Except for selected weak economies affected by reasons such as political instability, Asia-Pacific as a whole carried strong market confidence well throughout the year.
The deregulation of the Singapore telecommunications industry spelled opportunities for tech suppliers and telcos. Regional cooperation among ASEAN members to push education, skills development and training, as well as the e-ASEAN Framework, is poised to accelerate IT excellence in Asia for 2001 and beyond. NTT Docomo’s successful iMode service placed Japan on the world map as the rest of world looked on, hoping to learn from their experience.
As 2001 presents another 12 months’ of opportunity and uncertainty, Asian businesses must be mindful of technology hype, unpredictable market forces and the threat of more tech-savvy competitors. The acute global labour shortage will continue to be a thorn in the flesh as businesses will have to compete even more aggressively for the best workers with critical domain knowledge and Web know-how.
While other magazines attempt to predict the future, Intelligent Enterprise Asia has decided to take a step back and take stock of what’s happened in 2000. It is important to know where we are before trying to get to where we want to be.
HONG KONG--Internet Spirits Soaring High
Year 2000 will be etched in memory as the year the dotcom bubble burst. In Internet-savvy Hong Kong, the sudden reversal of fortune is apparent in the way venture capital investments dried up and the way the technology-heavy Growth Enterprise Market failed to live up to all its pre-launch hype.
At the height of the dotcom fever early in the year, huge crowd lined up several blocks to get shares in Tom.com, property tycoon Li Ka-Shing’s high-profile Internet venture. Roads were closed and extra police drafted in to deal with the chaos.
Anything that had Internet labelled on was gobbled up by avaricious investors with eyes out for quick returns.
The tech stocks crash in April doused this crazy frenzy, injecting a healthy dose of reality back into businesses where focus is reverted on old-fashioned concepts such as cost, revenue and profit.
Interest in the Internet and e-business, however, is still high. Companies are still on track developing a range of Internet services, particularly in the area of wireless applications in anticipation of the arrival of 3G (third generation) phones. Furthermore, this year also witnessed Hong Kong’s first Internet IPO when railway operator MTRC offered shares to the public as part of its partial privatisation strategy.
This exercise saw 77,000 people applying for shares online.
Meanwhile, the most important event that will have a far-reaching impact on Hong Kong’s future as a business and IT hub is happening right in the Mainland. After tough negotiations with the US and Europe, China looks set to join the World Trade Organisation, probably early this year.
This move will mean profound changes to the way companies in China do business, and presents foreign firms with huge opportunities and risks. For Hong Kong too, it is an opportunity but also a huge challenge.
Shanghai and nearby Shenzhen are giving the SAR a real challenge in maintaining its role and reputation for open governance, innovation and promoting best practices. Protecting that reputation, nurturing it, persuading companies that Hong Kong is a transparent place to do business, are real challenges for the year ahead. Looking forward, Hong Kong’s strength has been its ability to rapidly restructure--jettisoning old industries and embracing the new. It has never created much that was original but cleverly adapted efficient technologies.
Those gold-rush months of mini-stock market boon in Internet concept stocks were more about traditional Hong Kong financial engineering than a genuinely New Economy. More important is the widespread realisation that old ways of working cannot last. Sustainable recovery will depend greatly on good policy-making.
The preceding bubble economy has left many people without the skills to participate in the emerging industries. Flexible immigration policies--encouraging the right people--and education-sector reform must rank as some of the most pressing objectives. The telecommunications industry underwent a series of frantic changes. The most dramatic of which is the takeover by Pacific Century CyberWorks of dominant carrier Cable & Wireless HKT. Many observers had marvelled at how a company with so little revenue and earning was able to mount a successful acquisition. Company executives claimed it was a “successful marriage between an Internet company and a telecom company--a unique combination of content, Internet and telecom blocs to emerge elsewhere in the region”.
Now, with the approaching introduction of next generation mobile phone services, the coming 12 months will be equally challenging.
The good news for CyberWorks is that its mobile phone unit, CSL, was the only SAR mobile company to make money.
Credit rating agency Standard & Poor’s has already warned of rising business risks in a far too competitive SAR mobile market. As a result, industry consolidation is a likely scenario, meaning some operators might not survive to see the issuance of 3G.
The next generation mobile era, enabling high-speed data-transmission services ranging from video to personalised location-based services, is going to be the new battlefield in years to come.
In other industries, IT and the Internet revolution have also left their marks. Hong Kong’s shipping industry has been reaping the rewards of IT for the past 20 years in three major areas: data transmission, information and analysis. When these elements were applied in the commercial world, business decisions could be made and transactions conducted very quickly through electronic means.
Almost every major carrier offered customers the ability to log on to its Web site to make bookings or track and trace shipments.
Carriers initiate most of the functions themselves simply because the benefits to them are obvious. For instance, when a customer visits a carrier’s Web site for information, bypassing the customer service centre, the electronic helps reduce cost.
Hong Kong has a long way to catch up on shipping revenues generated online because the majority of the small- and medium-sized enterprises in the SAR are still using phones and faxes, and seem to be resisting the change to e-commerce. But as their business partners in the US and Europe are increasingly demanding for transactions to be done through the Internet, Hong Kong’s businesses also have to move into this new trading environment.
In order to get on par with these trading partners, Hong Kong plans to launch a study of its position as an international logistics hub in relation to counterparts in Asia, Europe and the US.
Logistics is the management science embracing the efficient movement and storage of goods and provision of services. Its scope extends from manufacturing to final delivery, including related aspects of IT and other control systems--also known as supply chain management.
The Hong Kong Port and Maritime Board said the logistics development committee--established in March --also would study SAR institutional arrangements.
The logistics committee, comprising representatives of the air and sea-freight community, was looking at business opportunities and trade flows through Hong Kong.
The committee also would look at the cyberspace facilities and regulatory infrastructure Hong Kong has been building through Tradelink and other bodies to determine if there was a need for improvement.
The Customs and Excise Department, which simplified trans-shipment procedures for air freight, is looking at a similar exercise for maritime trade.
Meanwhile, the rise in the number of Internet companies has a positive effect on the demand for office space, which is close to a record because of the economic rebound, strong take-up by New Economy companies and easing of supply.
Analysts and property consultants attributed the significant increase in rental value during the year to strong demand by telecoms firms, Internet service providers and portals, Web-based financial services and new-media companies. Demand from the dotcom sector has gone down as expected, and some property owners are dubious of accepting dotcoms as tenants.
In another 12 months, however, the distinction between Old and New economy companies will disappear as more businesses operate both online and off.
For instance, online brokerage Boom.com operates retail outlets, while traditional broker Celestial Securities runs the CASH online service.
Centaline Property has its database online, while GoHome is forging partnerships with small estate agencies.
The idea of putting catalogues on the Web and making a fortune has evaporated. Click-and-mortars--with their physical stores and successful Internet presence of reaching customers and saving costs--would be the strongest players in e-commerce.
Hong Kong banks are a prime example. At the start of the year there were only one or two banks offering customers the option of online transactions. There are now almost 30.
On the other hand, the predicted boom in B2B transactions has also failed to take off, although the area holds more promise in Asia than B2C.
Analysts said that B2B e-commerce could help suppliers and buyers streamline their transactions. But it would not work for every industry or for people who plunged into the market without enough planning, and especially if it is a generic B2B site that tries to do all things for all people.
MALAYSIA--No Choice But to Go Forth
Year 2000 saw a steady increase of online retail offerings, with new B2C and B2B players staking their claim on the ’Net space. The dotcom correction across the Pacific did little to dampen the “Malaysia Boleh” spirit as more companies hinted on plans to jump on the e-bandwagon.
Even if the train did arrive, many hesitated to jump on the coach. Said Association of Computer Industries Malaysia (Pikom) Chairperson Wendy Liew: “Last year was all about fact finding and contemplation. Even though some traditional businesses had embraced the Web, others are still watching from the sidelines.”
Sun Microsystems Malaysia’s Managing Director Govinathan Pillai agreed, pointing out that many public listed companies talked about e-commerce like it is the greatest thing since sliced bread but did not use it for their own procurement practices.
Although the Malaysian paradoxical behaviour continued to haunt companies, vendors remain undeterred and continued to challenge CEOs to understand e-commerce and its business benefits.
E-commerce department head at Royal Selangor International David Cheah believes that a few local success stories are in order to convince companies to take the leap of faith. “It is so typical of Malaysian entrepreneurs to get caught in a momentum after someone else has succeeded.”
Royal Selangor, a privately held company, is one of the rare success stories that carved a name for itself on the ’Net space selling its handcrafted pewter, jewellery and silverware products online.
Yet pundits concurred that the real movers and shakers likely to push the e-commerce envelope would be from the banking, manufacturing and media companies.
Southeast Asia online portal Catcha.com’s founding member and Chief Operating Officer Nic Lim should know, having had a fair share of flak. The portal posted a modest return of US$880,000 last year. “We had an eventful year as things moved very fast in all directions.” Lim is determined to continue pushing the envelope and looks forward to yet another equally challenging year.
As sleep depravation tops the list of dotcom players, the general sentiment was bolstered by an IT friendly national 2001 Budget that was released end-October. Pikom’s Liew said that so far, this was the first budget that acknowledged the importance of shaping a knowledge economy.
Necessity Is The Mother Of Inventions
Among the perks include a US$132 million venture capital fund aimed at startups, thereby allowing contributors to draw out savings from the pension fund--Employee Provident Fund--to buy computers and offering tax deductions to private companies that give their employees new computers.
“If the execution is flawless, then we’ll be on track to become an industrialised country,” said Lai Yit Loong, regional e-business marketing manager for Intel Asia Pacific.
He added that private companies should also take the lead and do their part to spread the use of technology among the common folk. “We expect a lot of exciting broadband technologies... this will certainly bring in more users.”
Despite the compelling bouquet of incentives, some quarters feel that more needs to be done, “for we do not have a critical mass to support e-commerce in Malaysia,” said Alvin Foo, CEO at VCN.
VCN last year introduced a marketplace portal aimed at matching buyers and sellers. Foo disclosed that the “pool” was too small but the number of players is on the rise.
“For the movers, a healthy bottomline is paramount and for the users, changing the culture is an uphill task. We’ll have to bide our time and wait for the next generation of students who enter the working world to change the culture,” he added.
Sun’s Govinathan agreed, adding that PC penetration rate does not equate to ‘Net usage. IDC estimated that close to 600,000 PCs was sold last year and is optimistic of an up-take this year.
The use of e-commerce has proliferated in corporations and city areas, said Yvonne Yong, research analyst at IDC Malaysia.
“Rural folks are still largely unclear of what exactly the Internet is all about. They have a vague notion and therefore education is vital in bridging the gap,” she added.
A survey conducted by the Ministry of Energy, Communications and Multimedia, indicated that only 7% of the 21 million population are registered Internet subscribers. In the last five years, registered ‘Net subscribers grew from 18,000 to 1.6 million. Pikom’s Liew is optimistic that the number of subscribers will grow by 50% this year.
The challenges in the year ahead includes filtering the noise from the data to ensure the right message gets across to the public. “Now that the knowledge economy idea is out there--let’s hope the education and awareness creation people get it right and tell the story straight and true,” pointed out Royal Selangor’s Cheah.
As more local companies enter the e-business fray, VCN’s Foo cautioned on the need to have enough grey matter and hard cash between them to stay in the game. “It is a long haul.”
B2B and B2C players need to give consumers a good reason to buy or risk losing their business. “The ‘Net opened us to the world and increased our competition at the same time,” said Liew.
Intel’s Lai agreed. “We certainly have to learn. We now have no choice, there is no turning back.”
THE PHILIPPINES--Building the Right E-commerce Blocks
The development of a network infrastructure is key to accelerating e-commerce in this country of 75 million people. Technology providers have teamed up with local telcos and service providers to improve Internet access and widen the number of people getting into the Web.
The Philippines is on the path towards full e-commerce implementation with the passing of the Electronic Commerce Act of 2000 introduced by Senator Ramon Magsaysay, Jr. and co-authored by Senators Juan Flavier, Blas Ople and Vicent Sotto III.
This landmark e-commerce law has set the tone for both the public and private sectors in taking the challenge of competing in the cyber market.
The entry of technology providers such as broadband, wireless access and the latest technologies coupled with the government IT initiatives would pave the way for e-commerce to take off.
Although e-commerce in the Philippines is still in the infancy stage compared to other advanced countries in Asia, its e-commerce infrastructure is now the focus of technology providers.
Jose Ramon Garcia, president e-2-door.com, Philippines’ first B2B portal for retail has noted that e-commerce in the Philippines has not taken off yet as some problems on network infrastructure and settlement system of commercial banks have yet to be addressed. Many are still talking about setting up payment gateways, fulfilment and access to the Internet.
There are about 600,000 local PCs in the Philippines connected to the Internet which today provides mainly dial-up access, but broadband is slowly making its way into the local market. However, some estimates say Internet penetration would reach one million, taking into account the schools, cyber cafes and coffee shops with Internet access.
The dominant telco, Philippine Long Distance Telephone Company (PLDT), and Globe Telecom are rolling out fast Internet access solutions such as digital service line (DSL) and wireless access.
Early last year, cellular phones numbered about two million and would reach to five million. “This is the beginning of what they called the tornado which will start by the first quarter of 2001. Tornado is the exponential growth of an industry,” said Garcia.
The Philippines is behind in e-commerce rollout compared to its ASEAN counterparts like Singapore and Malaysia. “The advantage of being slow is that we can see the rears of our opponents, and we can leap-frog older technology.”
“I see a hyper-growth starting in the first quarter of 2001. E-commerce would gradually pick-up because you need more content and more companies playing the field.”
Noel Rivera, country manager of Cisco Systems Philippines said that there’s a lot of conservatism among Philippine companies, where e-commerce is a topic they have explored.
With the approval of the Philippines E-commerce Law, some companies never bothered to ask any more. “Text messaging is a potential for growth, of which the Philippines is the largest user of short messaging service (SMS),” said Rivera.
There is a need to educate the market particularly business leaders in helping them understand what is the business case of e-commerce.
“E-commerce has not taken off as it should have. Many companies are missing the point of the whole exercise. Getting into e-commerce involves planning, preparation, other than providing for bandwidth which is happening.”
Companies should also look at their software applications, their operating systems or re-engineer their applications, and put the necessary databases to be able to utilise e-commerce. The challenge now is speed and no longer text-based applications.
Who, then, are the companies making success in e-commerce? It’s the brick-and-mortar firms because they are able to transform themselves to be competitive
entities using data networking technologies and IT.
SINGAPORE--Preparing for the New Economy
The past year saw Singapore pushing aside hi-tech market woes and the doom and gloom of dotcom stocks to restructure and prepare the city-state for the New Economy.
One such landmark announcement came in April when the government decided to open up the telco market two years ahead of plan--laying the foundation that is needed for vibrant growth in the wireline and wireless markets.
Analysts applauded this move, lauding it as an event that would accelerate the restructuring of the Asia-Pacific market.
“A year ago, the Singapore telecoms market was one of the most controlled in the region. It has since been transformed into one of the most open from a policy viewpoint,” said Bertrand Bidaud, Asia Pacific Director of Dataquest, a unit of Gartner Group.
He added that this move would have an impact on countries in the region, setting “a benchmark for others to follow by being one where restructuring was fast and deep”. Gartner’s Dataquest focuses on providing hi-tech and financial communities with market intelligence for the global IT industry.
And to further establish Singapore as a nucleus for telco activities in the wireless space, the country’s Infocomm Development Authority (IDA) launched an S$200 million (US$117 million) “Wired With Wireless” programme in October to complement its nation-wide broadband network initiative--Singapore ONE.
This complements the announcement made earlier to auction four third generation (3G) mobile licenses, placing Singapore as the first Asian country after Japan to issue 3G licenses.
Taking the leading from the government, incumbent telco provider--SingTel, inked its largest infrastructure project with India’s Bharti Enterprise to build India’s first private sector undersea cable venture.
And on the e-commerce front, a significant announcement came last July when the Monetary Authority of Singapore (MAS) announced its approach to the licensing, regulation and supervision of Internet banking in Singapore.
To the MAS, the risk considerations inherent in Internet banking are not new or fundamentally different from those posed in other forms of banking. That is why Internet banking, including Internet-only banks (IOBs), will operate within the same prudential framework as traditional banking.
Under its licensing policy for new banks, MAS said it is prepared to grant new banking licences to Singapore-incorporated banking groups to set up banking subsidiaries to pursue new business models, including IOBs, with a minimum paid-up capital requirement of S$100 million (US$59 million).
But even before MAS’ move to put Internet banking policies down on paper, e-banking was already sprouting on Singapore turf. Among the many e-banking initiatives announced by local banks like DBS, were the arrival of two pure Internet banks. In April ’00, finatiQ.com started operations under the Bank of Singapore license; and first-e Asia, a joint venture between Overseas Union Bank and Europe’s first-e group, announced its presence early this year as well although plans to start operations has been put on hold.
And looking back at the dotcom scene, eWorldofSports.com (eWOS)--a click-and-mortar sports retailer--hit the top of the IPO blooper list last year. UOB Asia, the investment banking arm of United Overseas Bank (UOB), announced last August that eWOS had been 1.3 times subscribed. But it neglected to reveal that this was because the underwriter, UOB, had taken up 10 million out of the 16.19 million shares.
Subsequently, UOB Asia was publicly reprimanded by Singapore Exchange (SGX) for releasing misleading information and eWOS shares were undersubscribed as a result of this fanfare.
Confidence in this dotcom can’t get any lower when eWOS’ non-executive chairman Keith Budge sold all his 100,000 shares in the company at a S$12,500 (US$7330) loss.
THAILAND--Still Finding Its Feet
While the world has been driven by Internet and e-commerce for years, Thailand’s dotcom business is still a new born baby who has just celebrated the first anniversary this year.
E-business--whether in the form of B2B or B2C--was introduced in Thailand about two years ago. The study by Thailand Development and Research Institute (TDRI) then showed that most businesses with Web sites had used their sites just as an advertisement, with only 57 companies offering the ability to perform online transactions. While Web sites, set up only for online transaction were hardly seen.
However, the situation has changed in the year 2000 as a lot of new Web sites have been set up just to do online business. Also many companies began using their Web sites as another sales channel.
Currently, a wide variety of products and services are offered online, ranging from market exchange to cyber mall, online auction, and flower and gift delivery. Some sites allow only online ordering but there are many sites that offer online payment.
Some of these Web sites limit themselves to delivering products within Thailand such as the Thai food restaurant S&P but some do deliver goods globally such as Siam Florist.
Although there are a variety of products and services Thai people can buy online, the volume sales is believed to be very limited, said Narong Intanate, president of the Value Group, a local leading IT distributor that was among the very first companies to offer both B2B and B2C services.
“There are three external factors that have limited and will continue to prevent e-commerce growth here, especially in the B2C space. They are consumer behaviour, limited Internet users and credit card holders,” said Narong.
He continued that Thais would still prefer to go out and buy products themselves as they want to see and test products before buying them.
They are not like the Americans who are familiar with catalogue buying, he added.
Internet penetration is another major setback for online business as current number of Thai Internet users stand between one and 1.2 million, which is only around 2% of the population. Apart from this, not all Internet users have a credit card--which means they cannot buy anything online--while some with credit cards do not trust the security system, as a result do not want to give their credit card numbers away.
“It would be hard for the Web site that focuses on B2C e-commerce to survive in the first year but if the sites belong to established companies that use the Web for B2B activities, those companies will find the Web an efficient tool to reduce cost, Narong said.
He added that if they could offer B2C to end-users, it would be more beneficial.
TDRI Research Specialist Somkiat Tangkitvanich also pointed out that local companies should be unique and should know how to focus to stay alive.
Despite the outside factors that are obstacles for e-commerce, Somkiat added that the major problems of dotcom businesses are that were focused only on a pure Internet business model or the so-called “click-only” business model. This model can hardly generate any income since revenue is based on only advertising, he added.
In addition, dotcoms face a shortage of innovative ideas and they like to copy business models. When there were traces of portal boom, many portal sites were established, he said, adding that most local Web sites presented their content in the Thai language that limited their market.
“If anyone wants to be a success, they need to differentiate themselves from others and have their own strengths,’’ Somkiat said.
Somkiat noted that it was difficult to identify success factors for dotcoms, but it is possible to cite unique ones. These included SiamGuru.com and PointAsiaOil.
SiamGuru.com is a useful Thai search engine technology and it allows users to search for Thai text, images and songs.
The company has clear target customers, focusing on corporate users who needed a Thai search engine for their data.
PointAsiaOil, which has yet to be launched at press time, was outstanding for its concept of an e-marketplace for the oil industry, he noted. In addition, the company also has wide business connections as well as strong investments.
The Thai government also realised the necessity to encourage dotcom businesses to guarantee the country’s ability to compete globally. The Commerce Ministry has set up a Web site for exporters while the Interior Ministry came up with a Web site called Khonthai.com which aims to be a major source for Thai people to check their personal information and other public information.
The Parliament also passed Thailand’s first e-commerce draft law in September. The law is now waiting for final approval from Senate before it can be enforced.
The e-commerce law would allow electronic documents to be used as evidence in court proceedings. The law will also mean that e-signatures are as legally binding as hand-written signatures for e-commerce transactions.
However, it does not mandate what technology businesses must use to implement e-signatures.
In addition to the e-commerce law, the Council of Economic Ministers has approved a draft e-commerce framework which is part of the National IT 2004 plan.
According to the framework, the government will be responsible for conducting measures to facilitate e-commerce usage and development in Thailand across key policy areas.
The framework calls for the government to endorse e-commerce as the national trade strategy for future economic and social development plans.