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Government Urges PayPal To Come To Pakistan

by Arif
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Finally, an array of light has fallen on Pakistan’s information technology (IT) related exports a boost as the government is engaged in talks to bring a global payment partner like PayPal to Pakistan. This was disclosed on Monday during a meeting of the Senate Standing Committee on Commerce.

A briefing on the country’s first-ever National e-Commerce Council was also given to members of the meeting. The committee met at the Parliament House with Senator Zeeshan Khanzada in the chair. The committee was told that Pakistan is the 37th biggest e-commerce market in the world and is still rapidly growing.

Committee members issued the importance of maintaining the quality of online services and e-Commerce so that it can gain the trust of the public and realize its true potential. Senator Tarin made a startling claim that Pakistani freelancers have parked around $3-4 billion dollars offshore due to high taxes domestically.

Government officials told Senator Afridi that they had held talks with PayPal and other similar payment gateways in a bid to bring them to Pakistan. The officials told the Senator that;

“We are trying to start this service in Pakistan as soon as possible, current payments are made through another payment gateway linked to PayPal on a marketplace such as Amazon.”

Furthermore, the former finance minister suggested the government offer freelancers a 10-year tax holiday. He called on the relevant authorities to allow freelancers to open 100% foreign currency accounts to freely receive and send payments. At this Senate Deputy Chairman Mirza Muhammad Afridi remarked that to enhance Pakistan’s IT exports, it was important to bring global payment platforms such as PayPal in Pakistan.

Why has PayPal Haven’t Made It To Pakistan Yet?

There are multiple technical, legal, and support issues faced by PayPal in Pakistan in the past that stopped the service to operate in the country.

Prior Behaviour Of the Government

For the last decade or so, there has been some effort from individuals, but the field lacks a robust effort by the government. One of the major challenges in Pakistan today is the mindset surrounding the digital economy and the low priority given to it by our leadership. Up until a few years back, the digital ecosystem in Pakistan has always been a sideshow which caused the industry to hinder its growth.

It’s about time Pakistan develops an overall ecosystem to motivate a company like PayPal to enter the market. This will allow anyone running an e-commerce company and wanting to make a payment to a vendor in China to smoothly make the transaction.

Legal Issues

Another reason for our current standing is our regulatory ethos. PayPal would have to pay the SBP-mandated $2 million license fee if it wanted to work in Pakistan. If the same regulations existed in the US, perhaps the world wouldn’t see the likes of Elon Musk and Peter Thiel, who created small startups like PayPal just to automate payments in the US.

PayPal earns between 2% on every transaction which makes it difficult to send money abroad on 3% on transactions, even a $100 million transaction a year could not justify a $2 million license fee. This coupled with intense regulation like FATF and the perpetual fear of financial fraud would discourage most companies.

While there are ways in which the government can resolve this issue, like the setting up of an indemnity fund for these companies, it is something that would require a serious effort from the government.

Pakistan has Less To Offer PayPal

PayPal can only act as a transaction company and has a pretty complex business model. Even in places like India, PayPal cannot use its platform for person-to-person transfers or payments due to strict regulations. One can only transfer money to banks in India via PayPal.

Pakistan lacks a central system or a platform through which customers can transfer money to any bank in the country. In places like India and the US, companies like PayPal can connect to any bank to process payments without acquiring a license. For PayPal to have the same option in Pakistan, it will not only need a license but will also have to commit to tough edicts of financial regulations.

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