In a rapidly evolving digital landscape, the government has taken proactive steps to regulate the burgeoning realm of online business. The cornerstone of this endeavour is the e-commerce bill, a legislative milestone aimed at bringing online commerce under the purview of legal recognition and taxation. Minister for Industry, Commerce and Supplies, Ramesh Rijal, presented the bill in the National Assembly on June 27, 2023. The e-commerce bill marks a significant shift in the way business conducted through electronic means is defined and governed in Nepal. It seeks to encompass all commercial transactions of goods or services facilitated through information technology, collectively referred to as electronic commerce or e-commerce.
This comprehensive legislation covers a diverse spectrum of online activities including advertising, movies, television, music, over-the-top (OTT) services, data collection, cloud services, gaming, mobile apps, online markets, software supply, data services, image download services, education, consulting, skill development and training services, e-books, e-libraries, e-magazines and more. One of the key provisions of the e-commerce bill mandates that any individual, firm, company or organisation engaged in online business must obtain prior permission from the relevant government agency.
Further, online business operators are required to establish an electronic platform which could take the form of websites, app, Facebook page, YouTube channel, or similar digital mediums. This platform is to serve as the digital storefront containing essential details such as the business name, address, registration information, head office location, as well as branch and outlet information for businesses with multiple locations. The bill outlines a meticulous process for listing businesses in the e-commerce domain. After establishing the electronic platform, businesses must submit an application to the Department of Commerce, Supply and Consumer Protection for listing, which includes obtaining a unique listing number. This step serves as the gateway to conducting online business activities legally.
However, the e-commerce bill is not without its share of challenges. One notable concern is the lack of clear definitions for various terms, such as ‘online business operator’ and ‘e-commerce’. This ambiguity can lead to confusion and differing interpretations, making it challenging for businesses to fully comprehend their obligations under the law. It is also one of the reasons some sellers hesitate to register their businesses.
Customers, too, may fear that access to a wide range of imported goods and brands could be restricted if vendors decide to cease operations due to regulatory complexities. Despite these challenges, the e-commerce bill represents a significant milestone in Nepal’s journey toward establishing a regulated and transparent online business environment.
The government’s steps to govern this dynamic sector is envisioned to pave the way for sustainable growth, consumer protection and greater accountability in e-commerce. As Nepal’s online population continues to grow, the e-commerce bill may be seen as a step towards fostering a secure and thriving online business ecosystem. With the right balance of regulation and innovation, the interests of both businesses and consumers can be safeguarded. This legislation acknowledges the transformative power of online commerce and is seen as a commitment to adapt to the changing economic landscape in the digital era.
It is essential to note that Nepal’s digital landscape has seen an exponential rise in social media usage. Platforms like Facebook lead the way with a staggering 9,857,000 users, encompassing 32.6% of the country’s entire population. Instagram boasts 1,300,800 users, Twitter counts 2,300,000, YouTube claims 3,800,000 users, and Pinterest and LinkedIn are also carving their presence in the digital space. This rapid expansion of social media has prompted digital marketing agencies to focus their efforts on these platforms, capitalising on their massive user bases to promote businesses. The ability to harness the power of social media for marketing purposes has become an invaluable asset.
Leveraging these platforms allows businesses to tap into vast audiences, giving them a significant advantage in reaching potential customers. While the e-commerce bill represents a significant milestone, there is need for clarity on whether it will enhance e-commerce or create roadblocks.
In this edition of Business 360 spoke to a few people working in the landscape of e-commerce to get their opinion on the development of e-commerce in Nepal and the recently introduced e-commerce bill.
Aabhushan Kansakar
Founder & CEO
Jeevee Health
How do you view the current state of online business in Nepal, and what challenges do you think the introduction of regulatory measures such as the e-commerce bill aims to address?
From my perspective, when we talk about the current state of online business in Nepal, it’s important to recognise that while it might seem straightforward from an outsider’s viewpoint, it’s actually an incredibly complex and ever-evolving industry when you are on the inside. Nepal is still in its early stages of e-commerce development, and over the past few years, we have witnessed notable growth in this sector. However, this growth has brought along its own set of challenges.
One significant issue we have observed is the emergence of what seems like organised e-commerce companies gaining near-monopoly in the market. On the other hand, unorganised e-commerce remains largely unregulated. This duality has created a peculiar situation. On one hand, it has enabled many individuals to earn a decent livelihood and build small to mid-sized businesses, which is undeniably positive. These businesses, however, often struggle with scaling up due to the lack of a structured framework and support.
Conversely, the unregulated nature of e-commerce has also given rise to a host of problems. Customers frequently find themselves cheated with sub-standard products or, in some cases, not receiving their orders after making payments. Such fraudulent practices tarnish the reputation of e-commerce as a whole and erode the trust of consumers.
The issue with monopolies in e-commerce, as I see it, is a double-edged sword. While they can indeed contribute to the development of strong infrastructure, they also have the potential to result in higher prices for consumers due to a lack of competition. Additionally, they may squeeze suppliers, leading to reduced profits or even losses for them. Striking the right balance between encouraging competition and promoting a healthy business environment is crucial.
In light of these challenges, the introduction of the e-commerce bill in Nepal is a significant step forward. While no bill is perfect and amendments are often needed, this legislation appears to be a genuine attempt to address some of the pressing issues in the industry. Specifically, it seeks to tackle the problems associated with unregulated commerce and the formation of monopolies. The e-commerce landscape in Nepal is at a crucial juncture. It has shown promise but it also faces inherent challenges. The e-commerce bill, with some necessary refinements, can play a pivotal role in bringing about a more organised, fair and customer-friendly e-commerce environment while also ensuring that businesses have the opportunity to thrive in a competitive marketplace.
What are the key advantages and disadvantages of the e-commerce bill’s comprehensive approach in regulating a wide range of digital business activities in Nepal?
The e-commerce bill’s comprehensive approach in regulating various digital business activities in Nepal comes with both distinct advantages and disadvantages. One of the key advantages of the e-commerce bill is that it establishes much-needed standards for the e-commerce industry. These regulations are designed to bring order and accountability to the sector, which, in turn, can lead to increased trust and loyalty among consumers towards online shopping platforms. When customers have confidence that their rights are protected, and they are dealing with reputable businesses, they are more likely to engage in online transactions. This boost in trust can drive the growth of the e-commerce market and benefit both consumers and businesses alike.
However, it’s essential to acknowledge the potential disadvantages as well. One notable drawback of comprehensive regulation is that it can discourage risk-taking and innovation, particularly among entrepreneurs. When there are stringent rules and requirements in place, some individuals may be hesitant to enter the e-commerce market due to the perceived complexity and compliance burdens. This might limit the emergence of new and creative business models and ideas. It’s worth noting, though, that the tension between regulation and innovation is a common challenge in various industries. Innovation often thrives in unregulated or less-regulated markets, where entrepreneurs can experiment with novel concepts and approaches without being encumbered by bureaucratic requirements.
However, as the market matures and becomes significant, regulation becomes essential to protect consumers, ensure fair competition and maintain overall market stability. Also, the e-commerce bill represents an effort to strike a balance between fostering innovation and safeguarding the interests of consumers and businesses. While it may introduce some level of regulatory complexity, its overarching goal is to create a more trustworthy and secure environment for online commerce in Nepal. As with any regulation, its effectiveness will depend on its implementation and the willingness of all stakeholders to adapt to the changing landscape of the e-commerce industry.
With the e-commerce bill mandating government permission and detailed information disclosure, how might these regulations impact the growth and innovation potential of startups and small businesses in the digital space?
The e-commerce bill’s provisions regarding government permission and detailed information disclosure can have a significant impact on startups and small businesses operating in the digital space in Nepal. Firstly, let’s look at the requirement for every e-commerce entity to register itself. On the surface, this might appear as a potential roadblock for startups and small businesses. However, it’s important to note that if the government can streamline and simplify the registration process, it need not be overly burdensome. If the procedures are clear, straightforward and don’t entail excessive red tape, it can actually be a step in the right direction.
Formal registration can bestow a sense of credibility to these businesses, potentially leading to increased trust among consumers. Trust is a valuable asset in the digital marketplace, and it can drive growth and customer loyalty.
Secondly, the demand for detailed product and seller information disclosure may appear challenging, especially for smaller businesses. However, as rightly pointed out, e-commerce is fundamentally a technology-driven field. From a technological standpoint, implementing such disclosures is entirely feasible. Many successful e-commerce platforms worldwide already require sellers to provide comprehensive information about their products and their identities. This transparency not only enhances consumer trust but also safeguards buyers from potential fraud. Now, let’s address the issue of innovation. Regulations like these can indeed pose challenges to innovation, as they introduce new requirements and processes that businesses must comply with.
It’s essential to understand that innovation often arises in response to challenges and demands. Startups and small businesses have a history of finding creative solutions to meet regulatory requirements while simultaneously improving their operations. For instance, they may develop innovative methods for verifying product quality and seller authenticity, thereby enhancing the overall customer experience. Regarding digital platforms like Facebook Marketplace, it’s true that these regulations may introduce complexities in their operations.
But it’s a necessary step toward ensuring that even global tech giants adhere to local regulations. This can create a more level playing field for local startups and small businesses, fostering fair competition. So, while the e-commerce bill’s regulations may initially appear daunting, they have the potential to drive growth and innovation in Nepal’s digital space if implemented thoughtfully. The key lies in the government’s ability to simplify administrative processes and support businesses in adapting to the changing landscape. Ultimately, these regulations aim to create a more trustworthy and secure environment for e-commerce, which can benefit businesses and consumers alike in the long run.
Transparency and consumer protection are said to be the central themes of the e-commerce bill. How do you foresee these measures influencing consumer trust and confidence in online businesses?
The emphasis of the e-commerce bill on transparency and consumer protection is a crucial step that has the potential to significantly influence consumer trust and confidence in online businesses, especially in the context of Nepal. First and foremost, when consumers know that there are regulations in place that prioritise their protection and rights, it instills a sense of security. It assures them that they have legal recourse in case of any issues, which is a fundamental aspect of building trust in online transactions. In a market where online shopping is still evolving, this sense of security can be a game-changer.
Moreover, the transparency measures mandated by the e-commerce bill are equally significant. When consumers have access to detailed information about products and sellers, it empowers them to make informed decisions. They can evaluate the credibility and reliability of the businesses they are dealing with, which is critical for building trust. Knowing the information they see online accurately reflects the product and seller builds confidence that they are not falling victim to deceptive practices. One of the major challenges in Nepal has been the fear of being cheated by individuals or businesses masquerading as legitimate e-commerce entities. With the e-commerce bill in place, consumers can be more assured that they are dealing with genuine, registered e-commerce businesses that adhere to certain standards and regulations.
This assurance can go a long way in overcoming skepticism and encouraging more people to embrace online shopping. In summary, the emphasis on consumer protection and transparency in the e-commerce bill has the potential to be a turning point for online businesses in Nepal. It can help bridge the trust gap that has existed and continues to be a challenge in the online marketplace. When consumers feel secure and well-informed, they are more likely to engage in online transactions, which can drive the growth of e-commerce and benefit both consumers and businesses in the country.
The e-commerce bill places emphasis on electronic platforms’ compliance. How might this affect the behaviour and practices of online businesses, and what are the challenges or benefits that could emerge as a result?
The emphasis of the e-commerce bill on electronic platforms’ compliance is a significant aspect that can have both challenges and potential benefits for online businesses. However, there seems to be some misunderstanding and ambiguity in its interpretation. Firstly, it’s important to clarify that if a business falls under the category of e-commerce, it essentially means they are conducting transactions in the digital realm. This typically involves having a registered website or app where customers can make purchases. This digital presence serves as a vital point of reference in case of any fraudulent or unlawful activities, allowing the law to identify the business responsible.
On the other hand, the e-commerce bill also recognises the provision for e-commerce sellers to operate through registered e-commerce platforms. In such cases, individual businesses may not necessarily need to maintain their own separate websites or apps. Instead, they can leverage established e-commerce platforms to reach their customers. This provision can be beneficial for smaller businesses that may find it challenging to maintain their own online presence. However, the ambiguity arises when we consider transactions occurring on social media platforms. For instance, if a business owns a physical store and utilises Facebook as a channel to reach customers, it might be perceived as similar to selling via WhatsApp, SMS or telemarketing. In this scenario, the e-commerce bill’s requirements may not be as clear-cut.
The challenge here is that if a business does not have a physical location registered, which is typically a requirement for a registered company, they may find themselves in a legally uncertain position when conducting online transactions through social media. This ambiguity can lead to confusion about whether they are operating within the bounds of the law. However, a potential solution to this issue lies in the registration of social media platforms as recognised marketplaces in Nepal. As you rightly pointed out, if Facebook, for example, were to register itself as a marketplace in Nepal, it could provide a legitimate platform for businesses, including those without physical stores, to sell their products or services online.
This could clarify the status of such transactions and ensure compliance with the e-commerce bill. In conclusion, the e-commerce bill’s emphasis on electronic platforms’ compliance is a significant step towards regulating online businesses. However, the interpretation and application of these regulations, particularly in the context of social media transactions, can be challenging and ambiguous. To address these issues and unlock the potential benefits, collaboration between the government and digital platforms, as well as clear guidance for businesses, is essential. This would not only ensure compliance but also facilitate the growth of the digital economy in Nepal.
As Nepal takes steps to regulate its digital marketplace, what broader implications do you think this has for the country’s economic development and its positioning in the global digital landscape?
From my perspective, the efforts to regulate Nepal’s digital marketplace carry significant implications for the country’s economic development and its positioning in the global digital landscape.
Stimulation of Economic Growth: Effective regulations in the digital marketplace can act as catalysts for economic growth. By creating a structured and secure environment for online transactions, these regulations can foster the growth of e-commerce. As more businesses venture into the digital space and consumers gain confidence in online shopping, there is a potential for increased economic activity. This translates into higher sales for businesses, generating revenue for the government through taxes and fees, and contributing to overall economic development.
Job Creation: The growth of the digital marketplace has a direct impact on job creation. When businesses expand their online operations or new e-commerce startups emerge, there is a demand for a skilled workforce. Jobs are created in various sectors such as digital marketing, e-commerce management, logistics, customer service and more. Additionally, the growth of supporting industries like payment gateways and delivery services further enhances employment opportunities.
Enhanced Consumer Trust and Confidence: Regulations that address the disclosure of seller and product information are essential to build and maintain consumer trust and confidence. When consumers have access to accurate and comprehensive information about products and sellers, they are more likely to engage in online transactions without fear of being misled or defrauded. This trust factor is critical for the sustained growth of e-commerce and ensures that consumers continue to participate in the digital marketplace.
Technological Adoption: A well-regulated digital marketplace encourages technological adoption within the country. Businesses are more willing to invest in technology and innovation when they operate in an environment that offers legal clarity and protection. This can lead to the development of new digital products and services, fostering innovation and growth in the technology sector.
Global Positioning: Nepal’s efforts to establish a well-regulated digital marketplace can enhance its positioning in the global digital landscape. An environment with clear and reliable regulatory frameworks is attractive to international businesses and investors. It can potentially attract foreign direct investment and facilitate international trade, positioning Nepal as a player in the global digital economy.
In conclusion, the journey to regulate Nepal’s digital marketplace is not only about creating a fair and secure environment for online businesses but also about unlocking its potential for economic growth and global competitiveness. Effective regulations can stimulate economic activity, create jobs, build consumer trust, drive technological innovation and position Nepal as a favourable destination for digital investments. These broader implications are pivotal for the country’s economic development and its role in the ever-evolving global digital landscape.
Sushmita Agrawal
Founder
Bhumi Nepal
How do you view the current state of online business in Nepal, and what challenges do you think the introduction of regulatory measures such as the e-commerce bill, aims to address?
I view the current state of online business in Nepal as incredibly promising, especially in the aftermath of the Covid 19 pandemic. The Covid 19 crisis has acted as a catalyst, propelling online businesses to new heights. Consumers have become increasingly reliant on online shopping due to its convenience. The ability to purchase goods from the comfort of one’s home has become a habit for many. Moreover, Nepal’s impressive 78% internet penetration has played a significant role in connecting consumers from all corners of the country to online marketplaces. This widespread internet access has made it easier for consumers to access a wide range of products and services online, contributing to the growth of e-commerce in Nepal.
I am particularly excited about the introduction of the e-commerce bill in Nepal. This regulatory measure seems to address several critical aspects that are essential for the sustainable growth of online businesses in the country. Firstly, it aims to ensure consumer protection. As more people turn to online shopping, it’s vital to have regulations in place that safeguard their rights and interests. Consumer trust is paramount in the e-commerce industry, and having measures in place to protect consumers from fraudulent activities and subpar products is crucial.
Secondly, the e-commerce bill focuses on cybersecurity which is of paramount importance in today’s digital age. With increasing reliance on online platforms, the risk of cyberattacks and data breaches is ever-present. The bill seeks to establish guidelines and standards to protect both businesses and consumers from cyber threats. Another significant aspect is payment solutions. The bill aims to streamline and regulate online payment systems, making transactions more secure and efficient. This is particularly important as online payment methods become increasingly popular among consumers.
Data protection is also a critical concern. With the growing amount of personal data being shared online, it’s essential to have regulations in place to protect individuals’ privacy and data security. The bill addresses these concerns by setting standards for data protection in the e-commerce sector. Additionally, it seeks to maintain global integrity by aligning with international standards and best practices in e-commerce. This is crucial for Nepal to be seen as a credible and reliable player in the global online marketplace.
Lastly, the bill includes provisions for monitoring online marketplaces. This will help ensure fair competition and prevent illegal activities on e-commerce platforms, promoting a level playing field for businesses. Further, the bill’s focus on collecting taxes from small and medium-sized enterprises (SMEs) that operate online without proper registration is a commendable effort. This will help the government generate revenue while also ensuring that businesses operate within the legal framework.
In conclusion, the introduction of the e-commerce bill in Nepal is a significant step forward for the online business ecosystem in the country. It addresses critical issues such as consumer protection, cyber security, payment solutions, data protection, global integrity and marketplace monitoring. These measures are essential to foster a safe, trustworthy and thriving e-commerce environment in Nepal, benefiting both businesses and consumers alike.
What are the key advantages and disadvantages of the e-commerce bill’s comprehensive approach in regulating a wide range of digital business activities in Nepal?
It has both advantages and disadvantages, and it’s important to consider the potential impact on various stakeholders. One of the key advantages of regulating digital business activities is that it instills trust and a sense of security among customers. When consumers know there are regulations in place to protect their rights and interests, they are more likely to engage in online transactions with confidence. This can lead to increased consumer participation in the digital marketplace, ultimately benefiting businesses.
However, there are also several disadvantages to consider, especially when it comes to governing small digital business activities. Small startups often want to test the waters and experiment with their business ideas without committing to a full-fledged website and complex registration processes. For instance, imagine a farmer in Dhankuta who grows avocados and decides to sell them online. This farmer may want to start small, perhaps by posting about the avocados on social media. If orders start coming in, they can quickly fulfil them without getting tangled in the bureaucracy of website development and formal registration.
The concern here is that the introduction of these regulatory processes may deter aspiring entrepreneurs, particularly the youth of Nepal, who are already facing various challenges and demotivation. Many young individuals wish to try their hand at startups before making significant commitments, especially if they are unsure whether their products or ideas will be well-received by consumers. This experimentation phase is crucial for innovation and economic growth. If the e-commerce bill makes it mandatory for small businesses to go through a complex registration and website-building process, it could create a barrier to entry. This might lead to talented young entrepreneurs abandoning their business ideas and leaving the country in search of better opportunities elsewhere.
It’s essential to support and encourage the entrepreneurial spirit among the youth and provide them with an environment where they can test their ideas without unnecessary hindrances. While the e-commerce bill has its advantages in terms of consumer protection and trust-building, it should also consider the unique challenges faced by small digital businesses and startups in Nepal. Balancing regulation with flexibility for experimentation and innovation is crucial to ensure that the bill does not discourage young entrepreneurs from pursuing their dreams and contributing to the growth of the digital economy in the country.
With the e-commerce bill mandating government permission and detailed information disclosure, how might these regulations impact the growth and innovation potential of startups and small businesses in the digital space?
The regulations outlined in the e-commerce bill, particularly the requirements for government permission and detailed information disclosure, could have a significant impact on the growth and innovation potential of startups and small businesses in the digital space, and not necessarily in a positive way. One of the immediate concerns is that these regulations could deter small businesses from even attempting to innovate or enter the digital space. Imagine a scenario where a skilled baker, fresh out of a reputable bakery school, wants to test the waters in Nepal by selling their baked goods online before committing to the establishment of a physical bakery or a large-scale online platform. The thought of navigating the bureaucratic process of obtaining government permission and disclosing detailed information might discourage them from pursuing their entrepreneurial dreams in Nepal.
The cost implications are another critical factor to consider. Startups and small businesses often operate on limited budgets. The expenses associated with complying with these regulatory requirements can be daunting. These financial burdens could divert resources away from innovation and business development, making it even more challenging for startups to compete and thrive in the digital space. Furthermore, the introduction of such regulations might force small businesses to rely heavily on big established e-commerce companies to explore online opportunities. These large corporations may have their own sets of rules and regulations, along with commission structures that may not be favourable to small and medium-sized enterprises. In such a scenario, SMEs could find themselves lost in the crowd, struggling to gain visibility and compete with established players who have more resources at their disposal.
Ultimately, these regulatory barriers could stifle the innovation potential of startups and small businesses in Nepal’s digital space. Instead of fostering a diverse and dynamic entrepreneurial ecosystem, such regulations may inadvertently discourage new entrants and limit competition. It’s crucial for policymakers to strike a balance between regulating the digital marketplace for consumer protection and ensuring that these regulations do not create insurmountable obstacles for aspiring entrepreneurs and small businesses, which are often the drivers of innovation and economic growth.
Transparency and consumer protection are said to be the central themes of the e-commerce bill. How do you foresee these measures influencing consumer trust and confidence in online businesses?
In my opinion, the emphasis on transparency and consumer protection in the e-commerce bill is undoubtedly a positive step that will have a significant impact on consumer trust and confidence in online businesses. With these measures in place, consumers will likely feel more secure and comfortable when engaging in online transactions. Knowing that there are regulations and safeguards to protect their rights and interests can make consumers more willing to trust online vendors without hesitation. This increased trust can lead to higher consumer participation in the e-commerce space, ultimately benefiting online businesses.
Transparency is a key element of building trust. When consumers have access to clear information about products, prices and sellers, they are more likely to make informed decisions and have confidence in their online purchases. The bill’s focus on requiring detailed information disclosure by online businesses contributes to this transparency, which, in turn, enhances consumer trust. However, it’s essential to acknowledge that there are potential concerns associated with the e-commerce bill. One notable concern is that the bill may appear as a liability and a burden to business owners, especially small businesses and startups. While consumer protection is vital, it’s equally important to create an environment that supports sellers, particularly those who are just starting their online ventures.
The bill’s regulatory requirements, including government permissions and detailed information disclosure, may impose additional costs and administrative burdens on businesses. For small businesses, these costs and administrative complexities could be particularly challenging to navigate. It’s crucial for policymakers to strike a balance between consumer protection and the ease of doing business to ensure that the regulatory framework does not become overly burdensome for entrepreneurs. So, while the e-commerce bill’s focus on transparency and consumer protection is expected to boost consumer trust and confidence in online businesses, there is a need to address the potential challenges it poses to business owners, especially small businesses. Striking the right balance between regulation and support for sellers is essential to create a fair and successful e-commerce environment that benefits both consumers and businesses alike.
The e-commerce bill places an emphasis on electronic platforms’ compliance. How might this affect the behaviour and practices of online businesses, and what are the challenges or benefits that could emerge as a result?
The emphasis on electronic platforms’ compliance in the e-commerce bill has the potential to significantly impact the behaviour and practices of online businesses, leading to a mix of challenges and benefits. One notable advantage is that compliance with electronic platforms can streamline and simplify the operations of e-commerce businesses. Embracing electronic platforms can make various aspects of business management, from inventory tracking to order processing, more efficient. This ease of operation can contribute to business growth, as it allows online businesses to focus on providing quality products and services to consumers.
For customers, this emphasis on compliance can enhance trust and convenience. When consumers know that online businesses are following regulations and best practices, they are more likely to make purchases without concerns about data protection or cybersecurity. This trust is vital for building long-term relationships with customers and encouraging repeat business. Moreover, compliance can also help online businesses gain trust in global markets. Adhering to international standards and regulations can make it easier for businesses to expand their reach and engage with customers from around the world. This can be particularly advantageous for businesses looking to tap into the global e-commerce market.
However, there are challenges associated with this approach, especially for small and medium-sized enterprises. The bill’s requirements for compliance may pose a significant burden on SMEs, potentially leading to their closure. The need to register and maintain compliance at multiple levels and in various areas can be overwhelming and costly for smaller businesses with limited resources. This can create an uneven playing field, where only well-established e-commerce companies with substantial financial backing can thrive, while smaller players struggle to keep up. Additionally, the bill’s focus on consumer perspectives may lead to complex and stringent regulations that could be challenging for new businesses to understand and navigate. The compliance costs associated with meeting these regulations can be a significant barrier to entry for startups and entrepreneurs, deterring them from entering the e-commerce market.
In summary, the emphasis on electronic platforms’ compliance in the e-commerce bill offers potential benefits in terms of simplifying business operations, enhancing customer trust and facilitating global expansion. However, it also presents challenges, particularly for SMEs, in terms of compliance costs and regulatory complexity. Striking a balance between consumer protection and the feasibility of doing business is crucial to ensure a fair and sustainable e-commerce environment.
As Nepal takes steps to regulate its digital marketplace, what broader implications do you think this has for the country’s economic development and its positioning in the global digital landscape?
One of the most significant potential benefits is the boost to Nepal’s economic growth. By establishing clear regulations and a regulatory framework for the digital marketplace, Nepal can create an environment that fosters confidence among global investors. This, in turn, can attract more investments into the country, leading to economic expansion. Increased investment can also result in the creation of jobs and opportunities, particularly among the youth, who are vital for driving innovation and progress.
The regulatory measures can provide stability for new innovators who wish to enter the digital space. With defined rules and regulations in place, entrepreneurs and startups can operate with a sense of certainty, knowing that they are working within a secure and supportive environment. This can encourage more individuals to venture into digital entrepreneurship, leading to a more dynamic and competitive landscape. Moreover, the positive effects of these regulations can extend beyond Nepal’s borders. As the digital marketplace becomes more regulated and secure, it can attract a global audience. Many Nepali citizens living abroad may want to use Nepal’s e-commerce sites to send gifts or make purchases for their friends and loved ones back home. With trust in the security and reliability of these websites, they can engage in digital transactions without concerns about fraudulent practices, ultimately benefiting the Nepali economy through remittances and increased international trade.
Cybersecurity is another critical aspect. The regulation of digital payment transactions can enhance security, making online transactions more secure and reliable. This, in turn, can attract more international transactions, as consumers and businesses worldwide seek trustworthy digital platforms for their financial activities. The perception of Nepal as a secure and reliable digital marketplace can positively impact the country’s global positioning in the digital landscape. So, Nepal’s efforts to regulate its digital marketplace have the potential to bring about significant economic development and enhance the country’s standing in the global digital landscape. These measures can attract investments, create jobs, provide stability for innovators, and boost international transactions. Additionally, cybersecurity measures can enhance trust and further contribute to Nepal’s positive image in the global digital arena.
Sagar Dev Bhatta
President
E-Business Association of Nepal
How do you view the current state of online business in Nepal, and what challenges do you think the introduction of regulatory measures such as the e-commerce bill aims to address?
The current state of online business in Nepal can be described as being in its early stages, akin to infancy. Despite the enforcement of online business operations following the Covid 19 pandemic, we haven’t reached the full potential of online commerce in Nepal. There’s still much work to be done in terms of expanding and maturing the online business landscape. It’s commendable that the government has introduced the e-commerce bill as a means of protecting consumers and preventing fraudulent activities. One of the primary issues in Nepal is that many transactions are conducted without proper documentation, such as bills. This lack of documentation increases the risk of people getting cheated in transactions. In this regard, the e-commerce bill seems to be addressing this problem correctly by emphasising the need for clear records and transparency in e-commerce transactions.
However, the bill appears to be primarily designed for established e-commerce companies like ours, which are already competing in the customer care and trust-building arena. It doesn’t seem to account for informal transactions, such as those taking place on social media platforms like Facebook and Instagram. In many cases, individuals sell goods on these platforms without registering their businesses in e-commerce, and there are neither incentives nor regulations in place to encourage or control these activities. One of the challenges with the introduction of this regulatory measure is the requirement for registration with the Department of Commerce. If a business is already registered with the department, it might seem redundant to register in multiple places for the same company. Furthermore, the bill doesn’t cover the nuances of person-to-person (C2C) transactions. It only distinguishes between sellers and marketplaces, making it challenging for those who want to operate in both capacities from the same company. This could lead to confusion and additional administrative burdens.
Moreover, in a country like Nepal where many groceries, such as vegetables, are sold unpackaged, the bill’s requirement for mentioning manufacturing dates for groceries poses challenges. It’s often impossible to determine when certain grocery products like lentils were manufactured. Similarly, the bill’s insistence on specifying expiry dates raises concerns, particularly in C2C transactions. For example, when purchasing a second-hand charger from a reseller, it’s often impossible to discern the charger’s manufacture date. In conclusion, while the e-commerce bill has the laudable goal of consumer protection, there are various practical challenges and ambiguities that need to be addressed. It appears that the bill focuses more on compliance and enforcement than on facilitating and promoting the growth of online businesses, particularly in the informal sector. Addressing these issues and providing more clarity in the bill’s provisions will be essential to ensure its effectiveness in regulating the digital marketplace in Nepal.
What are the key advantages and disadvantages of the e-commerce bill’s comprehensive approach in regulating a wide range of digital business activities in Nepal?
The e-commerce bill’s comprehensive approach in regulating various digital business activities in Nepal has both advantages and disadvantages worth considering.
Advantages
Increased Tax Collection: The introduction of this bill is a positive step as it has the potential to increase tax collection for the government. Tax revenue is crucial for funding various public services and development projects. It is essential for the government to focus on this aspect as well, especially given the growth of the digital economy.
Focus on Transparency: The bill emphasises the need for transparent transactions and encourages the conversion of transactions into digital formats. This focus on transparency is vital for reducing tax evasion and fraudulent activities in the digital marketplace. It also helps in tracking and monitoring financial transactions.
Consumer Protection: The bill includes provisions related to consumer protection, which is essential for building trust in the digital marketplace. Ensuring that consumers are protected from scams, fraudulent products and other malpractices is crucial for the growth of e-commerce.
Easy PAN Provision: The idea of providing an easy Permanent Account Number (PAN) to businesses is a valuable suggestion. Simplifying the process of obtaining a PAN number can encourage more businesses to comply with tax regulations. It streamlines the tax collection process.
Disadvantages
Compliance Burden: The bill mandates that every online business operator must possess an electronic platform, which can take various forms, including websites, applications, social media pages and digital channels. This requirement might place an unnecessary burden on certain businesses. For instance, if someone is hired by a foreign company in Nepal to create digital content, it might not make sense to require them to create a website or application.
Lack of Clarity: The bill does not provide clear definitions for various terms, such as ‘online business operator’ and ‘e-commerce’. This lack of clarity can lead to confusion and different interpretations, making it difficult for businesses to understand their obligations under the law.
Additional Compliance Requirements: The bill adds an extra layer of compliance by mandating the listing of e-commerce businesses on a designated portal. This creates additional administrative work for e-commerce platforms, adding to the already existing compliance requirements such as company registration, industry registration and tax-related registrations. The accumulation of these requirements can be burdensome for businesses.
Repetition of Existing Provisions: The bill appears to repeat provisions that already exist in other laws, such as tax payment regulations. This repetition can create confusion and redundancy in the legal framework, and it doesn’t introduce new provisions to address specific issues related to e-commerce.
In conclusion, while the e-commerce bill has commendable objectives, such as increasing tax collection and ensuring consumer protection, it also presents challenges and shortcomings in its current form. There is a need for clarity in definitions, a reduction in unnecessary compliance burdens and a focus on addressing unique e-commerce-related issues rather than duplicating existing regulations. Balancing these aspects will be crucial to creating an effective and business-friendly regulatory framework for the digital marketplace in Nepal.
With the e-commerce bill mandating government permission and detailed information disclosure, how might these regulations impact the growth and innovation potential of startups and small businesses in the digital space?
It could have significant implications for the growth and innovation potential of startups and small businesses in Nepal’s digital space. While the intentions behind the bill such as regulating e-commerce and ensuring trustworthiness are commendable, there are several challenges and concerns that need to be addressed.
Cost Barrier: One of the major challenges highlighted by the bill is the cost barrier for startups and small businesses. The bill mandates the need for electronic platforms, which can be websites, applications or other digital infrastructures. Building and maintaining such platforms require substantial financial investments. For instance, the cost of developing a simple website can range from Rs 3 lakhs to Rs 5 lakhs. More advanced features, like search engines that utilise machine learning and AI, can push the costs to a range of Rs 50 lakhs to Rs 1 crore. These expenses can be prohibitive for startups and small businesses, making it difficult for them to compete with international players.
Competitive Disadvantage: The high costs associated with compliance to the bill can lead to a competitive disadvantage for smaller businesses. Established companies with more resources may find it easier to adapt to these regulations, while startups and small businesses struggle to meet the requirements. This could create a situation where larger companies grow even bigger, potentially stifling competition and innovation.
Limited Innovation: The bill’s stringent requirements may also limit innovation and experimentation in the digital space. Startups and small businesses often rely on creative approaches and flexibility to experiment with new ideas. The financial and regulatory burden imposed by the bill may discourage these businesses from pursuing innovative projects, as they focus more on compliance and survival.
Demotivation for New Ventures: The bill’s requirements, particularly the upfront costs of infrastructure development, may demotivate individuals from starting new businesses. The prospect of having to meet these prerequisites before even opening for business can deter aspiring entrepreneurs, hindering the growth of the digital economy.
Redundancy with Existing Laws: There is a valid argument that the bill duplicates some aspects of existing laws, such as the Consumer Protection Act. These laws already provide mechanisms for addressing consumer grievances and ensuring product quality. Instead of creating a new regulatory framework, it might be more effective to strengthen and improve the enforcement of existing legislation.
In conclusion, while the e-commerce bill aims to regulate and promote trustworthy e-commerce practices, it must consider the practical challenges it poses for startups and small businesses in Nepal. Finding a balance between regulatory compliance and fostering innovation is crucial. Additionally, exploring ways to reduce the financial burden on smaller businesses and aligning the bill’s objectives with existing consumer protection laws could lead to a more effective and balanced regulatory environment for the country’s digital marketplace.
Transparency and consumer protection are said to be the central themes of the e-commerce bill. How do you foresee these measures influencing consumer trust and confidence in online businesses?
The emphasis on transparency and consumer protection in the e-commerce bill raises some important questions about its actual impact on consumer trust and confidence in online businesses. While the intention to protect consumers is undoubtedly crucial, there are some concerns that need careful consideration. The introduction of e-commerce bill may seem like populist rhetoric. It creates a dilemma regarding which legal framework should be used to address issues: the existing Consumer Protection Act or the new E-Commerce Bill. This confusion could potentially hinder effective consumer protection and enforcement. The bill appears to be more focused on scrutinising and penalising e-commerce companies rather than fostering a protective environment for online transactions. While penalties have their place in ensuring accountability, a balance should be struck to encourage legitimate businesses to thrive in the digital space.
The provision of imposing fines immediately after a mistake is made raises concerns, particularly when some mistakes could simply be human errors. It might be more reasonable to have a graduated approach that considers the nature and severity of the mistake before imposing fines. While consumer protection laws are essential, consumers also have a role to play in safeguarding their interests. They should be informed and aware of their rights and responsibilities when engaging in online transactions. Education and awareness campaigns can empower consumers to make informed choices.
The bill doesn’t address the challenges faced by businesses related to hosting websites. Many businesses, especially smaller ones, have to spend substantial amounts on hosting websites hosted outside the country. This adds to the cost of doing business and should be taken into account when crafting supportive legislation. To truly benefit the e-commerce ecosystem and encourage its growth, the bill could include provisions that provide incentives for businesses to identify themselves as e-commerce companies. One approach could be setting yearly transaction targets for registration, allowing businesses selling through various digital platforms to qualify as e-commerce companies. Such recognition can boost confidence and foster growth, particularly for small and medium-sized enterprises.
In summary, while consumer protection is crucial, the e-commerce bill should strike a balance between scrutiny and support for the growth of the digital economy. This could involve clearer distinctions between existing laws and the new bill, a more graduated approach to penalties, and provisions that incentivise and recognise businesses in the digital space. By doing so, the bill can contribute to building consumer trust and confidence while fostering the growth of e-commerce, including the informal sector, and boosting small business confidence in Nepal’s digital landscape.
The e-commerce bill places an emphasis on electronic platforms’ compliance. How might this affect the behaviour and practices of online businesses, and what are the challenges or benefits that could emerge as a result?
The emphasis that the e-commerce bill places on electronic platforms’ compliance raises several important questions and concerns regarding its practical implementation and potential impacts on online businesses. Firstly, the bill suggests that electronic platforms should be responsible for ensuring their compliance. However, this notion seems somewhat impractical. In the realm of online business, there are various ways to sell products or services. For instance, a business owner might have their own physical shop, operate a Facebook page, and also sell on established platforms like Daraz. This diversity in selling channels poses a challenge when it comes to addressing compliance. How can authorities effectively audit platform compliance in cases like this where businesses operate across multiple channels?
The bill lacks clarity on the audit process for platform compliance. It’s essential to define a clear and practical methodology for auditing and ensuring compliance across various types of electronic platforms. A well-defined process will help avoid confusion and ensure fairness in regulatory enforcement. When drafting new legislation for e-commerce, especially in places where the e-commerce industry is relatively new, it’s crucial to anticipate what might happen over the next 20-25 years to provide a flexible regulatory framework that accommodates innovation. However, adding additional layers of information to the bill can make it complex and challenging to implement.
Moreover, there is a concern that the bill might inadvertently make certain business practices illegal. For instance, based on the information we have, if a business sells its products or services through platforms like Facebook, Instagram and other social media channels, it could be considered completely illegal under the bill. This raises significant concerns, as many small businesses rely on these social media platforms to reach their customers and conduct transactions. So, while the e-commerce bill’s emphasis on electronic platform compliance is well-intentioned, it needs to address the practical complexities of online business operations. A clear and flexible regulatory framework that considers the diverse ways in which businesses operate in the digital space is essential. Additionally, careful thought should be given to how audits will be conducted and how compliance will be enforced to ensure that the bill achieves its intended goals without hindering innovation or placing undue burdens on businesses.
As Nepal takes steps to regulate its digital marketplace, what broader implications do you think this has for the country’s economic development and its positioning in the global digital landscape?
As Nepal takes steps to regulate its digital marketplace, there are several broader implications to consider for the country’s economic development and its positioning in the global digital landscape. First and foremost, it would be beneficial for the government to create a more foreign investment-friendly environment for the digital marketplace. The current regulations, such as the Foreign Investment and Technology Transfer Act 2019 (FITTA), have high capital requirements that can be challenging for foreign direct investment (FDI). Easing the investment threshold, even for amounts as low as $20,000-30,000, could attract more FDI into the e-commerce sector, stimulating economic growth.
However, as we move towards a more digital marketplace, there are significant challenges that need to be addressed. These include concerns about safety, security and data breaches. It’s crucial to establish robust cybersecurity measures to protect both businesses and consumers in the digital space. Additionally, there is a need to enhance digital literacy among the population. This includes educating the public on safe online practices, what to do and what not to do, and developing educational materials to facilitate digital literacy. Investment in digital literacy is vital for ensuring that everyone can participate in the digital economy. One key aspect of Nepal’s economic landscape is the significant reliance on foreign remittances. Digital platforms have made it easier for people living abroad, with high spending power, to send gifts, electronics and other goods to their family members back home.
This has improved services and accessibility. However, building trust in these digital transactions is essential. There is a misconception that e-commerce deliveries should be flawless, but this is unrealistic. Even globally recognised platforms like Amazon can have defective deliveries. Therefore, the focus should be on establishing clear return and refund policies to protect consumers’ interests. While the e-commerce bill addresses various aspects, it would have been more effective if it had prioritised and emphasised return and refund policies. In Nepal, many orders are placed through various digital mediums, such as phones, Viber, WhatsApp, websites or apps, but payments are often made through cash on delivery. This creates difficulties in implementing consumer protection measures. To address this issue and promote consumer protection, there should be a greater emphasis on encouraging digital wallet and card payments.
These payment methods naturally enable consumer protection through the implementation of return and refund policies. Therefore, the government should focus on promoting digital payment methods to enhance consumer protection in e-commerce transactions. Moreover, there seems to be a lack of government focus on the use of invoices in digital transactions. Invoices play a crucial role in creating a transparent and accountable business environment. Encouraging businesses to use invoices in their digital transactions can further enhance the credibility of the digital marketplace. Thus, regulating the digital marketplace in Nepal holds immense potential for economic development and global positioning. To fully harness these benefits, the government should consider creating a more foreign investment-friendly environment, addressing cybersecurity concerns, investing in digital literacy, and prioritising return and refund policies to protect consumers. Additionally, promoting digital payment methods and emphasising the use of invoices can contribute to the growth and credibility of Nepal’s digital landscape.
