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Top e-commerce firms against the move allowing 100% FDI

  • Published at 10:23 pm September 8th, 2018
Experts at 'Roadmap for Local E-Commerce Industry Issues, Challenges & Solutions' yesterday COURTESY

In contrast, the existing National Investment Policy (NIP) allows a foreign investor to own 100 percent stake on any business entity in Bangladesh. And the government is planning to implement it in e-commerce sector, organizers said

The country’s leading e-commerce entrepreneurs have urged the government to implement the Digital Commerce Policy that upholds the interest of local companies over foreign firms in the e-commerce business.

They expressed their concerns as a move from the government has been taken to allow 100 % Foreign Direct Investment (FDI) in the E-Commerce industry.

They made the call at a meeting, styled, “Roadmap for Local E-Commerce Industry Issues, Challenges & Solutions” organized by ten local top e-commerce entrepreneurs in the capital Saturday.

The sector people made the demand in the face of the government’s recent move to allow foreign companies to own 100% stake in local e-commerce ventures.

As per the digital commerce policy of the country, approved in July this year, foreign investment in the e-commerce industry is allowed on a 51:49 ratio; meaning foreign investment in any venture could be as high as 49%.  The policy is aimed at preventing global e-giants from controlling the market, and giving the local IT firms an edge over their foreign investors.

In contrast, the existing National Investment Policy (NIP) allows a foreign investor to own 100 percent stake on any business entity in Bangladesh. And the government is planning to implement it in e-commerce sector, organizers said.

“We are not against the Foreign Direct Investment (FDI). But we are alarmed over their likely overwhelming presence in the e-commerce business as the planned investment opportunity would hurt local investors,” Asikul Alam Khan, founder and CEO of Priyoshop.com, an e-commerce company, said. 

The investment model should be a joint venture method, which will help the local firms to grow. If the operating model is allowed for foreign entities it will hurt the country’s struggling e-commerce entrepreneurs, he said.

The government has to think whether it wants to see only two companies like Alibaba or Amazon.com or not, he questioned. 

Ownership model for foreign investors 

“A 100% stake could be allowed in case a company registered in a foreign country, with minimum five shareholders, each not holding more than 33 % stake on the same entity,” said AKM Fahim Mashroor, founder of ajkerdeal.com,  a leading local e-commerce venture said in his presentation.

Further the total e-commerce platform to be operated locally must be developed and managed by local resources, he said. 

On top of that, all data must be hosted within the Bangladesh territory for protecting data security and privacy, said Mashroor, a former president of BASIS.

Challenges for the E-commerce sector 

As entrepreneurs, limited access to funds, logistics challenges to reach customers outside Dhaka, higher data cost for non-broadband internet users, unfair competition from global giants and telecommunication companies and international payment of digital advertisement are some of the major challenges faced by the Bangladesh e-commerce industry.

Ways forward 

As an emerging industry, the sector already has made an investment of over Tk100 crore and employed over 50,000 people. The yearly turnover stood around at Tk700 crore.

So, the government should give adequate space for it to grow and flourish.

We are not only seeking protection, but time to develop our sector so that the local entrepreneurs can compete with foreign digital firms, said Asikul. 

In this regard, he said the government has to think how much space it would give foreign investors, and how much space for local firms to grow.

Citing the telecommunication industry of Bangladesh, Asikul said the country has an infrastructure in the sector but do not have a market share in the industry. He questioned whether Bangladesh is going to experience the same fate in the e-commerce industry.  

“By restricting the FDI outright in the sector, we can grow bigger. So, for a sustainable growth of the e-commerce industry, the government should outline a balanced and friendly policy under which we can work and progress in building a positive Bangladesh,” said M Asif Rahman, co-chair, Standing Committee of BASIS on Startup.

The policy should be well-balanced, where local investors will get protection to grow, he added. 

“As a member of the World Trade Organization (WTO), Bangladesh is bound by law to allow FDI. But it has to protect the domestic e-commerce entrepreneurs through policy support,” said Mohammad Abdul Haque, Finance Secretary of e-commerce Association of Bangladesh (e-CAB), adding that “To this end, government should bring about changes to the existing policy

The government can also protect the local entrepreneurs by increasing taxes for foreign investors and hiking fees for domain registration, which ends with .bd, he added.

Price Dumping a concern

Taking part in the open discussion, e-commerce entrepreneurs have termed the price dumping as a big threat for the sector creating an unhealthy competition.

“We are witnessing the practices of price dumping by foreign companies, which is a threat to local e-commerce entrepreneurs,” said Zeeshan Kingshuk Huq, co-founder and chief executive of Zero Gravity.

“We have made an ecosystem with a huge investment and trained professionals, but foreign companies hire them with lucrative pay packages, affecting the level-playing field for the local business people,” said Mahmudul Hasan Sohag, chief executive of Rokomari.com.