Dr Suborna Barua is an associate professor at the Department of International Business, Dhaka University. His research has focussed on the technology-driven business model and its financial management as well as financial technology (fintech). He is heading several research projects on this subject at the moment and also works as a consultant and trainer at home and abroad. In an interview with Prothom Alo, he talks about the recent Evaly scam, its impact on e-commerce in the country, future prospects of e-commerce and the way ahead.
E-commerce has been faring well in the corona situation around the world. It has expanded in Bangladesh too. How far has the fraudulence of Evaly, and a number of other e-commerce companies, cramped growth of this business in the country?
E-commerce has advanced greatly worldwide and will go even further ahead. Whether we want it or not, e-commerce is the new future of Bangladesh too. So I do not think the underhand dealings of Evaly and others will create a long lasting impact on the growth of e-commerce in the country. In fact, what has happened may actually have a positive impact on the growth of this sector.
Would you explain that further?
You will notice that other than this handful of companies, there are many companies who are running their businesses with an excellent reputation. The Evaly incident hasn't had a serious fallout on this. The reason is that there is a difference between the customers of these companies and those of Evaly.
Secondly, such fraud is nothing new in this country. It is just that the method has changed. There was Jubok and Destiny before, now this has changed to a digital format. Evaly has taught us an important lesson of digital deception. If this incident did not take place, we perhaps would not have been able to conceive how smoothly digital deception can be carried out.
There may be apprehensions for a brief span of time among the consumers about future activities in this sector. However, if this experience is used as a lesson and if good institutions are put in place with legal and policy framework, then e-commerce has a bright future in Bangladesh in the long term. And if the present predicament is overcome in an efficient and astute manner, these apprehensions will soon dissipate.
Nowhere in the world is e-commerce seen as an area of investment, though there are a lot of discounts. In our country, though, e-commerce has become an area of investment. Why is this so?
There are many reasons why this situation has emerged. Firstly, over the past decade, on average people's incomes have increased significantly. Yet, on the other hand, the areas of investment have shrunk. In Bangladesh, the ratio of savings to GDP is 40 per cent but we have not been able to transform these savings into actual investment.
In Bangladesh, there are three major areas of investment in the private sector. These are -- bank deposits, government bonds (such as savings certificates) and the share market. Interest has been slashed on both bank deposits and savings certificates. And many are hesitant about entering the share market because of the risks involved and past experience. So where are people supposed to make a little profit by investing their savings?
Secondly, in the other areas of investment, tax is imposed on whatever little interest or income is earned. And at the end of the day, inflation cuts drastically into whatever little amount is earned, making it negative. So there is hardly any chance of making a profit or an earning through investments.
Thirdly, the number of educated unemployed in the country is on a steady rise. No matter how much we talk about demographic dividends, the fact remains that unemployment had made a large chunk of our educated youth idle and pitched them into economic uncertainty. If we analyse the customers of companies like Evaly, we will see that the majority of them are young or middle aged. They have a lack of economic activities and attractive investment opportunities, and these companies cleverly take full advantage of this situation. These customers simply unsuspectingly step in the trap, lured by the hope of big profits.
E-commerce, like any other business, is a bit marketplace. Is there need for a separate law for e-commerce?
There certainly is. Many of us do not have a clear concept about e-commerce. In fact, many who make statements about this in the media, are mixing this up with regular business. In no way is e-commerce like any other business and so conventional legal framework will not be too effective or applicable to control this sector.
Can you expand on how e-commerce differs in character from conventional business?
We assess the financial strength of conventional businesses by their fixed assets like factories, buildings, land, machinery, etc. But this benchmark can't be used for e-commerce and tech-driven companies, like Uber or Pathao. With the incredible power of technology, these companies operate from a small office or provide service to a huge population by means of a mobile app. So their intrinsic valuation can never be as in conventional business. That is why a separate law is required for the growth and control of e-commerce and all tech-driven businesses. If this can be done, the government can apply this law to the other tech-driven start-ups that are emerging outside of e-commerce.
How can e-commerce be supervised? Who will be responsible to look into the business model of the companies or check if they are cheating the people? Is there need for a separate institution for this?
I do not think a separate institution is required for this. We can look after this sector as in the case of other sectors, with our existing institutional reach and capacity. If a law is drawn up, an appropriate institution of the government can be given the authority and supervisory responsibility in this regard. In India e-commerce is mainly controlled by separate 'Customer Protection Rules', which is implemented by the consumer directorate. In our country too, a law can be prepared and the Directorate for National Consumer Rights Protection be given the due authority and responsibility. In Bangladesh the Competition Commission can also be involved in this work.
A panel of experts can be formed to work jointly with the Directorate for National Consumer Rights Protection or the Competition Commission. They can regularly analyse the market of this sector as well as the business models of these companies and monitor any unequal competition.
How can the genuine e-commerce businesses recover from the damage done to confidence in this sector?
Recovering confidence is difficult and time-consuming. But as I said before, the losses faced by the businesses are temporary, not long-term. But two tasks are essential at the moment. One, the genuine businesses will have to step up their services for their clients compared to before. This will ensure that the clients will feel reassured and confident. Two, the government must take effective and intelligent action against companies like Evaly. An expert committee can be formed, and under the committee a 'coordinator' or 'supervisor' can be appointed to companies like Evaly. The committee will comprise experts who will be able to find innovative solutions to the problems. On a positive note, the High Court has in the meantime issued directives for a four-member board to be formed, including a former judge, secretary and chartered accountant. I believe that this board in the future can include e-commerce experts if required.
The commerce minister has said that the government will not take any liability for the e-commerce clients. It may be difficult for the government to take financial liability, but Evaly is a government-authorised company and were not functioning clandestinely. The government has to take the liability of not being able to prevent this. What do you think?
The government certainly has some liability about not being able to prevent this and a senior official of the commerce ministry has already admitted this during 'e-Commerce Policy Talk', a recent e-CAB event.
We always say, no matter what the private sector does, the regulatory bodies must always be a step ahead. We must start preparing from now for what our government agencies are to be in the next 5 to 10 years. If we can work from now in the private sector, particularly keeping the fourth industrial revolution in mind, looking into the possible challenges ahead, then we can avoid untoward situations as in the e-commerce sector.
Many are blaming the clients' greed for the Evaly fiasco. Is that justified?
The greed was there, but before blaming the people, you have to look into the reasons behind this greed, into why they fell into this trap. As I said before, companies like Evaly took advantage of the situation and lured in a huge number of people. Everyone has a degree or greed. Maybe some people were actually excessively greedy and invested their money here. But I feel that circumstances accelerated this process. I will entirely blame the fraudulent companies for the whole process. They unethically took advantage of people's circumstances.
What is needed of the government and entrepreneurs to expand e-commerce further and increase confidence in the sector?
The government needs to regularly publicise its commitment to the sector and its all-out efforts. They must deliver the message to the people that they are attaching importance to this sector as to any other regular sector and view this as a rising sector where they are ready to provide all support.
The role of e-CAB is very important too. Its members have to take some responsibility too. They took a lot of time to cancel the membership of four members like Evaly. e-CAB should prepare a uniform principle-based guideline for its members immediately so that all members will follow certain specific business rules. e-CAB should hold regular meetings with its members and also awareness meetings. e-CAB can hold year-round people-oriented events to mobilise awareness regarding e-commerce. As a business organisation, e-CAB has to be member-oriented and client-oriented, running training and awareness programmes for both sides.
There is much complaint in the market that proper service is not available in this sector. The entrepreneurs should waste no time in paying attention to their service and to invest, so that confidence and trust is generated among the clients. e-CAB has to play a strong role to address these regular and serious complaints.
How can it be ensured that e-commerce consumers remain consumers, not become investors?
Proper education is required for this awareness. People must be made aware of what is investment and what is not investment. In this regard, e-CAB and the government agencies can jointly run extensive public awareness programmes and training. And attention must be paid to the main reasons for which so many clients are stepping into these traps. Creating awareness, creating a proper environment for investment in the private sector, creating opportunity for earnings and generate employment for youth -- these steps will decrease the propensity for consumers to become investors in e-commerce.
Thank you.
Thank you too.