Govt Finally Approves E-Commerce Policy Framework for Online Stores

The federal government has finalized E-commerce policy framework to create an enabling environment for holistic growth of e-commerce across all sectors of the country.

This will protect the interests of consumers and sellers with a special focus on development and promotion of SMEs to transform Pakistan into a significant player in the regional and global digital economy.

Prime Minister Imran Khan chaired the cabinet meeting on Tuesday.

Globally, E-Commerce has played an important role in the success of both large organizations and Small and Medium Enterprises (SMEs) as it helps to reduce transaction costs, explore niche markets and avoid intermediaries.

It is estimated that in 2017, the value of worldwide E-Commerce transactions was approximately $29 trillion of which $23.9 trillion was Business to Business (B2B) E-Commerce, while Business to Commerce (B2C) E-Commerce stood at $3.9 trillion. However, cross border B2C is estimated at $ 412 million.

Pakistan’s E-Commerce industry is performing fairly well over the last few years. According to the State Bank of Pakistan, E-Commerce sales stood at Rs. 18.9 billion by the end of June 2018 while the total size of Pakistan’s E-Commerce market in 2018 was Rs. 99.3 billion.

Capitalizing on the efforts made by the public and private sector there is a need to take measures to increase the competitiveness of the local enterprises in order to enhance their share in global trade, without compromising consumer trust.

For this purpose, it is crucial to develop a policy framework of addressing key areas of concern; it is crucial to develop a policy framework for addressing key areas of concern i.e. consumer protection, inability for the financial sector in optimizing its growth and to tap its potential to generate revenue in the medium to long run.

Realizing this very important need, the Prime Minister assigned the task to the Commerce Division to frame a comprehensive national E-Commerce Policy Framework in consultation with all the stakeholders including the private sector.

Accordingly, the following bodies were constituted to deliberate on the prospective Policy Framework:

(i) National E-Commerce Advisory Council;

(ii) National E-Commerce  Policy Board;

(iii) National E-Commerce Policy Unit;

(iv) five working groups on taxation, payments infrastructure, regulatory framework – Commerce Logistics and E-Commerce & WTO.

Ministry of Commerce conducted extensive consultations with all the stakeholders, including the Federal Board of Revenue (FBR), State Bank of Pakistan (SBP), Securities and Exchange Commission of Pakistan (SECP), Ministry of IT & Telecom, Provincial Revenue Authorities, and private sector.

To address various issues, the working groups made recommendations, which have been incorporated into the proposed E-Commerce Policy Framework.

According to sources, consensus could not be developed among the stakeholders on tax exemption issues. Commerce Division has proposed that differences in tax issues should be resolved by the provincial revenue authorities in consultation with the private stakeholders.

The proposed policy framework covers areas such as consumer protection, taxation issues, payment gateway, privacy, and personal data protection, data sovereignty and localization and training of the SMEs for establishing their online presence.

The policy framework will pave the way for developing E-Commerce in Pakistan by creating an enabling environment for the growth of existing E-Commerce enterprises, encouraging new entrants, facilitating local and cross border trade (especially exports), enhancing competitiveness and contributing to the overall digital economy.

The policy framework will also lure enterprises to venture into E-Commerce, enhance their productivity and generate new employment opportunities.

Govt To Form a National E-commerce Council

The government has been proposed to establish the National E-commerce Council aimed at promoting and regulating the growing industry of online trade through incentives, facilitation and collaboration among stakeholders and the protection of consumers’ rights at large.

The council will work under the Ministry of Commerce and collaborate with different relevant ministries as well.

According to the draft policy framework on E-commerce presented in the Ministry of Commerce, the Council will work as a single-window for policy implementation and review to facilitate E-commerce players while reflecting on the current issues being faced in each of the nine areas including;

1. Regulatory and facilitation framework,

2. Financial inclusion and digitization through payment infrastructure development,

3. Empowerment of youth and SMEs through E-commerce,

4. Taxation issues,

5. Consumer protection in the digital environment,

6. ICT sector and telecom services in Pakistan.

7. Logistics,

8. Data protection and investment, and

9. Global connectivity and multilateral negotiations.

The council will provide strategic direction on policy and initiatives to the sector and its stakeholders while also monitor the collaborative initiative among the players. It will provide recommendations and progress on the development of E-commerce to the federal government.

The recommendations were made in the policy framework for the gradual shift of the Cash-on-Delivery (CoD) payment method to digital payments, with a timeline of September 2022 for payments beyond Rs. 10,000. Furthermore, efforts shall be made to convert all CoD payments into digital payments preferably within 10 years (2029).

It is recommended that MoIT&T in collaboration with SBP will approach PayPal and other payment gateways to ensure the availability of several international payment gateways in Pakistan.

It has also been decided that all online businesses maintain a physical address in Pakistan. The Code of Conduct will be made public for E-commerce platforms to ensure consumer protection.

You can see the final draft here