Mahbub & Company | Digital Commerce Policy 2018 limits FDI in e-commerce companies to 49pc
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Digital Commerce Policy 2018 limits FDI in e-commerce companies to 49pc

Digital Commerce Policy 2018 limits FDI in e-commerce companies to 49pc

The Cabinet has approved the long-awaited National Digital Commerce Policy 2018 (“NDCP 2018”) on 16th July 2018, which now explicitly states that the foreign e-commerce ventures will not be allowed to operate in Bangladesh without forming joint ventures (JV) with local firms.

Paragraph 7 of the Action Plan of NDCP 2018 states that, “the policy does not allow foreign investors to hold a stake of over 49 (forty nine) percent in any e-commerce venture in Bangladesh.”

According to the literature, the major change in the policy results from the stakeholders concerns regarding the protection of the interest of numerous local e-commerce entities that have flourished in the country in recent years. Such provision is aimed at protecting and prioritizing the interest of the local e-commerce firms.Bangladesh Investment Development Authority (“BIDA”), the commerce ministry and the ICT division will execute the policy.

In addition to the newly constructed clauses, Article 3 of the NDCP 2018 also has a provision for establishment of a central cell under the relevant ministry for implementation of the policy guidelines and for ensuring necessary coordination among the government agencies concerned. This would speed up the overall process and would work as a one stop service platform for foreign investment in the e-commerce sector.

Moreover, the policy has also addressed that the existing rules and regulations regarding foreign investment would be applicable for e-commerce business as well. The policy has further addressed the provisions for relevant payment methods to protect consumers from cyber crime and frauds. In lieu of the technological advancement, mobile banking, prepaid cards and credit cards, would now be connected with national payment switch to ensure real-time fund transfer through e-commerce sites.  Simultaneously, the policy has called for updating the existing legal framework to protect the patent, trademark and copyright of the products sold through the e-commerce sites.

Analysis

The e-commerce sector in Bangladesh started to grow from the year 2000; however the biggest challenges were the payment gateway, delivery system and customer education against its rapid growth. The sector encountered an expeditious development after the launch of the first payment aggregator SSL COMMERZ in 2010. At present there are numerous e-commerce sites that have been doing business in Bangladesh, which have foreign ownership such as Daraz, OLX, Kaymu, etc. Daraz, one of the leading e-commerce players in the country and a sister concern of e-commerce giant Alibaba, will now have to offload a majority of its shares to comply with the new policy.

– Saqeb Mahbub, Associate Partner & Rifat Rahman, Associate