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The Financial Express

Digital platform economy and Bangladesh


Digital platform economy and Bangladesh

Digital platforms have become a quintessential part of the modern economy. They have revolutionised many sectors, including housing, retail and transportation. New types of transactions, such as ride-sharing and home-sharing, as well as new modes of working, such as freelancing, have become possible due to digital platforms. Although the first digital platforms appeared in the mid-1990s, the sector accelerated from the mid-2000s onward, backed by fast internet speeds and the launch of smartphones (World Economic Forum, 2020). Particularly, after the financial crisis of 2008, companies with the digital platform business model rapidly came to dominate an increasing share of the global economic activity, often by affecting the traditional mode of business.

Globally, over 70 million workers are registered with these digital platforms that ease remote working. The digital platform economy has been growing rapidly and has facilitated spending of around USD 126 billion in 2018. Around 0.5 per cent to 2 per cent of the workforce from the Organisation for Economic Co-operation and Development (OECD) member countries are involved with these digital platform companies.

In the last couple of years, Bangladesh has also seen rapid growth in internet connectivity as well as some supporting measures for digital entrepreneurs. However, access to finance is one of the major constraints for digital start-ups. Besides, to promote digital platforms, ease of payment for online transactions is necessary. Bangladesh is now the second largest supplier of online labour in the world, with a 16 per cent share of the global online workforce, following India which has a 24 per cent share of the global online workforce. Recently, the number of online workers from Bangladesh has increased in creative and multimedia platforms at the end of 2019 (Oxford Internet Institute, 2020).

Unfortunately, a universally accepted definition of the digital platform economy does not exist. Spagnoletti, et al. define digital platforms as "building blocks that provide an essential function to a technological system and serves as a foundation upon which complementary products, technologies or services can be developed" (Spagnoletti, Resca & Lee, 2015). On the other hand, Xu et al. define digital platforms as "a set of subsystems and interfaces that form a common structure from which derivative applications can be developed and distributed" (Xu, Venkatesh, Tam & Hong, 2010). Koh and Fichman take a different approach, and define digital platforms as "two-sided networks that facilitate interactions between distinct but interdependent groups of users, such as buyers and suppliers" (Koh & Fichman, 2014). Pagani advocated that multisided platforms exist wherever a company brings together two or more distinct groups of individuals that need each other in some way, and where the company builds an infrastructure that creates

value by reducing distribution, transaction, and search costs incurred when these groups interact with one another (Pagani, 2013).

Nevertheless, all digital platforms share a number of common features, such as (i) digital matching of buyers and sellers through the internet, often through algorithms that track past online actions; (ii) low entry costs that allow small sellers to easily come to the market and compete with larger sellers; (iii) ex-post screening through reviews and ratings of products and services by previous buyers; iv) non-exclusive and short-run contracts allowing workers to work for multiple clients at the same time for relatively shorter durations than formal employment; and (v) direct transactions of money between buyers and sellers (Fradkin, 2018). These common characteristics may be found in digital platforms that are part of the "sharing economy", such as ride sharing or home sharing, as well as those that are part of the "on-demand economy", such as e-commerce websites, food delivery applications and freelancing websites. However, it must be noted that many e-commerce websites represent the online outlets of businesses that also have brick-and-mortar stores. This makes it difficult to draw the line in terms of establishing how much of e-commerce is part of the digital platform economy and how much of it is actually an online version of the real economy. Therefore, for the purpose of this study, we shall exclude e-commerce websites from the ambit of our discussion on the digital platform economy.

To put it specifically, the paper discusses and analyses the digital platform economy in Bangladesh in terms of the following objectives: (i) to understand the status of the digital platform economy in terms of its size and contribution to employment and economic growth; (ii) to assess the bottlenecks for further expansion of the digital platform economy in the country; (ii) to explore how different sections of the population benefit from digital platformisation; and (iv) to suggest policy recommendations to overcome the constraints to further expansion of digital platforms.

METHODOLOGY, DATA SOURCE AND ANALYTICAL APPROACH: Data for this study was collected through three main sources: (i) review of secondary information; (ii) key informant interviews (KIIs); and (iii) expert group meeting (EGM). Such a triangulation of data collection techniques was used in order to obtain information and insights from diverse sources and develop a clear idea about digital platforms in the context of Bangladesh.

For secondary data collection, policy documents, reports and datasets published by various national and international organisations were analysed and utilised for the study. Additionally, newspaper articles, opinion pieces and blogs were reviewed. The Online Labour Index (OLI) was used to provide a list of prominent online platforms and their monthly estimated unique visitor count from Alexa (Alexa, 2020). Based on Alexa's figure, the top online platforms were selected.

A virtual EGM was conducted on September 26, 2020 as part of the study. The stakeholders in EGM included various organisations including e-Commerce Association of Bangladesh (e-CAB), Bangladesh Association of Software and Information Services (BASIS), Shohoz, Evaly, Daraz Bangladesh, ASIX, Foodpanda Bangladesh, Sheba XYZ, Shikhbe Shobai, Pathao Limited, Othoba.com, Bproperty.com Ltd., Rokomari and Uber Bangladesh. Additionally, key stakeholders from e-CAB and BASIS were interviewed and consulted for the purpose of this study.

DIGITAL PLATFORM ECONOMY AROUND THE WORLD: The digital platform economy makes a contribution to the economic growth and employment generation of a country. A growing body of literature indicates that adopting the digital platform business model will shape the future of work and lead to the emergence of new business and employment models.

In case of developing countries, it has been debated that the digital platform economy has been acting as the leading driver of the economic growth in terms of raising capital and labour productivity, and thus facilitating access to the global market. Labour markets are continually changing due to the broader application of new technologies such as artificial intelligence, cloud computing, 3D printing, internet of things (IoT), and robotics which are the key components of the digital platform economy. While it was claimed that the traditional business model might replace the platform economy model, in the case of transportation platforms, the growth in the supply of drivers has come together with a 53 per cent fall in transport pay. Besides, the majority of the participants in the transportation platform remain active in only a few months of the year.

Due to the absence of official statistics and a uniform definition, realising the digital platform economy's actual size in terms of gross revenue and number of active workers has been hindered. Several attempts have been made in recent years to measure the contribution of digitisation to social and economic outcomes. Sabbagh, El-Darwiche, Friedrich & Singh (2012), for instance, created a composite digitisation index comprising six essential dimensions, using 23 information and communications technology (ICT) indicators. Based on a study of 150 countries and using a classical production function, they found that a 10 per cent rise in digitisation leads to the increase in gross domestic product (GDP) per capita by 0.50 to 0.62 per cent . The effect of digitalisation on GDP per capita accelerates as countries progress to a more advanced level. Evidence from Europe shows that the platform economy had generated about EUR 3.6 billion in revenue. Additionally,  transaction values increased by 56 per cent in 2013 and 77 per cent in 2014. Currently, 62 major platform companies are operating throughout Asia, with a market capitalisation of at least USD 800 million. The firms within Asia can be clustered under four regions, China, India, Northeast Asia and Southeast Asia. Among these regions, Beijing hosts the highest number of platforms (16), followed by Tokyo (11), Shanghai (6) and greater New Delhi (5).

However, building one's platform is taxing because in most markets global platforms are flourishing by now. Hence, investing in another company's platform may be the best way to attain a global reach. For fruitful transformation and for overcoming bottlenecks, the concerned stakeholders will need to design digital platforms in a way that that can act more effectively in the interest of its users, while at the same time, offering the financial benefits for the platform owners. In this way, we can build and maintain trust in digital platforms in the longer term and unleash their full potential.

DIGITAL PLATFORM ECONOMY IN BANGLADESH: Bangladesh has been witnessing an increase in sharing-based services, both from local and global companies, for example, Uber, Pathao and Shohoz. These companies have already raised significant equity funds. The ride-sharing business in Bangladesh has grown notably and it has amassed 260 million USD to the digital platform economy with 6 million rides in each month. A study has estimated that the size of the ride-sharing market of Dhaka city would be around BDT 22 billion a year (Kamal & Ahsan, 2018). Among the different modes of ride sharing in private passenger motor vehicle, the market share of compressed natural gas (CNG) autorickshaws was estimated to be 60 per cent, whereas bike-sharing  and car-sharing services occupied 21 per cent and 12 per cent of the market share respectively (Figure-1).

Conducted on university students in Dhaka, it was found that consumers are generally positive about using commercial car-sharing services, but are concerned about their safety and security. Among the survey respondents who participated in the study, 80 per cent were willing to use car-sharing, 68 per cent preferred car-sharing over other forms of public transport, and 66 per cent felt that car-sharing would be a success in Dhaka.

Changes in certain government policies have also given the digital platform economy a boost. For example, the approval of online payment services by the central bank in 2009 has enabled convenient and smooth transactions. Moreover, the formation of the Bangladesh Electronic Fund Transfer mechanism has further enabled various institutions to offer payment services to the unbanked segments of the population. Online payments in Bangladesh have increased from Tk 1.68 billion in 2016 to Tk 19.78 billion in 2019. In 2020, online payment is projected to reach Tk 40 billion due to the surge in online transaction during the COVID-19 pandemic (e-CAB, 2020).

Due to its low cost labour, Bangladesh has been deemed as the next big information technology (IT) outsourcing destination in the world. In the global freelancing market, Bangladesh is ahead of all other countries in sectors such as sales and marketing support, with significant contribution in software development, technology, creative and multimedia, clerical and data entry (World Economic Forum, 2019). The number of online workers has been growing over the years across all sectors. Figure-2 depicts the status of the online workers in the country.

Beyond freelancing, digital platforms have become a source of livelihood for thousands of people in Bangladesh (Table-2). Currently, there are 2,000 website-based entrepreneurs and up to 50,000 Facebook-centric entrepreneurs in Bangladesh.  The Covid-19 pandemic has also expanded employment opportunities in the e-commerce industry. Moreover, around 500,000 jobs are likely to be created through digital platforms in the next one year (e-CAB, 2020).

Dr Fahmida Khatun is Executive Director, Centre for Policy Dialogue (CPD). Syed Yusuf Saadat is Senior Research Associate, CPD and Md Jahurul Islam is former Programme Associate, CPD. Research support was received from Ms Fariha Islam Munia, former Programme Associate, and Ms Rezwana Rashid Antora, Programme Associate, CPD. This study is part of the "Future of Work in Bangladesh" project supported by Friedrich Ebert Stiftung (FES), Bangladesh.

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