Originally posted in The Financial Express on 4 August 2021
Within digital platforms, there is a triangular connection between three parties: platform, seller and buyer. Therefore, digital platforms connect individuals who have demand with Facebook-centric entrepreneurs (Deloitte, 2018). Most consumers perceive benefits relating to improved convenience, more choice and increased transparency. Furthermore, online platforms enable more suppliers to participate in the market, which enhances competition. In this way, consumers are more likely to find cheaper products through a comparison platform, which may allow the consumers to access more information so that they are better informed about the product, service or content they are looking for (Oxera, 2015). Businesses may avail the benefits of digital platforms relating to funding, recruitment, marketing and e-commerce. Research has shown that digital platform companies diminish the geographic barriers, the cost of marketing and expand the size of the market.
Digital platform companies also facilitate actors to contribute in the global value chain by reducing transaction costs, helping to validate the quality and credibility of suppliers, and matching suppliers with prospective international buyers. In addition to creating opportunities for cooperation and integration into global value chains, digital platforms employ instruments, such as consumer ratings, to overcome information frictions that enable firms to create a credible reputation (World Bank, 2020). Thus, potential buyers gain access to the previously unavailable information about the reputation of suppliers, which assists the former in making more informed decisions.
Digital platforms have become important enablers of trade in many markets across the world. The use of the digital platforms help to enhance the choice of consumers, the efficiency and competitiveness of producers, and also increase the participation of citizens from all walks of the society. There are at least four key factors which will ensure that Bangladesh benefits from the rise of digital platforms: (i) increase in the number of internet users in the country; (ii) greater involvement of companies in online activities; (iii) improved technological know-how of individuals which allows them to use online search engines and other services; and (iv) broader availability of smartphones for the majority of people.
Estimates suggest that around 39 million people in Bangladesh currently use Facebook. Due to the increase in the availability of the internet, many entrepreneurs in Bangladesh are choosing digital platforms for continuing their business. While for the majority of the people, credit cards have not become available, mobile payments and cash-on-delivery have progressed as well-accepted processes.
The success of digital platforms is closely associated with the range of goods and services they offer to their consumers. Digital platforms permit smaller companies, in particular, to enlarge their operations outside their region, catering to customers in single markets (European Commission, 2019). The digital revolution has altered the way of demanding products that the customers require and the mode of receiving the products, for instance, in the digital media, audience or the consumers may decide whether they want particular advertisements to attend to including when and how to attend.
Although the concept of the digital platform economy is new in Bangladesh, it is gradually gaining confidence and spreading rapidly among the new generation. For enhancing their credibility and acceptability, many digital platforms need improvement in their strategic approach and customer services. A number of other things such as, ensuring the quality of the product, timely delivery of the services, efficient management of the inventory, flexible return policy and overall transparency will result in greater growth of the digital platform economy in Bangladesh. To link the target audience and brands, online marketers can use these components in an efficient way.
CHALLENGES AHEAD
There is an ongoing debate regarding the structure of the pays and benefits received by digital platform workers and the social safeguards in place for them. As digital platform workers are often considered independent contractors, they are not always entitled to receive the same level of pay and other benefits as enjoyed by regular employees. Without proper measures to ensure good platform work, the growth of the digital platform economy might be threatened, rendering it unable to contribute positively to the overall economy (World Economic Forum, 2020).
There is a gender divide in the case of accessing the digital platforms, especially in Bangladesh. The country’s financial inclusion profile dictates that 41 per cent of the population has an account with financial institution, but only 2.8 per cent women do online transactions compared to 4.3 per cent men who do online transactions (Table-1).
According to Bangladesh Multiple Indicator Cluster Survey (MICS) 2019, only 5.6 per cent households in Bangladesh owned a computer and only 37.6 per cent of households had access to the internet in 2019 (BBS & UNICEF, 2019). However, use of computers and the internet was found to be more common in relatively richer households and among men, compared to relatively poorer households and women. In 2019, only 0.4 per cent of households from the poorest wealth index quintile in Bangladesh had a computer, compared to 21 per cent of households from the richest wealth index quintile who had a computer (BBS & UNICEF, 2019). As of 2019, only 4.6 per cent of women had used a computer and the only 14.2 per cent women had used the internet over the course of their lifetime (BBS & UNICEF, 2019).
There are several challenges in developing and expanding the digital platform economy in Bangladesh, which were identified by the participants of the EGM. These include: (i) Lack of access to computers and internet; (ii) Unreliable supply of electricity; (iii) Slow internet speed; (iv) Limited technical skills; (v) Poor English language skills; (vi) Low level of proliferation of credit and debit cards hindering online payment; (vii) Difficulties in obtaining payments from abroad; (viii) Legal loopholes that allow digital platform companies and workers to escape the tax net; (ix) Funding constraints that threat the sustainability of digital platforms; and (x) Insufficient foreign investment for digital platforms.
During the EGM, the experts mentioned that lack of access to computers and the internet was preventing many people from participating in the digital platform economy in Bangladesh. The experts also stated that those who managed to overcome such obstacles to enter into the digital platform economy often faced problems due to unreliable supply of electricity and slow internet connection. According to the experts, the limited technical skills and poor English language skills of Bangladeshi workers made it difficult for them to compete in the global digital platform economy and to secure jobs that matched their education and experience. As a result, digital platform economy workers from Bangladesh were either forced to accept menial tasks or offer very low prices to undercut their competitors. The experts agreed that due to the low level of proliferation of credit and debit cards, many consumers were facing difficulties in making online payments for their purchases in various digital platforms. However, this problem was partially mitigated due to the rapid spread of mobile financial services. Nevertheless, the experts emphasised that Bangladeshi digital platform economy workers were facing serious obstacles in obtaining payments from abroad due to the absence of global payment portals, such as PayPal. As a result, both Bangladeshi freelancers and their foreign clients were suffering. The experts felt that the time had come for the Government of Bangladesh to formally recognise companies and workers in the digital platform economy and gradually bring them under the tax net. However, they also mentioned that since the digital platform economy in Bangladesh was still in a nascent stage, the government must also provide some fiscal incentives for this sector in order to encourage further growth. Finally, the experts mentioned that if the digital platform economy was to succeed in Bangladesh, then it would have to explore new and innovative forms of funding to ensure the long-run sustainability of the sector. In this regard, the experts believed that it would be crucial to attract foreign investment in digital platforms in Bangladesh in the coming days.
CONCLUSION AND RECOMMENDATIONS
The role of digital platforms in the economy is increasing day by day. Business opportunities are also increasing in this digital platform economy, which has come to the forefront during the COVID-19 pandemic. However, building the trust and confidence of users in Bangladesh will be a major task of the digital platform economy in the coming days. Although lots of mobile applications are coming into the market, the policies related to the monetisation of mobile applications still do not exist. Bangladeshi workers in the digital platform economy are working from their own motivation and have not received proper training from the education system. As a result, they have only seen the tip of the iceberg in terms of success in the digital platform economy. If the vast young population of Bangladesh could be properly trained and equipped with market-relevant skills, they could reap tremendous benefits through the digital platform economy. Thus, the government must prioritise the digital platform economy in its policy agenda so that Bangladesh does not fall behind other countries during this time of the fourth industrial revolution.
In light of the growing importance of the digital platform economy for Bangladesh, the following policies are recommended to boost the growth of the sector:
i) Empower individuals with market-relevant skills, especially technical skills and English language skills, through specialised training, so that they can participate in and benefit from the digital platform economy.
ii) Explore new financial tools and models for ensuring the sustainability of digital platforms in Bangladesh.
iii) Formulate a 5-year national digital platform economy development plan.
iv) Create a national guideline of the use of data generated in digital platforms.
v) Amend consumer rights protection laws so that they encompass digital platforms.
vi) Attract foreign investors to come to Bangladesh and invest in digital platforms.
vii) Bring companies and workers in the digital platform economy under the tax net.
viii) Increase digital awareness among the mass population.
ix) Provide tax holidays for new companies entering the digital platform economy.
x) Encourage brick-and-mortar companies to go digital through fiscal incentives.
Dr Fahmida Khatun is Executive Director, Centre for Policy Dialogue (CPD). Syed Yusuf Saadat is Senior Research Associate, CPD and Md Jahurul Islam is former Programme Associate, CPD. Research support was received from Ms Fariha Islam Munia, former Programme Associate, and Ms Rezwana Rashid Antora, Programme Associate, CPD. This study is part of the “Future of Work in Bangladesh” project supported by Friedrich Ebert Stiftung (FES), Bangladesh.