Cross border e-commerce (CBEC) is establishing itself as the new frontier in online sales worldwide. Overall e-commerce accounts for 12% of global exports and is expected to reach 30% by 2023. Although cross border e-commerce is booming, it also faces its challenges, including logistics, data management, tariffs, and taxes. The establishment of free trade zones is one way to overcome global challenges. Already different countries and companies have invested in free trade zones. China is in leading position, having setup 13 e-commerce free-trade zones, and approved another 22 this year. Free trade zones can meet the demand of online businesses including fast delivery, convenient logistics, and economies of scale.
Globalization and technological development have changed the face of the world by reducing the information gap between demand and supply and between countries. China is one of the fastest-growing economies in the world and already realized its maximum potential in manufacturing. On the other hand, its agricultural import value increased from US $ 15.8 billion in 2002 to US $ 113.8 billion in 2016 and is expected to increase in near future. In contrast, in Pakistan, the industrial sector has recently developed, but the contribution of the agriculture sector to the economy is still significant in terms of providing employment to 60% of the population and supplying raw material to industry. Due to its fertile land and favorable climate, Pakistan has a comparative advantage in agricultural products. However, productivity is low due to inefficient production methods, lack of advanced agricultural production technologies (hybrid seed, pesticide spraying drones, and irrigation technologies), proper infrastructure, and storage facilities.
This situation underscores the comparative advantage of Pakistan and China in different products. On the one hand, due to the saturation of the domestic market and surplus production capacity, China continuously needs new markets to export manufacturing products. On the other hand, Pakistan needs to import advanced agricultural technology to increase productivity. Although offline trade is already underway, cross border e-commerce has enormous potential for both countries. It is particularly beneficial for Pakistan, as it faces the challenge of providing gainful employment to educated youth. The emergence of free trade zones in digital business has further opened the way to efficient trade.
Gilgit Baltistan’s Moqpondass Special Economic Zone (SEZ) is one of the critical projects under the China Pakistan Economic Corridor (CPEC), aimed at achieving effective trade and economic prosperity . We propose that barrier-free online trade between Pakistan and China in that zone will further increase foreign exchange earnings and employment. To the best of our knowledge, there is limited information available on CBEC’s trade barriers and ways to promote such trade. We plan to launch a pilot project for trading selected products through cross-border e-commerce platforms to explore possible challenges and opportunities for efficient CBEC trade through.
Objectives We hope to achieve the following goals through this project: • Identify the challenges and opportunities of the CBEC free trade zone between China and Pakistan.
• In-depth study of the two trade channels (offline and online) for selected products from the perspective of consumers, producers, and government.
• Capacity building for local youth and farmers through e-commerce education, internships and training workshops.
• Analyze the mediating effect of e-commerce training on trade progress.
• Determine the impact of CBEC trade on job creation and poverty reduction.
Gilgit is well-suited for e-commerce as it has the highest literacy rate (72%) compared to other parts of the country. This provides us the opportunity to train young people to start their own online businesses. Another distinctive feature of Gilgit is that 90% of households own agricultural land, and the livestock ownership is 30% higher than in other parts of the country . In addition, the Gilgit region has a grassroots network of local support organizations (LSOs), village organizations (VOs) and women's organizations (WOs). The presence of these local rural organizations can help mobilize young people to engage in e-commerce, is cost-effective, and can achieve spillover effects in a short period of time. These features make Gilgit an important area agricultural entrepreneurship.
The project will adopt the experimental method as follows:
• Selection of suitable products for e-commerce trade from both countries;
deciduous fruits and nuts from Gilgit (Pakistan)
Infrastructure and agriculture technology from Xinjiang (China).
• Selection of suitable site for the pilot project, preferably a village.
• Capacity building of students and youth through training and internships to conduct CBEC trade on the e-commerce platforms.
• Integration of CBEC trade with the experimental CBEC Free Trade Zone in Gilgit.
• Data collection to analyze trade barriers between two countries and propose appropriate policy measures.
Expected outcomes of the project
The expected outcomes of the initiative are as follows:
• Assess the feasibility of CBEC in the free trade zone, while ensuring economic benefits at all levels.
• Identify the most effective CBEC trade channel (offline/online) between Pakistan and make corresponding policy recommendations.
• Determine the significance of training centers for digital business and propose better ways of knowledge transfer.
• Provide evidence-based guidance to stakeholders to promote CBEC trade between Pakistan and China.
We hope to achieve the spillover effect of the project on other sectors and areas in the country and use the pilot project as an example of prosperity and sustainable growth.