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IDC Outlook For B2B e-Commerce In Malaysia Optimistic

The future looks positive for Malaysia's B2B e-commerce market despite the overall negative sentiment associated with the Internet industry, according to IDC Market Research (M) Sdn. Bhd.

IDC has recently released its forecast for the Malaysian B2B e-commerce market, expecting a figure of US$7.8 billion in 2005. According to analyst Linus Lai, investments in the B2B sector will continue even though there are fewer VC companies willing to fund the Internet sector. He said revenue growth in B2B is considered as the natural outgrowth of what could prove to be a widely "unpredictable" adoption phase in Asia.

"It has been IDC's contention that the majority of B2B e-commerce investments come from traditional brick-and-mortar companies that are now investing to roll out their Internet strategies," Lai said.

However, even though opportunities abound, profits will remain scarce and untapped unless Web retailers understand their online customers and the challenges they face, he added.

"Among the obstacles to successful online ventures are the need to understand what is being bought online, the challenge of local merchants competing with international brand names, the need to reduce the concerns of online security, and the under-development of financial and logistics services, as well as the need to examine goods purchased," Lai explained.

He added that although the whole B2B e-commerce sector suffers from misplaced hype and unproven ventures, there still exists a real kernel of value. "It will take time, patience and experimentation to find the right formula for a particular industry segment or country," Lai said.

In the B2C arena, IDC expects the Malaysian market to reach US$1.5 billion in revenues by 2005 as the local community moves ahead as an e-commerce-enabled base of users. As of last year, one-third of all local Internet users have made online purchases over the past 12 months. Lai anticipates that by 2002, 50 percent of all local Internet users will have conducted Internet transactions.

According to its recent survey, IDC also estimated that Malaysia's Internet user base had hit the 2.5 million mark last year, and will reach 3.25 million by end-2001. The compound annual growth rate (CAGR) of local Internet users for the next five years up to 2005 will be 20 percent, the survey stated, compared to 30 percent averaged throughout the Asia Pacific region.

The survey further forecasted that in 2005, Malaysian Internet users will make up 3 percent and 19 percent of users in Asia Pacific and ASEAN, respectively.