TAKING ADVANTAGE OF E-COMMERCE Legal, Regulatory, and Trade Facilitation Priorities for Lao PDR Taking Advantage of E-commerce Legal, Regulatory, and Trade Facilitation Priorities for Lao PDR1 1 This note was prepared by Marcus Bartley Johns (Senior Trade Specialist), Mombert Hoppe (Senior Economist), Martin Molinuevo (Senior Trade Specialist), Konesawang Nghardsysone (Economist), and Lillyana Daza-Jaller (Consultant). Preparation of this note was funded from the Multi Donor Trust Fund (MDTF) to support the Second Trade Development Facility, funded by Australia, the European Union, Ireland, Germany, the United States, and the World Bank. Summary and Key Recommendations T he rapid growth of e-commerce globally, including in the Association of Southeast Asian Nations (ASEAN), helps lower the costs of trade for Lao PDR exporters, and reduces prices for consumers. E-commerce can reduce costs for those who often face the greatest challenges in participating in “traditional” trade, including women, small firms, people with physical disabilities, and people in isolated communities. However, constraints in the e-commerce environment, such as limited Internet connectivity, high costs of payments, an incomplete regulatory infrastructure, and high trade facilitation and logistics costs, hold Lao PDR back, resulting in low levels of participation in e-commerce at the present, based on available data. These con- straints will need to be addressed in order to foster greater e-commerce participation. This note sets out some of the key challenges Lao PDR faces in upgrading its competitiveness in e-commerce, based on indicators that compare its per- formance with other countries. It does not provide an exhaustive coverage of all the constraints faced, but introduces more detailed analysis on two aspects of the e-­commerce environment: (1) regulations that have specific relevance for e-commerce, e.g., in protection of personal data, consumer protection and privacy, and; (2) the trade facilitation environment affecting e-commerce. The legal and regulatory framework contains some elements necessary to sup- port greater participation in e-commerce, but in other areas it needs strength- ening. Two important areas for further work are in strengthening the protection of consumers participating in e-commerce; and developing and implementing legisla- tion for the protection of personal data. Taxation of e-commerce is an important policy area, and a focus for many governments in ASEAN, as well as globally. Aspects of the taxation regime require clarification (e.g., the application of a de minimis threshold for low-value goods shipments—see below). Such taxation reforms should be informed by a previous careful assessment of costs and benefits, based on actual flows of services and goods in Lao PDR, before introducing new taxes that might restrict the growth of e-commerce before it has begun. The earliest area of growth in international e-commerce is likely to be through cross-border trade in goods. The trade facilitation regime needs further reform to avoid imposing undue costs on small firms or entrepreneurs seeking to participate in e-commerce. These groups are the least equipped to manage the costs associ- ated with weak transparency, unpredictable regulations, and delays in clearing ship- ments. Lao PDR has made progress in addressing some of the most relevant costs commerce facilitation, including improving transparency through the Lao Trade for e-­ Portal, but much more work is needed. Clarification is required on the regulations in place for low-value goods imports, and a formal framework to streamline the process- ing of such imports is also necessary. TAKING ADVANTAGE OF E-COMMERCE Key Recommendations 1. Implement relevant ASEAN approaches addressing regulatory issues specific to e-commerce, especially those associated with the ASEAN Work Programme on E-commerce, with a focus on: a. Consumer protection: Address any gaps relating to e-commerce in the 2010 Consumer protection law. Build capacity within government to implement con- sumer protection legislation, as well as awareness by consumers and firms of the rights and responsibilities involved. b. Privacy: Develop and implement regulation, including on a voluntary basis for the protection of data and privacy, based on the ASEAN Framework on Per- sonal Data Protection (2016). c. Electronic signatures: Effectively implement the existing electronic signatures legislation (the Law on Electronic Transactions) to ensure electronic signatures are recognized by all public agencies as valid. 2. Lao PDR should take a cautious approach to imposing new taxes on e-­commerce activities. There are limited data available on how to determine the impact of new taxes, and there is no international consensus on e-commerce taxa- tion. Lao PDR is encouraged to monitor international discussions on e-commerce taxation to identify areas where consensus may emerge, and understand imple- mentation challenges on e-commerce taxation in other countries. If plans develop for new taxes, these should be based on a cost-benefit analysis, as well as draw- ing on other countries’ experiences. 3. Establish a transparent and consistently applied procedure for handling low-value cross-border shipments, in line with the World Trade Organization Trade Facilitation Agreement and World Customs Organization Immediate Release Guidelines. This should include a clear de minimis threshold, below which taxes and duties are not collected, along with simplified procedures for low-value shipments. 4. Move away from the physical submission of paper documents for trade clear- ances to the electronic submission of documents. The goal should be to elimi- nate requirements for physical submission of documents for normal shipments, including low-value shipments typical in e-commerce. Paper-based clearance of cross-border shipments continues, despite the potential for electronic clearance through ASYCUDA World. Reforms that reduce the number of regulatory require- ments for traders (e.g., reduction of licenses required to trade) would also be important. Electronic submission of documents not only reduces compliance costs TAKING ADVANTAGE OF E-COMMERCE 3 for traders, but also for the government, due to a reduction in the need for physical inspection of forms. 5. Intensify efforts to systematically apply risk management principles in pro- cessing cross-border shipments. This is especially important as the volume of individual shipments grows, putting an additional burden on Customs and creat- ing delays if risk-based approaches are not used. Risk-based approaches to cross-border shipments recognize that the majority of shipments are likely to pose minimal revenue, public safety, or other risks. By facilitating the clearance of low- risk shipments, Customs and other agencies can concentrate resources on other aspects of the screening process and on those shipments identified as posing greater risks. 6. Confirm the leadership role of the Ministry of Industry and Commerce (MOIC) in the coordination of the e-commerce agenda across government, work- ing closely with other ministries, and bringing in the private sector. The e-­commerce agenda is one that cuts across the responsibilities of many different ministries, not just MOIC alone, so it needs to be acknowledged that a coordina- tion role involves bringing a range of different stakeholders together from across government. Examples of ministries involved include finance (on taxation), tele- communications (on connectivity), or education (on skills). TAKING ADVANTAGE OF E-COMMERCE I.    E-commerce: What Is It, and Why Is It Relevant for Lao PDR? E -commerce refers to the buying and selling of goods and services through digital means, including the use of the Internet, as outlined in more detail in Box 1.2 This has been a rapidly growing sector of many economies around the world, both developing and developed. Southeast Asia is no exception, meaning Lao PDR is situ- ated within a dynamic region for e-commerce. Although there is little information on the extent of e-commerce participation by firms in Lao PDR, available information suggests that the country currently has minimal participation in e-commerce. Lao PDR has not seen the kind of e-commerce growth that has taken place in the rest of ASEAN. For example: ●● Of the top 30 websites (by traffic) in Lao PDR, none are e-commerce sites. The list is dominated by search engines, social media, entertainment, and news/­ discussion boards. 3 ●● Few of the major platforms for e-commerce in the region offer to deliver goods, or make services available, to consumers in Lao PDR. For example, Grab (a ride-­ hailing service) is present in all ASEAN countries except Lao PDR and Brunei. Lazada, a retail platform operating in each of the ASEAN-6 countries, is also not present in Lao PDR. Some local equivalents are developing, such as eshopping. la (retail), vaivai (ride-hailing), or mydelivery (food delivery), but they do not yet appear to attract many users, nor have they grown significantly.4 ●● There does appear to be limited use of the Internet for consumer-to-consumer e-commerce. This reportedly involves direct buying and selling, using platforms like Facebook or WhatsApp.5 This also takes place in other ASEAN countries, but 2 There is no globally agreed definition of “e-commerce.” The Bank refers to e-commerce as the buying and selling of traditional goods and services (e.g., shoes, accountancy services), as well as digital trade, which includes newer “digital goods and services” that would not exist without the Internet (e.g., cloud computing services, data management). 3 Source: Web traffic data from Alexa.com. In comparison, Thailand and Vietnam both have two e-commerce websites in their top 30 (Lazada and Shopee) and Cambodia has one (Khmer24.com). 4 According to an October 2017 presentation to UNESCAP, Lao PDR’s Department of Import and Export, supported by US$560,000 of ADB financing, developed an “official e-commerce platform” for Lao PDR small and medium enterprises (SMEs) in 2015, and launched the website in 2017. As of 21 December 2017, only 18 products were listed on the website for sale. Web traf- fic data from Alexa.com indicates that the site receives minimal visitors. 5 Vientiane Times Article, August 2017: http://jclao.com/e-commerce-set-to-boom-in-laos-but- no-laws-to-regulate-sector/ TAKING ADVANTAGE OF E-COMMERCE 5 Figure 1: Growth in Retail E-Commerce: Retail E-Commerce Share of Retail Sales (LHS), and Annual Growth (RHS) 4.5% 56% 60% 54% 4.0% 45% 50% 3.5% 43% 3.0% 40% 2.5% 30% 2.0% 1.5% 20% 18% 1.0% 10% 0.5% 0.0% 0% Singapore Indonesia Malaysia Vietnam Philippines 2012 2015 Annual growth 2011–2015 Source: E-marketer. they also participate in e-commerce through platforms for buying and selling, which facilitates participation in a much larger market of buyers and sellers. E-commerce in goods still only makes up between 1 and 4 percent of overall retail in selected ASEAN countries, but it has been growing at a very rapid rate (see Figure 1). Why Does E-Commerce Matter for Lao PDR? Although the limited data available without the e-commerce platform, would suggest that e-commerce participa- need to rely on intermediaries and other tion in Lao PDR is at the earliest parties before, during, and after the stage, e-commerce comes with many transaction. This can be illustrated with opportunities that means it is impor- a simple example: If an entrepreneur tant to facilitate its growth. in Vientiane selling goods relies only on transacting with people with whom First, e-commerce lowers the costs he/she can physically interact, or who that firms face in exporting to inter- become aware of his/her goods without national markets. Evidence from other using the Internet, he/she will almost countries shows that e-commerce not certainly be limited to the immediate only increases the share of firms that market. The entrepreneur might want to export, but also the range of markets sell internationally, but potential buyers that they export to. They do so mainly are very unlikely to be aware of what the by connecting and allowing transactions entrepreneur is selling or trust the quality between distant sellers and buyers who, of the goods (among other challenges), TAKING ADVANTAGE OF E-COMMERCE 6 Box 1: Defining Concepts Discussions on e-commerce relate to a number of different concepts, potentially resulting in confusion. Three commonly used-terms are “digital economy,” “digital government,” and commerce.” For the purposes of this note the World Bank uses the terms in the following way: “e-­ Digital economy: the use of digital technologies in the economy to facilitate growth, produc- tivity increases, new business models, etc. E-commerce: the use of the Internet to facilitate the buying and selling of goods and ser- vices, both domestically and across borders. Digital/e-government: the use of information and communication technology (ICT) to improve government efficiency, including service delivery. The relationship between these three concepts is illustrated in this diagram. E-commerce is shown as a subset of the wider digital economy. Digital government is shown as a distinct set of issues, but there is some potential overlap with the digital economy. For example, digital government projects that use ICT to make it easier for firms to comply with regulatory require- ments can help to lower private sector compliance costs, contributing to the growth of the digital economy (as well as the economy more widely). Digital government/ Digital E-commerce e-government economy because of the physical distance and of these costs, leading to increased lack of any prior relationship between participation in trade, increased sur- them. E-commerce helps overcome vival rates for small firms, and greater these challenges by using the Internet diversification in export markets. to connect the buyer and seller, signifi- Figure 2 shows evidence from a 2014 cantly reducing the impact of physical eBay study on SMEs participating in separation. e-commerce through the eBay platform, comparing their export performance Small firms are the least equipped to with that of the larger population of deal with high costs of participating all “off-line” SMEs. Separate studies in trade, and e-commerce offers ways indicate that small firms participating in of reducing some of the key sources e-commerce have higher survival rates TAKING ADVANTAGE OF E-COMMERCE 7 Figure 2: The Impact This contrasts with the situation in tradi- of E-­ Commerce Participation tional trade, where the male-dominated on Export Rates for Small Firms business networks can result in women traders receiving less return for their Share of SME Vendors That Export (%) goods and services than male traders. eBay Off-Line Analysis of male- and female-owned firms suggests that male-owned firms Indonesia 100 3 are more likely to find customers through Malaysia 99 55 traditional networks of contacts, but Philippines 94 8 women-owned firms do not have access Thailand 100 48 to these networks.7 E-commerce offers a Vietnam 100 15 powerful way of overcoming this chal- lenge by directly connecting sellers with Source: eBay 2014 using eBay data and consumers abroad. World Bank Enterprise Surveys. Second, e-commerce can have wider, positive effects on economic wel- than off-line SMEs. By making it easier fare. Expanding the range of goods for small firms to participate in trade, and services available to domestic e-commerce could contribute to the producers can lead to greater quality of diversification of Lao PDR’s export base. inputs being available at lower costs for Greater use of online platforms for domestic firms. In Vietnam, one study trade could support greater partici- showed that firms using e-­ commerce pation of women in trade, by reduc- had on average 3.6 percentage points ing the gender bias in relationships higher productivity growth8 than between buyers and sellers through firms that did not use e-commerce. anonymity, and by allowing for more In the same way as trade in general, flexible working hours to overcome e-­commerce can improve consumer the time constraints women typi- choice and lower the price of goods and cally face in countries like Lao PDR. services available in the domestic mar- On Elance, a major global freelancing ket. This could be especially important platform, 44 percent of workers are in an economy like Lao PDR where there women, compared with 27 percent in the is a reliance on imports for many inputs nonagricultural economy more widely.6 and consumer goods. 6 World Bank (2016), “Digital Dividends: World Development Report 2016,” p108. 7 Bossuroy, T., et al (2012), “Shape Up and Ship Out? Gender Constraints to Growth and Exporting in South Africa” in Brenton, P., Gamberoni, E. and Sear, C. (eds) Women and Trade in Africa: Realizing the Potential, World Bank, Washington. 8 Total Factor Productivity. See World Bank 2017. TAKING ADVANTAGE OF E-COMMERCE 8 The Challenges for Lao PDR For Lao PDR to take advantage of the technology-enabled business. The lim- opportunities presented by e-commerce, ited number of Internet providers is an it will need to take measures to improve additional challenge. It makes Internet the competitiveness of its e-commerce connectivity expensive and not reliable. environment. A study based on indica- The issue also makes the Internet signal tors, compiled by UNCTAD and the poor which compromises participation in World Bank, shows that the e-commerce e-commerce. environment in Lao PDR is the weakest in Southeast Asia in most categories.9 Lao PDR’s use of the means of This section showcases some of the electronic payment needed for main indicators. commerce to grow is also limited. e-­ In ASEAN, Lao PDR has the third-lowest Basic connectivity to the Internet is proportion of the population with bank weak, with the lowest proportion of accounts, with just under one-third of the Internet connectivity in ASEAN. Lao population having an account at a finan- PDR has the second-lowest number of cial institution, ahead of Cambodia and mobile broadband subscriptions per Myanmar. However, Lao PDR has the 100 people in the region, and mini- second lowest usage of digital means mal use of fixed broadband (see Fig- to access bank accounts (see Figure 4). ure 3), which is important for growing This is an important indication of the Figure 3: Indicators on Connectivity Internet users/100 people Mobile and fixed broadband subscriptions 90 160 82.1 80 140 71.2 71.1 70 120 60 52.7 100 50 48.9 40.7 39.3 80 40 60 30 22.0 21.8 19.0 40 20 18.2 10 20 0 0 ya a l a am Br e La dia lo Vie ia Th nes am ar ilip ge do d R al i o ei ya R Ph etn r ilip am C one s b ia a ia al d ng sia In e ba C ia ve a ge M esi or M ne Vi ma In lan s d e M ilan or l a hin PD C nm M PD La run am s Th od d Ph era ay bo ba tn ap In pin ra Si ay pi u n ap ai n ng B o v Si lo G G Fixed broadband subscriptions/100 inhabitants Mobile broadband subscriptions/100 inhabitants Source: ITU. 9 UNCTAD (2018), Lao PDR’s Rapid eTrade Readiness Assessment, http://unctad.org/en/ PublicationsLibrary/dtlstict2018d3_en.pdf TAKING ADVANTAGE OF E-COMMERCE 9 Figure 4: Share of Account Holders That Access Their Account Digitally (mobile/Internet) 60% 50% 40% 30% 20% 10% 0% Myanmar Lao PDR Cambodia Philippines Indonesia Thailand Vietnam Malaysia Singapore Low-income Middle-income East Asia & Pacific Source: World Bank Global Findex 2017. capacity to use electronic payments clear. Its logistics timeliness is the lowest and mobile banking, both of which are in the region, and it has the third lowest important for growing e-commerce. score in the Universal Postal Union index of postal service reliability. Lao PDR also faces challenges in terms of logistics capability to ensure Technology use by firms is also very timely and reliable delivery of goods limited. World Bank Enterprise Survey once e-commerce grows. The two data show that even on one of the main means of delivering goods ordered most basic indicators of firm use of tech- through e-commerce are through logis- nology—use of e-mail to communicate tics companies (e.g., DHL, Fedex) or with clients—Lao PDR is also the weak- the postal service (see Figure 5). On est in the region (see Figure 6). both fronts, the challenge for Lao PDR is TAKING ADVANTAGE OF E-COMMERCE 10 Figure 5: Indicators on Logistics Postal reliability index Logistics timeliness (100 = most reliable) (1 = low performance; 5 = high performance) 100 98.2 5.0 90.0 4.40 90 84.3 4.5 83.4 80 4.0 3.90 70.3 3.65 3.56 3.74 3.46 3.50 70 68.1 3.5 3.30 3.35 65.6 3.19 3.27 60 3.0 2.85 2.68 48.0 50.2 50 2.5 40 2.0 3028.0 25.2 25.7 1.5 20.8 20 1.0 10 0.5 0 0.0 In bo i do dia o ia al R Ph yan ia Si pi r a s ai re et d m ba C dia ve na ge i do ia o ia al R y ia Si pin r a s ai e Vi and m ba C a ve a ge e am une ilip ma ilip a ng ne ng e Vi lan Th por di l a hin M PD M PD am n La nes s In bod La s M ays na na Th po Ph anm l a hi ra ra M ay ne C Bru In In l Br et C lo lo G G Source: LPI and UPU. Figure 6: Indicators of Firm Use of Technology Firms using e-mail to interact with clients (%) 100 91.5 90 85.0 80.4 80 78.0 70 69.0 60 57.5 52.9 50 46.2 40 30.6 30.1 30 24.3 20 10 0 a ia R ia ar s d am a na e ne di n di ag PD es s nm la hi ay bo In tn pi er n ai C e ya al do o ilip am av Th Vi La M M In Ph C l ba lo G Source: Enterprise Surveys. TAKING ADVANTAGE OF E-COMMERCE 11 Conclusion As the above indicators highlight, Lao especially due to its central geographic PDR faces many challenges in grow- location in the dynamic ASEAN region. ing its participation in e-commerce. The positive news is that Lao PDR has The subsequent sections focus on two the potential to learn from the way many specific elements of the e-commerce, other countries have approached the environment, regulatory issues specific challenge—it is also true that given the to e-commerce; and aspects of trade fast pace of technological change, and facilitation that have a significant impact the continual decline in price, the bar- on Lao PDR’s e-commerce competitive- riers for entering this type of trade also ness. Of course, there are many other continue to decline. With the right policy issues that need to be examined in more and regulatory framework in place, detail, as the indicators above highlight. Lao PDR will be well placed to benefit, TAKING ADVANTAGE OF E-COMMERCE II.    Specific Policy and Regulatory Issues for E-Commerce T he legal and regulatory framework in Lao PDR includes several of the key build- ing blocks for growing e-commerce. However, there is room for greater regula- tory certainty in specific areas, and also for ensuring regulation continues to be conducive to—and does not restrict—e-commerce. This section surveys the following policies:10 ●● Consumer protection measures such as restrictions on spam, right of withdrawal (e.g., procedures for returning products procured through e-commerce), and online dispute resolution; ●● Full implementation of the legal regime for electronic signatures, ensuring elec- tronic signatures are recognized by all public agencies as valid; ●● Privacy and data protection, ensuring reasonable safeguards exist for the use of personal information, including consent on the use by third parties, and the “right to be forgotten”;11 ●● Laws and regulations on acceptance of electronic documents and e-signature; and ●● Other specific regulations in intellectual property rights, intermediary liability, and taxation, that affect the participants engaged in e-commerce transactions. Lao PDR has taken meaningful initial steps in the regulation of e-commerce. It has introduced a legal framework for the recognition of electronic documents and signatures, adopted provisions limiting intermediary liability, and maintains an open regime for the cross-border flow of data and localization of data centers. However, there are several areas where the necessary enabling regulation is yet to be developed and implemented. In addition, some of these regulations already implemented could be updated to ensure consistency with global trends, as well as complemented with regulations meant to foster trust in digital markets, such as the protection of online consumers and data privacy. 10 This is not an exhaustive list of regulatory issues that affect the e-commerce environment. It is important to note that policy and regulation affect all aspects of the e-commerce environment introduced in the preceding section. For example, the level of liberalization and regulation of the telecommunications sector affects private investment in connectivity. Similarly, regulation on pay- ments affects the entry of new players into this market. Detailed analysis of these areas will be the focus of a separate, forthcoming study by the World Bank. 11 The right to be forgotten refers to the claim of an individual to have certain data deleted so that third persons can no longer trace them (Weber, Rolf H. “The right to be forgotten.” More than a Pandora’s Box 2 (2011)). TAKING ADVANTAGE OF E-COMMERCE 13 In general, the objective should be to strike a balance of introducing rules that enable and promote e-commerce, while avoiding overburdening and creating unwarranted restrictions. Certain regulatory policies, if well-designed and well-implemented, can facilitate and incentivize e-commerce growth; while others can act as a deterrent to e-commerce. Consumer Protection Lao PDR has basic consumer pro- and off-line transactions, but does not tection legislation in place through feature provisions meant to regulate a 2010 law, but more is needed to the specific concerns of participants ensure it addresses the additional in e-commerce. The law includes provi- requirements of the online economy, sions on transparency that are important so that consumers have at least the for e-commerce, but it does not include same protections online as off-line. provisions on right of withdrawal (allow- Regional standards have been devel- ing consumers to withdraw from the oped that give a basis for this effort agreement to purchase), redress (allow- in Lao PDR, as well as in the OECD. ing consumers legal recourse in the Main steps ahead include providing for case of problems), and online dispute consumers of rights and guarantees resolution, that can help boost consumer that address the specific challenges confidence in e-commerce transactions. of e-commerce, including redress and Updates to the legislation to address enforcement. Just as importantly, con- these issues in line with good interna- sumer protection legislation needs to tional practice would strengthen con- be implemented effectively, and aware- sumer protection for e-commerce in Lao ness raised of consumer rights and the PDR, thereby facilitating its growth. obligations on firms. At the regional level, ASEAN member Consumer protection regulation states (including Lao PDR) set out the helps boost trust in digital markets key aspects of a consumer protec- by leveling the playing field between tion framework in the 2025 Economic the business and the consumer in Community Blueprint. The Blueprint online transactions. Adequate regula- flags the need for ASEAN member tions help reduce concerns consumers states to develop a: and providers encounter when buying and selling online, such as the rights “common ASEAN consumer pro- and obligations they are subject to as a tection framework through higher result of an electronic transaction.12 levels of consumer protection leg- islation, improve enforcement and The consumer protection law cur- monitoring of consumer protection rently in place13 covers both online legislation, and make available 12 OECD Guidelines for Consumer Protection in the Context of Electronic Commerce, 2000. 13 Consumer Protection Law No. 02/NA, dated 30 June 2010. TAKING ADVANTAGE OF E-COMMERCE 14 redress mechanisms, includ- Protection (ASAPCP), including by ing alternative dispute resolution establishing an ASEAN-wide ODR mechanisms.”14 mechanism by 2025. This initiative, adopted in Vientiane in 2016, can Dispute resolution recommendations increase confidence in Lao sellers by provide for mechanisms to resolve consumers across the region, thus sup- domestic and cross-border disputes, porting their access to regional markets. including internal complaints han- dling and alternative dispute reso- Privacy and data protection lution. When goods or services are Lao PDR does not have a regulatory defective or do not meet the advertised framework in place for the protection quality criteria, governments should of personal data and privacy. Along ensure there are enforcement authorities with consumer protection, this will be and relevant bodies to ensure cost- important in boosting consumer trust in effective means are available for con- e-commerce as it grows. sumer redress. While some e-commerce platforms offer guaranteed returns for Lack of consumer trust in the way all their purchases, a regulatory frame- their personal data are used has a work for online dispute resolution can negative impact on e-commerce, and help generate trust in smaller vendors privacy protection laws are necessary or nascent individual websites. Online to prevent unlawful uses of personal dispute resolution (ODR) mechanisms data. Lao PDR currently has no regula- offer an inexpensive and speedy proce- tory framework in place for data pro- dure to solve disputes between buy- tection in digital markets. While a solid ers and sellers through arbitration or regulatory framework for privacy protec- mediation, even if located in different tion can be an important pillar to support jurisdictions. ODR mechanisms can be digital markets, comprehensive regula- established by domestic authorities or tion and oversight of privacy rules are as international initiatives. For instance, usually demanding in terms of technical the International Consumer Protection and human resources. However, as an and Enforcement Network (ICPEN), an intermediate step, Lao PDR may con- international organization that brings sider other regulatory practices, such as together consumer protection agencies promoting voluntary codes of conduct from different countries, offers an ODR by companies. These codes of conduct procedure for cross-border e-commerce can be developed by businesses in disputes that has been adopted by consultation with government and other 36 countries around the world (https:// stakeholders. This can be paired with econsumer.gov/). a certification scheme. For instance, under the Privacy Shield agreement with ASEAN countries have committed to the United States, the EU has recog- improving consumer protection for nized that US-based firms (who face cross-border purchases under the less stringent regulatory requirements ASEAN Strategic Plan for Consumer 14 ASEAN Economic Community Blueprint 2025. TAKING ADVANTAGE OF E-COMMERCE 15 than EU firms when it comes to privacy) Data flows and localization may comply voluntarily with EU require- regulation ments, which would make them eligible Lao PDR does not impose signifi- to handle EU citizens’ data. cant restrictions on cross-border flows of data. This is positive given The ASEAN Framework on Personal the importance of data moving freely Data Protection (2016) is an approach for the growth of e-commerce, and to managing data privacy that Lao the establishment of restrictions is not PDR has agreed to as an ASEAN recommended. If Lao PDR makes a member state. Although it is nonbind- policy decision in the future to impose ing, it provides an appropriate framework restrictions on cross-border data flows, for developing data privacy legislation this should be developed in close and its implementation in Lao PDR. consultation with the private sector, and The framework sets out key principles implemented cautiously. It should also and aspects of a data privacy regime, follow the best practice of requiring data including: localization. One current example of a ●● Notification and consent on the use data localization requirement applied of personal data; on the basis of “classification” is the law requiring securities companies to store ●● Accuracy of personal data collected data on domestic servers. This should be by organizations; reviewed as it may introduce unneces- sary costs for meeting Lao PDR’s regula- ●● Security with which personal data tory objectives. are held to avoid breaches; The ability to transfer data across ●● Allowing individuals to request cor- borders is not only essential for rections to personal data; e-commerce, but is also an increas- ingly important pillar of economic ●● Permitting transfers of personal data competitiveness. Cloud computing to other jurisdictions, on the basis allows users to store, manage, and of notification to and consent of the process data remotely. It eliminates individual, and on the basis that the infrastructure costs, which is highly jurisdiction/s to which the data is beneficial to users who can choose transferred also has a legal frame- to pay only for the quantity and time work for the protection of personal needed. Data localization is the require- data; ment imposed upon data providers to locate their servers domestically. This is ●● Limiting retention of personal data costly for businesses and ultimately for beyond the period for which it is consumers, as companies have to build needed; and additional data centers, and it limits cloud-based services that are available ●● Holding organizations accountable domestically. for the use of personal data. TAKING ADVANTAGE OF E-COMMERCE 16 Although there is no broad require- impacts on prices and therefore on Lao ment in Lao PDR to localize data, PDR consumers and producers. Lao PDR does require securities companies to store all their data in The growth of e-commerce has led domestic IT systems.15 Although this to new taxation issues since parties measure may be based on the desire to to a commercial transaction tend to protect sensitive financial information, be located in different countries. The data localization does not necessarily taxation of the increased number of low- offer any guarantees that the consumer value goods crossing borders is also a information is better protected in serv- topic of discussion in many countries—­ ers in Lao PDR than elsewhere, and it both in terms of duties levied, and also tends to increase the investment value-added tax/goods and services tax and operation costs for the companies (VAT/GST). Currently, Lao PDR law has concerned. Data centers are costly and not established a special regime for the can entail prohibitive barriers to entry, taxation of goods and services traded especially for small, nascent markets, cross-border through electronic means. such as the Lao securities market. Lao PDR may consider reviewing the cur- Before contemplating any changes to rent regime and assessing whether such taxation policies, it would be nec- requirements are justified. essary to obtain better data on the extent of e-commerce in Lao PDR to Taxation thoroughly assess the costs and ben- efits of different policy approaches. Lao PDR does not have a clearly This should to take into account the full defined policy on the taxation of range of costs and benefits involved, goods and services exchanged including: through e-commerce. Discussions around taxing such exchanges are tak- ●● The revenue implications of growing ing place in many countries, but there e-commerce: a number of govern- are few best practice examples globally. ments perceive an increased risk of Similar discussions are taking place in revenue leakage through an expan- Lao PDR, but it will be critical that gov- sion in e-commerce. This needs to ernment first thoroughly assesses the be analyzed carefully. In terms of costs and benefits of any new approach trade in goods, given the low value before making changes to relevant tax of most e-commerce shipments, legislation. Such changes should only even if there is incorrect declaration be implemented once the scope and of the value of goods, the actual rev- growth of e-commerce and its economic enue loss is likely to be very small. impact can be clearly understood. Such analysis will have to compare the costs ●● Collection and compliance costs: involved in collecting any additional the costs of trying to collect tax rev- taxes levied on goods and services enue related to e-commerce would traded through e-commerce, as well as need to be taken into account. 15 Announcement on IT system of securities company No. 371/SECO, dated 24 February 2012. TAKING ADVANTAGE OF E-COMMERCE 17 Because of the limited data avail- as electronic and digital signatures. ability, this is a difficult area in which This largely follows international guid- to conduct analysis, but studies in ance; however, there is significant room other countries have found that it is to improve the practical implementa- difficult to collect taxes and duties tion of some regulations and policies on the low-value cross-border goods that are meant to recognize electronic trade without the collection costs documents—for example, in complying exceeding the revenue generated.16 with border clearance requirements (see section on trade facilitation). ●● Impact of “de minimis” on consum- ers and producers: lower thresh- Ensuring electronic documents and olds for the application of custom signatures are recognized by all duties can lead to higher consumer public agencies facilitates remote prices, thus diminishing consumer electronic transactions, especially welfare. They may also reduce B2B (business to business) deals. competitiveness, as producers who The requirement of paper contracts acquire inputs through e-commerce and handwritten signatures presents face higher prices. New Zealand, an obstacle to efficient individual deals for instance, estimated that if the between domestic and foreign busi- threshold was lowered to a point at ness, especially for business relations which common consumer goods that require a degree of customization would be subject to duties and GST, of the products and services and that some goods could see hikes of are provided over time, such as those between 39 and 45 percent.17 that allow suppliers to connect to global value chains and/or services that require ●● Producer gains/losses of not facili- peripatetic delivery over extended tating e-commerce: e-commerce contract periods. While Lao PDR has can be used to facilitate imported laws in place that give legal validity to inputs that may then be exported in e-documents and e-signatures, these final products. Increasing the duties/ follow older models and are not effec- taxes levied on such inputs can neg- tively implemented, limiting adoption by atively affect the competitiveness of stakeholders. Lao PDR producers. Lao PDR’s Decree and Law on Elec- E-documents and e-signatures tronic Transactions18 (LET) of 2012 sets the rules for the use of electronic Lao PDR has the basic legal frame- documents and digital signatures. work in place that recognizes elec- The LET gives legal validity to elec- tronic and paper documents, as well tronic documents and the information 16 For example, Australian Treasury 2012, “Final Report: Low Value Threshold Taskforce.” 17 New Zealand Customs, Cabinet Paper presented to NZ Government on 27 June 2016, https:// www.customs.govt.nz/globalassets/documents/legal-documents/low-value-imported-goods- update-and-next-steps.pdf and https://www.customs.govt.nz/globalassets/documents/legal-docu- ments/low-value-imported-goods-update-and-next-steps.pdf (accessed 20 February 2018). 18 Decree and Law on Electronic Transactions No. 20/NA, dated 7 December 2012. TAKING ADVANTAGE OF E-COMMERCE 18 they contain. E-documents meet legal authenticity of the signature. In turn, requirements for being considered a a secure digital signature differs from written document, an original document, a basic digital signature in that, in the as well as a valid form for document former, the identity of the users and the retention where needed. Additionally, an encryption technology has been certi- e-document issued with a secure digital fied by a legally recognized entity. signature fulfills the legal requirement of a signed and stamped document. Elec- It is important to note that for most tronic contracts in compliance with the e-commerce transactions, especially LET and other relevant laws are legally those involving business-to-consumer enforceable. For the formation of an (B2C) e-commerce, the legal basis e-contract the parties must agree on the that the LET gives for basic electronic technological means, electronic commu- signatures is sufficient. For example, nications modes, and e-signature rules. in a typical B2C purchase of goods online, a user will indicate their agree- The LET differentiates between three ment with the terms and conditions of types of electronic signatures: the website/platform by clicking on a consent form, and then will agree to pay 1. the basic electronic signature is using the relevant payment mechanism defined as electronic data associ- (e.g., a credit card). ated with a data message which identifies the signatory and indicates For international e-commerce, which the signatory’s intention in relation to involves border clearance by Cus- the information in the data message; toms and other government agencies, the practice of not fully accepting 2. the basic digital signature is electronic documents is a barrier to uniquely linked to the signatory, the growth of e-commerce (see next able to identify the signatory, and section on trade facilitation). In this created using a method under the context, however, the immediate priori- sole control of the signatory, and any ties for Lao PDR are to ensure universal subsequent change of the data is acceptance of electronic signatures detectable; and where they meet the criteria set in the LET. This should be for the appropri- 3. the secure digital signature is cre- ate level of electronic signature for the ated using a method which ensures transaction involved; for the majority protection against forgery in com- of e-commerce transactions, including pliance with the procedures and international e-commerce, the basic requirements set out by the Ministry electronic signature will suffice. for Science and Technology. Other regulatory issues The main difference between these on e-commerce models is that while the basic electronic signature can be the simple writing of The development of a sound regu- the name in text or image, the two types latory framework for e-commerce of digital signatures entail the use of requires ensuring a large number of encryption technology to ensure the policies are considered. Some of these TAKING ADVANTAGE OF E-COMMERCE 19 policies might not appear to be directly protect their creations, while ensur- related to electronic transactions, but ing some flexibility for the sharing they can inadvertently impact digital of knowledge and information. Lao trade. Some policy areas that are par- PDR Law on Intellectual Property ticularly relevant include: of 2011 sets out the basis for the protection of patents and copyright, ●● Intermediary liability: social as well as recognizing acts permit- platforms allow individuals to share ted without consent of the author content of their own creation in the and without valuable consideration, form of text (blogs, tweets, articles, such as quoting published works, as etc.), images, or video. For this rea- long as the use is compatible with son, these platforms are described fair practice. The law adopts the as “intermediaries.” In order for them concept of “fair use” as a limitation to provide this content, a regime is to copyright, following the practice required where such intermediary in U.S. law and other jurisdictions.19 services can offer content cre- ated by third parties without being Finally, a growing number of Lao directly responsible for it. Following PDR’s international and regional trade international practices, Part V of agreement commitments contain the Law on Electronic Transaction provisions on e-commerce, which provides that intermediaries are generate an impetus for reform but only subject to liability if they have also require implementation. In terms information in data messages or of existing agreements, the ASEAN electronic records which give rise to Australia-New Zealand FTA (AANZFTA) civil or criminal activity, and imposes contains an e-commerce chapter, on the intermediary the obligation to although it is nonbinding. The AANZFTA remove criminal or harmful informa- chapter sets a framework for ASEAN tion. Importantly, this regime should members, as well as Australian and be complemented with specific pro- New Zealand, to put laws and poli- cedures for intermediaries to follow cies in place that address many of the for the prompt removal of unlaw- issues identified above, including rules ful information. This does not limit on electronic authentication and digital intermediaries from putting their own signatures, online consumer protection, standards in place that regulate the data privacy, and paperless trading. type of content that can be shared, beyond any requirements under law. In terms of agreements under nego- tiation, in September 2017, ASEAN ●● Patents, copyright, and fair use of Economic Ministers agreed to launch intellectual property: an intellec- negotiations for an ASEAN Frame- tual property regime must balance work Agreement on E-commerce. This the capacity of content developers process is ongoing but it is expected to (whether they are musicians, writ- cover the main topics addressed in this ers, or code developers) to legally report. The Regional Comprehensive 19 Law on Intellectual Property (Amended) No. 01/NA, dated 20 December 2011. TAKING ADVANTAGE OF E-COMMERCE 20 Economic Partnership negotiations also capacity of officials, cover areas of lim- contain a chapter on this topic. While ited understanding for the government, these negotiations are ongoing, it is not and generate new issues for the private possible to determine what obligations sector. The new agreements are likely to will be created, but it is likely they will be build upon but go beyond the existing at least at the level of AANZFTA, identi- ASEAN commitments through AAN- fied above. ZFTA. Lao PDR is likely to benefit from international support to understand the As with trade agreements in general, potential impact of these commitments, implementing commitments related successfully implement them, and take to e-commerce could be a driver of advantage of a more open regional mar- reform. At the same time, implementa- ket for e-commerce. tion can be a challenge and stretch the TAKING ADVANTAGE OF E-COMMERCE III.    E-commerce Facilitation One of the key shifts in trade brought about by rapidly growing e-commerce20 has been a large increase in the volume of low-value, small-parcel shipments cross- ing borders. This is because e-commerce has facilitated the order and delivery of indi- vidual products, or small rather than large consignments, at greatly reduced costs. Available data indicate that levels of cross-border e-commerce in Lao PDR remain low, meaning the challenge for Lao PDR is to put in place the policies and pro- cedures that will facilitate growth. This will be accomplished through a combination of more effective implementation of existing reform initiatives to lower trade transac- tion costs, as well as addressing aspects of e-commerce that relate to particular trade facilitation processes or requirements. It would allow firms and consumers to benefit from e-commerce as the enabling environment improves in mobile connectivity, logis- tics, access to payments, and other areas where Lao PDR lags behind other countries in the region. This is particularly important for a landlocked developing country such as Lao PDR which already faces high transport costs relative to competitors. The objective for Lao PDR should be to balance the facilitation of e-commerce trade with maintaining its control over the border, in ways that do not generate excessive costs for the government, traders, and consumers. The only way of doing this is by intensifying the effort made so far to adopt a modern trade facilita- tion regime, which provides transparency and certainty, uses risk-based approaches to facilitating trade, ensures all relevant agencies are contributing to trade facilitation improvement, and increases the use of ICT and automation in the border clearance process. Information from other countries makes clear the extent of the rapid growth in small parcel trade. In Japan, small parcel deliveries by express services have almost doubled in the past 10 years, and the number would almost certainly be higher if postal shipments were also included. In Australia, around 10 million parcels valued at below AUD 1000 (US$800) are delivered annually by air cargo. Approximately 75 percent of these parcels are valued at less than AUD 100 (US$80).21 From 2008 to 2011, express cargo delivery of parcels valued at under AUD 100 grew by more than 41 percent,22 from 5.07 million to 7.21 million annually. Data from New Zealand sug- gest a similar clustering of small parcels associated with e-commerce below a value of around US$80. 20 Cross-border trade in traditional, physical goods. 21 Economic Structure and Performance of the Australian Retail Industry, Australian Productiv- ity Commission, 2011. 22 Low-Value Threshold Taskforce Final Report, Australian Treasury, 2012. TAKING ADVANTAGE OF E-COMMERCE 22 Figure 7: Some, but Limited, Growth in Cross-Border Small Parcel Delivery, with More than Half of Total Shipments Valued at Under US$150 2015 11,679 4,362 6,720 22,761 2016 13,020 4,357 6,915 24,292 2017 13,958 4,554 7,025 25,537 YoY Change (2015–2017) 19.5% 4.4% 4.5% 12.2% Source: DHL Lao PDR. Note: YoY = year over year Available data for Lao PDR show a modest increase in low-value shipments associated with e-commerce. Between 2015 and 2017, shipments valued at below US$150 expanded by only 12.2 percent, according to data provided by DHL (see Figure 7). Parcels valued at US$150 account for more than half of all small parcel shipments delivered by DHL—and it could be expected that other carriers delivering goods by air do so with comparable values, given most express companies globally are experiencing the same trend of increasing e-commerce deliveries. This growth in small parcel trade is positive, but it comes with challenges for Cus- toms, other border agencies, and ultimately for other traders, too. Where inefficien- cies exist, for example, in the use of paper-based rather than automated systems, their impact is compounded by the rapidly-growing small parcel trade. This can also push up costs for Customs and border agencies, especially if they try to maintain inefficient procedures, such as paper-based clearance or high levels of physical inspection. This also pushes up costs for traders. If the costs for traders are high enough or the regula- tory complexity is significant, this can act as a major brake on growth in e-commerce, especially given the relatively small size of the Lao PDR market, compared with more developed e-commerce markets in neighboring countries such as Thailand and Viet- nam. There would be a risk that e-commerce in Lao PDR would be restricted before growth even begins. De minimis Thresholds and Simplified Procedures As e-commerce grows, one of the In Lao PDR, the de minimis regime most relevant areas of trade facilita- is not clearly defined, with a de facto tion policy is the use of de minimis threshold of US$50 being imple- thresholds, below which goods are mented, although the regulation exempt from duties and other taxes underpinning this does not seem and are subject to streamlined clear- applicable to this type of cross- ance procedures, including minimal border trade. This de facto level of documentary requirements. US$50 is being implemented based TAKING ADVANTAGE OF E-COMMERCE 23 on interpretation by Customs of a 2016 There are also no streamlined clear- regulation issued by the Ministry of ance procedures for express small Finance.23 This regulation requires that value parcels and cargos valued (i) less frequent travelers (two trips above US$50. Any parcels or cargos per month) who possess any artefact with the value exceeding US$50 are or goods of about US$50 in value for required to follow the formal customs noncommercial purpose will be exempt declaration process through the ASYC- from import taxes, and (ii) more frequent UDA system. This clearance process travelers (more than two trips per month) often frustrates importers with unneces- will not be exempt from import taxes sary transaction costs and processing even if the value of goods is US$50 or times for small value parcels. According less. An actual value for the latter will to express delivery companies, low- be determined by Customs, and import value parcels and cargos imported into taxes will be applied. It should be noted Lao PDR are currently mostly trade sam- that the regulation appears intended ples and for noncommercial purposes. for goods carried by passengers, not International experience shows that Cus- for wider trade, so its interpretation by toms spends more money on this admin- Customs seems to be broader than istrative process than it collects in import intended. This underlines the impor- taxes. Due to the high transaction costs tance of establishing legal clarity on the for individual importers to self-clear their de minimis regime. low-value packages through Customs, freight forwarders and customs brokers Customs clearance of goods under are often used to handle customs clear- this de facto US$50 threshold is ance, generating costs for small firms relatively simple in most cases but and individual consumers. is not clearly defined or consistently applied. Goods imported with a value An in-depth assessment on costs and of less than US$50 have been reported benefits of the de minimis regime in cleared for release by Customs after Lao PDR is crucial to formalize and the waybill and inventory records were increase the de minimis threshold and checked, without a full customs declara- to establish well-defined streamlined tion and requirement of supporting doc- clearance procedures. Lao PDR’s de uments. However, this practice has not minimis threshold is one of the lowest in been formalized into a clearly defined ASEAN countries, and it would benefit regulation that is fully in line with the from raising the threshold to facilitate World Customs Organization (WCO)’s a growing e-commerce in small and Immediate Release Guidelines (IRG— low value packages and offset its high see below). A simple regulation could be logistics costs. There is still a lack of established to formalize all processes to understanding of the de minimis regime ensure transparency and predictability among policymakers, customs officers, in handling de minimis goods in order to and stakeholders, and how it is impor- avoid any discretionary actions. tant to stimulate e-commerce for small 23 MOF Regulation # 2834, dated 30 August 2016 on collecting value-added tax (VAT) at 10 percent for passenger’s artifacts or carried goods. TAKING ADVANTAGE OF E-COMMERCE 24 and medium enterprises in the country. globally of the thresholds at which these Lao PDR needs to determine an appro- categories apply. The global express priate de minimis value by taking into industry advocates that a threshold of account its own circumstances and US$200 is set for Category 2 goods, international good practice. If the coun- allowing them to cross borders with try could establish a formal de minimis simplified procedures and no duties/ level, it is likely to have a positive impact charges. on small and medium enterprises and provide opportunities for increased Reflecting the global divergence e-commerce. in practice, there is no common approach in ASEAN, and governments International guidelines set out good have different views on the merits of practices for managing the cross-bor- raising or lowering de minimis thresh- der delivery of low-value goods. The olds. For example, Figure 8 shows the World Trade Organization (WTO) Trade wide variation in thresholds in ASEAN, Facilitation Agreement (TFA) procedures although there is potentially an emerging on Expedited Shipments (Article 8) as trend toward raising the thresholds—for well as the WCO Immediate Release example, Indonesia, the Philippines, and Guidelines are relevant to Lao PDR, as Malaysia recently raised their thresholds. a member of both organizations. The The level at which the threshold is set provisions of Article 8 of the WTO TFA has implications for the costs associated set out a number of procedures that are with assessing risk, inspecting parcels, good practice for facilitating a grow- collecting revenue, and so on. Setting ing e-commerce goods trade. These the threshold involves a policy choice on include: whether revenue should be collected on low-value shipments, but it needs to be ●● minimizing documentary weighed against the capacity to collect requirements; these revenues given the high volume of low-value goods as e-commerce grows. ●● expediting the clearance of goods The benefits for consumers of facilitating on arrival; and e-commerce also need to be taken into account. ●● setting a de minimis threshold below which duties and charges will not Lao PDR should put into place a clear apply. framework for handling the importa- tion of low-value goods, drawing on The WCO Immediate Release guidelines these standards as they apply to Lao set out four categories for the clearance PDR as a WTO and WCO member, as of goods: Category 1 for documents; well as practices in other countries. Category 2 for low-value goods where The de minimis value should be set at a no duties/charges apply; Category 3 for level where it does not result in exces- goods where duties and charges are sive compliance costs for traders, or applicable but simplified procedures excessive collection costs for the Lao apply; and Category 4 for higher-value authorities. Consideration should be goods where duties and charges are given to raising the de facto level of applicable. There is a wide variation TAKING ADVANTAGE OF E-COMMERCE 25 Figure 8: De Minimis Thresholds in ASEAN Economies De minimis, i.e., no duty/tax collection (US$ equivalent, converted from local currencies) Brunei 295 Cambodia 50 Indonesia 100 (Note: Only for delivery through courier services. Increased in June 2017 from US$50) Lao PDR 50 (Note: De facto level with legal basis unclear) Malaysia 128 (Note: Increased from US$76 in October 2017) Philippines 200 (Note: Increased from US$100 in October 2016) Singapore 296 Thailand 28 Vietnam 40 Average 131 Source: Authors; and GEA Data on De Minimis Regimes World Wide, global-express.org. Data not available for Myanmar at time of drafting. US$50 to a value at approximately the threshold. These procedures could also ASEAN average of US$131. Simpli- apply to goods below a certain higher fied clearance procedures should also threshold (e.g., US$500), even if duties/ be put in place for goods below this charges apply to them. Rebuilding Momentum on Other Trade Facilitation Reforms Lao PDR has made some progress which also show manufacturing firms in its trade facilitation performance reporting that the average number of in recent years, but further improve- days to import and export has fallen. ment is needed to establish clear and However, despite this reduction in clear- efficient procedures that facilitate ance time, Lao PDR is not making full e-commerce. Improvements have been use of systems and processes required made in customs clearance reforms to make further substantial progress and the introduction of an automated in facilitating trade. This is reflected in customs declaration processing system declining relative performance in ASEAN (ASYCUDA World). Results from the on key international benchmarks such Time Release Studies (TRS) show that as the Logistics Performance Index. The the mean customs clearance time has regulatory framework for a large number decreased from 17.9 hours in 2010, to of products also remains cumbersome 11.2 hours in 2012, and to 6.5 hours in and nontariff measures drive up compli- 2016. These results are consistent with ance costs and paperwork. World Bank Enterprise Survey data, TAKING ADVANTAGE OF E-COMMERCE 26 Use of ICT A fully functioning LNSW, consistent with the vision set in the 2013 Blue- Customs is not making use of the print, would deliver a major benefit for potential for the ASYCUDA World sys- all traders, and would address a key tem to allow for paperless clearance. constraint on e-commerce growth, Customs clearance still requires physi- while also lowering compliance costs cal submission of the paper customs for the government. The excessive use declaration form and its supporting of paper-based processes results in documents, in parallel with electronic high costs for the public sector, with staff submission of customs declaration data. undertaking routine document-checking An electronic signature in support of tasks where these resources could be electronic submission of customs data used more effectively in other roles. Expe- for clearance is not yet widely recog- rience shows that the greater use of auto- nized in practice, although it is allowed mation in border clearance processes by the Law on Electronic Transaction. involves a shift in staff roles and responsi- bility from routine checking functions, to a Optimal use of electronic customs clear- more efficient use of resources, i.e., tasks ance and streamlined procedures will that focus on higher-risk shipments. help reduce unnecessary delays and abuse of dedicated customs rules and procedures. While the development of the Risk management Lao PDR National Single Window (LNSW) The use of risk management is still at is under way, its longstanding delay has an early stage, although it is central affected the government’s appetite and to the efficient management of grow- momentum for sustaining meaningful ing cross-border trade. In principle, reforms in trade regulations on predict- Lao Customs is making some use of ability and transparency. It is essential to ASYCUDA World to define shipments ensure, as articulated in a 2013 LNSW for screening based on risk. However, Blueprint, that the establishment of the its capability to frequently analyze and LNSW connects multiple government update the risk profiles remains limited, agencies, providing for a single submis- and Customs officers tend to inspect sion point for trade-related approvals. It shipments regardless of the risk-based is essential that this effort goes beyond screening. For example, there are automating existing procedures with- reports of rerouting low-risk cargos to the out properly re-engineering business high-risk channel without proper quanti- processes and reforming inconsistent fication and justification. In March 2017, regulations. To date, the LNSW is still not Customs attempted to improve compli- operational, and recent advice suggests ance of front-line officers by limiting the it will not offer the kind of comprehensive number of officers able to channel goods functionality outlined in the Blueprint. Even for inspection. However, the initiative was in the case of the Customs ASYCUDA met with significant internal resistance system, which would technically allow for and implementation has been inconsis- paperless trade transactions, the authori- tent. Clearance by customs officers often ties have been reluctant to eliminate the opens door for negotiation and discre- manual submission of documents, even tionary actions that lead to unnecessary for trusted traders. delays and transaction costs for traders. TAKING ADVANTAGE OF E-COMMERCE 27 Addressing these fundamental issues and simplifying regulatory require- will improve the environment for general ments. This is especially the case for trade and for e-commerce. requirements administered by agen- cies other than Customs. Lao PDR Streamlining trade-related approval maintains a complex regime of Non- procedures Tariff Measures (NTMs) that affect many imports and exports. Further analysis is Some improvements have also been required to identify the extent to which made in the transparency of trade reg- NTMs affect goods typically imported ulations through the launch of the Lao through e-commerce. However, NTMs, Trade Portal (the country’s national like import licenses that generate little trade repository). Lao PDR has imple- revenue but generate complexity and mented a Trade Information Portal in cost for traders, affect the kind of goods goods, with a solid user base and ongo- (small size, relatively low value per ing effort to keep the content updated. product) that may be imported through It has recently added to this a portal for e-commerce. For example, import information on trade in services. licenses are in place for: parts for motor vehicles, motorcycles, and bicycles; Ensuring this content is updated and material for food preparation. Import regularly, thereby making information licenses that appear to generate mini- readily accessible to entrepreneurs mal revenue are also in place for goods and SMEs, would assist in facilitating that are important inputs for improving e-commerce. Functional tools like duty information technology (IT) connectiv- calculators and plain language searching ity, thereby enabling e-commerce. This for product classification—­ complemented includes optical fiber, insulated wire, by the greater use of advance rulings by and electrical apparatus for telephony. Customs on product classification, value, Complying with these NTMs generates and origin—can be useful in providing unnecessary delays and puts financial more information to SMEs. This can also burdens on importers and exporters to create an incentive for voluntary com- obtain documentary compliance. This pliance with trade-related regulations, is reflected in private sector complaints mitigating the risk of revenue loss through about the time required to comply with false declarations of value (even if the low documentary procedures for trade: the commerce goods means the value of e-­ World Bank Group’s Doing Business potential impact of this risk is low). How- Report 201824 shows that obtaining ever, without the application of de minimis documentary compliance still takes thresholds and simplified procedures for about 216 hours, or 9 working days, small shipments, the relative costs for for import as well as export. The NTM individual consumers and entrepreneurs Review Sub-Working Group, for which of accessing information will continue to the Ministry of Industry and Commerce be high. is the Secretariat, should play a role in assessing and streamlining the role of The portal should be used to its full NTMs in e-commerce. potential as a tool for streamlining 24 WBG Doing Business Report 2018. TAKING ADVANTAGE OF E-COMMERCE Conclusion T his report has surveyed two key aspects of the e-commerce environment where reforms would help Lao PDR boost its e-commerce competitiveness. First, in terms of the legal and regulatory framework for e-commerce, some of the basic building blocks are in place, but gaps also exist. There are three notable areas for further work. First, implementation of the standards set through the ASEAN Framework on Personal Data Protection would support consumer confidence in e-commerce. Addressing gaps in the existing Lao PDR consumer protection legislation to ensure it applies fully to e-commerce is the second priority. Third, Lao PDR needs to fully implement the provisions in the Law on Electronic Transactions to ensure elec- tronic signatures are recognized by all public agencies. The second broad challenge addressed in this report is facilitating e-commerce in goods. Lao PDR has made some progress in reducing the transaction costs asso- ciated with accessing information and processing cross-border shipments. However, there is a need for further work in a number of areas. The de minimis regime needs to be clarified, with simplified procedures for low-value shipments put in place. The transition to full electronic processing of shipments needs to be completed, and the simplification of and transparency in the trade regulatory framework needs to be further improved. Finally, the risk-based processing of imports needs to be fully implemented. Although e-commerce is currently at low levels in Lao PDR, reforms in these areas—as well as in other aspects of its e-commerce environment—will make it easier for its producers and consumers to benefit. For a landlocked country that faces high trade costs in “traditional” trade, the potential offered to lower the costs of connecting to international markets is especially important. Effectively tackling the challenges of e-commerce requires a strong leading voice within government, as well as close cooperation among multiple government agencies. MOIC has been identified as the focal point for e-commerce in the Lao government. As such, MOIC’s initial actions should focus on three channels: (i) tak- ing stock of the different elements of the “digital ecosystem,” including infrastructure, entrepreneurship, regulation, etc., and understanding where the main challenges lie; (ii) identifying the main public and private actors relevant in the field, and; (iii) identify- ing the main e-commerce opportunities for Lao PDR. TAKING ADVANTAGE OF E-COMMERCE 29 As the leading agency on e-commerce, MOIC must ensure all agencies under- stand the potential for e-commerce and are in agreement on how to support it. For instance, MOIC must work closely with: ●● The Ministry of Telecommunications, which plays a central role in ensuring the infrastructure is in place (and is affordable) to support the development of digital business; ●● The Ministry of Finance, in providing for effective revenue collection, in a manner that fosters rather than restricts e-commerce; ●● Customs, in establishing efficient channels for e-commerce of goods; ●● Ministry of Education, in ensuring a healthy number of young people are interested and well prepared in areas related to digital technologies; and ●● Other agencies as required. MOIC will also need to work closely with key private sector stakeholders in this area in Lao PDR, to identify the main business interests for e-commerce in the country and implement policy reforms that have an impact on e-commerce. The private sector should be seen as a partner in upgrading Lao PDR’s e-commerce competitiveness. For a landlocked country like Lao PDR, digital technologies offer new channels for integration with international markets. As such, the potential for e-commerce as a tool for export diversification and increased competitiveness cannot be dismissed. By providing an open regime for foreign investment and cross-border goods and services—and data—, Lao has taken steps toward creating a conducive regime for e-commerce. However, much remains to be done, both within the public sector and with the private sector. TAKING ADVANTAGE OF E-COMMERCE