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DBID is a Good Idea but All Policies Involve Trade-offs

After months of work, the commerce ministry yesterday launched the digital business identification (DBID) for the ecommerce companies with the stated goal to check irregularities in the sector. A mobile app has also been launched for DBID registration. Some 11 companies were given the DBID certificates at the launch. 

Every digital commerce company — be it ecommerce with a website or f-commerce on social media platforms — will now have to obtain the digital business identification number (DBID) for doing business. The requirement is applicable for all types of digital commerce businesses. No company will be allowed to sell products through websites, social media platforms, or any other applications without DBID certification. Those in the f-commerce industry, which includes individuals and businesses that trade goods and items on Facebook, must also register to receive their DBIDs.

The DBID can be obtained via the myGov app of the Registrar of Joint Stock Companies (RJSC), which operates under the commerce ministry. Upon applying, applicants receive a mail with the certificate, as well as a text message to their cellphone number with a link for downloading the certificate. The DBID is free to obtain. There is no charge involved. The ministry plans to bring all digital businesses under registration within a year, which will be a daunting task. 

Many details about how the new initiative will function remain unclear, however. One possibility discussed previously is that the IDs will be used to interlink e-commerce organizations with the upcoming escrow system and the national complaints management center. The implementation of the system is likely to take time and go through its own challenges. 

The regulatory initiative came after massive irregularities by a few ecommerce companies in recent times that have created huge reputational risk for the entire ecommerce industry. At least thirteen rogue e-commerce companies wound up with liabilities worth several thousands of crores of taka as a result of their reckless activities.

The thinking behind the initiative is simple: the recent irregularities in the ecommerce sector created an extensive risk for the entire ecommerce industry and new regulatory initiatives are needed to improve customer trust in the sector. Before DBID, the regulators have tried several ad hoc initiatives. The outcome so far has been mixed.  

Thinking critically about policy decisions 

There is no doubt about the need for policy initiatives to direct and regulate the ecommerce sector, given the recent irregularities in the sector and the huge potential of digital commerce. DBID will hopefully be that initiative that not only brings discipline to the sector but will also help grow and prosper it. 

It is beyond doubt that DBID is done to support the ecommerce industry with good intentions. However, it does not mean it cannot go wrong. All policies involve trade-offs — a double-edged sword. Regulators will be wise to keep that in mind and work hard to ensure that DBID does not stifle the growth of the digital commerce sector. The initiative has already received skepticism from many smaller digital commerce companies such as f-commerce companies selling products on Facebook.

Prominent technology entrepreneur and former BASIS president Fahim Mashroor points this out in an opinion piece for TBS: “The big e-commerce companies can easily be registered with the DBID, as they have trade licenses and all the necessary documents. The government should ensure an easy way for Facebook-based start-ups so that they do not face any hurdles in getting registration. It should continue providing the registration-service free of cost.”

Ecommerce has seen excellent growth in the past two years. Per Bangladesh Bank Maya 2021 data, transactions through e-commerce platforms stood at BDT 1,183 crore. Bangladesh Bank data further shows the sector saw a 164% year-on-year growth and is growing at 30% MoM. Several estimates suggest digital commerce across platforms saw BDT 10,000 crore in transactions in 2021 and is expected to grow significantly in the next few years. 

While these numbers are exciting, the sector remains under-penetrated. Ecommerce, in every meaning of the word, is just getting started in Bangladesh. 

Putting additional unnecessary regulatory burdens on the sector may increase friction and significantly slow down the growth and penetration. 

More importantly, DBID makes it mandatory for all digital commerce initiatives regardless of type and size. The requirements can be burdensome for many smaller players who use social media platforms such as Facebook to sell things online. Getting business licenses is already difficult and expensive for many of these small businesses. Adding additional requirements can deal a mortal blow to many of these businesses, which will significantly curtail the growth of digital commerce in the country and make the opportunity inaccessible to many small entrepreneurs. 

The requirement can also prove anti-competitive, making ecommerce accessible to big players only and prohibitive for smaller ones. Smaller players such as facebook based online sellers operate with much fewer resources than the traditional big ecommerce players. Additional regulatory requirements will create an additional burden on these smaller players. 

To ensure an even playing field, it will be wise to make getting DBID easy and inexpensive for all kinds of digital commerce players. We have to keep in mind that policies should not be made to protect group interests. 

I’m generally skeptical of unnecessary extensive regulatory interventions, particularly when it comes to nascent markets. From Ride-hailing Guidelines, The Business Of Ride-Hailing, And Tech, Aggregator and Technology Policy

“I'm skeptical of the need for any regulation without significant evidence that it is absolutely necessary. It is more so when an industry is in the development phase which applies to ride-hailing in Dhaka.

I consider ride-hailing in Dhaka to be in a very early stage. When we try to design policy for an industry that is not fully matured yet, we run two particular risks: 1) we can’t foresee what the industry will look like in a few years when it will fully mature thus fail to address that in the policy 2) and we run the risk of doing something that can hamper the growth of the nascent industry because while every regulation does evolve over the time, it often takes time.

For instance, almost all the ride-hailing companies in Dhaka now have logistics operations and on-demand food delivery operations. While it is possible that they run these logistics operations with a separate license, it is absolutely possible to connect two services technologically and that is where leverage is for the ride-hailing companies. I don’t think the approved guideline has considered this reality.

Every regulation comes with certain limitations. Although regulations are prepared with utmost good intentions; at times, they end up not serving the purpose.

When you prepare a regulation, it is always about tradeoffs. You choose one policy over another, meaning you gain some benefits and face some disadvantages. When policymakers often see the benefits from a certain regulation, there are chances that they overlook the shortcomings both in the short-term and long-term.” 

The initiative to create an additional business registration for ecommerce companies makes sense given the recent widespread malpractice in the ecommerce industry by certain players. 

But I also think we need to be careful about what we want to achieve. As mentioned above and many industry insiders agree, it could complicate operations for many smaller ecommerce companies with good behavior who played no part in causing the current situation. 

The need for regulatory measures arises because bad actors in a certain ecosystem behave badly and they need to be restrained in the interest of the ecosystem. But if it is done without enough deliberation, it could end up harming the innocent ones and the entire industry. 

The regulators should absolutely go to extra lengths to curb the bad behaviors in the ecommerce industry, but they should also be mindful of the fact that it should not harm good actors of the ecosystem and the momentum of the industry. 

Digital commerce has seen meaningful growth over the past few years. However, as I mentioned earlier, the industry remains under-penetrated. Only a small segment of the overall potential customer segment uses ecommerce today. The sector has a long way to go and it will. It is absolutely necessary to have policy initiatives to establish discipline and ensure the smooth growth of the industry. But it should not create additional challenges for smaller players in the sector. We must not jeopardize the potential of the industry with our good intentions. 

Photo by Hal Gatewood on Unsplash

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