The Federal Cabinet has urged the State Bank of Pakistan (SBP) to come up with a clear-cut policy on e-commerce to facilitate foreign companies.
These instructions were issued during a discussion on the e-commerce policy of the Commerce Division.
The Commerce Division, in its draft policy, said that e-commerce refers to the production, distribution, marketing, sale or delivery of goods and services by electronic means. Globally, e-commerce has played an important role in the success of both large organizations as well as small and medium enterprises (SMEs), as it helps reduce transaction costs, explore niche markets and avoid intermediaries.
Globally, e-commerce has been growing exponentially since the last two decades and has recorded sales growth of 13 percent in 2017 with the estimated sales of $29 trillion. In addition, the number of online shoppers grew by 12 percent and reached 1.3 billion.
E-commerce in Pakistan is at a nascent stage, with modest internet retail sales, despite 161 million cellular subscribers, 70 million 3G/4G subscribers, 72 million broadband subscribers and total teledensity of 76.56 percent, as of July 2019. It is an emerging sector in Pakistan, with a noticeable surge recorded recently in online vendors, local e-commerce platforms and online payment facilities introduced by banks and large cellular companies.
Pakistan’s E-commerce Market
According to State Bank of Pakistan (SBP), excluding Cash-on-Delivery (CoD) sales, e-commerce sales stood at Rs. 18.7 billion by the end of June 2018 while the total size of Pakistan’s e-commerce market in 2018 was Rs. 99.3 billion. The number of registered e-commerce merchants has risen 2.6 times and e-commerce payments have surged 2.3 times in just 12 months.
Keeping in view the importance of e-commerce, the Prime Minister had assigned the Commerce Division to frame a comprehensive e-commerce policy in consultation with the stakeholders.
Accordingly, the Commerce Division constituted the following four bodies to deliberate on the policy framework:
- National E-commerce Advisory Council
- National E-commerce Policy Board
- National E-commerce Policy Unit
- Five working groups on taxation, payment infrastructure, regulatory framework, logistics, and E-commerce & WTO.
Commerce Division claims that it conducted extensive consultations with all stakeholders, including the Federal Board of Revenue (FBR), State Bank of Pakistan, SECP, Ministry of IT and Telecom, Pakistan Post, Ministry of Communications, Provincial Revenue Authorities and the private sector to prepare the draft.
Commerce Division, submitted the draft policy framework to the Cabinet on June 18, 2019, however, in compliance with the directions from the Prime Minister office, held another round of consultations with relevant stakeholders.
To address various issues, the recommendations given by the working groups and comments of all stakeholders have now been incorporated in the revised e-commerce draft policy framework.
In pursuance of the Cabinet’s decision of July 16, 2019, the Commerce Division held consultations with the Ministries of Science & Technology and Communications before finalizing the draft e-commerce policy framework. Both ministries have indicated their concurrence to the draft e-commerce policy framework.
Payment Gateway
The sources said that when the policy was tabled at the cabinet, members of the cabinet emphasized the importance of a payment gateway for the effective roll-out of e-commerce in the country. It was pointed out that while some foreign companies are interested, the SBP needs to come up with a clear-cut policy.
Cabinet members were of the view that the SBP does not seem to possess the capability to find a solution to the payment gateway problem. They also said that the payment gateway matter is essentially a market access issue and needs to be tackled diplomatically as well. It was also suggested that the format of the draft needs to be improved to make it a policy document which should not contain recommendations, but the definitive policy of the government.
Women Empowerement
It was also suggested that the policy may have linkage with the one-woman-one bank account’ initiative which complements the e-commerce initiatives apart from promoting women empowerment.
After the discussion, the Cabinet directed the Commerce Division to incorporate the improvements suggested by the Cabinet members in the final policy document. It was also decided that the policy will develop linkages with the one-woman-one bank account’ initiative which complements the e-Commerce.
Looks like the government doesn’t have any idea of what exactly is a payment gateway. SBP already have rules in place for establishing payment gateways in the private sector. It is now up to different entities to try and establish such gateways but unfortunately no progress so far.