Infrastructure lack, environment impact hinder e-commerce growth

MANILA, Philippines — The e-commerce market in Southeast Asia is expected to continue to grow, but challenges such as the lack of infrastructure and environmental impact need to be addressed for the sector’s sustainable and inclusive development, the Asian Development Bank (ADB) said.

In a report, the multilateral lender said Asia Pacific, which became the dominant force in the global e-commerce market amid the pandemic, is expected to maintain its competitive position.

It also said Southeast Asia, which is the third biggest e-commerce market in Asia Pacific, is expected to continue to grow.

In particular, Southeast Asia’s e-commerce market value is expected to expand to $211 billion in 2025.

Last year, Southeast Asia’s e-commerce market value totaled $131 billion from only $43 billion in 2019.

“Vast room exists for growth across all economies in the subregion. Southeast Asia’s high internet and smartphone penetration have expanded the market for mobile commerce in the region,” the ADB said.

While e-commerce holds great promise for the economy through the creation of new opportunities, there are barriers and challenges to growth, it said.

Among the barriers cited by the ADB is the lack of internet access and infrastructure connectivity for last-mile delivery.

The ADB also cited the environmental impact of online shopping as another challenge.

While online shopping does less damage to the environment compared to traditional retail, the ADB said e-commerce is still expected to have significant amounts of emission as the sector continues to expand to adapt to growing consumer demand.

As such, it said engaging in more sustainable ways of consumption and doing business will be needed.

“Policymakers and businesses need to consider alternative solutions that promote sustainability and bring down greenhouse gas emissions in e-commerce, such as alternative delivery systems, sustainable delivery transport, common warehouse management, recycling and sustainable packaging, volume-rate garbage disposal, and separate collection of packaging waste,” the ADB said.

In addition, the ADB said e-commerce risks fueling anti-competitive behavior because of the advantages it offers for e-commerce businesses, and poses challenges to tax authorities in terms of tax policy, administration and compliance.

“In the long term, developing economies that improve regulations, infrastructure, and technical capacity to address these challenges and establish enabling frameworks will be better placed than others to maximize the benefits of e-commerce, both domestically and internationally,” the ADB said.

It said the benefits include having sufficient information and communication technology infrastructure, improving digital literacy of the labor force, legislating consumer and other legal protections, ensuring environmental sustainability, and minimizing the side effects of non-competitive hurdles.

“Economies that fail to overcome these barriers risk falling behind in the e-commerce market – being less dynamic at home and less competitive abroad,” the ADB said.

It also said economies that fail to embrace digital innovations will miss the opportunity to achieve more inclusive growth.