What ails Nepali start-ups?It is not good when entrepreneurs have to use software unapproved by the government.
It has been two years since the draft E-Commerce Bill was made ready, but it is yet to pass by Parliament and become law. So start-up entrepreneurs are in a state of confusion while carrying out their e-commerce businesses. Lack of legislation, among other aspects, remains one of the most problematic issues for Nepali start-ups, especially those operating on digital platforms. Several acts and policy pronouncements have been put in place to facilitate the digitisation process and ameliorate the challenges faced by these ventures, but they have run into roadblocks and remain on paper without being translated into action.
For instance, the Digital Nepal Framework 2019, Electronic Transaction Act 2008, Industrial Policy 2011, National Intellectual Property Policy 2017, and the Information and Communication Technology Policy 2015, among others, which are expected to act as enablers to support the digitisation process, have not yielded real benefits.
Infrastructure and bottlenecks
As emphasised in the ICT Policy 2015, the government had an ambitious goal of making at least 75 percent of the national population digitally literate by the end of 2020. Similarly, grand plans were launched to provide internet access to all by 2020 besides making platforms for electronic payments a national priority. But these twin objectives are yet to materialise. There are no shortcuts to better business operations and enhance the competitiveness of small and medium enterprises (SMEs) except effective production processes and improved linkages aided and assisted by ICT. Virtual marketplaces have a humongous potential to encourage and enable export-oriented Nepali SMEs to sell their merchandise and services abroad.
Equally important is attracting investments from local and overseas IT enterprises to bolster start-ups in Nepal. Discussions the author has had with entrepreneurs and past research show that start-up entrepreneurs do not perceive the overall economic climate to be encouraging. Changes in policy formulation exercises and failure to communicate them promptly have prevented government efforts from bearing fruit. The digitisation drive Nepal has embarked upon is proving to be tardy due to the inertia and hidden agenda of policymakers and big interest groups. These people are powerful and can influence the government's digitisation initiative. Delays in making digital signature and e-bidding legal and mandatory are acting as a dampener in promoting digitisation. Ambiguities in policy have further hampered the pace of the drive, causing dismay to digitally-enabled ventures in particular.
Only progressive policies will allow experimentation and risk taking. A feeling of distrust creeps into the minds of entrepreneurs when policymakers exhibit a lackadaisical and lethargic attitude in drafting and making suitable amendments. A sense of urgency and an element of credibility need to be injected into all the digitisation initiatives before they are supported by an enabling policy framework.
Consumers and entrepreneurs using e-commerce platforms find the ecosystem not ready, especially with regard to new digital initiatives. The much deserved 10 percent tax rebate in electronic payment provided by the policy announced earlier needs to be extensively publicised so that the benefits percolate to the targeted beneficiaries. Failure to educate them about the modalities will discourage them and act as a motivational dampener. Improper and ineffective policy formulation resulting in hardship has been the bane of the start-up ecosystem in Nepal.
Proper protocols for grievance redressal and effective safeguards against copyright violation have to be provided in practice. It is not enough to merely mention them in the Copyright Act 2002. Intellectual property infringement, such as copying logos online and stealing website information, should be monitored on a regular basis through appropriate control mechanisms. But neglect on the part of the government in this regard is a sad commentary on the state of affairs. Government officials are unaware about the nature of the business and the regulations, resulting in delays in registration. It is not good when entrepreneurs are compelled to use software that is unapproved by the government.
IT-enabled enterprises and start-up entrepreneurs are unsure about legal matters such as provision of tax incentives and rebates. This puts them in a dilemma as to the extent to which their operations are in conformity with the provisions in the legal framework. The government also needs to formulate policies and frame rules to collect commission charges through e-payment gateways. As long as government officials don’t fully understand the nature and functioning of e-business, entrepreneurs will be forced to face registration-related hurdles that are avoidable.
Start-up entrepreneurs firmly believe that to run e-commerce businesses profitably and sustainably, a pragmatic draft bill needs to be introduced immediately. Appropriate legislative interventions need to be made and adequate institutional networks provided for the Digital Nepal Framework and other government regulations to become effective. Only legislation that provides preferential treatment to the stakeholders can eliminate the perils in the entrepreneurial ecosystem.