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Business-to-Business E-Commerce

There is great potential for e-commerce over the next few years since Singapore has a well-developed Internet infrastructure, combined with strong government support and high percentage of IT literate population. The business to business sector accounts for about 97% of the revenue for all ecommerce transactions.  Leveraging their existing telecommunications infrastructure, the Singapore government would like to turn Singapore into a major e-commerce hub for Asia.  Part of this is motivated by the desire to tap into the business opportunities and translate it into economic growth and part is being driven by the desire to turn the country into a knowledge-based, high value-added economy.  [1]

Business to Business

In 1998, the government has launched an Electronic Commerce Plan to drive the use of electronic commerce in Singapore, and to strengthen Singapore’s position as an international e-commerce hub. See Table 1 for a summary of the government initiatives, including laws and regulations, aimed at growing e-commerce.

 The target is to have S$4 billion worth of products and services transacted electronically through Singapore, and 50 per cent of businesses to use some form of e-commerce by the year 2003.   The plan has 5 main objectives.  The objectives are listed below:

• Develop an internationally linked e-commerce infrastructure

• Focus on the business-to-business services 

• Implement education and support services to train and educate

• Promote usage within private and business sectors

• Harmonize cross-border e-commerce laws and policies

                 Table 1 – Government Electronic Commerce Initiatives

Electronic Signatures

Singapore is one of the first countries in the world to enforce a law that addresses the issues that arise in the context of electronic contracts and digital signatures. In July 1998, the Electronic Transactions Act (ETA) was enacted to provide a legal foundation for electronic signatures, and gives predictability and certainty to contracts formed electronically.

The Singapore Electronic Transactions Act (ETA) sets the framework for electronic laws in many countries. The ETA addresses the following issues:

• Commercial code for e-commerce transactions

• Use of electronic applications and licences for public

• Liability of service providers

• Provision for a Public Key Infrastructure (PKI)

• Intellectual Property Rights
   

Tax Issues for B2B Commerce

Goods purchased over the internet in Singapore and stay within Singapore are subject to government tax.  There are two areas of tax laws in relation to e-commerce, Income tax and Goods and Services Tax (GST).  Any internet based operation based in Singapore which is deemed to be revenue generating center is liable to be subjected to income tax.  All registered GST traders must charge GST for goods delivered to a local location. In the case of goods that are shipped overseas, no GST tax applies.

Business to Business - Potential

In a 1999 survey conducted by the Centre for Management of Innovation & Technopreneurship at NUS (CMIT), they found that  9% of all companies in select industries are currently using some form of Internet-based B2B e-commerce.[2]  They also found that that among the industries covered, manufacturers of electronic products showed the highest level of current usage of e-commerce (14.9%). This was followed by freight forwarding companies (9.2%) and publishing companies (7.8%). See Figure 2 for further data.

In Singapore today, more than 16% of the large companies are currently using the Internet for B2B e-commerce. Less than 8% of the small and medium companies are currently trading with their partners on the Internet.

 Figure 2 – B2B Usage

Barriers to Entry

Singapore companies that are interested in adopting e-commerce cite the following as key barriers to entry:

• Security,

• initial setup costs, and

• ongoing operational costs.

Security is the main concern for both B2B and B2C Companies.

Internet Procurement

Among companies currently procuring through the Internet, about one third (31.8%) relied solely on email to communicate order information with business partners. More than half (56.8%) use web-based trading platforms including Internet trading communities and transaction-enabled websites.   

Figure 2: Source: NCB B2b E-Commerce 1999 Survey

 Business to Business Revenue

Among companies currently procuring through the Internet, more than 95% report actual purchase volumes of less than $100,000 per month. There is a small proportion among this group of companies (1.6%) who are already procuring in excess of $10 million over the Internet. In comparison, about 88.2% of the companies planning to use Internet-based procurement expected less than $100,000 worth of monthly purchase volume.

 [1] Veloo, Peter. 1999. E-commerce forum to give Singapore a boost. CNET. 10, September.

[2] Centre for Management of Innovation & Technopreneurship at NUS (CMIT),

[3] Peck, Casuarina. 2000. E-commerce In Singapore To hit US$2.1B By Year-end
Singapore Internet dot com. 22, November.

[4] ibid

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