Lagging in digitalization

Government has time and again failed to understand the need to go digital in all the sectors and put the effort in developing regulations to monitor the digital platforms

Few weeks back, Nepal Rastra Bank (NRB) announced that it will take serious action against those who receive or make international payments through social media platforms. Considering these transactions to be illegal, NRB has said that any such activities would be treated as foreign currency embezzlement for which the action would be taken under the Foreign Exchange Act (2019). The announcement was made amid the rising popularity of social media channels including Facebook, Instagram, Twitter and Youtube. While NRB seems to have recognized the growing popularity of these channels, the statement indicates the failure of NRB to prescribe a proper solution to bring these transactions into a tax bracket.

It isn’t true that making or receiving payments over international online channels is illegal. However, as none of the banking sectors are connected to the international digital banking channels, most of the companies and individuals opt to make payments using foreign bank accounts and cards. These payments are then either sent or received through informal channels such as hundi which then happens to be illegal in nature.

Provisions so far

As stated by one of the officials of NRB, there is a provision that allows any institution or individual to make payments for advertising over social media platforms which requires approval from the Ministry of Communications and Information Technology. Upon receiving the approval, the provision allows payments up to Rs 10,000 to be made through banks. It is unclear if this limit is per transaction or per year for an institution or an individual. However, any transactions beyond this limit require approval from NRB.

While the process to get an approval of almost a hundred US dollars is such a hassle, one can barely think of dealing with provisions to get approval beyond Rs 10,000. Moreover, for an agency providing advertising solutions to multiple clients and running multiple online ad campaigns, visiting a bank each time to make the payment is in no way a practical solution.

In one of the interviews, Sixit Bhatta, the founder of the popular Nepali ride-sharing app, said that “If we look at the developed economies, the absence of laws and regulations means it’s legal, and you make the frameworks very swiftly to accommodate innovation. In our (underdeveloped) economies, they (the government) deem the absence of laws as not legal and they are pretty slow in creating regulations.” The government has time and again failed to understand the need to go digital in all the sectors and put the effort in developing regulations to monitor the digital platforms.

In the absence of law, Pathao and Tootle riders have been cracked down and fined multiple times for “operating the vehicle against its purpose”. However, after a strong backlash from the public over the social media platforms, the government stepped back and stated that it would allow their operations. Soon it was heard that Prime Minister KP Sharma Oli directed the Ministry of Physical Planning and Transportation to come up with the laws for governing these platforms. While the Department of Transport Management had stated that it would have the new law ready by the New Year’s Day of 2076 (April 2019), nothing has been heard of over these several months.

Amid the growing popularity of online shopping portals and increased online transactions, the government released a national strategy for e-commerce only in August 2019, almost five years after the e-commerce began operating in a full-fledged manner. Yet lack of auxiliary infrastructures has been much of a hurdle for these platforms every now and then. For instance, the country lacks proper road maps and house numbering systems to locate or deliver the ordered goods. Moreover, the inability to make use of the debit or credit cards of the national banks for the payments in these platforms and compulsion to use third-party payment channels such as eSewa and Khalti has been a hassle for the users. Third-party platforms have surely been a boon until now. However, the ability to make direct payments through the cards of the banks is much of an easier option.

Time to speed up

No one can deny the fact that the offerings that can be made through online platforms are immense. The ability to encourage such platforms and accommodate them into the regulated market will not only ease the lives of the people but will also allow the government to bring these into a tax bracket and earn revenues.

Moreover, while the government aims to welcome millions of tourists there is a need to realize the significance of developing digital infrastructure to cater the needs of the tourists. For sure the tourists would prefer to search for a cab service online, book it through an app, and make payment using their card rather than taking up a hassle to walk to the street, look for a cab, bargain over the price, and get used to with the currency.

The author, MBA from the University of Northern Iowa, is a marketing professional

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