Endless opportunities on the horizon for the e-commerce sector in Bangladesh

How would you define the significant growth and emergence of the e-commerce industry over the past 7 years?

Bangladesh has experienced incredible economic progress. It was therefore reasonably foreseeable that with the transformation of user behavior and increased financial capability, more people would be receptive to futuristic trends in shopping and exploring desired products.

Over the past decade we have seen customers grasp the concept of online shopping and its pros and cons. Then we saw the growth of digital financial systems and their deep integration alongside traditional methods. Kudos to the relevant stakeholders for bringing optimism to the industry and helping it move rapidly with the times.

For all the latest news, follow the Daily Star’s Google News channel.

E-commerce is still a nascent industry, but it shows a lot of potential that can give a significant boost to the national long-term growth trajectory.

In light of the budget (2022-2023), what impact could it have on companies heavily dependent on FDI?

In the recently published Finance Bill 2022-2023, it appears that startups received favorable incentives in case of critical business sustainability issues, such as loss carryforward (9 years) and minimum tax (0 ,1%). Daraz hails the vision of policy makers to facilitate the growth of startups, as they need massive foreign investment and a minimum of 8-10 years to mature their business.

However, a startup is an integral part of the digital ecosystem, not the whole ecosystem. So incentivizing only part of the industry will not bring the desired growth,

Therefore, the necessary incentives must be provided to the e-commerce industry. The e-commerce sector is highly dependent on foreign investment due to the requirement of massive funds for a sustainable and long-term business plan. Unfortunately, he was excluded from these vital incentives.

Moreover, eligibility for these benefits was limited to startups incorporated in 2017-2018 or later, with an annual turnover of BDT 100 crore only. Also, they cannot be a subsidiary with a 50% or more ownership.

These barriers have excluded entities like Daraz, Chaldal, ShopUp, Pathao, etc. with significant foreign investment. We have been investing heavily in this sector for a long time and are still loss-making and collectively do not even represent 2% of the potential market.

What budget changes would you recommend for the contribution of the e-commerce industry to generate meaningful revenue? What do you think of a possible tax break for the industry?

First, we must recognize that the industry is still in its “nascent state”. Many skilled resources are also needed to strengthen the logistical backbone of the industry. We also need more investors and larger capital funds to secure the financial future of the industry.

Our strategic steps need to be measured and adjusted for accuracy. This is where we would like to include the theme of tax exemption.

Currently, the contribution of the e-commerce sector to the overall revenue collected by the National Board of Revenue each fiscal year is still minimal. Therefore, we believe that even if the tax is exempted for this sector, it may not create an immediate income crisis. But this small change can be a game-changer for market players, giving them a better financial position to support their efforts and explore their prospects with more courage. We are also seeking the authority’s help to facilitate the inclusion of the definition of “online marketplace” in the bill. We also want the aforementioned incentives to be included for e-commerce entities to encourage foreign investment and the overall sustainability of the e-commerce industry. We believe that if we put too much pressure on entrepreneurs and markets through binding regulations from the outset, the true will may not be sustainable for us to reap the optimal benefits in the future.

How do you define the term “marketplace”? Do you think the existing definition in the SoP leaves room for e-commerce industry malpractice?

There must always be a specific definition of widely and commonly used terms for strict legal and organizational purposes. It is necessary to keep everyone on the same page, especially when there is room for misunderstanding. The current definition of online sales of goods in the VAT law only defines retail purchases and sales, whereas the marketplace needs to be defined and incorporated. For the legal and VAT context, it should be defined so that it is published in the SOP by the Ministry of Commerce.

It should be noted that the marketplace definition mentioned in the Digital Commerce SOP 2021 is legally approved. In the marketplace model, there are separate legal responsibilities for buyers, sellers, platforms or payment gateways. Therefore, without a separate classification, online marketplaces may continue to face operational bottlenecks, as long as their activities are considered to be those of retailers.

A typical marketplace has between 30,000 and 40,000 vendors, and it’s difficult to identify which people or organizations are eligible for VAT. Also, the market should not be held responsible for collecting ‘Mushak’ as they are neither direct buyers nor sellers.

What steps should be taken to accelerate the growth of the e-commerce industry?

Like most other countries in the world, Bangladesh now has a thriving e-commerce industry worth around $1.6 billion and will double to $3 billion by 2023. We are slowly entering a technology-dependent ecosystem, where priority must go to digital means of purchases and transactions.

Thus, it is foreseeable that e-commerce will add more value to our economy, to our businesses and to our entrepreneurs. Many companies have already partnered with Daraz as sellers. Outside, there are many other e-commerce businesses. Then there is also f-commerce.

These create more opportunities for business exploration in a way, while creating employment opportunities and eradicating the unemployment problem of the country. In this way, e-commerce is helping to shape the next generation of Bangladeshi businessmen, providing them with the opportunity to gain experience with much improved convenience and customer reach.