Empowering Inclusive and Sustainable Trade in Asia-Pacific: Perspectives on the WTO E-commerce Moratorium

Krishna Moorthy

The India Electronics and Semiconductors Association (IESA) is working towards integrating India into the global Electronics System Design and Manufacturing (ESDM) and semiconductor manufacturing supply chain. This initiative is crucial for India’s economic growth. By aligning with international industry standards and practices, India can attract investments, create job opportunities, and foster innovation in the electronics and semiconductor sectors.

To ensure successful integration, bridging the gap between academia and industry is essential. Due to the rapid advancements in deep technologies, even educational institutions are finding it challenging to keep up with the pace. Therefore, collaboration and knowledge exchange between academia and industries are needed to facilitate the efficient transfer of technology and promote skill development in emerging fields.

The success of micro, small, and medium-sized enterprises (MSMEs) and startups is key to India’s future. India has built a significant startup ecosystem, making it one of the largest globally. Supporting and nurturing these businesses will contribute to economic growth, job creation, and technological innovation. Policies and initiatives that create a conducive environment for MSMEs and startups are crucial for India’s economic prosperity.

A sustainable model for digital transformation and cross-border data movement is also essential. Every day, terabytes of data, including chip design data and licensed technology transfers, cross borders. Developing secure and efficient mechanisms for data handling while ensuring privacy and protection is crucial for fostering global partnerships and achieving industry, innovation, and infrastructure goals.

India’s policy on data privacy and protection is seen as a step in the right direction. With ongoing discussions and deliberations on the policy, India acknowledges the importance of robust regulations to safeguard personal and sensitive data. Strengthening data protection measures will enhance trust, promote the growth of the digital economy, and contribute to achieving peace, justice, and strong institutions.

Regarding moratoriums, a clear definition and implementation process are necessary. It is not possible to categorize a moratorium simply as good or bad. Establishing distinct classifications and definitions for the goods and services involved and conducting systematic studies are essential to better understand and address the complexities surrounding moratoriums.

The volume, accuracy, and security of data involved in the digital landscape present significant challenges. As large amounts of data are transferred between points, concerns about its accuracy, correctness, and security arise. Careful handling and effective data management strategies are imperative to address these concerns and ensure the integrity and reliability of data in various digital processes.

The Goods and Services Tax (GST) has played a significant role in normalizing tax components such as sales tax and value-added tax in the technology industry. Over the past 15 years, the technology industry in India has experienced tremendous growth and has become a major contributor to the economy. The implementation of customs duty should consider both the input and output side of products or services to ensure fair and equitable taxation.

Providing credit for paid customs duty can help offset the additional cost burden on businesses. This mechanism will promote competitiveness and encourage businesses to participate in global trade. Initially, excluding MSMEs and services from customs duties and gradually including them can be a viable approach to support their growth and prevent undue burdens on these sectors.

Finally, there are concerns about the impact of customs duties on the technology industry in India. Given its significant contribution to the economy, any policies or decisions regarding customs duties should carefully consider potential consequences to maintain the industry’s growth and competitiveness.

In conclusion, the IESA plays a crucial role in integrating India into the global ESDM and semiconductor manufacturing supply chain. Bridging the gap between academia and industry, nurturing MSMEs and startups, ensuring sustainable digital models, and implementing effective tax and customs duty policies are key priorities for India’s economic development. With the right strategies and initiatives, India can position itself as a global leader in the electronics and semiconductor sectors, promoting innovation, job creation, and economic growth.

Audience

During the discussion, several prominent issues were brought to light. Firstly, a member of the audience raised the concern that small companies struggle to differentiate between imported and domestically-produced digital services. This was seen as a significant challenge, as it can impact the ability of these companies to compete effectively in the digital economy.

The importance of a bottom-up approach for small businesses was also emphasized, with one audience member expressing agreement on its significance. This approach focuses on empowering small businesses and giving them a voice in decision-making processes, leading to better economic growth and job creation.

Case studies further highlighted the crucial role of intermediate activities in business models, where both imported and domestic materials are used in the value chains. This finding underscores the interconnected nature of the global economy and the reliance on cross-border collaborations for businesses to thrive.

In relation to start-ups in the digital space, it was noted that many Indian start-ups primarily serve foreign clients. This highlights the international nature of the digital economy and the potential for global expansion and opportunities for these start-ups.

The adoption of digital tools was shown to have a significant positive impact on businesses, with evidence indicating a 31% increase in customer reach. This demonstrates the effectiveness of digital tools in driving business growth and enhancing market presence.

Furthermore, the increase in exports was found to be a reflection of the effectiveness of digital tools. This suggests that digitalisation plays a crucial role in enabling businesses to expand their reach and access international markets.

The use of digital inputs and final products in the production process can have potential cost implications. This observation raises questions about how the incorporation of digital technology in the production process may affect overall costs and profitability.

Trade decisions were highlighted as an area that often lacks adequate input from stakeholders. This raises concerns about the inclusivity and transparency of decision-making processes and the potential impact on various stakeholders in the digital economy.

The need to address digital taxation was also highlighted. It was noted that the shift towards digital transactions necessitates the development of appropriate tax policies and frameworks to ensure fairness and reduced inequalities.

Complexities in VAT structures and the need to outsource VAT handling to larger entities like Amazon were identified as challenges for small and medium enterprises. This underscores the need for streamlined and simplified tax systems that accommodate the unique circumstances of small businesses.

Lastly, there was a plea to eliminate the moratorium in order to allow tax decisions to be made at the national level, based on national circumstances. This call to action emphasizes the importance of national sovereignty and tailoring tax policies to suit specific countries’ needs and circumstances.

Overall, the discussion shed light on various challenges and opportunities in the digital economy. It highlighted the need for small companies to effectively differentiate between imported and domestically-produced digital services, the significance of a bottom-up approach for small businesses, and the crucial role of intermediate activities in business models. It also acknowledged the international nature of start-ups, the positive impact of digital tools on business growth, and the implications of digital inputs and final products on production costs. Additionally, concerns were raised about trade decisions, the need for digital taxation policies, and the challenges faced by small and medium enterprises. The plea to eliminate the moratorium underscored the importance of national-level tax decisions tailored to specific circumstances.

Devi Ariyani

A recent survey in Indonesia has shown that micro, small, and medium enterprises (MSMEs) heavily rely on digital goods and services. This reliance has led to increased productivity and cost efficiency, positively impacting MSME operations. The use of digital technology has also facilitated business expansion, both locally and internationally, with a 31% increase in customer expansion reported. However, the continuation of the moratorium on digital goods is crucial for MSMEs, while challenges such as limited access, increased trade costs, and threats to inclusivity need to be addressed. The survey revealed that most digital goods and services used by SMEs in Indonesia are imported, highlighting the country’s reliance on foreign technology. Furthermore, the implementation of an 11% value-added tax (VAT) on digital goods and services is an important consideration for the digital economy. A moratorium on digital goods may also impact business planning and international transactions, emphasizing the need for careful management. Overall, the survey demonstrates the importance of digital goods and services for Indonesian MSMEs, while highlighting the potential challenges and implications associated with their regulation.

Gareth Tan

The discussion explored various aspects of entrepreneurship, digital regulation, startups, and government partnerships. A key point that emerged is the recognition of the specific challenges posed by digital entrepreneurship. It was emphasised that this form of entrepreneurship brings about unique and difficult situations that require innovative solutions.

Furthermore, the conversation highlighted the increasing focus of governments on digital regulation. This shift in attention can be attributed to the growing significance of the digital economy in driving substantial parts of national economies. This observation underscores the need for governments to adapt their regulatory frameworks to effectively govern this evolving landscape.

In relation to digital regulation, startups and micro, small, and medium enterprises (MSMEs) were identified as particularly vulnerable. These entities were deemed to be most affected by digital regulation and often ill-prepared to navigate its complexities. This highlights the challenges faced by such businesses in adapting to regulatory requirements in the digital sphere.

As part of the effort to bridge the gap between governments and businesses, the Dialogue and Partnership Alliance (DPA) aims to provide a platform for engagement between startups and MSMEs with governments. This initiative serves to facilitate communication and collaboration between these entities, fostering an environment conducive to addressing the challenges posed by digital regulation.

In addition, it is worth mentioning that Gareth Tan, a participant in the discussion, expressed dissatisfaction with the management of the Q&A session. While the details of his grievances were not provided, his discontent suggests that the session may have been ineffective in addressing participant concerns or facilitating productive dialogue.

In conclusion, the discussion shed light on the challenges and opportunities associated with digital entrepreneurship, the increasing focus of governments on digital regulation, the vulnerability of startups and MSMEs to regulatory changes, and the DPA’s efforts to foster partnerships between businesses and governments. Gareth Tan’s dissatisfaction with the Q&A session serves as a reminder of the importance of effective facilitation in ensuring meaningful and productive discussions.

Firnando Buenayre Sirait

Hara is a blockchain-based data exchange that aims to bring visibility to farmers and promote digital financial inclusion in the food and agriculture sector. The company utilises young and technology-savvy individuals in villages to collect data about farmers and their lands. This data is securely stored on the blockchain, ensuring its integrity and protection. The objective is to create a network of data that can be used to establish partnerships, such as with financing and insurance companies, to enhance the value and support provided to farmers.

One specific area of focus for Hara is traceability within the palm oil supply chain. By implementing blockchain technology, Hara seeks to develop a system that can track palm oil production from the source to the end consumer. This traceability can help ensure sustainable sourcing and responsible production, aligning with the Sustainable Development Goals of Zero Hunger and Responsible Consumption and Production.

However, there is concern regarding the potential implications of Singapore’s data moratorium on Hara’s operations. As Hara stores and processes its data in Singapore, any regulations or restrictions imposed by the government could directly impact the functioning of the business. The outcome of these regulations remains uncertain, but it is an element of uncertainty that Hara needs to consider and monitor closely.

In addition to the challenges posed by data moratoriums, cross-border data transmission also proves to be a hurdle for businesses aiming for growth. The current business model of continuous innovation and rebuilding may be hindered by the burden of transmitting data across borders. Not only does this process incur costs, but it also limits the speed and efficiency of innovation. This is particularly relevant for businesses heavily reliant on digital goods and services, as any restrictions on cross-border data flow would need to be thoroughly examined and studied to understand their impact.

The potential increase in costs due to cross-border data regulations is another key concern. These additional expenses might have to be shouldered by both the company and its customers. As a result, customer pricing and company budgets may be affected, potentially hampering business growth and profitability. While it is essential to keep businesses profitable, some suggest that passing on a portion of the rising costs to customers may be necessary to maintain financial stability and sustainability.

Overall, Hara’s blockchain-based data exchange has the potential to bring significant benefits to the food and agriculture sector by providing visibility for farmers and promoting digital financial inclusion. However, challenges such as data moratoriums and cross-border data transmission need to be addressed and monitored. Further research and analysis are required to fully understand the implications of these challenges and recommend appropriate strategies to mitigate any negative outcomes.

Katrin Kuhlmann

The analysis highlights key points regarding trade policies, revenue concerns, and the potential of the digital economy. Firstly, a significant number of surveyed Micro, Small, and Medium Enterprises (MSMEs) were unaware of the World Trade Organization (WTO) moratorium on customs duties and electronic transmissions. This lack of awareness could have negative implications for their businesses, as it may result in additional administrative costs passed on to customers. Moreover, approximately 74% of MSMEs reported not being consulted about potential changes in import tariffs on electronic transmissions, indicating a lack of communication between MSMEs and policymakers.

The analysis emphasises the importance of inclusive trade and bottom-up analysis. Katrin Kuhlmann, who conducted an empirical study, believes that understanding how trade policy decisions would affect MSMEs is crucial. The study revealed the significant impact of changing trade policies on MSMEs, highlighting a lack of knowledge concerning the WTO moratorium among MSMEs and concerns about the lack of consultation with the government.

Concerns about revenue and debt burden prevail among many governments, particularly in African countries. Therefore, governments are exploring the potential of the digital economy as a revenue source. However, caution is advised as the digital space differs from physical goods, requiring a deeper understanding of its revenue potential and effective administration.

The analysis also highlights the positive impact of business innovation on growth potential and future revenue. Companies making innovative strides are commended for contributing to economic growth. Furthermore, evidence-based research is essential for informed policy decisions. For example, a feasibility study in India demonstrated that digital imports led to an increase in jobs, while an OECD study found that the revenue implications of digital imports are relatively small in terms of total government revenue.

The analysis draws attention to the approaching deadline for the WTO e-commerce moratorium. Research indicates that ending the moratorium could decrease consumption and harm GDP. Therefore, maintaining the moratorium while conducting further research on the implications of e-commerce is suggested.

Lastly, the analysis stresses the need for more study on the cost implications of the moratorium and the importance of greater consultation and engagement before revoking it. Local regulations and consultations are also deemed important in shaping policies.

Overall, the analysis provides valuable insights into the challenges and opportunities related to trade policies, revenue concerns, and the digital economy. It underlines the importance of awareness, consultation, and evidence-based decision-making to support the growth and sustainability of MSMEs and effectively manage revenue and debt burdens.

Gareth Tan:
Hello everybody. Thank you so much for joining us today for the last slot of this wonderful public forum. Thank you for making the time to be here and thank you for, you know, sometime maybe delaying your flight home or something for this. I know that there’s been a fair bit of excitement about this topic so we are excited to also be here presenting to cap things off, cap off what have been some very exciting and interesting conversations over the past week. So my name is Gareth Tan. I am Associate Director at APCO Worldwide. We are the Secretariat for the Coalition for Digital Prosperity for Asia and we represent Asia-Pacific small and medium businesses across a number of different jurisdictions in terms of providing them a platform to engage with governments and understand regulatory issues that might be coming their way. So just to kick things off, entrepreneurship is a challenge. It doesn’t need to be overstated. Entrepreneurship is a challenge in any environment whether in the developed or developing world. Entrepreneurs face constant obstacles to profitability and constantly need to juggle innovation and the sustainability of their business models. Digital entrepreneurship, of course, presents particular challenges. At the same time though, governments are increasingly looking to digital regulation and regulating the digital sector. So issues concerning data, digital trade, security and similar issues are of growing concern to regulators and for good reason. Significant portions of national economies are increasingly driven by the digital economy. So naturally there is a great deal more attention being paid to these issues. So this is where the DPA comes in. Startups and MSMEs are often the most affected but least prepared for digital regulation. The DPA wants to therefore provide them adequate forewarning about the kind of trends that might be affecting them, the kind of regulations that might be coming in their direction and allow them an avenue to ask about some of these trends before they hit them. More importantly though, the DPA also wants to provide them with a platform to engage with governments. We want to make sure that policy makers can understand the challenges that startups and MSMEs in the digital sector face and the opportunities they face, they are able to detect as well across the region. So let me just maybe run through some of the activities that the DPA has been up to over the past few months. First of all, this is your panel for today. I will be introducing each panelist individually and each of them is an august authority in their own field. So I hope you are looking forward to hearing from them soon after this. So again, we are a coalition that represents Asia-Pacific businesses and seeks to connect them with governments and help them to understand, help both sides to understand each other in a more concerted way. We have a number of different members from across the region, in Singapore, in Vietnam, Indonesia, India, Korea, Thailand and Japan and we are looking to expand rapidly throughout the region as well. Ever since our launch in September of last year in Singapore, we have held further launch events in India, Korea, Indonesia, and Thailand, at each of which we have been able to bring government regulators into conversation with our members to ensure that they have a strong understanding of the concerns that start-ups that are looking to expand into the region have. Most recently, we had a launch event in Vietnam, which was held in conjunction with the National Agency for Technology, Entrepreneurship, and Commercialization Development, NATEC, which is under the Ministry of Science and Technology. And that attracted many, many start-ups and start-up-affiliated organizations in Vietnam. We’ve also prioritized digital trade as a key area for us to invest our time and attention into because digital trade does affect many of the SMEs that we are engaging with, their ability to expand into different regions, their ability to access different technologies. So we were notably, we organized an event on the sidelines of the IPEF trade negotiation round in Singapore, and that allowed us to bring some of our Singaporean SMEs in contact with some of the trade negotiators to have them understand some of the issues that they face in expanding wider in the region. We also have developed a report analyzing some of the economic impact. So you can, you know, go onto our website, which is on the brochure that we have handed out, and please find out more about us. Some member case studies. We were able to help a Singapore, we were able to help our, a Singapore member called Kenobi to access exclusive networking opportunities with key government agencies in Vietnam, alongside that, you know, one of our panelists, Hara, is, we also have been able to help profile them at an international level to, again, give Hara the platform to engage with international regulators that control some of the… key policy issues that affect HARA’s business model. So before I hand things off to our speakers today, I wanted to just really touch on the moratorium on customs duties on electronic transmission from the perspective of the DPA. So from the conversations we’ve had from our members on the moratorium and the concerns they’ve raised, on the whole there’s been need for a lot of education. There is not a strong understanding at the best of times of what the moratorium is, what the moratorium does. But when there has been that education, when members understand what the moratorium is doing, they become very worried when they hear that the moratorium might be removed. So I mean, there’s a very, very simple reason for that at the end of the day. Working within the bounds of the moratorium is all our SMEs have known. It’s all they have kind of like understood to be their norm. It is the default condition in which they have seen a lot of unicorns rise and fall, a lot of emerging technologies emerge and be adopted. Whether or not they have been aware of the moratorium’s effects directly, they know that tariff-free data flows have enabled their business cases and the business cases of the companies that they wish to emulate. It’s because of this, therefore, that our SMEs are very, very worried and have reflected as much to us. They’ve asked us if the removal of the moratorium will mean that their access to technologies they need to maintain their competitive edge against more well-resourced companies, especially given the increasingly frequent emergence of new technologies like blockchain, the metaverse, and AI, if that’s going to be affected. They’ve asked us what the imposition of tariffs might mean on their ability to expand into other regions, reach new consumers, and achieve the scale that their predecessors have. in a tariff-free environment. And they’ve also asked us what new customs regulations are going to mean for the cost they already have to bear with regards to due diligence, and what that will in turn mean for their already very fragile balance sheets. So we at the DPA do not have firm answers to these questions, and the answers we have come to have not been encouraging. That’s part of why we’re here today, to see there’s an answer that we can come to together which can make sure that our SMEs retain the same opportunities they have today, past March 2024. So today we’re really privileged to have perspectives from some of the Asia-Pacific region’s key growing economies, as well as a lot of research from the region and further afield. Without further ado, let me introduce our first speaker. Professor Kathleen Coleman is a visiting professor of law at Georgetown University Law Center and faculty co-director of the Center on Inclusive Trade and Development. She’s also the president and founder of the New Markets Lab, a non-profit law and development lab. Professor Coleman, please.

Katrin Kuhlmann:
Thank you so much. I am absolutely delighted to be here, and it’s great to see all of you on a Friday afternoon. I will try to make this as lively as I can, since I know everyone has had a very long week. So I am going to talk about a study that I have done, an independent research study through my non-profit organization, NML. We call it for short. We can go to the first slide if you don’t mind me telling you which slide, right? And so the non-profit organization that I work with, I started it in 2010. It was really meant to be a way to think about trade differently, more from the bottom up. I am a former trade negotiator, have worked on trade issues for a long time. I’m now teaching trade law. But often when we look at how… when we think about trade bond we think about trade policy we think of it kind of going from the government down we don’t really think about it starting from those who are impacted by it and i think this is such a perfect issue of really needing to think bottom-up because this is something that is going to impact countless small companies around the world so this study was designed to figure out what impact would it have could we try to assess a potential change in the moratorium might have an impact on a small business so that was how we designed this and again we started from this kind of big challenge and this is something i’m so thrilled to hear us all talking about let’s make trade more inclusive i feel like that is becoming a buzzword right inclusive and sustainable trade don’t mean just that we put out a press release saying that or that we put those words into a trade agreement they really do mean that we have to do much deeper work kind of going bottom-up so we set about to try to look at this question through the lens of the moratorium which is fascinating too because the change hasn’t happened yet so we’re trying to kind of assess a potential change in the future uh… and we did this is a pilot in two countries uh… outside of asia so i made sure that that was okay for the panel that i spoke about you know kind of a a different perspective but we could do this study anywhere we’ve developed an instrument that we could then replicate in other countries uh… tailoring it somewhat to domestic law we had to do this a little bit every time we had to change how we were approaching it based on domestic law uh… but this was meant to be a pilot that we could replicate and we know of course as we have already heard from gareth that digital trade is incredibly important to small businesses particularly after the pandemic and we know that governments are increasingly looking at regulation in this area so we wanted to see then how could trade rules in digital trade in particular related to the moratorium and a potential change on customs duties and electronic transmissions, how would they impact those who are less engaged? How would we assess whether these companies know about this, whether they’ve been consulted by their governments, and whether there would be a potential impact in terms of cost, in terms of compliance, and in terms of competitiveness? So that’s what we set out to do. We can go to the next one. Here’s how we designed the study. We developed a structured survey instrument, so we wanted to try to get as many responses as we could, and we wanted them to be consistent. So we knew that we needed a survey to do this work. We knew it needed to be an empirical study. Even though I’m in the law faculty, I try to look at how other disciplines do their work, and I think structured surveys are a really good way of getting information consistently across. And we also wanted this to be statistically significant. So we wound up talking to almost 300 companies in Kenya and South Africa. We did some kind of one-on-one consultations, and then we did field visits and wound up doing a lot of meetings with individual MSMEs. We worked with a technology partner called Verdentum that has a lot of experience doing survey work and is also a social enterprise, really works also in this field of development like we do as a legal nonprofit to help us collect the data, process it, and analyze it. And I wanted to use slides so that you could see some of the visuals at least of the data. And we have a handout that I think some of you – I saw it as I was going – walking up to the front of the room, so I think you have that as well. So again, what did MSMEs know? Had they been consulted? And what kind of impact? So let me unpack this a bit and show you what we found. Is it working? Oh, good. You don’t – I don’t need to bug you anymore. Okay. So the survey was structured around these, the following elements. So first we tried to understand how were MSMEs using digital technology? How much does it impact their business? Is it central to their business, and do they kind of differentiate between local and cross-border? Then we tried to understand what awareness do small businesses have about the government policymaking process, both generally, which I think is really important information for all of us doing trade policy as well, and specific to import measures on e-commerce. So we tried to understand their awareness. How do they get information on changes in policy? How do they communicate with the government? Are governments representing their needs? Is the perception that MSMEs think that their needs are being represented by government? Are they members of trade associations? And then more specifically, were they aware that there could be possible import tariffs on electronic transmissions if this moratorium were to be lifted? Then we looked at whether or not they knew in particular about government regulatory approaches in digital and in trade and the moratorium and its possible expiration. And then we looked at the impact, cost, compliance, and competitiveness. So we looked across a range of businesses and sectors, ICT, retail, professional services, health, manufacturing, financial, agriculture, construction, energy, hospitality, mining. We tried to get kind of as broad a spectrum as we could of businesses, a total of 292 MSMEs surveyed through the project. We also tried to add a gender component to the extent that we could. And there’s also work that’s been done by trade experts, which you might have heard about too, where they did consultations in Africa, in Latin America, and in Asia to try to get a sense of how women would be impacted by lifting the moratorium. So the gender component, I think here we tried to understand, like, are these companies… companies that have strong representation of women in the decision making process and most of them did. Of these companies the overwhelming majority rely heavily on digital transmissions in their businesses. And you all know too that the definition of MSME or SME is different in every country. So again we follow domestic law when we are deciding what counts as an MSME. Alright so on access and awareness. In general our take away was a significant majority, 88% of the MSMEs we surveyed highlighted that communication channels with government policy makers are not easily accessible. I think this is a challenge for all of us. Here we are in Geneva at the WTO talking about trade policy. We need to really think about how those who are impacted by trade policy engage with it. And this is not just for the moratorium, this is more generally speaking. The slight majority reported that they are not aware whether they are members of trade associations. So I’m sure that they’re I think probably for very small businesses. Participation in trade associations is not quite the same as larger businesses. Again this might go very country to country. I know a lot of those on the panel are really engaged with MSMEs. But I think that there was a little bit of an uncertainty around how to use trade associations. So obviously trade associations can be a very powerful conduit for learning things and for transferring information. But there was still a little bit of uncertainty on how to use and engage through that channel. More specifically most of the MSMEs, over 50%, were not aware that the government was considering possible additional import tariffs and customs administrative measures on digital goods and services. The substantial majority of them were not aware that there was a WTO moratorium on customs duties and electronic transitions. I thought that might be the case going into it that most companies would not have heard of this. I went company to company in South Africa and remember just this kind of sense of shock, you know, when companies said, really, this is something that’s happening? We had no idea about this. Why didn’t we know? And then we would kind of explain, well, this is what that might mean. They’re like, this would impact us tremendously. Why are we not part of this conversation? And then, of course, many didn’t know that it might expire. If you don’t even know it exists, you probably don’t know that it’s going to expire. But we tried to ask the questions in a number of different ways so that we could get some very precise results. In terms of engagement with government, so this big thing here is poorly accessible, not accessible, moderately accessible, or very accessible. So very accessible is a pretty small number, 35 out of, you know, the total is not, you know, that’s not what we’re aiming for, I don’t think, right? So just under three-fourths, 74% of MSMEs that we talked with stated that they were not consulted about a possible change in import tariffs on electronic transmissions. So, again, I think that’s pretty significant that most of them say they have not been consulted on this. A small minority said that they felt that government really represented their interest in international negotiations. So there’s some promising hope there. But, again, that should be the majority, right? And then in terms of the impact, which I think is always the interesting part of all of this, right? What kind of impact is this going to potentially have on companies? So we’ve tried to get at impact in a few different ways. One was the capacity to comply with customs administrative requirements and additional requirements in this area. Another was added tariffs and the costs that they bring. And then the third was potential impact on growth potential and competitiveness. So as a baseline, about three-fifths, 60% of the companies expressed that they have little or no capacity to comply with customs administrative requirements and particularly not anything new. So they’re already stretched on what they have to deal with. Even though we’ve done such good work, I think trying to simplify some of these requirements. They still said, ìWe donít have any more bandwidth here.î And that includes a whole range of things, import declarations, legal compliance, procurement of import-export licenses, record-keeping. You know, this is hard for a small company to deal with when youíre just trying to keep in business and make the business grow. Over half of the companies we spoke with stated that they would pass on additional administrative costs. So yes, this would add costs for them, and yes, they would pass these costs on to their consumers. A little over one-third of them said they would pass all of the administrative costs on to their consumers. And their consumers are also going to be small businesses probably, individuals, you know, marginalized communities. These are not ñ so this is going to put extra costs on those who probably cannot shoulder it. Of the MSMEs surveyed, slightly over half said that they would pass the tariffs on, and over two-fifths said that they would pass down all levels of tariffs. So again, additional compliance costs, pass it down. Additional tariffs, pass them down. And I think this has an impact, too, as a lot of these sectors are trying to become more competitive. So agriculture, for example, become more competitive through using digital tools. Again, something like this could have an effect on these businesses and might wind up having a long-term, you know, growth potential. So we also looked at the degree to which it would result in additional administrative requirements, how that would impact them. Sixty-three percent said that they would have significant or moderate impact on their growth potential, and 61 percent reported significant or moderate impact on competitiveness in global markets. So we asked both about their growth potential, you know, kind of more generally, and then about how they saw that impacting their ability to trade and engage in global markets. Okay. I’m almost done. Two stories, though, because this was not just a survey with numbers. This was actually real people and real companies. So one of them, and some of them didn’t want us to use their names. because we’re also talking about their engagement with government, so we realize that there’s some sensitivity there. So one of them we talked with was a microfinance entity in Kenya. They use mobile-based technology to provide credit to about 10 million unregistered women-owned microenterprises. They distribute personalized financial literacy content, work with women and adolescent girls, and depend heavily on technology licenses. So this company said that additional costs due to customs duties would result in higher costs for them, and that they probably would have to pass those costs down, might result then in the women and girls they work with not being able to receive their products. It would make things more expensive. It would make them less competitive. The second one we talked with just, I mean, again, there were quite a few, but the second one that we’re highlighting here is an animation studio in South Africa. has this kind of budding sector on animation and all kinds of technological arts. And this company was an award-winning 2D animation studio, develop and produce animated content. They are dependent on cross-border transactions day-to-day. They said that the additional duties due to customs duties on electronic transmissions would inevitably have to be carried by their consumer, and that this could be prohibitively expensive, could potentially stifle trade opportunities for them. So I just want to share a few findings and takeaways, and then I will stop. So clearly the use of technology is very intertwined with small businesses. We saw that across the board. And since we know that a lot of MSMEs are not aware of the moratorium, and by default the possibility that something will change with the moratorium, my biggest takeaway is we just need to do a lot more homework on this. We need to study this a lot more deeply before any decision is made. And I think, again, this is kind of kind of a signal for doing this kind of work as other policy decisions are approaching as well. Most of them just were unaware of policy changes due to trade negotiations generally. Most of them didn’t feel that they had been consulted by their governments. So I feel like these are some pretty powerful takeaways. And that channel between small businesses and governments, I think, is really important. In these countries that we talked with, most of the business associations that sound like hadn’t really been incredibly active on the moratorium. We talked to some who had been, of course. This is not to say that all business associations are not engaged on this, but not all of them seem to be. And I think this is sort of just scratches the surface. We were really only able to do this as a pilot. There’s an urgent need, I think, for more empirical work like this. I just want to make one note, too, that we had to kind of change our methodology a little bit as we were going along. So when we first started doing this, we thought that we could distribute the survey mainly through business associations, and we could get kind of significant feedback that way. That didn’t work so well, mostly because these companies just don’t have the time. And you have to really engage more one-on-one kind of personally. I mean, I’ve seen this over and over in the work that I’ve done. It wasn’t until we really went out into the field and started doing more one-on-one, like company after company, that we got better results. So I think if we feel like there are shortcuts to all of this, there probably are not. And again, I think just to close this out, this really highlights the importance of doing this bottom-up analysis before we make decisions about trade policy. This is how we’re going to get inclusive trade. So I’ll stop with that. I hope this was helpful, and I’ll be happy to answer questions. Thank you so much.

Gareth Tan:
Thank you. Thank you, Professor Coleman. I really appreciate it. And I mean, I think the findings of your work have really brought to fore the importance of understanding that there is an education. gap, fundamentally speaking, about the moratorium. There is an understanding gap. There is kind of like a lack of information that’s out there, publicly available. I mean, it’s something that we at the DPA have also noticed in terms of our engagement in Indonesia with Indonesian trade associations. There is not an understanding of the moratorium, despite the fact that the moratorium is going to affect a wider range of sectors every day, basically. So with that, I think let’s move on to Ibu Dewi Ariyani. Ibu Dewi is the Executive Director of the Indonesia Services Dialogue Council, an independent council that focuses on policy and regulatory reforms for the development of the services sector in Indonesia, and promotes a tripartite dialogue between government, private sectors, and research institutions. Ibu Dewi, please.

Devi Ariyani:
Thank you for the introduction there, Gerrit. Good afternoon, everyone. It’s a pleasure to be here and to be part of this panel. I would like to further build on Professor Katrin’s presentation. ISD has also conducted similar studies. So we’ve conducted a survey to 764 MSMEs in Indonesia across various sectors, and our research basically focuses on three key areas. The first one, what digital goods and services are being used by the MSMEs, and secondly, how they use it, and how is the impact since using the digital goods and digital services to their businesses. So when looking at the data, we found that the role of digital goods and services are critical to their businesses. Can we show the slide, please? Thank you. So interestingly, as Professor Katrin said, none of the respondents were actually aware of what moratorium is, they do not even know what moratorium is, they cannot even differentiate between apps or operating system or a software, they cannot differentiate between digital goods or digital services. However, they will be able to identify what’s in the content of their smartphone or what’s in the inside the computers and what digital technology that they’re using. And from the survey, we found that 61% of the respondents are women-owned businesses. And these are the groups who were previously informal workers. They were not in the businesses before, so these are new entrepreneurs who used to record the transaction of the book. They don’t know how to do trades, but with digital technology, they’re able to do transactions and are able to facilitate trade cross borders. They’re also able to serve the customers beyond their geographical boundaries. And if we ask further, what do they use digital goods and digital services for? We can see it’s not just confined for the export purposes. We can see that they use digital goods and services for both core processes, as well as the supporting functions of the business, starting from sales and marketing, logistic and shipment, R&D, procurement, finance and accounting. So they use it in every step of the process in the businesses. And when we check further, how is it impacting their businesses, basically it has positive impact towards productivity, be it in income, profit, assets, customers, as well as they’re able to employ more people because the business has grown. The use of digital goods and services. has also impacted in terms of improving cost efficiencies in marketing cost, logistic cost, and shipment cost. So the data is showing us how critical it is for MSMEs to access digital goods. Next slide. And we see the similar pattern across sectors as well. So it’s not just on services, we can see even for agriculture and fisheries. For manufacturing services and also for other sectors, the same trend on income, operating cost, and business expansion, it recorded growth and significant down on operating costs. So these are very important to understand how important it is for MSMEs. They don’t understand moratorium, they don’t understand about the digital, or they cannot differentiate between digital goods and services, but they’ve been living with it, they’ve been using it for their day-to-day operation, and the impact is imminent. And we can also see that the use of digital technology increases the services export. We can see just under a decade ago, in 2015, digital services export is only less than 30%, but then over five years, it’s already more than double. So this is showing how digital technology helps them to serve the customers of, to serve the cross-border trade, and also their customers beyond their geographical boundaries. So with these slides, I think I would like to close this session with, not this session, to close my part by underlining how critically important the moratorium is, and how potentially disruptive to MSME businesses if there’s no moratorium. Thank you. I will hand this back to Garrett.

Gareth Tan:
Thank you, Ibu Dewi. An important message all around. Now, we are moving on to one of our DPA members, Hara. So, Hara is a blockchain-based data exchange for the food and agriculture sector. And its CEO, Fernando, or Ando for short, has over 13 years experience in leadership, business development and consultancy. So, he’s been a serial entrepreneur, engaging in diverse fields including AR, VR, integrated data analytics and the deployment of blockchain into various real case studies. So, Ando, please take it away.

Firnando Buenayre Sirait:
Thank you. So, I’m going to more bring a perspective from the SME side more practically. So, I would say Hara, we’re kind of like a company, a digital native company, where basically we build all of our operations digitally without any manual processes. So, we basically have a mission to create an ecosystem that allows the invisible becoming accessible. Because when you’re talking about farmers in Indonesia, we don’t say the industry has a blue mark, like a blue ocean, but we call it as a dark ocean. Because the data availability is very less and the reliability of the data itself is very low. Because the updates of the data and how can you ensure that it’s still reliable, it’s very questionable. So, in order for us to face that challenge, we try to target two of our very most important stakeholders, which is a farmer itself. And then on the left side, and then on the right side, we have a young person in the village, which we could say he or she is a digital native. savvy person or probably a tech etiquette person. At least they can operate a mobile phone. So what they do is that they become a data collector to support the farmers in order for them to have access. Because by that time, when we started off in 2017, I think one out of 10 farmers has smartphones. So if you don’t have smartphone, if you only have feature phone, it’s really hard for you to be integrated. So what we do is that we collect these agents and we ask them to actually support data acquisition of farmers. So we firstly start with the acquisition of the identity in which we record them with blockchain. So the standard data acquisition for farmers, we put it as standards of know your customer, which is applicable for banking. So then we can actually use this and transfer this to different stakeholders who need them. And in order for us to ensure our compliance towards the PDP law in our country or even in different parts of the regions, we ensure that we are able to at least getting consent from every single farmers who are actually collecting the data. And the second most important information that we try to acquire is basically the land. So we try, so every agents with the farmers will go around the land with their smartphone. And then you’ll get a digital image, which is the satellite image of the land itself and a direct calculation of how much size is the land. So these two informations, we’re able to connect them with different stakeholders. I don’t wanna, I personally don’t really agree of buying and selling data. We don’t buy and sell data, but we build partnerships in order for this information can be more valuable. So we work with financing companies from P2Ps to conventional banking to provide loan services for them in order so then they’re able to get access really fast. So this is the part where we require. we would like to get support also from the government at least to an acceleration for digital financial inclusion and uh… in order to speed up cashless society because our pyramid of society in indonesia it’s very very cash basis and the second part sorry for the and the second part is that aside of financial we go into the insurance company how can we include insurance company to support farmers when they’re having crop failures so then they’re not able to get their bet that so um… we try to digitize all the process of the claim process so then even the insurance company doesn’t have to go down to the field which cost a lot for them to do so uh… so then we’re able to verify over on the data acquisition on the metadata of the location and the time when it’s taken so we’re able to ensure that the trust level of the information it’s it’s highly uh… created throughout the uh… uh… the parties was involved in the uh… insurance process and uh… we also target kiosk because kiosk inside in the ecosystem of farmers is very key because they’re the place where farmers get you know all their seeds their fertilizers their pesticide or even consultation in the way of how they’re able to do to do a good case by uh… good agriculture practices and if we see the if you see here in the picture you see on the left this is what it looks like in most villages indonesia how the agri kiosk so they don’t really have a good mechanism how they put their products how they put their uh… inventories or even they don’t have a good accounting system they’ve just put it on a on a piece of paper or a book which is kinda like ripped and uh… that’s what they use so and in order to digitize that it’s not also easy because when we’re talking about digital infrastructure that something that is especially in indonesia when you go to rural areas uh… internet is still not they’re available constantly there might find some but not yet constantly so this is something that we So in order for this to live up, it requires a democratization of internet access to the bottom of the pyramid. And going into the next iteration that we are doing as a tech company based on blockchain is that we live, we try to develop traceability, I recall that, iterations. We started off in 2020, starting from the poultry business, going to horticulture business, and now we’re exploring into the palm oil, as we know that currently sustainable sourcing, it’s become a key, and I think most of you have heard EUDR, which is going to take place very soon, and where every single product that is actually entering to the EU has to have a due diligence of a deforestation-free source. And to understand the complexity, you can see here in the process, from the smallholder estate to mills, refinery, vaccination, filling, shipping, that’s a long process, and we know that these entities could be different parties. If a conglomeration, they might own the supply chain end-to-end, but what if they’re all separated? How can you make sure this traceability can happen? We tried to input blockchain technology into the problem, and how we create digital twins of every single process. And with this token technology, traceability is able to be executed, because when you’re sharing information, it’s all about trust, right? How can I make sure I’m able to trust people who’s accessing this information, and becoming transparent and also immutable? So if I try to jump in more detail, how complex all the process, don’t get confused on the picture, but if you see the supply chain coming from FFB, which is a fruit-fresh bunch, the fruit that is harvested by the farmers, it goes into a mill, bulking, refinery, and then up into shipment. There’s a lot of processes, change tanks, merging of different batches, there’s several adjustments, there’s even residue. So these complexities basically exist in the Palm Oil supply chain. And so far, based on our iteration in the past one year, using digital twins and token technology is able to make this more efficient and ensuring that in the end, whoever buys the product is able to be ensured that this product is traceable up until the upstream. Where’s the state or where’s the smallholder farmers? So if we see a blockchain-based traceability solution, here shows that farmers are able to be compliant towards sustainability and able to deliver sustainable standards on each processes required by the regulations or also in certain areas, and also how the farmers are able to benefit from this. And we know that the global Palm Oil is going to increase up to $100 billion in 2032. And this is not only a commodity that people are concerning on traceability, but we know that there’s other six major commodities which is related to forestry, and these commodities in the future will actually require traceability. And doing this traceability would require a lot of digital information transaction. You’re talking about going out and in, verification and so on and so forth. So that’s why if I put into the context of Professor Catherine’s survey, I’m actually those startups who actually don’t really get those full information of this moratorium. At least I’m privileged in the past one year, I was able to be under DPA to get to know more about this. And the more I got into it, the more I understand. and the business that we’re doing, I was like, wow. The amount of data that we are actually detecting, and we’re actually hosting it not in Jakarta, in Singapore. And basically, anytime we want to use our data, basically, there’s going to be some implication in the future. So this is something that, actually, for me, myself, when I see this, it’s like, we’re not actually myself, we’re not really like saying no to the policy, but more into like, how can we learn from what’s happening? And what’s best, because I’m sure that when a regulation is put onto the table, it’s for a greater good, not to make others being in, how do you call that, struggling or being challenged. But how can everyone have a win-win solution? So because, yeah, everyone, I think, I represent, out of the most startup companies, that actually do use digital services. Because, yeah, we are all digital native company. We don’t use manual stuff anymore. Not only talking about how we do our business, but how we run our teams. We use softwares, a project management system that is actually coming from abroad. So we need to pay more, and I think that could be really a high impact towards our business. So I think I would stop in there, and would love to discuss more further on. Thank you.

Gareth Tan:
Thanks, Ando. Again, important perspectives. So now we’ll move on to Mr. Krishnamoorthy, who is the CEO and President of the India Electronics and Semiconductor Association. So Mr. Krishna has led a highly successful corporate career, and has worked as managing director and corporate VP levels in three semiconductor MNCs in India, namely the National Semiconductor Incorporated, Texas Instruments, and Rambus Incorporated, over the course of two decades. So Mr. Krishna, please.

Krishna Moorthy:
Thank you, Gerrit. It is a pleasure and good afternoon to all of you and thank you for having me as a panelist and we will listen to the deep study that was carried out by Professor Kilman and my colleagues from the Asian continent as to what they have seen in the MSMEs and SMEs. I am trying to take a slightly bigger picture here and I am also going to focus on electronics and semiconductors as the vertical that I will speak about because that is my domain of expertise. So I will take the first five minutes to introduce India Electronics and Semiconductors Association because that may not be familiar to many of you, what we do and what I am going to talk about is definitely connected with this classification that I am putting here. We work with four different stakeholders primarily. One is the industry of course and the objective there is to grow electronics and semiconductor business in India and IESA as an organization is striving to become the go-to destination for all the electronics and semiconductor design and manufacturing ecosystem and eventually integrate India into a global ESDM and semiconductor manufacturing supply chain entity which is a big aspiration the country has and a lot of policies and systems and mechanisms are being advocated by the government on one side and the young and talented engineering population is also aspiring to be a global player. The second area of focus for us is the academia with whom we work very closely and trying to be the knowledge partner in such a way that the gap between the requirement of the industry versus what the academia today teaches, how do we bridge the gap and make the talent availability. and the quality of research that happens in the universities scale up because deep technologies are moving at a pace where even the academia and the research programs in the academia are struggling to catch up with. So how do we bridge that gap? And third, of course, is very important for this discussion is that we work as a trusted partner with the federal government, Delhi, as well as with the different state governments. And there, our activity is primarily related to policy formulations. And some of them are very relevant for this discussion, primarily, again, on electronics design and manufacturing-related policies, semiconductor-related policies, how do we accelerate startups and MSMEs. For a country of that population, we are all convinced that the future of India depends on how successful our startups are and how successful our MSMEs are. And unless we reach a level of big magnitude with these two, and startups, we have made some very good progress, I think we have probably third or fourth biggest startup ecosystem. But as some of our colleagues said, the struggle to become successful for startups is universally known, and it’s probably a little more difficult with the kind of infrastructure that we have, which is evolving, but it is still not mature. So that’s the context of policies. And the last, of course, is a society. We do all this, we become deep technology savvy country, and we develop a lot of new technologies, but at the end of the day, how does it benefit the society in which we live? And is it making a difference to the quality of life? Is the healthcare improving? Is the education improving? Can we make a difference there? So this is the overall agenda that IESA drives. So essentially the title is, so we have different stakeholders, and each one of them, as you can see here. The expectations that they have from an organization like us is quite different. It’s not that all the different stakeholders, the government has a different expectation. Big companies, the multinational companies, the Indian big companies, they all have a different expectation. When it comes to MSMEs and startups, their expectations and what they expect or what they would like to see happen quickly in the context of what we are doing is quite different. And then, of course, when it comes to manufacturing, it’s a completely different requirement. And Academia has their own problems and pressures to deal with. So this is, I would say, the complex situation in which we are trying to find some common denominator so that all these stakeholders, particularly I would focus more on the MSME startups and Academia, because though we think that Academia can run on its own, our experience says that it is not true. Academia requires a lot of support from industry and vice versa. And we need to enable that in a very structured way. And until we do that, we are not going to see the next generation technology becoming permissive and available across the world. So with that, let me come to the top. This is already done. So I’ve been trying to classify the data movement in the electronics and semiconductor industry ecosystem in India. I tried to put it in four different buckets to keep it very simple, though, of course, it’s far more complex. And I know that many of you are experts in this and you might think that this is too simplified, but I’m trying to keep it as simple as possible so that the discussion and our purpose of this meeting becomes more meaningful. So the first one, of course, is bi-directional continuous data flow. This is a big business need for chip design today. Companies like Intel and Qualcomm and NVIDIA employ thousands of engineers in India. Probably most of them have the second largest design center located out of India. And similarly, big companies like the Capgeminis of the world have huge infrastructure for global services. So here we see that terabytes of data cross the border every day, every hour probably. The second, of course, is the data flow between R&D institutes and academia, and particularly between U.S., Europe and Southeast Asia. So these are research collaborations and peer reviews of work that is getting done, PhD level work that gets discussed and debated. Again, a huge amount of data does cross the border without any doubt. And the third, of course, we have seen a significant amount of data that flows across the borders, is licensed technology transfers. And this is also due to some of the transfer of technology agreements, some of the offset obligations, for example, in defense purchases, etc. So these are areas where a significant amount of bidirectional data moves. I think we’ve come to the fourth data where the equation and the dynamics changes a little bit. And this is where probably we believe that a much deeper study is required. This is perceived to be a unidirectional flow of data where the data coming in results in a commercial activity within the country and keeps increasing in what we can call a localized business without any accrual of revenue to the exchequer. And this seems to be the point of contention or point of discussion in many forums that I was… Some of the examples we discussed multiple times and even when here in WTO when the discussion happened two years back, 3D printing data for example. It comes into the country and then you make 100,000 of a product like this and get sold. Of course, there is a GST mechanism which offsets a large amount of that revenue part. But how do we quantify this? What kind of mechanisms and measures can be put in place to identify and capture this correctly? And the other one of course, an interesting case study that we did work on is software upgrades of the magnetic resonance imaging equipments from 32 splice to a 64 to a 128 without any physical goods moving across, they are able to do the capability enhancements of systems and machines to a higher capability which again generates a huge amount of profit uptake for the entrepreneurs or the companies, but at the same time, the resultant revenue accrual is not considered to be commensurate. So is it commensurate, is it really the fact of the matter, that is probably where I don’t want to run over my time, but our position here is each one of these four cases that I talked about require a very detailed study in the first place. First one to one trip of my earlier file probably is relatively straightforward, it is much easier to compartmentalize them. But the fourth one, particularly the one where the data comes in and gets converted into a product or a service of much higher value addition that happens is that and within that we take the case of MSMEs. Now is this just a case of customs duty topic or is there something bigger than that? Because when we look at the customs duty accrual within India, it is maybe about 12-13% of the total tax revenue. It is not more than that. Out of the total tax revenue, it definitely does not exceed 13% of the total. So is that the issue only confined to a customs duty related topic or is there something more that we need to study, particularly when it comes to high revenue accrual activities, verticals, which are related to that, that probably requires a deeper study. And we cannot escape the fact that the world is going to be digitally transformed. And some of the payment systems that we use are definitely path-breaking. Unified payment interfaces, etc., have become the order of the day. So we cannot wish that away. So a sustainable model definitely needs to be evolved, and we are looking at different models, but I think a sustainable and globally acceptable model needs to evolve. And the concern, of course, is the model, when it evolves, is it going to be not having a big adverse impact on the developing economies. We cannot definitely go back to the North-South divide kind of debate anymore. I think that phase of the world is over. So recently, India has taken a big step, and I would say a path-breaking one, when it came to the discussion of the policy on data privacy and protection. And many of the concerns that we talk about are getting addressed there. So I would say the kind of study that Professor Kilman did and some of the studies that David talked about, we can very quickly evolve a very good template for a much wider study. I think that probably is where I would rest my presentation. But I think a global template can easily be evolved within the kind of, I would say, distributed study that is happening in different places, if we can get them all together, put all the heads together. We do have a sustainable and good template which can evolve a mechanism which will address these topics. Thank you.

Gareth Tan:
Thank you so much Mr. Krishna and again a hearty congratulations on the launch of your European chapter this morning. So just before we go into Q&A, I wanted to use my moderator’s privilege to ask a few relatively basic setting questions that might be interesting to some of our DPA members. So first of all, what are the pros and cons of the moratorium, fundamentally speaking? What do some of our panelists view to be the uses of the moratorium and what kind of things can accrue when it’s gone, what kind of advantages can accrue when it’s gone as well maybe? So Professor Katrin, would you start us off?

Katrin Kuhlmann:
Sure. I’ll try to be brief because I saw we have a number of questions in the audience too and I know this is the end of the day so we’re like standing in between whatever exciting things come next. You know, I mean I think that having done a lot of international law and development work, clearly many governments are concerned about revenue. I mean I think that’s not a secret, right? I think that I do a lot of work in Africa, for example. A lot of countries are very concerned about their debt burden and how they’re going to be able to service that, how they’re going to be able to find alternative sources of revenue. So it seems like this is some, you know, that a lot of the consideration of this is seeing all of this explosion happening on the digital space and trying to figure out how to turn that into a revenue-creating arm. I think it’s really interesting to hear your take on India too, where customs duties have become now such a seemingly more insignificant part of total revenue, which could be a really interesting case. case study, I think, for other governments doesn’t seem to be the best place to look for revenue. And I also think that one of the challenges with looking at this area is that it’s so different from a physical good. So I think that we just don’t even really understand how this would be applied, how it would be administered, what would it look like. I mean, to me, the reason that we’re having this conversation is that it’s just we need to do so much more work to really even get our arms around what this could be. And it makes me just incredibly nervous that there is this kind of push to at least keep making some kind of a decision, even if it’s a decision on continuing the moratorium, without knowing all of these things, without having so many open questions. So I don’t know whether I answered the question fully or not, but that’s kind of, I guess, how I see this, that it’s just too, it’s very premature and it’s something that needs to be studied much, much more deeply because it is going to have all kinds of implications and it’s just different than what we know so far.

Gareth Tan:
Thank you. Ibu Dewi, if I could turn to you.

Devi Ariyani:
Yeah, I think ISD studies that shows the positive impact of digital goods and digital services being used by the MSMEs is quite evident. We can’t ignore the fact that the use has impacted their business significantly. So I think if there’s no moratorium, that means access to digital goods will be more difficult for them and the trade costs might be higher for them. And inclusivity might be also at stake. So we’ve seen from the ISD survey that 61% is women-owned businesses, whereby previously they were informal workers, and they’re able to do transaction cross-border because of this facilitation of digital goods and services. So we need to be mindful that any policies might disrupt what is currently happening.

Gareth Tan:
Thank you for that. Mr. Krishna?

Krishna Moorthy:
Before I talk about the advantages and disadvantages, a topic like this, I don’t think we can ever say the moratorium is good or moratorium is bad. We need to understand that this has been going on for maybe two decades of moratorium around that. So even the basic things like how do we classify and define goods and services, number one, and then talk about the processes and systems that are required to operationalize that which Dr. Katrin talked about just now. I think we need to get our arms around this properly first and whatever time it takes because we cannot come back every time we are closer to a decision date and start pulling our hair as to what’s going to happen if we remove it or if we don’t remove it, then we are not going to get anywhere. We need to, as I said, define a template, fix a timeframe, get together and do the studies required and get the definitions and processes in place and get the definitions first in place and then the processes put in place and then come back and talk about it. I think that has become a bigger imperative now than ever. Certainly, the advantages, I wouldn’t even call it an advantage, but it has become a de facto way of life that we don’t even realize how much of data is going from point A to point B at any point of time and how we are dependent on that data. The second question of its accuracy, its correctness, its security, they are layers on top of that, but even the volume of data that we acquire and use today, most of the time unknowingly, is huge. So we need to take a few steps back and put the house in order, if I can use that phrase, so that this becomes a lot more efficient.

Gareth Tan:
Thank you so much for that. And just one short question before I turn it over to the audience. How do you anticipate local business sectors are specifically going to be affected by this? And for this, if I could turn to Park Ando for his perspectives to start with.

Firnando Buenayre Sirait:
So if you see it in a small, medium businesses, like at least from the story of business that I’m currently building, looking at the impact, for me, first, it’s shocking, the first time for me to understand this, like, oh, OK, this applies. I think it goes into the survey what Professor Catherine did. And I think from my perspective, how we see this is going to affect a lot in the way how we innovate in the future, because, you know, as a startup, we kind of like crash walls, break down and then build again, crash walls, break down, build again, because we have the liberty to do that, right? We have all the resources around, we can do quite a lot of things. But having cross-border data transmission becoming a burden, I think that’s become a bit of a challenge for us to grow even more. And I think if we want to see how to govern this, I think, you know, I think what Mr. Krishna mentioned, like, more studies need to be developed. At least, you know, a company like me, I would volunteer, you know, to examine how it impacts my business, because all of our processes are using digital goods and services. So, again, I’m sure it would impact a lot on the cost, and I’m sure if I answer directly, if these costs arise, how do you put it? Probably I would share several on the customer, of course, and several I bear. I think it’s more into looking at what’s best to be put into the customer and what we should bear as a company. But again, our costs will increase, but again, sometimes we need to take that as a risk of the business, but we can’t create business if it’s in a loss, right? So a lot of things, at least for me, it’s still to be defined and to be learned more. So at least this is a journey of a year for me, at least understanding that this is going to be re-evaluated, and I’m sure more studies we’re going to maybe put in, and then more clarity will be put in also and how it could benefit the small and medium enterprises. Thank you.

Gareth Tan:
Thank you all. Professor Catron?

Katrin Kuhlmann:
I just want to make a really quick point and say that listen to what you’re doing is phenomenal. I mean, this is so innovative, and I think that there are so many companies out there that are doing tremendous things. Making a change on this would impact all of these businesses, all of this growth potential, all of this future revenue, all of – has such far-reaching that I think that is such a big factor to be weighed that is really not being talked about enough. So I just wanted to say that, and I’m really excited to see what you’re doing.

Gareth Tan:
Would anybody else like to chip in on that, or should we open it up to questions? I think we’ve got a lot of questions, it looks like. Let’s start from the right, sir, and maybe you can take multiple questions at the same time. Sir, if you can go first, and then two ladies over there, and then the gentleman over here before we go back there.

Audience:
Thanks very much. I’m John Cook from the City UK in London. I was fascinated by all the presentations. Thank you so much for giving them and I was particularly struck by Katrin Kuhlmann talking about the need for this to be a bottom-up process. What I wasn’t quite clear about and I’m not sure whether one can be clear about it is when one is personally interviewing these very small companies, they presumably can’t distinguish between what’s an imported digitally delivered thing and what is a domestically produced one. So that is just an added uncertainty for them, I presume. That was my observation, question really, but don’t answer it at once, go around and answer more.

Katrin Kuhlmann:
If I may. Thank you very much and thank you to the panel. Extremely interesting presentations, I really enjoyed listening to them. So one of the things that, you know, I take the point that it’s always useful to have more evidence-based research when you make policy decisions, but I guess just a question to the panel. We do have a deadline coming up. I don’t think it’s a question of pushing for a decision. I think we have a deadline coming up with MC13 and looking at a decision on the extension of the WTO e-commerce moratorium. And so in light of that, while I totally agree that it makes sense to continue all of the great research that’s been done, including by the panelists up there, but I think it’s important and just wondering what the panel thinks about, certainly there is some very There’s fresh evidence out there, for example, the OECD study that’s been done that’s looked in particular at the revenue implications and found that they’re actually quite small in terms of total government revenue. I think it’s between 0.8 to 0.13 percent of total government revenue if you look just at tariffs. Two, in India in particular, there have been studies that, a recent study that is looking at MSMEs in particular that indicated that increases in digital services, digital imports for every 1 percent rise in digital imports is associated with a 0.4 to 0.8 percent rise in MSME jobs. Similar kind of pattern on their output. So I think there-and also, that study, as well as the OECD, has pointed to what they do think would happen if the moratorium were to end writ large on a more economy-wide basis, and that is a depression in consumption, a depression in collection of revenues overall, harm to GDP, and-as well as impacts in particular on MSMEs. So I guess my question to the panelists, in light of the fact that we are coming up against a deadline, like it or not, that’s not self-imposed, it’s the MC ministerial in February, it certainly sounds like-certainly the-on the semiconductor side and in the case of HARA, there’s a pretty compelling case to be made that, in terms of the kind of work that you’re doing, and in the semiconductor side, the fact that there’s two-way data going back and forth and it’s essential to that operation, that ending the moratorium in February, if that were to be the decision, would have a downside. And so just wondering about your thoughts, and if I was understanding what you were saying correctly. Absolutely agree. It makes sense to do continuing research, and that’s why I think continuing the e-commerce work program and the dedicated sessions on the moratorium are so important. But just getting your thoughts, were you saying you think there shouldn’t be a decision to continue it, or were you just saying, continue it, but let’s continue this study?

Gareth Tan:
Should we maybe address those two first questions first then? We can maybe take one or two after that, but yeah. Oh, yeah, let’s just take them all then, Matt.

Audience:
Jane Drake-Brockman, Australian Services Roundtable. I was fascinated by the two case studies. It’s always marvellous to have entrepreneurs explain their business models, and it seemed to me that many of the operations in those business models are what you would call intermediate activities. I mean, inputs, the operating system got referred to a lot. The data flows as inputs and ingredients got referred to a lot. So we seem to be really talking about a value chain where a lot of materials coming in, some imported, some domestic, probably hard to tell in an electronic transmission, and it’s all going out somewhere. I had the impression, Fernando, that you had some foreign clients. I couldn’t be crystal clear. clear about that. It’s pretty clear that a lot of Indian start-ups in the digital space have foreign clients. And Debbie, you made it quite clear that there’d been a 31% increase in customer reach as a result of adopting digital tools. I wondered if you can, and you showed us the increase in exports, but I’m wondering if in that customer reach increase, if you, was it both domestic and foreign? I mean, is what we’re talking about a value chain here? Are we talking about all the digital inputs and then your final product? Because it seems to me Catherine’s point about far-reaching implications is going to be in particular at that cost level in the production process itself. But we have the opportunity to really understand that with these particular speakers.

Gareth Tan:
And so, I’m so sorry, we might not have time for your question, but I’m sorry. I had my hand up first. No, look, I’m sorry. This is totally unfair the way you’re running this. Okay. And I will formally protest to the secretariat about that because you’ve gone out of your way to make it impossible for the panelists to address the question. I’m trying to give you an opportunity to speak here.

Audience:
Thank you. So, I wanted, I have a question for Professor Kuhlman, but first I wanted to thank you for having documented in your study what a lot of us know, namely that trade decisions are made without adequate input from stakeholders, and that is a real problem. Our colleague mentioned the UNCTAD study, just so people know, sorry, the OECD study on the implications of digital taxes. There’s an UNCTAD study which comes to a completely different conclusion. UNCTAD, of course, is representing developing countries. Everything you said, Professor Kuhlman, makes perfect sense. We all know that taxes increase costs. The problem is everything is going digital, and so you’re going to tax digital, and the question is how to tax it. Yesterday, we had a great presentation from the International Monetary Fund. which was very well balanced which basically said yes tax them but do it by VAT. Now for anybody who knows about VAT you know that that’s the worst possible thing for small and medium enterprises because of the different rates the complexities in fact usually you can’t do it yourself so you outsource that to somebody like Amazon because only they can do that. Plus don’t forget that there are other alternatives excise tax, sales tax, etc. So my point is that we don’t know what we’re doing the moratorium was a leap in the dark it was done in 1998 when Amazon was just starting to sell books nobody had any clue about what this was about today it’s everything what you need to do is exactly what you said Professor Coleman bottom-up what is bottom-up? Well keep it local allow local governments to make the right decisions based on their local economy removing the moratorium does not mean everybody’s gonna tax it just means that everybody’s gonna be able to look at their local circumstances and figure out what is best is it VAT? Is it excise tax? Is it sales tax? Is it maybe customs duty which it might be less regressive and actually easier to administer than the pervasive VAT tax that IMF was calling for so that’s my plea get rid of the moratorium so that you can actually make decisions at the correct level which is the national level based on national circumstances thank you very much chairman

Gareth Tan:
you’re very welcome shall we proceed with answering those questions

Devi Ariyani:
John okay I will start with trying to respond to John’s questions with regards to can we identify whether digital goods and services that used by SMEs is local or imported we did identify that in our studies so we asked them to mention what are digital goods and services that they use, what are, so they mention all, and then we identify which one is local and which one is more lit. So based on our studies, we can literally say that mostly are imported. Indonesia is not importer of digital goods and services, although there’s some that’s also local. There’s local software and there’s local applications as well that they use. But mainly, predominantly, they are imported digital goods and services. With regards to Jane’s question, customer expansion, it’s both local and international. So the 31% is coming from both local and international. But we didn’t identify which countries that they export to. It’s just that identifying this expansion, is it just within the Indonesian territory or is it outside Indonesian territory? But we did identify the countries. And with regards to your question, sir, I don’t get your name. Richard Hill, our world is not for sale. Thank you. Yes, the VAT, in the Indonesia case, the VAT has been implemented, so it’s 11% for digital goods and services. And I think if there’s no moratorium, I think it leaves uncertainty for businesses in terms of business planning. And also this uncertainty, it just confuses more for the businesses, especially it remains challenging for the small businesses because they don’t know if there is a declaration, if they have to pay custom duties. They don’t know how to do it. They’re not used to do so. So I think it will pose challenges, quite honestly, if there is a moratorium. additional cost on top of what they’re paying right now. Also, if it is removed, that means there is a possibility, there’s a risk of fragmented policies around the world, and when they need to do transaction, that means they need to look first, okay, what’s the policies happening in one place versus in other countries. So I think that will be a challenge. That’s all I can say so far.

Krishna Moorthy:
Okay, thank you. So as I said earlier, it’s not something that we can come to a conclusion immediately that yes or no, but the number of different taxes that we had lived with before the GST came into existence, we had all these components, the sales tax and value-added tax and all kinds of things, and I think it all got reasonably normalized with the GST. So the question is, on the input side of a product or a service, you are going to bring in customs duty or not, and can it also be considered on the output side where the product or services get sold, and depending on whether it gets sold within the country or it gets exported, can there be a mechanism to provide credit for the customs duty that has been paid, which offsets the additional cost burden? So that’s why I said we need to come up with a very well-defined template and do the study quickly. And again, it’s not always easy to do it quickly because we have been living with something which we all assumed for sure that it’s going to stay with me forever for my life, but probably that’s going to change the way things are being talked about today. But how quickly can we come across and address this issue? And maybe the initial phase, one of the possible answers to that is to… to keep the MSMEs and services out for the time being and bring it for the rest and see how it works, learn from that, and then extend it progressively to the rest of the people. I mean, these are all mechanisms and processes we have to get together like this and sit across the table and look at the pros and cons. And specifically to your question, madam, about semiconductors, the technology industry in India is something which has grown over the last 15 years and unfettered. So I don’t think anybody has really gone and looked at, okay, if I move this a little bit, what happens here? The kind of services industry that has grown on technology out of India is hundreds of billions of dollars. What happens to that? I don’t know whether we have all the answers today to answer that question. Yeah, probably I would like to answer on the matter here, talking about the impact to the value chain. So in our case, so when we’re doing traceability, it involves two parties, right? We’re talking producers and the buyers. So the buyers are mostly coming from abroad because palm oil, Indonesia, basically 50% of them are being exported. So as we are one of the biggest, so and talking about these services, I think this is just my view how I see it, right? So data itself is all produced in Indonesia from different supply chains. And these information are required to be declared abroad, right? So that information basically is going to be exported to another country to be used as declaration. I mean, in the current business process, of course, it’s basically digital services, right? People pay for the services in order for this to be done automatically, I mean, automated because we’re not, again, doing papers, because at least I know that the EU regulation is not going to accept papers anymore, right? It’s going to be system to system. meaning there’s going to be data transactions there. And this is talking about palm oil that is Indonesia to Europe, but we were talking about the whole forestry industry. We’re talking all the African countries, the Latin American countries, where everything is basically going to be, I mean most of the consumers are basically either Europe or Asia-based, right? And so those information will flow as an export of information towards them. I mean currently they’re not paying anything for any of those data transmissions. But if there’s any custom implies to that, I mean creating traceability itself, it’s already quite a high cost for companies because it is a new service that people need to do because you need to digitize things in order to be traceable, right? You can’t just take a picture of a document and then put it online. So I think having this implication, I think for companies in the ecosystem, it feels like it’s going to be like double up the cost. So again, I don’t have any immediate opinion on how the taxation works or the custom works. To be honest for me, I have no comment on that yet because I don’t have much knowledge on it. But I think again, talking about data transmission, in my personal opinion, it’s more important talking about the security of it, the protection of the data rather than the transmission because we’re talking traceability. It’s quite sensitive information that you’re actually throwing out, right? You’re talking location. You’re talking names. So I think it’s more into that rather than on the data transmission side. That’s from my side. Thank you.

Katrin Kuhlmann:
Okay. I love going last and I wanted to hear from all of you. You’re the real experts. John, I think this is a good question and I think Debbie answered it well. We tried to include some text in the survey just explaining what we were talking about just so that it was again very standard and there was no confusion. But still, we did ask a question on this, and there was some confusion on it, so I don’t think that it’s a question that is definitely worth asking and something that we need to probably keep thinking about. Christy, good to see you, and I think your point was really well made, and I just want to say, first of all, I’m glad that you brought up the OECD study, and to me, that is actually an indication of why there needs to be more study done, because when these first studies were done on the cost implications of the moratorium, they were very different, right? I mean, the numbers looked really different several years ago on what this would mean than now. I mean, now it’s gotten to a point where, as you said, that it’s not going to have a significant cost revenue implication for countries, but that’s different than what we were talking about some time ago. So the longer that we’re doing some of this study, the better that we’re getting at actually understanding what might happen, which to me says we should be advocating for keeping the moratorium, because we don’t know all of these things. We need to do much more study, and I think to your point, and thank you for your words about the study that we had done, I thought that we would get some of those responses. It’s always sad to get them, though, too. You don’t want to be right in a situation like that. You don’t want to see that there hasn’t been consultation or that there’s not awareness, but to knowing that, I think, actually, and knowing that through some kind of an empirical arm’s-length study, I think, is a good thing to do, I do think that there should be much more of that engagement and much more of that consultation. I would advocate for everything being bottom-up and locally different, and maybe at some point you do regulatory sandboxes, but I don’t think we’re there. I mean, I just don’t think we’re ready to be experimenting in this area if we are seeing from several of these studies that companies are going to be significantly impacted, are not aware of this, have not been engaged. That needs to happen first, before any decision is made about. revoking the moratorium, I would say. So I think it’s important to keep this in place until that work can be done to answer your question. And again, I think that the economic studies really do highlight to us the need to keep doing these other kinds of studies, too, because we’re just going to learn more and more as we go. So I will end on that note. I don’t know if we’re still taking any questions, but I really enjoyed getting to hear all of you. And thank you for having me.

Gareth Tan:
I’m afraid that’s all the time we have today, but thank you so much, everybody, for participating. It’s obviously a very important issue. There’s a lot of passion in the crowd. Thank you for that passion. But yes, with that, we’ll bring this session to an end, and we hope that you have a wonderful weekend and you travel safe back to wherever you come from. Thank you very much. Thank you. Thank you. Thank you.