Bureaucratic maze hampers e-commerce growth

Bureaucratic maze hampers e-commerce growth

An online shopper browses products offered on an e-commerce platform in Thailand. (Photo by Varuth Hirunyatheb)
An online shopper browses products offered on an e-commerce platform in Thailand. (Photo by Varuth Hirunyatheb)

E-commerce in Thailand is growing quickly and furiously. Yet the majority of operators refuse to be under the state regulatory system. You can't blame them. Blame the bureaucratic maze that keeps them out.

According to the Electronic Transactions Development Agency, there are more than 500,000 e-commerce operators in Thailand. Only 823 of them have registered their businesses with the Ministry of Commerce while only 2,460 direct-sales businesses have registered with the Office of the Consumer Protection Board (OCPB).

When less than 1% of e-commerce operators are under state supervision, it is bad news for both consumers and regulators.

It is not difficult to understand the operators' reluctance to join the system. At present, the e-commerce registration is scattered under different agencies according to their types and sizes of businesses, creating confusion among business operators.

For example, the e-commerce business registration is under the Department of Business Development, Ministry of Commerce. But once their earnings exceed 1.8 million baht, and if they are not the registered small- and medium-sized enterprises (SMEs) with the Office of Small and Medium Enterprise Promotion, then they must re-register directly with the OCPB. They also need to register with the Revenue Department to be part of the VAT system. And if they want to have their payment systems, they must acquire permission from the Bank of Thailand.

Imagine the time and headaches small businesses must go through in the mammoth-sized maze that is Thai bureaucracy.

Furthermore, despite the rapid growth of e-commerce, Thailand still does not have any specific laws regulating it. At present, e-commerce is operating in a legal Wild West, without any consumer protection.

Additionally, without state registration, these businesses cannot access state services to strengthen their capacities and expand their market reach. Building an effective and healthy e-commerce infrastructure is, therefore, necessary to ensure steady growth, consumer confidence and tax revenues.

It is useful to learn how other countries regulate their e-commerce. China and South Korea, for example, have E-Commerce Acts to establish a one-stop centre for business registration and licensing to avoid overlap among state agencies. This law protects consumers as well as businesses from being taken advantage of by platform operators.

Apart from registration difficulties, the lack of concrete benefits from registration also prevents e-commerce operators from joining the state regulatory system. To change this, the government first needs to coordinate among different state agencies to set up a one-stop centre for e-commerce registration with a set of incentives to convince them to join the system.

For example, the government could give them free access to state services to sharpen their online business skills, with training on topics such as choosing the right platforms for their merchandise, introduction to new e-commerce technologies, and effective marketing and public relations.

The operators also need information about the pros and cons of the aspects of each platform such as the fee rates, requirements for goods distribution, and the platforms' different services for members such as sales statistics and the payment system.

They will also be inclined to register their businesses if they can receive business consultation in return.

Special topics could include legal advice on e-commerce rules and regulations, accounting, tax requirements, tax forms and documents, and protection against exploitation from the e-commerce platforms.

Payment is one of the main problems small online businesses are facing. The 2017 Payment Systems Act does not allow them to set up individual payment systems. Only the registered companies with paid-up capital over 10 million baht can set up their e-payment systems for their customers.

After setting up an accessible registration system, the government should then improve the e-payment system for operators. In China, the regulatory system is divided into two levels. The nationwide e-payment system is only for companies with a minimum paid-up capital of 100 million yuan. For provincial or local e-payment systems, eligible companies must have a minimum paid-up capital of 30 million yuan. Having two levels of e-payment enables small businesses to enter e-commerce.

Importantly, the government must issue a law to regulate e-commerce specifically. It should cover e-commerce registration, consumer protection, measures to protect the sellers in the e-commerce platforms, and privacy protection policies.

To protect consumer interests, the law should require e-commerce platforms to share the responsibility with the providers of goods and services when consumer rights are violated. It should specify business transaction security standards by requiring e-commerce operators to have a reliable third party to provide payment gateways and escrow services. This measure to guarantee consumer compensation when damages occur will save operators from having to pay deposits with the OCPB.

The e-commerce law should also prohibit fake reviews of goods and services, deletion of consumer reviews, the sale of fake goods, and tie-in marketing without buyers' prior knowledge and consent.

There should be provisions to prevent the e-commerce platform operators from taking advantage of the providers of goods and services through unfair rules and fees. The platform operators must be required to record the information of goods, services and transactions for at least three years for official auditing.

Privacy is also an important matter. The law must make it clear that collecting buyers' data needs their prior consent and the use of that personal data must not affect their product choices or prices.

The research by the Thailand Development Research Institute shows that e-commerce will grow even more vigorously here than ever before when the e-commerce infrastructure is fully in place.

Setting up a one-stop service centre to facilitate e-commerce and VAT registration and creating confidence in state protection for good providers vis a vis the powerful platform operators will help to draw more e-commerce SMEs to work within the system.

Legal measures to strengthen consumer confidence will further spur e-commerce growth, especially with reliable third-party payment gateways for small operators, trustworthy privacy policies to protect buyers' personal information, and credible product reviews for their buying decisions.

With proper laws and infrastructure to boost system reliability and consumer confidence, e-commerce growth and opportunities for Thailand are limitless.

Thanthip Srisuwannaket is a researcher at the Thailand Development Research Institute (TDRI). Policy analyses from TDRI appear in the 'Bangkok Post' on alternate Wednesdays.


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