Authors: Tristan Dreisbach, Jacob Bathanti

This delivery note examines how the Republic of Korea put in place policies to promote e-commerce in the country over a period of two decades beginning in the 1990s. The birth of e-commerce—buying and selling that is carried out in virtual markets via the internet—transformed the ways in which customers and businesses find and interact with each other. The Korean government wanted to encourage the growth of e-commerce in the country, which could have a number of benefits for the national economy. As e-commerce has become more widespread across the world, including in developing countries, studies have highlighted the potential for e-commerce to make markets more efficient by lowering transaction costs, and to increase inclusion by allowing new players to enter the market. 

Delivery Challenges: Building ICT Infrastructure and Creating Legal and Regulatory Structures 
Building and promoting a thriving e-commerce sector required Korea to overcome several delivery challenges that could impede implementation of this policy. Before e-commerce could flourish, Korea needed to build a basic ICT infrastructure to enable broader access to the internet. Moreover, the government needed to create a body of regulations and laws to support and oversee that emerging sector of the economy. Some of the main issues the government would have to address were how to verify identities; enable the establishment of firms; create regulations for effective electronic contracts; protect consumer privacy; and develop payment systems and electronic currency. Enabling users to trust the e-commerce system was a particularly salient issue. 

Lessons Learned
Prioritizing Trust-Building Institutional Systems
Embracing e-commerce technology required governments to ensure that basic policies were in place to allow buyers and sellers to feel comfortable using online platforms. Korea’s experience demonstrated the importance of prioritizing the establishment of institutional systems that foster trust between buyers and sellers. The laws and regulations developed by Korea ensured the credibility of electronic documents, created electronic signatures, and protected consumers, which helped the e-commerce sector thrive.

Adapting E-Authentication Systems 
After constituents complained about an e-authentication system that they saw as overly burdensome and subject to security and compatibility issues, the government responded by loosening its regulations and providing vendors more leeway in how they could authenticate transactions. A major focus of the original policy was the mandatory use of specific technologies, which hindered the development of new technologies and the growth of e-commerce in general. The government implemented reforms that ultimately addressed those issues, including the eventual abolition of the electronic certification system that had helped in the sector’s initial development. The government’s flexibility and adaptability toward its policies constitute a helpful lesson for other countries that are considering developing their e-commerce sector.

Balancing the Role of the State and the Private Sector
Korea was successful early on in building a trustworthy e-commerce sector by mandating the use of a specific authentication technology and standardizing that technology throughout the country. As time went on, however, the government allowed vendors more leeway in choosing different authentication technologies. Other countries seeking to develop their e-commerce should consider how best to balance the need for broadly adopting authentication measures, on the one hand, with the advantages of giving the private sector a role in developing the institutional foundations of e-commerce on the other hand.