms Infrastructure, trust and security Continuing policy reforms Infrastructure, trust and security Trust –most Latin American countries enacted legislation on electronic signatures, contract & other documents model legislation, like UNCITRAL (Colombia, Peru) own legislation based on comparative law (Argentina, Brazil, Chile, Panama, Venezuela) specific amendments to federal civil & commerce codes, administrative law, criminal code (Mexico) Security - upgrading is now a main focus Protection from third-party access/threat to communications, transactions and confidential information Increase in firm-level and private sector protection – digital tools, risk management strategies, trust marks and seals Cybercrime legislation to criminalize interference with infrastructure, transactions Privacy & data protection laws to regulate collection, use, dissemination of personal data accessible to Internet actors Intellectual property protection of digital rights management systems to protect content, secure rights, revenues Awareness campaigns and regulatory simplification to build trust of MSMEs Broadband makes firms more competitive Unmetered and fast access to the web Use of videoconferencing, outsourcing (ASPs), e-learning Online procurement/auctions, online ordering, email marketing and customer service support Accelerates local content development Key broadband access policy issues – foster private sector competition Promote and facilitate inter-modal competition between cable, DSL, fiber and wireless operators. Remove barriers to local loop and leased line competition and sharing of infrastructure Promote demand by shared use of Internet (schools, SMEs, etc) and community access to broadband (telecenters, schools)

10 10 Issues Registration time for business formation is 91 for medium complexity and 136 days for high complexity firms (Monterrey) Government lacks comprehensive system to electronically link the more than a dozen agencies involved in the process Objectives Process re-engineering to simplify registration & operating permits in 10 states ICT-based solutions to integrate operations at all layers Improved e-procurement system to build value chains Training for government staff and business Dissemination program among business to promote use Approach Demand-driven by interests of states and municipalities Coordinated with Federal regulatory reform program (SARE) for business process simplification Managed under each state and local authorities working group by integrator managers Bank financing of consulting services, equipment, works and training under approved reform plan Minimum 25% state financing contribution Expanding G2B Business registration & procurement in Mexico Expanding G2B Business registration & procurement in Mexico

11 11 Deepening ebusiness markets Awareness, training & learning-by-doing Top barriers to e-business adoption among MSMEs Lack understanding of how e-business functions as a strategic, value-adding tool Lack metrics and models that convince them that benefits are greater than costs Lack internal ICT & e-business know-how, outside support & time to design and implement e-business systems Promote e-business awareness information, tools & training programs used to determine business case and prepare e-business investment plan Workshops and peer exchange of experience Online information, downloads and self-service tools Initial economic & technical consultations Facilitate pre-investment support for in-firm learning-by- doing and innovation Demonstrates success in overcoming market failures lack of information & hands-on experience in e-business underestimate e-business value & under-invest in e- assets Support development of intermediaries to facilitate adoption

12 12 Reaching the poor - lessons of telecenters in LAC Good at expanding communications Weak ICT and e-business training and upskilling Low sustainability and business value added Low development impact Little commercial investment in e-learning, applications & content Need to redirect toward high value, sustainable e-business service markets - pilots in Ecuador and Mexico to Reach at least 50,000 low income microbusinesses Generate market outreach, competitiveness, growth Yield financial sustainability & franchising within 3 years Key design features Private sector management, governance & co-financing Sector-specific e-learning programs Microbusiness-appropriate applications for market outreach, transactions and improving core business processes Local business content market development eBanking services with microfinance partners Peru - Red Cientifica Peruana (RCP) Connectivity, not productivity 89% of Perus Internet users use RCP Cabinas Publicas User profile - higher education & income 56% users between 15- 25 years old 40% users have a computer at home Use profile – email, info search, chat Email (60%), Search for information (51%), chat (39%) 60,5% total users visit Cabinas between 2 to 3 times per week. Deepening ebusiness markets among microbusiness Sustainable eBusiness development services markets

13 13 Recap E-business is one important innovation strategy that can –Advance productivity, competitiveness and growth –Reduce business environment barriers –Contribute to MDG for poverty reduction The Bank can help accelerate e-business adoption by supporting 1.e-leadership institution-building for policy reforms, programs, monitoring and evaluation 2.Continued reforms in ICT infrastructure, trust and security regulations 3.G2B programs to lower transaction costs and expand opportunities 4.Awareness, training and pre-investment programs to deepen e-business markets 5.Expansion of sustainable e-business services markets to reach low-income microbusiness

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