Digital economy: Regulatory challenges

Some quarters have been giving credit to COVID-19 for the rise of the digital economy.   The truth, however, is that, the growth of the digital economy has been exponential even before we realized how lethal COVID-19 is and how it will influence the way we do business. 

It all started in 1989, the year the World Wide Web came into being. Through the years, as the global communication network expanded, entrepreneurs and consumers all over the world found it so handy to do business or purchase online. Gladly, it afforded small entrepreneurs to reach larger markets. Not only that, it gave them also the opportunity to access, so easily, significant information that only huge corporations used to exclusively have. Thus, giving them better chances of taking a viable share of the market.   

Take the gifting market, for instance. The research study by Technavio (a leading technology research and advisory company with a global coverage and focuses on emerging technology trends that can shape the market) on the global personalized gifts market for 2017-2021 “provides detailed industry analysis based on skill and technology (hand decoration, embroidery, engraving, printing, and carving), product (photo and non-photo personalized gifts), retail format (in-store and online), and geography (the Americas, Europe, APAC, and MEA).”

It also says in its report that as it gets to as far as a compound annual growth rate or CAGR of 8.5% (by 2021), the “global personalized gifts market size is expected to reach US$ 31.63 billion by 2021.” 

It further said that “the Americas is predicted to be the leading regional segment, generating both highest revenue and maximum incremental growth through the forecast period.”

“Seasonal decorations, such as decorative cups, plates and napkins, account for a major portion of the total revenue generated in the market. Also, the growing home and wall décor market have also been aiding in the expansion of the growth opportunities for personalized gifts.”

On these developments, Technavio analysts singled out at least three key factors that are contributing to the growth of the global personalized gifts market. “These are growing gifting culture and increasing demand for seasonal decorations; innovative gifting solutions and advancements in technology; and the expanding online retail, kiosks, and online distribution channels.”

Notably, most of these items (especially, the personalized gifts) are not really manufactured by huge corporations. These are mostly done by small entrepreneurs.

The same is true in the country today. As we can observe, Facebook alone carries a lot of items for sale. Using their FB personal accounts, entrepreneurs sell their items with gusto but with total disregard of existing laws. Apart from quality standards and warranties, the “price tag” requirement of the “Consumer Act of the Philippines”, particularly, Article 81, is the most abused. 

So that, just recently, sellers are urged by the Department of Trade and Industry to abandon the now famous “PM is the key” phrase.  In its stead, DTI mandated that a price tag must be indicated.

Moreover, the Asia-Pacific Economic Cooperation (APEC) reported that “the ride-hailing and ride-sharing services like Uber, Grab and Go-Jek have a reported market size of USD20.4 billion in 2016–2017 in Southeast Asia alone.” 

So huge, yet, this figure still excludes motorbikes, which are popular in countries like ours.  Though this development afforded livelihood to many, according to APEC, this has met “concerns in a number of jurisdictions about passenger safety as well as labor standards for drivers.”

More so with online bookings. APEC further reported that “the number of online bookings for short-term rentals have grown at an even faster rate: from more than 21,000 arrivals in 2009 to over 80 million recorded in 2016.”  However, while these so called “digital accommodation lessors” have some advantages over their customary counterparts, such as hotels and pension houses, most, if not all them, have no permits to operate and do not adhere to fire and safety laws.

Therefore, for everyone’s protection and safety, national and local regulators must make sure that the established standards are adequately complied with by these digital entrepreneurs.  More importantly, as we all know that most, if not all, of these digital entrepreneurs, are not paying taxes to the government, we must urge congress to pass House Bill 6765 or the Digital Economy Taxation Act of 2020 as proposed by Cong. Joey Salceda.   

Hopefully, together with subjecting the digital entrepreneurs of the same rules and regulations imposed on the traditional businesses, this bill, if passed into law, shall not only raise PhP29 billion annually but shall also level the playing field.