Pakistan is set to invite global online payment giants PayPal and Alibaba to offer their services in the country, the IT ministry has said, after easing its e-commerce rules. US-based PayPal and the Chinese e-commerce giant Alibaba (which operates a service called Alipay) could not operate in Pakistan due to strict regulations until recently.

This could be a good development for Pakistani consumers and retail outlets. The ease of transaction online due to PayPal will allow local commerce to sell faster and the benefit for the economy would be massive. Local producers have suffered due to the lack of online payment facilities, resulting in the creation of a system of cash on delivery payments for retail, which is local and not international. PayPal and Alipay will make businesses rethink their strategies and we will see new hybrid systems of payments emerging as well as local startups being able to conduct their business more efficiently and getting access to international buyers.

The problem is not in local commerce, which will hopefully thrive, but in international trade. PayPal gives Pakistani consumers the option to buy from international outlets like eBay and Amazon, which due to payments problems they could not. Pakistan will thus be making a choice to embrace globalisation, and the access that global brands will have into our domestic markets. Again, at the private level, retailers will need to rethink their strategies so that they don’t lose market share.

Additionally, Alibaba poses the risk of Chinese goods flooding our markets faster than we can handle. The Chinese plan can clearly be seen in this, where a closed market has convinced itself to open up to China. This is something that the government does not realise. PayPal is not here because it’s a good idea, it more so because China thinks it’s a good idea. There is a clear risk of Chinese dumping and or retailers buying a lot of cheap goods from China for resale to the further determent of local industry.

Even with the above-mentioned caveats, the development could be positive. Online shopping and business is a small part of the market, and PayPal also has limited to how much capital can be transferred and monitors closely for fraud. The activity has started at a small scale, as many people are reluctant to invest in and engage with new technologies in our very traditional market structures. Maybe this will allow for the adoption of PayPal like services to be incremental, rather than all at once shocking the system.