Blanket approach threatens a business success story

Is more regulation of online retail enterprises really the answer?

IN THE Yangon Region Hluttaw last month, Minister for Finance and Planning U Myint Thaung responded to a lawmaker’s concerns about online businesses by stating that they needed a licence from Yangon City Development Committee.

This is not correct, according to YCDC, which says that it only issues licences to businesses with a physical presence.

But even if online businesses were able to get a licence from YCDC, it’s worth considering what benefits this would bring for consumers and entrepreneurs. Is more regulation – or in this case, any regulation – the answer? Even the lawmaker who prompted the discussion admits that the government wouldn’t have the capacity to enforce such rules in the online sphere.

It’s a tricky subject. For decades, governments around the world have grappled with how best to regulate online businesses. Myanmar has been largely sheltered from these issues because internet penetration was so low until recently. As internet use rates catch up with other countries, it is now facing the same challenge.

Despite a lack of convenient payment systems, many people – some of whom have never run a formal business – are using social media, websites and apps to sell products and services.

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It’s not hard to see the attraction for these entrepreneurs. The entry barriers are low: anyone can create a Facebook page and open an online shop, avoiding the myriad fees and licences – not to mention rent and wages – associated with a physical presence.

This was highlighted once again in the World Bank’s Doing Business index, which recently placed Myanmar 171st out of 190 countries for 2018. For all the talk of reform, the country remains a relatively difficult place to register property, access credit, pay taxes and connect to the electricity supply – all essential steps for your typical small to medium enterprise.

For consumers, too, online shopping fills a major gap. Retail experiences in Myanmar can often be a frustrating experience due to poor product range and quality, and sub-standard customer experience. Browsing online offers immense advantages in terms of choice and price comparison, and most online stores offer free or reasonably priced delivery.

As to the argument that shopping online is unsafe or risky for consumers; it makes little sense in a country where payments are nearly always made on delivery, whereby items can be inspected as if in a retail store. Prospective buyers can also check seller reviews before agreeing to a purchase. Also, few physical retailers offer warranties or refunds. Whether you’re on Facebook or in a high-end shopping mall, caveat emptor – generally translated as buyer beware – remains the golden rule.

This does not mean that there is no place for regulation of online shopping and other web-based businesses. But those seeking to institute regulations need to be careful about how they proceed to ensure they do not stifle the economic opportunities opened after the liberalisation of the telecommunications sector.  

Another issue is introducing rules that the government does not have the capacity to enforce. Doing so would only handicap those who try to do the right thing, and burden government departments further.

Consider tax, which was one of the issues raised in the recent hluttaw discussion about online businesses. The Internal Revenue Department struggles to collect corporate and income tax in the best of circumstances. Expanding its focus to the online sphere at this point in time would not be wise.

Rather than blanket rules, targeting sectors of concern may be a better approach. Products or services that are illegal in “the real world” – such as gambling, weapons or narcotics – would be an obvious place to start. Health products, financial services and high-tax items are just a few other areas possibly deserving of scrutiny.

Many of the complaints raised about online businesses – particularly surrounding consumer safety and false advertising – apply equally to brick and mortar businesses. Setting up an effective complaints mechanism that aims to protect all consumers, regardless of where they shop, would be a positive step.

This editorial originally appeared in the November 9 issue of Frontier.

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