Finally, the federal government looks serious about e-commerce. This column has previously emphasized the need for a forward-looking and consumer-centric policy for e-commerce. Now the federal cabinet is reportedly taking up a draft e-commerce policy framework prepared by the focal ministry, Ministry of Commerce. (For background, read: “Need for e-commerce regulations,” published December 14, 2018).
The progress on this matter is welcome. Sources suggest that the PML-N government was also serious about e-commerce, but political instability in the later years also hurt this framework’s passage. This government is now past its firefighting year and paying attention to such areas. Interestingly, an informed source told BR Research, e-commerce policy framework is back in the news only because its approval is one of the many criteria that the government must fulfill to access funding from a development partner.
Even if a fiscal imperative has jolted government into action on an unrelated, but important matter of economic policy, the latter merits its own share of analysis. The draft e-commerce policy framework, published by the Commerce ministry last month, is a step in the right direction. However, it seems as though the cross-cutting nature of e-commerce has muddled the policy response once again.
At the top, it is a good idea to create a high-powered “National E-commerce Council” that will act as a one-window unit for policy implementation and operational matters at the federal and provincial levels. (The Competition Commission of Pakistan is conspicuous in its absence on the Council). Given past experiences with such councils, it would be better to establish and empower one National e-commerce Authority, which can dedicatedly steer the sector in the desired direction by taking a holistic approach.
In the payments area, the proposal to enable card-not-present transactions over the Internet through the 1-link network (Paypak) will help reduce the reliance on cash-on-delivery (COD) mode of payment. However, it is not a good idea to limit COD transactions to Rs10,000 per ticket in three years and entirely to zero transactions in ten years. Just ensure better e-payment solutions and let people pay as they like.
The proposal to provide a three-year income-tax exemption to micro digital businesses having annual turnover of up to Rs10 million is positive. However, it can be further graduated upwards to include small and medium digital enterprises. The draft framework encourages freelancers and software exporters when it talks about enforcing the law for retention of 35 percent of earnings in special FCY accounts. Digital businesses can also make import payments up to Rs100,000 per invoice without SBP approval.
Beyond those measures, the draft framework is fairly generic in nature. On matters of taxation, the proposal to harmonize the GST across the country, as provinces are charging different GST rates on services, kicks the can down the road. There is also no clarity on how e-commerce players will avoid double taxation within and across provinces for the same transaction. At the Customs, it isn’t clear what kind of warranty contracts will be acceptable for re-export of damaged goods without new documentation.
The consumer protection leg of the draft is rather weak. The draft sounds over-optimistic when it suggests that making changes in existing consumer protection laws and consumer courts will cut it. The idea to establish independent alternate dispute resolution centers and e-courts requires elaboration. For online marketplaces, a code of conduct has been outlined, which deals with product pricing, disclosures, complaint resolution mechanisms, etc. However, consequences of violating this charter aren’t spelled out.
This sector’s importance for Pakistan’s youthful population can hardly be overemphasized. Therefore, the cabinet would be wise to ask the Commerce Ministry to have another go at consultations and come up with holistic and actionable measures in the short, medium and long terms. Any proposed measures must go far enough to evoke compliance by digital businesses and inspire confidence among consumers.