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IS BANGLADESH READY FOR A DIGITAL ECONOMY?

Malaysian startup Aladdinstreet, an exclusive premium quality and halal focused commodity e-marketplace that caters to both B2B and B2C communities over the Internet in Malaysia and overseas. Brand360 is a branding and marketing consultancy company, focused on building strategy, brand design and marketing. EOnnet is another Malaysian startup that provides training and consulting for Internet-based marketing. These Malaysian startups and many such others grown-up in last 5-8 years making a bold mark in Malaysian ecommerce segment as well as their digital economy. I was curiously listening from the women entrepreneurs/founders of these companies about their initial struggle, hard works, challenges and critical journey towards success of their startups in a panel discussion in the Digital Economy Forum 3.0 event in Kuala Lumpur recently.

The essence of this article is to discuss about fast growing digital-based trade, commerce and business and how that aligning to the economical eco-system of Bangladesh. Certainly, this is a vast topic. Technology-based startups are one of the significant groups in this eco system. Bangladesh being in her baby stage of digital economy has to get knowledge and experience from developed countries to build digital economy of the country. We can chart Malaysia, one of the fastest growing digital economies in Asia as a role model to align with the digital economy plan and initiatives of Bangladesh. Before I elaborate, let’s have a quick overview on the DEF 3.0 event in Malaysia.

The “Digital Economy Forum 3.0” event was organized by Malaysian Digital Chamber of Commerce (MDCC) in August this year in KL which was indeed a great learning experience on the subjects of technology-based business, e-Commerce, innovative ideas, start-up success stories from government officials, community and industry leaders, technologist and entrepreneur. Posturing the theme “Catalyzing Malaysian Economy Through Internet-based innovation”, objectives of this two-day program was to bring together industry expert under one common roof to discuss challenges ad solutions towards the growth of the industry, discussing Malaysia government policy on e-commerce in the spectrum of digital economy growth, foster the participation and dialogue between various stakeholders including the government, organizations and the digital business communities, so as to promote the growth of Malaysian digital economy.

These objectives are the reflection of the current state of Malaysian digital economy, which indicates that the foundation has already been established and an eco-system is set to run digital business. Now in 2017, Malaysian public and private sector stakeholders are forwarding the different development layers to further grow the digital-based economy for the nation. I realized how much importance has been given to digital economy of Malaysia, when I found supports and active participation of four ministries (International Trade and Industries, Science, Technology and Innovation, Education and Communication and Multimedia) and Secretariat of the Advancement for the Malaysia Entrepreneur (SAME), SME Corporation, Human Resource Development Fund (HRDF), Malaysia Digital Economic Corporation (MDEC) in this forum. All of these major government and private organisations extended their strong hands, under MDCC’s initiative to help SMEs, enterprises and startups to embrace technologies in their business to progress the digital economy.

The two-day event covered almost every aspect that requires innovating, building and growing business with technologies; importance of innovation and integration, exporting to cross-border, sharing economy to line-up with industry 4.0 revolution through panel discussion, key notes, success story sharing by ministers, community and industry leaders, technologist and entrepreneurs. In the event both the minister’s insightful and inspiring speeches revealed the level of commitment the government has to help this segment to turn Malaysia into a digital hub. Government’s commitment was best defined by Mr Datuk Jailani Johari, communications and multimedia deputy minister, who said, “The contribution of Malaysia’s digital economy to the GDP is expected to exceed the 20% target by 2020,” during his speech in another digital economy and e-Commerce conference in July, 2017.

If Malaysia has set 20% target of digital economy contribution in their GDP, question is where Bangladesh is in this race. According to BASIS, software industry is expecting to contribute 1% in coming years in the GDP. From this we can get an indication of e-Commerce contribution in economy. Influence of technology in our lives is rapidly growing in recent years and middle-class people are attracting to online commodity shopping. Apparently M-commerce, with increasing use of smartphones and PDAs, Bangladeshi users are making various types of transactions including buying and selling of goods, transferring money, requesting for services through the access of internet service on their mobiles. With the uprising of electronic transaction via banking channels, people have a wide range of choices from clothes, grocery, handhold items, ornament, foods etc. Area of digital commerce has spread out beyond online buying/selling to various media subscription and virtual products and services business.

E-commerce based businesses are associated with delivery, logistics, payment security, fraud management issues. As e-commerce is a vital part of running trade and commerce digitally, essentially improving the online transaction system is a fundamental pre-requisite. Bangladesh has entered the digital economy sphere compare to Malaysia and most of the primary facets like development of delivery channel, affordable and speedy internet, fraud protection, cybercrime and online piracy etc have remained challenges in front of respective stakeholders. These key issues should be addressed in order to make online shopping experience trustworthy, safe and secure for consumers.

Internet is the catalyst for ecommerce growth. If we look into moving digital services of different industries, there is no significant example that a furniture maker or food processor company started selling their product through online. In financial services, banks are promoting their product through website and social media but these do not fall into the digital commerce category, as transactions are not involved except in one or two services like EFTN. RMGs are not selling their cloths through their websites or large super store like Agora or Shwapno are not taking online orders. Implementation of credit/debit card by merchants and banks are still not even 5% of total cash transactions in the country as we can see majority of the shops are using cash. Malaysian people have gone far in online purchase such as buying flowers, groceries, movie ticket, bus/train ticket or even maid service.

While the practice of electronic transaction is non-significant in the digital ecosystem, the rising of technology based start-ups are showing light to embrace ecommerce. Although, not a wide variety, but online shopping companies like Bagdoom, Ajkerdeal, Daraz are examples of successful startups popularizing online shopping in the country. With eye-catching and extraordinary promotions in special occasions and festive seasons, Bagdoom is attracting and reaching to mass consumer. Online traders like Bikroy.com or job portals like Bdjobs have grown so significantly in the last few years that new startups can follow their strategies to become successful. However, startups still have a long way to go by facing and overcoming the challenges of proper government policies, high risk of failure, initial/working capital, promoting in an immature market.

In Malaysia it is much easier to setup a technology-based start-ups business. MyCash Online, a startup focused on providing end-to-end online services for migrants, has served over 60,000 unique migrant workers, and is a great example of successful start-up. Interestingly, the CEO and co-founder is a young Bangladeshi, Mehedi Hasan Sumon, who, being a foreigner, has not faced any discrimination at all. ”We have enjoyed tremendous support from different government agencies, including MDEC. We got MSC status from MDEC very easily and also got government grant through Cradle for LYL Technology. I think startups in Malaysia are very lucky to have many government agencies, funds and accelerators for support. There is also a huge community of angel and corporate investors, which is missing in Bangladesh,” Sumon said in an interview. Echoing Mehdi’s point, if Malaysia could create such a conducive environment, even for foreign entrepreneurs, why we can’t develop similar environment for the Bangladeshis? It is time to move move fast before online giants like Amazon or Alibaba step into Bangladesh and become threat to our new, small and medium ecommerce communities. Building and maintaining an ecommerce site for an established company may not be a challenge, if the company adopts right online marketing strategies and invest in digital infrastructure. But for startups, capital is a vital component to start and run the business up to a certain period. Traditionally banks were playing the key role for funding new companies, but now venture capitalists have extended their portfolios for startups, more specifically to technology startups. Realizing the importance, MDCC has also organized a workshop in the DEF 3.0 event that covered venture capital and crowd funding.

There were successful entrepreneur, startup owners, investment consultants and a bunch of angel investors who joined the workshop to share their experiences, success stories, criterion and process of raising fund for venture capital. Crowd funding is a new practice of funding a project or venture by raising many small amounts of money from a large number of people via the Internet, has been getting popular in the recent years. There are six enlisted firms recognized and guided by Malaysian Security Exchange Commission (SEC). The investors panel was sharing advices on unique ideas, business model, sustainability, safety, transparency and evaluation criteria to raise crowd funding.

In respect of transforming business to online, concern was raised whether to operate own e-store or join to a marketplace or maintain a hybrid environment. Business owners have shared their journey to move online while running their business offline too. ClickAsia, a brand store selling IT devices and software has grown 8% of their sales from offline to online and now ranked sixth in the online marketplace in Malaysia and Singapore. ATKC, a hardware tools and construction material supplier has moved from physical store to online store, selling their products online and maintaining delivery logistics and transports from third party.

Their journey was challenging but they had given inflexible efforts in gathering knowledge and devotion to move their business into digital form. James Ang, one of the successful Singaporean technology leader and an angel investor, who is also mentor for many start-ups in Singapore and Malaysia, rightly stated in one of his LinkedIn page post, “The curious and growth mindset epitomizes a true entrepreneur and progressive leader”. Bangladesh has no crisis of curious, enthusiastic, talented young entrepreneurs who can become another Lazada or Shopee (Malaysian leading online shops) with proper guidance and nurturing. The uprising trends in digital economy of Bangladesh brining immense opportunities of various digital services like ride sharing, virtual education, and food distribution through online and mobile apps indicate that. What we need now is to execute series of events similar to DEF 3.0 workshop in Malaysia, which could be a great example and an eye opener for us.

There are clearly two streams to grow digital economy in Bangladesh; one is enterprise and medium size businesses building and developing their own ecommerce channel to buy and sell their products and services. Another is ecommerce startups conducting their B2B and B2C business. Third party financial channels require establishing monetary exchanges models to support the ecommerce channels as their underlying backbone. Although Master/Visa/Amex/PayPal like traditional fintech channels are supporting to some extent, but businesses require reliable and secure native payment channels in order to conduct business confidently. Obviously, the central bank, as well as government has significant role to support private sector initiatives from regulatory, policy and cyber security perspective.

Digital economy movement is not limited to only online based transactions or ecommerce, but wherever economic activities might be, application of technologies can enable those activities digitally. This is like adopting a foreign language or mobile phone for communication or credit/debit card instead of paper money among mass population. Consequently, responsibility of implementing and practicing digital instruments in economy does not lie with the ICT ministry, BASIS or computer council only. All parties related to the country’s economy such as the banking sector including the central bank, various chambers of commerce and finance, education, commerce, science and telecommunication ministries have certain accountabilities to develop structured, policy and regulation based, well-governed digital economy. As an example, Malaysian e-commerce industry has reached to approximately $5.8 billion this year due to all stakeholders’ active engagements and substantial efforts. Bangladeshi stakeholders need to construct a favorable environment such as funding of private enterprises, setting up incubator firms for entrepreneurs that support innovation and digitization of all existing and new businesses.

Fintech revolution is often referred to essential constituent of digital economy growth. Perhaps, many new innovative technologies like Blockchain for Crypto currencies (e.g. Bit Coin) transactions in finance appeared destructive when apply to real business world. This is because those fintech are yet to be systematically supported by proper financial regulations for fintech firms and securing interest of impacted consumers of United States, Europe and other developed economies. On other hand, technologies like Big Data and Internet of Things are opening new spectrum of B2C, B2B and C2C paradigm in the digital economy.

Nobel Prize winner economist Joseph Stiglitz stated in his speech on “How to Reboot the Global Economy” in a World Economic Forum event that “GDP is not a good measure of good performance; it’s not a good measure of well-being”. Digital economy is a powerful tool for improving the standards of living. We have to be very vigilant in our evaluation and sincere in formulating appropriate policies for the sake of the growth of our digital economy, and ultimately for the well-being of the people. ■

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