Thriving e-commerce and its conflicting policy implications

MS Siddiqui | Published: September 07, 2018 21:56:23 | Updated: September 09, 2018 21:52:52

Electronic commerce (popularly known as e-commerce) has picked up in Bangladesh in recent years. Modes of operation in such business vary depending on market segments or categories. Business-to-consumer (B2C) companies are involved in sales of goods and services with individual consumers mostly in retail operations. Business-to-business (B2B) ventures provide goods or services to other businesses. Consumer-to-consumer (C2C) entities facilitate transactions between individual consumers. eBay, an online auction site, notably serves the C2C market. It earns from transactional fees, ancillary services and advertisement. Also relevant here are other categories like government-to-business (G2B) and government-to-consumer/citizen (G2C) initiatives.

Many of us still have confusion over e-commerce as an idea. The nature of such business is a bit different. There are many traders having presence in physical market, but without commercial internet connection. Some of them use their internet site merely for passive promotional purposes rather than getting engaged in online commercial activity. There are some companies which combine physical office/ establishment with online trading. A global example is Wal-Mart that sells from both their physical and web stores. There are also some purely online shops like amazon.com and bikroy.com. E-commerce, therefore, is defined as a sector of business that uses electronic systems to engage in commercial activities.

The e-commerce marketplace has witnessed dramatic shifts in recent years. Countries have either regulated this marketplace by rules and law or they are in the process of formulating rules for such business. The cabinet has approved National Digital Commerce Policy 2018 on July 16. It has 61 work-plans with short, medium and long term policy to support e-commerce from now on until 2040. The policy speaks of visionary government targets. But confusion arises around a condition that was incorporated in the policy with restriction of 100 per cent foreign direct investment (FDI).

United Nations Commission on International Trade Law (UNCITRAL) has developed a guideline for e-commerce law. The body was established by the UN in 1966 to harmonise the law of international trade. In fact, it is a core legal body of the UN system that works to create accessible, predictable and unified commercial laws. UNCITRAL developed a model law on e-commerce in 1996 to enhance the use of paperless communication. In 2001, it created a model law on electronic signatures since future e-commerce will focus on electronic contracting with a view to creating a draft convention; online dispute settlement; dematerialisation of documents of title; and a convention to remove legal barriers to the development of e-commerce in international trade instruments.

More other organisations like The Organisation for Economic Co-operation and Development (OECD), The World Intellectual Property Organisation (WIPO), The Internet Corporation for Assigned Names and Numbers (ICANN), The Asia-Pacific Economic Cooperation (APEC), World Trade Organisation (WTO) have contributed to different parts of this new marketplace. The Hague Conference on Private International Law has been a global leader on Internet jurisdiction issues.

The study of McKinsey Global Institute found that more than 90 per cent of eBay commercial sellers export to other countries, compared with an average of less than 25 per cent of traditional small businesses. OECD has estimated that customs and other border barriers can add a premium of up to 24 per cent to the price of goods sold. Government can easily simplify, standardise and harmonise customs procedures across the world that would make trade more efficient and have a positive impact on costs.

The growth of e-commerce brings more diversity to the international trading environment in terms of size of players, type and value of shipments and types of commodities traded online. Bangladesh should promote e-commerce to face challenges of advanced technology adapted by our competitors in the global market.

There is a general allegation that businesses are used to evading tax on trade, but e-commerce is about 100 per cent business on record and there is no option of concealing the transaction volume. In e-commerce, the goods and services are ordered using different networks, but the payment and ultimate delivery of the goods and services may be conducted online or offline (OECD, 2002). The exchange of information of any transaction touches two key areas: between customs and e-commerce intermediaries, including the marketplaces, transpor-ters/carriers, freight forwarding agencies, express operators, postal operators and financial intermediaries. Moreover, internet enables businesses to establish a seamless and borderless commercial system - resulting in customs and other relevant regulatory information being centrally stored in one global location.

E-commerce is based on advanced cooperation with regard to trade. The customs department of any country should be able to have improved access to commercial information directly or indirectly related to an international trade transaction for its risk management and control purposes. There is an opportunity in the area of customs and taxation to be developed and replaced by e-customs solutions and e-taxation solutions. National Board of Revenue (NBR) has already introduced Asycuda ++ system for customs assessment and it is close to introducing e-customs.

With the introduction of e-commerce-friendly e-customs, the government will get firm control over borders to prevent fraud, expedite revenue collection, violations of intellectual property rights (IPR) or other illicit trade. E-commerce will facilitate coordinated border management among the government stakeholders. It will domestically as well as internationally ensure that critical information about control and risk assessment purposes is being exchanged early in the supply chain and the release of legitimate shipments taking place at the earliest.

The introduction of e-commerce and growing cross-border trade is an outcome of globalisation as well as the information economy. The global governance has cast attention of the policymakers prominently. The people, societies and nations are coming increasingly together and there is a particular focus as to how closely coming together the international market is. Globalisation is not just about the deepening of financial markets, but also includes a whole range of social, political, economic, and cultural phenomena. A rapid reform is needed in (1) the nature of the manufacturing company; (2) the changing nature of business dynamics; (3) major changes in the research and development (R&D) activities of firms; (4) demand articulation in technological development; (5) technology fusion; and (6) institutional inertia. Bangladesh should develop this eco-system as mentioned in the 61 policy agenda of the government. We have to live with it and face the situation positively and smartly. A closed-door policy is suicidal for the nation as we cannot afford to ignore it.

The real challenge of e-commerce is not simply about internet commerce, it also includes any form of computer-mediated commercial exchange, notably electronic data interchange (EDI). There is a global concern of privacy and security of personal data. Interestingly, the Bangladesh users of Viber, What'sApp, Facebook, Linked-in, twitter etc. have already got all our personal data stored in their system as is the case with other countries. This is something widely discussed in WTO also and pending for decision in the next meeting of Commerce Ministers of WTO member nations. People have to wait for the next WTO Ministerial Conference in 2019 for formulating policy on protection of personal data. The decision will be binding all WTO member countries.

As far as foreign direct investment (FDI) is concerned, Bangladesh welcomes FDI in all but four sectors i.e., (1) arms and ammunition and other defence equipment and machinery, (2) forest plantation and mechanised extraction within the bounds of reserved forests, (3) production of nuclear energy, and (4) security printing and mining. The Foreign Private Investment (Promotion and Protection) Act, 1980 is the legal basis of FDI in Bangladesh. But any restriction on FDI involving the National Digital Commerce Policy conflicts with the national policy and existing law of the land. A policy cannot be conflicting with law and the state policy of any country. The Ministry of ICT has rightly raised objection to any such restriction involving FDI.

Interestingly, evidence suggests that the majority of internet-facilitated commerce takes place intra-nationally (OECD 2002) or at most, intra-regionally. The B2C form of e-commerce has a significant potential to generate international trade revenues. Overseas e-companies will come to Bangladesh to promote their business of product import and export thereby establishing factory and office here. This is what Bangladesh expects from overseas business as stipulated in our investment policy. In case of e-commerce, physical import and delivery of goods and services should be regulated by customs and other laws of the country. A number of e-commerce companies from home and abroad are active in Bangladesh market these days. Thinking about globalisation from conservative or any pre-conservative idea of protectionism is simply not possible or impractical to help protect the market for certain section of businesspersons.

MS Siddiqui is a Legal Economist.


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