IGF 2022 Open Forum #59 How competition can support SMEs online market access

Time
Wednesday, 30th November, 2022 (13:15 UTC) - Wednesday, 30th November, 2022 (14:15 UTC)
Room
Banquet Hall A

Round Table - Circle - 60 Min

Description

This session focuses on the enhancement of MSMEs’ competitiveness in digital markets. It explores the interlinkage between digital connectivity and competition, and how this link can support the SMEs to compete more effectively in digital markets. The expertise brought from both ITC and UNCTAD projects offers a unique and a holistic perspective concerning optimal MSME support, including both framework conditions necessary for individual MSME competitiveness as well as market conditions for competition. The perspectives of both projects which will be present complement each other in terms of supporting SMEs to compete. While ITC's project focuses on how digital connectivity (ICT infrastructure, digital skills etc) allows SMEs to develop basic requirements for developing, digitalizing and competing on digital markets, UNCTAD’s project focuses on enhancing market requirements to enable a fairer competitive environment for MSMEs to become active players in digital markets. Thus, the session brings together leaders of two projects concerned with supporting MSME development in the digital environment and using the opportunities of digitalization. On the one hand, Joe Wozniak from the ITC’s T4SD project will discuss why and how digitalization is important for MSMEs and how can we support MSMEs in order to reap benefits of digitalization in economies and geographies across the globe. World Bank research demonstrates that a 10% increase in mobile broadband penetration in Africa would result in an increase of 2.5% of GDP per capita. On the other hand, Pierre Horna from UNCTAD’s Competition and Consumer Policies Branch will offer the experience from their project on the contribution of competition policy to the resurgence of MSMEs with the focus on the online environment. In its common usage, “connectivity” relates to the ability to have affordable and reliable access to the Internet – and this implies a “digital connectivity value chain” that includes infrastructure between countries (such as cables and satellites), within the country itself (national backbone and services), toward the end users (wireless masts and devices) as well as cross-cutting systems (such as those for cybersecurity) and a legal and policy environment. The World Bank and others refer to these 4 levels in the digital connectivity value chain as: • First mile – where the internet enters a country • Middle mile - where the internet passes through that country • Last mile – where the internet reaches the end user • Invisible mile – hidden elements that are vital to ensuring the integrity of the value chain (the World Bank gives examples such as management of spectrum, network databases, cybersecurity and also mentions bottlenecks, like international frontiers) Last mile: Critical for family farmers and upstream producers. Connectivity at the last mile is an issue. This has knock on effect in terms of trade and development. • Big companies like Alphabet have the balance sheet to work with developing countries to connect the last mile but they don't do it because it's not profitable. • So there is no business case for them and/or the ROI is too long term. • This is a market failure. There could be critical apps that help upstream farmers access finance, sell, health apps for their family, etc. How do we deal with that, for example in Sub-Saharan Africa. Enforcement of existing laws may pose challenges since conventional measures of market power based on firm size may not reflect the true nature of online competition for example. In an online environment, it is possible for a firm with few assets (i.e., ‘small’ in the traditional sense) to have a large customer base. Some digital providers have also instituted policies that restrict the freedom of participating businesses to deal with competitors. One key question relates to the relationships between digital platforms and MSMEs, especially in developing countries, and preventing possible abuses of market power by digital platforms. Digital platforms act as intermediaries between business users (suppliers, advertisers, content providers, etc.) and users (consumers, viewers, etc.). They play a key role in pushing economies, both in developed and developing countries, towards digitization. However, the lack of market contestability, the potential for leveraging their power and monopolizing adjacent markets, and the platforms’ unequal position with respect to domestic and business users, including MSMEs, may foreclose the market, to SMEs among others. UNCTAD will present its newly launched recommended practices for digital platforms targeting SMEs’ access enhancement in digital markets. By supporting MSMEs' access to online distribution channels, eliminating entry barriers, and reducing the uncertainty that these businesses face in dealing with online platforms, these recommendations would help MSMEs to be better placed to secure vital financing to grow their operations successfully and innovate. Consequently, this will lead to higher levels of economic growth, better outcomes for consumers that benefit from increased competition, wider choice, lower market prices and greater opportunities for business owners and employees to succeed. This session will explore strategies and needs for authorities and governments to address most vital needs of MSMEs in digital markets to support the post COVID 19 recovery . It will discuss how governments can expand on the promise of a level playing field in the digital sphere to avoid a risk of fragmentation between market players, focusing on MSMEs, that are the backbone of most developing economies, notably through the lenses of UNCTAD’s recommended practices for digital platforms and MSMEs as well as ITC’s T4SD project on last mile connectivity. Participants from both private and public sector (ie digital platforms), the addresses and participants of both projects, will join the discussion to share their perspectives and discuss these key issues which are very relevant for the effective recovery of MSMEs in post COVID markets in an online environment. This will highlight our participative approach and the fact that we will be able to cover perspectives of all stakeholders, through sharing their perspectives firsthand.

UNCTAD has a wide range of expertise in hybrid and online meeting. During the pandemic, it has mastered various online learning tools to keep its webinars interactive with various tools such as Mentimeter (instant survey) and have used a dynamic delivery of our webinars by interacting with the audience through the chat and social media. We will rely on various tools to ensure the session is interactive including tools to engage live with the audience such as Mentimeter, slido, as well as filtering the chat. We’d recommend using Mailchimp to disseminate the invitation and use Mentimeter throughout the session as well as Zoom pro if interpretation is considered. In addition, REMO is a good virtual networking space and forum to interact online and offline with meeting participants.

Organizers

UNCTAD
Martyna Derszniak-Noirjean, PhD / Director International Cooperation Office Office of Competition and Consumer Protection, Poland Joseph Wozniak Director of the Trade for Sustainable Development (T4SD) Programme at the International Trade Centre, Geneva, Switzerland. Sophie Hunter, Project Assistants, UNCTAD

Speakers

Pierre Horna, Legal Affairs Official, UNCTAD, Geneva, Switzerland Joseph Wozniak Director of the Trade for Sustainable Development (T4SD) Programme at the International Trade Centre, Geneva, Switzerland Priscilla M. Njako, Manager, Buyer Power Department, Competition Authority Kenya; Layhy Chhea, Director of SME Department, Ministry of Industry,Science, Technology & Innovation (MISTI) Carolyne Ariokot, Intervention Manager, Access & Usage of Financial services, Financial Sector Deepening Uganda - FSD Uganda

Onsite Moderator

Martyna Derszniak-Noirjean

Online Moderator

Joseph Wozniak

Rapporteur

Sophie Hunter

SDGs

8.10
8.3
10.2
16.6

Targets: MSMEs are important and contribute to at least three of the Agenda 2030 Sustainable Development Goals (SDGs): SDG 8 (“Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all”); and SDG 10 (“Reduce inequality within and among countries”). To achieve SDG 8, MSMEs create jobs and have the potential for promoting decent work and entrepreneurship. MSMEs are relevant actors to achieve SDG 10 because MSMEs promote economic inclusion and have the potential to regenerate under-served geographic areas. Also, increasing productivity of MSMEs can help bridge wage inequality. Framework conditions for competitiveness of SMEs as well as competition law and policy are important instruments to achieve economic growth and inclusive and sustainable development, thereby contributing to SDG 8, but also to SDG 9 (“Build resilient infrastructure, promote sustainable industrialization and foster innovation”) since it enhances efficiency, promotes innovation, productivity and competitiveness; and SDG 10 as it guarantees a level playing field for all companies and creates possibilities for small and medium sized enterprises, allowing for markets to work for consumers - through wider choice, lower prices and good quality products - and all businesses. In the current context of increased digitalization and often highly concentrated markets, competition policy is even more relevant to create an enabling environment and be a driver of competitiveness. Furthermore, competition law and policy may also promote sustainability through the exemption of horizontal agreements that meet specific requirements as it is being discussed in some international fora. This approach, yet to be fully explored and discussed, may also provide MSMEs a way to further contribute to sustainability and achieve economic growth according to the Agenda 2030, the UN SG’s 10 priority agenda as well UNCTAD’s new Secretary General call to make trade more sustainable and inclusive . Since SMEs are highly prevalent in the economies of developing countries, the current push towards sustainable economic growth, notably in the context of COVID-19, is of great relevance to SMEs. Initial research suggests that the tools available to competition authorities may be useful to support sustainability agreements through specific exemptions. Beyond direct support to MSMEs, the regulatory environment has a huge impact on digital connectivity and MSME growth • Benefits from the successful implementation of cross-border paperless trade are large, with the potential to cut transaction costs by 25% across Asia and the Pacific region, as well as to increase regulatory compliance, reduce illicit financial flows and facilitate engagement in the increasingly digital global economy. It “allows small and medium-sized enterprises to reach global markets and compete on an international scale.” (ADB/ESCAP, 2018) • However, the commercial law applicable to these transactions has not always kept up to the new realities. To the extent that it has been amended with electronic commerce in mind, different countries have taken different paths. In a time of global or regional economic blocs, these differences can cause inefficiencies in or barriers to trade. • Example - tourist aren't going to beneficiary countries because of Covid. This has an effect on partners in our beneficiary countries like Vietnam. But now people can more easily buy things like online and have them shipped, like suits in Vietnam that are favorably priced for their quality. • There are bottlenecks because of government regulations. For example, they may not authorize online transactions like PayPal or apple wallet. They may have other regulatory procedures that stymie cross border transactions. • Solutions can be even more effective when implemented at the supra-national level, like with the AFCFTA. • Also with the future implementation of a WTO agreement on e-commerce. Digitalization of trade requirements like Certificates of Origin. Harmonization with international standards can help MSMEs to better navigate the hurdles. The principal relevant international standards are: A. United Nations Convention on the International Sale of Goods (CISG): The CISG, originally adopted in 1980, sets out basic rules of contract law for international sales of goods. Expert review in the early 21st century concluded that it could be applied to electronic sales. B. UN/ESCAP Framework Agreement on the facilitation of cross-border paperless trade (Framework Agreement): The Framework Agreement sets out principles and priorities for member states to legislate on cross-border e-commerce, without prescribing specific texts. It also provides opportunities for collaboration and mutual support in legal development. C. United Nations Convention on the use of electronic communication in international contracts, or Electronic Communications Convention (ECC): the ECC sets out how electronic contracts can be integrated into the commercial laws of member states. It can be made to work as domestic law as well. D. Further, the Trade Facilitation Agreement (TFA) of the World Trade Organization imposes certain obligations on parties to transact public business, such as customs processing electronically, etc. It would facilitation harmonization if the remaining CAREC members – Azerbaijan, Turkmenistan, Uzbekistan - joined the TFA Therefore, this session will have a twofold impact: by addressing competitive concerns for MSMEs emerging out of the crisis, it will also promote MSMEs and competition policy’ contributions to achieving the SDGs and Agenda 2030 to align economic growth and boosting competitiveness with these goals.

Session Type
OF