e-commerce The Way of Business in Thailand

e-commerce The Way of Business in Thailand Somnuk Keretho, Ph.D 1 Paisan Limstit 2 Abstract The word Internet, impacting on our workplaces and marketplaces, has absolutely changed the way we do business. The Internet enables instantaneous communication, and interaction among individuals and organization, and allows real-time global access to information, products, and services There are a lot of benefits of e-commerce as experienced by several successful cases, but at the same time we also recently witness the crash or the economy slowdown of many dotcoms companies around the world. Despite the downturn in the Internet economy, several forecasts and statistics still show the huge potential of e-commerce over the Internet, reaching perhaps the trillions of dollar in the first few years of the twenty-first century. Moving from e-commerce vision to reality proved far more difficult than most companies realized, many countries are attempting to provide several necessary infrastructures to facilitate e-commerce deployment. This paper reports a current status as well as some future directions of e-commerce development in Thailand. Expectedly, business companies and consumers in Thailand could realize and effectively obtain appropriate benefits of this e-commerce arena. 1. Introduction Electronic Commerce (e-commerce or EC) is a general concept covering any forms of business transaction or information exchange executed using information and communication technologies (ICTs). EC could take place between business companies (so called B2B e-commerce), between business companies and their customers (B2C e-commerce), or between companies and government sectors (B2G e-commerce). Electronic commerce includes also electronic trading of goods, services and electronic material. Electronic commerce and the electronization of business processes have revolutionized many industries. Recently, world economy has faced a downturn due to massive failure in many Internet-based IT sectors. Many reasons contribute to significant failures already evident within B2B and B2C economies worldwide. For example, many companies might have a superficial view of e-commerce, as well as having problems with their mismanagement, weak business cases and un-realistic business models. Meanwhile, many established trading communities are thriving within e-commerce context. Several forecasts continue to predict huge growth in traded e-commerce. For example, it is expected that global B2B e-commerce trading could lie within US$2 trillion to about US$10 trillion by 2004 i. Copyright 2002 National Electronics and Computer Technology Center (NECTEC) This document does not present the official position of NECTEC. Any opinions expressed are those of the authors. 1 Director of Electronic Commerce Resource Center (ECRC), Email: sk@ku.ac.th 2 Legal Officer at Electronic Commerce Resource Center (ECRC), Email: plimstit@nectec.or.th

It is also recognized that the major value of e-commerce is not from creating new businesses, but from streamlining existing business processes and improving B2B communications, resulting in efficiency and cost reductions. Having a solid business case and business model are therefore critical to the successful deployment of e-commerce. Although only a fraction of the total B2B trade, the value of B2C trade is also expected to grow substantially with predictions in the range US$0.2 billion to US$2 billion by 2004 ii. Many people may misunderstand that EC is just having a web site, but it is much more than that. There are many applications of EC such as home banking, online shopping, buying stocks, finding a job, conducting an auction, electronic procurement and purchasing, online marketing and advertising, travel information and services, collaborating electronically, and streamlining supply chain management. According to an e-commerce web-site survey conducted by e-commerce Resource Center/NECTEC, during the mid of year 2001, there were 12% of about 6,000 e-commerce web sites (both.com and.co.th Thai companies) that offer full-scaled e-commerce services, including for example on-line catalog, electronic order and logistic services. Although this number is relatively small, the figure is noticeably double comparing to the previous year survey. The top-10 business types of these web sites are tourism, computer-related products and Internet business, entertainment, web board services, service business, clothing and cosmetics, food and medical products, publishing, and real estate. (http://www.ecommerce.or.th). Whilst many enterprises recognize the benefits of e-commerce, successfully implementing an e-commerce strategy represents a considerable and costly challenge, and requires a broad integration of technology, law, policy, business processes and resource persons. Realizing the huge potential of e-commerce to the nation economy, the government needs to provide several facilitating infrastructure. EC is a multidisciplinary field that includes technical areas, such as networking and telecommunication, security, technical standards and protocol, and storage and retrieval of multimedia; business areas such as marketing, procurement and purchasing, billing and payment, and supply chain management; and legal aspects such as electronic transaction law, information privacy, intellectual property, taxation, contractual and legal settlements. All these things should be sorted out, prioritized and developed. This paper reports a current status by the year end of 2001, as well as some future directions of e- Commerce development in Thailand. Expectedly, business companies and consumers in Thailand would be aware of the potential benefits of EC, and efficiently deploy the EC vision into reality. 2. National Policy Framework for e-commerce Thailand IT Policy Framework Since September 2000, the National Electronics and Computer Technology Center (NECTEC) has embarked on a project to formulate the 2 nd National Information Technology Policy. In order to do so, NECTEC enlists the help of the Center of Innovative Policy, King Mongkut University of Technology Thonburi, to conduct the policy research in developing ICT policy framework of the nation. The draft of the National Information Technology Policy, namely IT 2010, has recently been submitted to NECTEC. Consequently, the revised draft has been forwarded for the consideration and approval of National Information Technology Committee and the Cabinet respectively. 2

IT 2010 is expected to serve as a blueprint for the country as it is entering the Knowledge-based and Sustainable Society (KBS) in the 21 st century. This is not just a policy on technology per se, but links IT with the social and economic development of the country. The three main components of IT 2010 for KBS are identified as strengthening information infrastructure and industry, building Human Capital ; and promoting Innovation. Five main flagships under IT 2010 policy are: e-government, e-commerce, e-industry, e-education and e-society. All of which operates upon the strong base of information infrastructure and industry. The purpose of e-commerce flagship is to strengthening competitive advantage of Thai entrepreneurs, especially SMEs by using e-commerce as an opportunity for exporting goods and services and for domestic consumption. To accomplish this e-commerce purpose, the Government must put forward 8 strategies and directions, namely: proactively participate in foreign trade policy, development and actively deployment of e-commerce SME policy, providing adequate and affordable IT infrastructure, developing human resource, creating public awareness, creating trust and confidence by developing legal framework, payment system and security, and information management in line with the following policies: 1. Government should recognize Electronic Commerce as the national trade strategy that should be included in the 9 th and 10 th National Plans for Social and Economic Development. 2. Government should support and provide those measures facilitating private sectors and consumers Electronic Commerce activities, aiming in building up trust and confidence among entrepreneurs and consumers. 3. Government should enhance competitiveness of small and medium enterprises (SMEs) in the global economy. 4. Government should lessen and avoid any restrictions that would obstruct such development. 5. Government should give priority to streamlining public administration by putting in place the electronic media and Information Technology and to set up e-government. 6. Government together with private sectors should monitor and set up EC-related indicators and database, and study policies and guidelines for the development at both international and regional scale. IT 2010 National IT Policy (2001-2010) 3

3. Government and Businesses Initiatives 3.1 Internet Infrastructure iii According to a survey jointly conducted by the National Statistic Organization and NECTEC, there were approximately 3.5 million Internet users in Thailand (January 2001). Supporting with another survey of NECTEC by the end of 2001 (http://www.nectec.or.th/ntl), more than half of the Internet users, are people in the urban areas. There are 18 commercial Internet service providers (ISP) as of the end of 2001. Besides constant development of basic infrastructure such as, the size of international and domestic bandwidth, numbers of access lines, and other network equipments to improve internet connections, ISPs also focus on providing service in other web-related areas such as, web hosting, dedicated servers, and co-locations. The medium and large-sized ISPs are aiming more than that. They have diversified their businesses into a new source of revenue such as, portal, online shopping mall, application services, e- Commerce solutions, and especially data center, a new trend to lure corporate customers. Public Internet To contribute people an equal opportunity to benefit from the Internet, especially those in sub-urban and rural areas, one of several initiatives supported by the government is to provide a public Internet terminal for users accessing Internet to surf web sites. The idea is analogous to a public telephone, which contains a telephone booth and a payphone handset. For the public Internet, there is a booth covering a personal computer equipped with a 56K modem and a Telephone Organization of Thailand (TOT) web browser program to access to the TOT Internet. Initially, TOT installed 300 units of public Internet booths in TOT service offices in major areas. The charging is as follows: connection cost is 3 Bahts, usage cost is 12 Bahts per hour and printing cost is 3 Bahts per page. Tambon Net Department of Local Administration (DOLA), the Ministry of Interior with a cooperation by TOT, launched Internet access points to all Tambons (a district, or a group of villages). Administration. There are about 7,200 Tambons nationwide. TOT will provide 3-5 subscriber numbers in each Tambon. This Internet service will be available for 1,000 Tambons within 2002, and expecting that all 7,200 tambons will be connected by the year 2003. These Internet services will be used for administrative work within the Ministry of Interior, and expectedly be utilized for e-commerce activities related to another nationwide Government s policy on economic development at the grass roots level of One Tambon One Product Project. 3.2 Banking & Taxation Internet Payment Some commercial banks have been providing Internet banking services for bank customers having all kinds of bank accounts i.e. Siam Commercial Bank (www.scbeasy.com), KrungThai Bank (www.ktb.co.th),and Bank of Asia (www.bankasia4u.com). In a form of secured electronic payment services, these banks provide electronic transactions for transferring money through the Internet in secured environment called Internet or e-payment gateway. Tax clearance The Revenue Department (www.rd.go.th) recently provided online services of filing a return and payment of taxes for Personal Income Tax, Withholding Tax, Value Added Tax (VAT), and Specific Business Tax since January 2002. Any natural person and juristic person can also pay tax by using 4

ATM (Automatic Teller Machine) or Internet banking with some participated commercial banks i.e. KrungThai Bank, Thai Farmers Bank, Siam Commercial Bank and Bank of Asia. Customs clearance The Customs Department realizes the importance of using Electronic Data Interchange (EDI) to exchange information in order to provide quality services to trading partners and other government agencies. The Customs Department's computer system in bonded warehouse allows for the following procedures a. EDI entry formalities where applicable at Import/Export. b. Export clearance procedures: the Customs officers must key in the computer with the export entry number, inspection of goods results and details of container loading before proceeding to the next export sub-division. c. One stop service payment for demurrage, seal and etc. 3.3 e-commerce Projects for Exporters There are many e-commerce projects initiated by Government agencies having goal to facilitate entrepreneurs in order to strengthen competitive advantage in the new economy. On June 30, 2000, the Export Development Committee agreed on the program to strengthen Thai Exporters in entering Global Electronic Commerce. In this regard, assigning the Department of Export Promotion (Ministry of Commerce) was assigned to handle the project for preparing Thai exporters in a future world trading economy on Internet. In order to serve 8,000 exporter-listed members, the Department has provided e-commerce facilities free of charge for members in an initial period for starting their business such as web page, URL, email, logistics, solution, etc. (source: www.depthai.go.th) In order to improve the efficiency and effectiveness with which it provides information to investors and to further position itself as a one-stop-shop for online investment information, the Board of Investment (BOI), has launched three new web sites - - www.investmentthailand.com: Thailand Provincial Investment Gateway for domestic and foreign investors can utilize the information in this site for investment decision making. - www.b-intelligence.net: a network of high caliber executives not only to share information, insights, and opinions, but also to serve as an authoritative voice on economic policy adjustments. - www.i-expertnet.com: a database of local and foreign experts who have experiences in the design and use of technology in industrial processes 3.4 e-government Procurement and B2B e-marketplace Another important project, initiated by the current government, is the online information and e-commerce activities on procurements by public agencies. The Office of Prime Minister is coordinating the development of Thailand e-government Procurement (EGP), as a project that aims to reduce cost, improve productivity of public procurement, raise transparency in government, provide business with better access and more efficiency to government markets. Phase 1 of this EGP project (www.gprocurement.or.th) is under the test run in consolidating e-procurement announcement from many public agencies, and the next phase of online e-purchasing is under developed. Besides, business sectors should be prepared for the current and future development of the EGP. Some entrepreneurs have been becoming the prime movers in e-procurement for B2B e-commerce. For example, Pantavanij is an electronic marketplace company, established by a group of leading companies in Thailand, such as Charoen Pokphand Group., Bangkok Bank, Siam Commercial Bank, Telecom Asia, and United Telecommunications. The services include logistics, payment solution, system integration for business alliance. 5

3.5 e-commerce Facilitation for SMEs and Community Development e-commerce for SMEs In the Master Plan for SMEs Development (industrial sector) developed by Ministry of Industry, there are strategies concerning the use of IT for SMEs competitiveness such as technology management, and industrial clustering. Ministry of Industry by the Department of Industrial Promotion has developed a web site (www.smethai.net) for promoting SMEs products and services. The Department also arranges free homepage with URL, email and provides seminars and training programs for SMEs. Telecenters or Community Access Centers To diffuse e-commerce development in upcountry areas and as a pilot best-practices project, Electronic Commerce Resource Center (ECRC) under NECTEC in collaboration with other organizations e.g. Community Development Institute (CODI), Department of Agriculture, has a plan to set up Telecenters or Community Access Centers. NECTEC has started its 4 telecenters with basic telecommunication access and basic e-commerce projects in 4 provinces, namely, Pisanulok, Surin, Lumpang and Chanthaburi. This pilot project was started from the last quarter of 2001 and starts operation in 2002. The main purposes of this project are to work closely with the communities and develop an appropriate business model of e-commerce, for example, to be a data warehouse of community so as to exchange product information, to support marketing and sale of local goods and services. The project of this kind could complement the One Tambon, One Product, e.g. on the electronic marketing and management of selling of local products, as well as the promotion of local attractive tourist areas. With the collaborative spirit with local communities, several possible programs could be initiated, e.g. the study of information suitable for the needs of the community, training that should be provided to the students, teachers, and as well as the people in the community in such a way that they will understand about the life-long learning community, specifically on how to utilize the Internet and e- Commerce to its potential. It is hoped that the results from these pilot centers could provide business models and some guidelines for other communities. 4. International Collaboration Thailand as a member of international economic communities plays an active role in e-commerce cooperation. ASEAN and APEC are among many international forums that have initiatives related to IT and e-commerce worth mentioning here. e-asean The Fourth ASEAN Informal Summit in 1999 achieved its first concrete result with the signing of the e-asean Framework Agreement. This initiative aims to enhance information and communications technology (ICT) for ASEAN and develop ASEAN' s competence to compete in the world market. The initiative also says that member states would work to establish high-speed Internet connection and make e-commerce effective for consumers. By the end of 2001, Thailand is appointed as a chairman of the e-asean working group responsible for promoting information technology use and for reducing the digital divide throughout the Association of Southeast Asian Nations (ASEAN) region. The e-asean plan consists of five components: e-trade, e-services, e-government, e-society, and e-investment. Thailand is also being a focal point of e- Society and capacity building. 6

e-apec Ministers of the Asia-Pacific Economic Cooperation (APEC) economies have endorsed an "e-apec Strategy" designed to strengthen market structures and institutions. APEC economies will be directed to take concrete steps to implement the action agenda of the e-apec Strategy in three critical areas: 1) strengthening market structures and institutions, 2) facilitating infrastructure investment and technology development for on-line transactions, and 3) promoting entrepreneurship and human capacity building. 5. Electronic Transactions Law and Business Impacts The implementation of EC involves many legal issues. One of many important laws is related to electronic transaction and digital certificates. In this section, the development of this kind of law is discussed. 5.1 International Development of E-Transaction Law ICC The GUIDEC (General Usage for International Digitally Ensured Commerce) I and II, drafted by the International Chamber of Commerce (ICC) Information Security Working Party in 1997 and 2001, aims to establish a general framework for the authentication of digital messages, based upon existing law and practice in different legal systems. It is also provides recommendations relating to secure authentication and processing of digital information and enhance the ability of the international business community to execute trustworthy digital transactions. UNCITRAL The United Nations Commission on International Trade Law (UNCITRAL) adopted the UNCITRAL Model Law on Electronic Commerce, which is intended to offer national legislators a set of internationally acceptable rules concerning the use of electronic communications and provides functional equivalents to use of paper-based documents. iv Furthermore, the Model Law also helps to overcome legal obstacle to international trade which is linked to national legislation when there is any dispute between the parties. It should be noted that the principles of the Model Law are applied in the Electronic Transactions Act said below. 5.2 Thailand Electronic Commerce Legal Framework The National Information Technology Committee (NITC) had concurred with the establishment of Information Technology Laws Development Project conducted by the National Electronics and Computer Technology Center (NECTEC) in 1998. Its main objectives are to study and draft the six ITrelated laws as follows: Electronic Transactions, Electronic Signature, Electronic Funds Transfer, Data Protection, Computer Crime, and National Information Infrastructure. On 18 October 2001 the House of Senate approved of the ElectronicTransactions Bill, which are from the consolidation of Electronic Transactions and Electronic Signature, and it was announced in Government Gazette on 4th December B.E. 2544 (2001). It will be coming into force on 3 April B.E. 2545 (2002) since it commences after 120 days as from its publication in the Government Gazette. (Section 2) 7

5.3 Electronic Transactions Law Scope The Electronic Transactions Act dealing explicitly with electronic trading or electronic transactions and is legally binding all kinds of e-commerce such as B2B, B2C, B2G. A definition of electronic transaction provided in section 4 ( a transaction conducted electronically in whole or in part. ) does not specify scope of transaction or activity, then this law provides that This Act shall apply to civil and commercial transactions made by data message, except the transaction which is not admitted of the application of the Act, as prescribed in the Royal Decree. (Section 3 para.1) It means all kinds of electronic transactions will be applied to this Act unless a transaction in which there is any specific reason. Principles This Act adopts the principles of the Model Law on Electronic Commerce so that it relies upon a new approach, functional equivalent approach, which is based on an analysis of the purposes and functions of the traditional paper-based requirement with a view to determining how those purposes or functions could be fulfilled through electronic means. This Act thus extends the scope of such notions as writing, signature and original in paper-based environment to encompass computer-based techniques such as data messages v. 5.4 Electronic Transactions Law and Business Impacts When the Electronic Transactions Act B.E. 2544(2001) is being implemented, the Electronic Transaction Commission will play an important role in facilitating Electronic Commerce activities and establishing trust and confidence environment to electronic transactions. The Commission shall have powers and duties to propose policies for the promotion and development electronic transactions, to monitor electronic transaction businesses, to recommend and give an advice to the Ministers for the purpose of issuing Royal Decree under this Act, and to issue any rules and notification relating to electronic signature. Given the parties to contract have followed the provisions of this Act, Businesses can do their all kinds of operation or electronic transactions with reliable methods. Amongst the provisions on which the Act is based, the following impacts will be occurred: 5.4.1 Facilitating e-commerce activities The impacts on e-commerce on Business-to-Business e-commerce (B2B) and Business-to- Consumer e-commerce (B2C) as well as the Business-to-Government (B2G) e-commerce are as follows: 1. The way of doing business of entrepreneurs, especially in, B2B will be changing. They can not only send trading data or communicate online but also make all processes in paperless environment such as negotiating, making a contract, and operating on their products. 2. People can make a contract electronically using the information generated in the form of data messages and such data messages shall be deemed to be in writing or bears a signature, if they met the conditions of law. It is not necessary for persons to contract to send a paper document to another party in order that both parties have to sign a signature on a written paper so they can use electronic signature instead. 5.4.2 Promoting businesses relating to electronic transaction Once the Electronic Transactions Act is being implemented, it is expected that businesses will be interested in launching e-commerce services concerning Electronic Authentication or want to be a Certification Services Provider (CSP) in Thailand. Business relating to electronic transactions in this Act can be classified into 3 categories (Section 32 34) as follows: 8

1) business required to be informed on the competent authorities 2) business required to be registered with the competent authorities 3) business required to be received a license from the competent authorities The classification of these businesses is set forth in the Royal Decree (Section 32) which Electronic Transaction Commission chaired by the Minister of Science Technology and Environment have the powers and duties to recommend and give an advice to the Minister for the purpose of issuing Royal Decree under this Act. In addition, businesses concerning electronic transactions operating their business shall follow the conditions and rules prescribed in the Royal Decree and the Commission s rule. The purpose or reason of this Act are to establish trust and confidence in data messages, to protect financial stability and commerce, to avoid any damage which may occurred to the public. (Section 32 para 1) 5.4.3 Establishing Trust & Confidence The Electronic Transactions Act states that the party to contract or business using reliable method of making electronic transaction in accordance with security procedure under this Act shall be presumed to have been a reliable method. Where a dispute occurred between the parties one party shall has a duty to adduce evidence in support of his allegations or contentions that electronic signature is unreliable against another party, if not, the Court shall be allowed to accept the latter s evidence is reliable. It means that person relying on electronic transactions and complying with those regulation will take an advantage from such legal presumption. It should be noted that parties have no freedom to make agreement that they assume that it is applicable because the requirement of the ETA and its successor shall be applied. 5.4.4 Streamlining public administration by setting e-government environment The government agencies can issue any approval, license, notification or administrative action or accept the filling of document, or provides for the method of payment in the form of data message, and businesses and individuals can submit any pleadings, registration form vice versa under the condition and measure prescribed in the Royal Decree. 6. Conclusion There is a consensus regarding the future of EC it is bright, generally speaking. However, the developed countries, the countries and business companies that are well prepared could leap the benefits of e-commerce in a significant scale. For the developing country like Thailand, the government plays an important role in building an environment for facilitating e-commerce by identifying and developing key building blocks, and enhancing electronic trading or transactions among businesses. Its information infrastructure should be becoming more universal and less expensive. Security, privacy protection, and trust must be higher such that consumers will have more trust and confidence, and would try different products and services. B2B business collaboration in several forms such as e-marketplaces, and supply chain management must be encouraged. Legal issues should be more clarified, and hopefully more products and services will be available on line at reasonable prices. Business sectors should be more serious in participating in this road of e-commerce development. 9

Reference: 1. Policy and Regulatory Update: Thailand report presented at APEC Telecommunications and Information Working Group 24 th Meeting between 17-21 September 2001 at Jeju, Republic of Korea (Docu 21: telwg24/plen/21) 2. Internet Information Research Center, NECTEC (http://ntl.nectec.or.th/internet) 3. The Revenue Department, (www.rd.go.th) 4. The Customs Department (www.customs.go.th) 5. Thailand Export Mart, Department of Export Promotion (www.depthai.go.th) 6. The Board of Investment, (www.boi.go.th) 7. Electronic Commerce Resource Center, (www.ecommerce.or.th) i http://www.emarketer.com/ereports/ecommerce_b2b/welcome.html ii http://www.emarketer.com/ereports/ecommerce_b2c/welcome.html iii See Policy and Regulatory Update: Thailand report presented at APEC Telecommunications and Information Working Group 24 th Meeting between 17-21 September 2001at Jeju, Republic of Korea (Docu 21: telwg24/plen/21). iv See Article 6, 7 and 8 in UNCITRAL Model Law on Electronic Commerce with Guide to Enactment (1996) with additional article 5 bis as adopted in 1998. Available at http://www.uncitral.org/enindex.htm. v Ibid., para 16-18. and see also Section 8, 9 and 10 in the Electronic Transactions Act B.E. 2544. 10