Lagging on the digital economy

The digital economy is transforming the way business is conducted across borders while at the same time, creating more equable market conditions between developed and developing nations. The digital economy offers opportunities for developing states to command a greater share of international revenue; to do this, developing nations must create the necessary policy framework to ensure that businesses can maximize their potential to compete within global value chains.

It is acknowledged that country specific data on digital trade may be rather elusive. According to estimates from the United Nations Conference on Trade and Development (UNCTAD), e- commerce sales have increased faster than national economies; growing by 38 per cent in 2014-2015 to US$19.9 trillion in business to business and US$2.2 trillion, in business to consumer transactions, with countries in the Asia -Pacific being the main beneficiaries of the rapid growth of e-commerce trade.

In addressing a country’s preparedness to optimize market share in the digital economy, one examines the policy framework and infrastructure that would support e-commerce. This framework includes legislation, barriers to trade, and ease of doing business. In addition, of paramount importance is the role of small and medium sized enterprises (SMES).

A coherent legislative framework that protects consumer rights, data and intellectual property is essential. In this regard, Barbados has already implemented some legislation which includes the Electronic Transactions Act and Computer Misuse Act. The Electronic Transactions Act provides a framework for e-commerce by making provision of legal recognition of electronic signatures and records.

This Act also stipulates that businesses are to record and report e-commerce related business. Furthermore, Section 22 prohibits use of information which is obtained without a person’s consent. The Computer Misuse Act protects integrity of data storage systems and prohibits unauthorized use of sensitive information.

 While our laws seem adequate,  e-commerce must surmount several challenges with regards to policy. The foremost of these are prohibitive customs duties. One considers, for example, the duty on apparel which could be as high as 60 per cent. In addition, the imposition of other taxes such as the National Social Responsibility Levy could potentially have adverse effects on SMEs that have traditionally sourced their products and services from external markets. The impact of this tax is further compounded by the imposition of the FX charge on foreign exchange transactions.

Is it a mystery why there have been several appeals to consider the impact of these charges on SMEs by the Small Business Association and they have not been addressed? Our government has adopted the myopic view that it is preferable to raise revenue in the short-term rather than incentivize industry. Such indiscriminate use of taxation may stifle some industries in their embryonic stages.

It is noteworthy that Caribbean governments have traditionally been dependent on both direct and indirect taxation to raise revenues. Significant dependency on indirect taxes could severely affect tax revenues as goods and services are digitized. In a recent report by the Inter-American Development Bank (IDB), it has been noted that in Barbados a staggering 95 per cent of total government revenue comes from taxes. One could only begin to imagine the crippling effect of the loss of revenue for the local economy.

This leads one to consider the importance of a regional approach to addressing challenges with implementing e-commerce frameworks. The advantages associated with this approach include mutual cooperation on consumer protection and cybercrime, as well as a harmonized policy framework for countries to trade in e-commerce. The approach taken by such trading blocs as the European Union (EU) and the Association of Southeast Asian states (ASEAN) is notable.

The EU’s Digital Single Market has focused on key objectives of improving access for consumers and levelling the playing field for digital networks and innovative services to flourish. It is also estimated that a digital economy could contribute 415 billion euros annually to the EU economy. Moreover, ASEAN by its programme, e–ASEAN, has pioneered an initiative which has focused on creating infrastructure on electronic transactions, cybercrime consumer protection and dispute resolution.

CARICOM has recently launched the CARICOM Single Market and Economy online platform which is aimed at promoting trade and improving the ease of doing business. This gives one a glimmer of hope, but still indicates that the region’s approach to e-commerce is still in its infancy and completely unprepared for the challenges posed to regulations by the advent of crypto-currencies, human-computer interfaces, and digital biometrics.

By refusing to position the Caribbean to respond to the expanding area of e-commerce, our governments are squandering the opportunities it presents to grow regional economies, and increase productivity and competitiveness. The nature of digital transactions and the accelerated pace of e-commerce development has posed challenges for developing states in implementing and reformulating policy. We can’t seem to muster the political will to move past implementing legislation for consumer protection, when we really need to get onto reforming trade and taxation policies to facilitate e-commerce.

The United Progressive Party favours a regional approach to formulating holistic policies for e-commerce, particularly as it relates to mutual cooperation against cybercrime.

Source: (The author is Maria Phillips, the UPP’s candidate for St. Michael North. Email:voteupp@uppbarbados.org. Website:www.uppbarbados.org)

One Response to Lagging on the digital economy

  1. Frederick Verity
    Frederick Verity October 14, 2017 at 5:30 pm

    The point needs to be made that banks are posing even bigger problems than government. Yes. Government is a problem too and we need a regional approach but the problem of secure portals, a platform to exchange currency for goods and the use of crypto-currency are all being dragged down by banks’ reluctance to provide the services. They lazy. They are not technology leaders

    Reply

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