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31 March 2016 Editorial


31 MARCH 2016

Disrupting the disruptors

The decision to allow 100 per cent FDI in e-commerce entities running online marketplaces is a belated yet welcome step by the government. It clears the air a great deal on the norms governing a rapidly expanding part of the economy, and makes de jure what has hitherto been de factoBillions of dollars have already been committed as investment in the sector, and online shopping is now an established retail habit. The growth potential of the segment has drawn in venture capital and private equity investors in droves, and e-commerce players had exploited the policy ambiguities and loopholes to obtain attractive valuations for their enterprises. The latest guidelines make it clear that as long as a business entity acts purely as a marketplace, facilitating online transactions between a seller and a buyer, 100 per cent overseas ownership is allowed in the venture. Safeguards have also been specified from the marketplace operator’s perspective, so that the responsibility for both delivery and quality of the product and related warranties will lie with the seller. E-commerce firms can provide support services to sellers, including warehousing, logistics, call centres and payment collection. The rub for them lies in some of the other conditions pertaining to what the foreign-owned e-commerce marketplaces cannot do hereafter.

The imposition of a 25 per cent cap on the value that sales from a single seller and group companies can contribute to overall turnover at the marketplace means some of the largest e-commerce players will have to redraw their business strategies. The unequivocal assertion that any ownership of inventory by the entity running the marketplace will render its business into the inventory-based model, where FDI is barred, also makes it clear that these foreign-owned e-commerce enterprises can no longer sell wares sporting their own brand names online.And the most worrisome norm is the vaguely worded one prohibiting ventures from “directly or indirectly” influencing the sale price of goods. This is construed by most observers as a deterrent for discounts. If the idea is to level the playing field, would e-sellers be allowed to slash prices only if their offline counterparts are offering discounts? Would pricing decisions be dictated by a government nod instead of market forces? Brick-and-mortar retailers, some of whom had moved court seeking an end to the deep-pockets-backed discounts offered by e-tailers that they claimed were ruining their businesses, might be pleased. But for the consumer, strict enforcement of the guidelines could make it difficult to access value-for-money deals. E-commerce, including m-commerce spurred by India’s smartphone surge, have been a significant disruptor in the way domestic consumers shop. If consumers lose interest, the Centre’s guidelines could well disrupt this disruption and end up staunching the very flow of foreign capital it aims to attract.

Lessons from the Palmyra victory

The recapture of the ancient city of Palmyra by Syrian government forces marks one of the biggest setbacks for the Islamic State since the group announced its ‘Caliphate’ in June 2014. It also demonstrates the continued weakening of the IS on the battleground. It lost about 14 per cent of the territory in Iraq and Syria last year, including the city of Ramadi, to Iraqi troops. Several factors have been at play in structurally weakening the IS over the past few months. The tide started turning against it when in June it lost Tal Abyad, a strategically important town on the Turkish-Syrian border, to Kurdish rebels. The town was one of the IS’s main access points for smuggling in weapons, materiel and fighters. Turkey’s move to tighten its long and porous border with Syria after jihadists began attacking Turkish cities and international pressure mounted on Ankara, squeezed the IS’s cross-border supply lines. Pointed U.S. air strikes on the group’s oil infrastructure and training camps too weakened it both financially and organisationally. But the final blow came from Russia. From the beginning of its intervention in Syria, Russian President Vladimir Putin kept saying that the best answer to the terrorists in Syria would be the “restoration of statehood”. This is what Russia achieved in Syria. Five months of Russian intervention has bolstered the regime of Bashar Al-Assad, raised the morale of its troops and helped it make major advances on the ground. The ceasefire in Syria, which led to a partial suspension of the fighting with the rebels, may also have helped government forces to use their resources more effectively.

Palmyra is an instance that could be repeated in future battles against the IS: first weaken the organisation through multiple attacks and then launch a final ground offensive by the most organised military force — in this case the Syrian national army — to recapture territories. For the IS, territory is important. It is its hold over territories that makes the IS different from other jihadist groups. The claim of establishing a ‘Caliphate’ comes out of the territories it controls. So every time it loses land the ‘Caliphate’ shrinks, weakening its terror machinery further. The fight against the IS will not be complete unless its core is destroyed. This is not an easy task, however. The group seems to be deeply entrenched in Raqqa, its de facto capital. Mosul is still under its control. If the advances made in Ramadi and Palmyra are to be taken forward, there has to be coordination between the anti-IS forces, including the U.S. and the Syrian army. President Assad is less of a threat than Abu Bakr al-Baghdadi. Mr. Assad’s fate could be decided through a political process, which is now under way, but not that of Baghdadi. Both the peace process in Syria between the regime and the rebels and the war on the IS in Syria and Iraq could continue simultaneously. The international community must help the Syrian and Iraqi governments continue their campaigns to free more territories from the IS.


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