For the country, which is developing a digital economy as a new source of growth for its gross domestic product (GDP), this project promises to generate trade worth RM286bil by 2025.
WHEN launching Malaysia’s digital free trade zone (DFTZ) jointly with Alibaba Group’s founder Jack Ma last Wednesday, Prime Minister Datuk Seri Najib Tun Razak’s opening remark was: “Today is a special day for Malaysia”.
Indeed, it was not only a special day for Malaysia, it was also a day of triumph and pride for the PM – spotted smiling throughout the tech-inundated dazzling ceremony.
To Malaysia, which is developing a digital economy as a new source of growth for its gross domestic product (GDP), this project promises to generate trade worth RM286bil by 2025.
Within the next eight years, the DFTZ – mooted by Najib late last year – is expected to create 60,000 direct and indirect jobs for Malaysia and double the export growth of small and medium enterprises (SME).
By pushing for this DFTZ – the first e-free trade zone outside China – Malaysia can herd SMEs, micro businesses, warehousing facilities and logistics firms into one place, and increase trade with the world.
'There is no shortcut on the journey to digital transformation. It requires completely different skill sets and attitudes, as well as greater expectations among the stakeholders.' - Lee Heng Guie
For the local economy, there is now a new impetus of growth. With the DFTZ, the digital economy is expected to contribute 20% to the GDP in 2020, up from initial target of 18.2%. In fact, the digital economy is seen as the way forward to spur immediate growth.
For the Prime Minister, the mere presence of Alibaba Group’s founder Jack Ma at the launch the DFTZ was a personal achievement and honour. This is the man that the whole world wants to partner with now.
Najib met with this legendary e-commerce wizard in Beijing last November and both agreed that Malaysia should launch the e-zone soon, after Ma agreed to be Malaysia’s adviser. Ma gave Najib a timeline of four months “to make it happen”.
For Najib, the excitement was also to see Ma bringing along four CEOs and 16 Chinese logistics companies, whose combined business in the delivery of goods and parcels account for 43% of global logistics business.
“This is by far the largest entourage Ma Yun (Jack’s Chinese name) has brought along in his overseas tours. I sense the importance Alibaba is attaching to this country,” said a senior journalist in Ma’s media entourage.
Indeed, it was most exhilarating for the PM – whose voice refused to betray him – when he learnt that even US President Donald Trump could not match his charm.
When Ma met with the most powerful man in the world in the US in January, there were fewer Alibaba executives following him.
Pride was also written all over Najib’s face when Ma, who confessed he had originally thought the launch would not be held in time, said: “Malaysia is more efficient than I thought”.
In reply, the beaming PM said joyfully: “We have proven to you (Ma) and the world that the Malaysian government can make it happen within four months. I want to assure you I will drive this personally.”
The DFTZ will also see the creation of a new Kuala Lumpur Internet City (KLIC) in Bandar Malaysia and Catcha Group has been made the master developer.
The KLIC aims to house 1,000 internet-linked firms and 25,000 tech professionals, by taking up five million sq ft feet (464,515 sq m) built over 15 years.
Within Bandar Malaysia, Alibaba will also be occupying 500,000 sq ft (46,451 sq m) for the setting up of small businesses.
Involvement of Alibaba
After the extravaganza of video display and drum beatings, hard work has to follow to develop the digital economy, which effectively means an advanced form of Internet economy with more pervasive use of technology in life and business.
Malaysia Digital Economy Corporation (MDEC) and the Hangzhou-based Alibaba have laid down their long-term plans, which can be completed in four to 14 years.
Among others, the DFTZ will help SMEs to export their products globally with ease and enable global marketplaces to source goods from local manufacturers.
Alibaba and its units are participating in four areas in the DFTZ: e-fulfilment hub, e-service platform, e-payment and financing, and e-talent development.
The e-fulfilment hub will be set up within KLIA Aeropolis in a 8ha (plus 36ha) of land given by the Malaysian government. This hub will facilitate smooth clearance of imports and exports, and thus faster delivery of products to consumers.
Alibaba’s units will work with Malaysia Airports Holdings Bhd to develop a regional e-commerce and logistics hub in KLIA Aeropolis.
The e-service platform here will be connected to Alibaba One Touch Platform, which will link Malaysia to Hangzhou’s Cross Border E-Commerce Pilot Zone to enable SMEs of the two nations to trade efficiently.
In e-payment and financing to facilitate business-to-business trades, Alibaba has signed pacts with Maybank and CIMB.
Leveraging on its cloud, big data and Internet of Things (IoT) technology, Alibaba’s e-talent development unit will help local entrepreneurs and startups to train and develop e-talents.
Founded in 1999, Alibaba is the world’s largest retail commerce company. Its businesses comprise core commerce, cloud computing, digital media and entertainment, innovation initiatives.
It is known for creating and operating the world’s largest one-day online shopping festival every year on Nov 11. Last year, it sold goods worth 120.7 billion yuan (about RM70bil) through Alipay.
First to come – Alipay
For Alibaba, the first step to digitising Malaysia is the introduction of its time-tested Alipay system.
“Malaysia should be a cashless society and your PM supports the idea. We want Alipay to be here, sooner and faster,” Ma told reporters at a press conference last Thursday.
If Malaysia acts to Ma’s expectations, its people will soon be using mobile phones to make payments at retail outlets, restaurants and hawker centres, instead of cash and credit cards.
And in ordering products online, delivery is within 72 hours.
And in future, even villagers – not just SMEs in urban areas – can prosper by selling their produce to the outside world.
Indeed, this development is taking place in some Chinese villages adopted by Tencent – China’s second largest Internet giant.
The PM is thrilled by the prospects that even orang asli and Penans in jungles could be financially inclusive with the new system. He said at the launch: “I am excited about this.”
Challenges ahead
But in terms of ICT infrastructure, Kuala Lumpur is seen as lagging behind Beijing by seven to eight years. Therefore, there is a lot to catch up.
To economist Lee Heng Guie, the most challenging task for Malaysia to digitise is to drive the development and adoption of cloud services, big data analytics and the IoT, which are the necessary enablers to catalyse economic digitalisation.
And Malaysia’s broadband must be reliable and have a wide coverage and speed, he adds.
Lee, who heads the Socio-Economic Research Centre, tells Sunday Star: “There is no shortcut on the journey to digital transformation. It requires completely different skill sets and attitudes, as well as greater expectations among the stakeholders.”
Within the country, the expected disruptions and loss of jobs in some sectors brought about by digitalisation may cause resistance.
While Alibaba has created 35 million jobs, it has also resulted in the closure of traditional businesses and loss of jobs. Many fashion outlets in China are facing this fate after the emergence of online shopping.
However, the digital economics is still acknowledged as an enormous and unstoppable force.
Ma acknowledged there are challenges ahead. He said: “The next four years are crucial”.
“The launch ceremony was good. The negotiations in the past four months were good. But there will be difficulties in implementing them,” said the frank tycoon, ranked by Forbes as the second richest in China with a nett worth of over US$29bil (RM128bil).
But Ma said he has confidence Malaysia’s DFTZ will succeed as the PM shares his vision of empowering SMEs and micro businesses. During this trip, Ma made several demands on Malaysia.
According to the PM, Ma said he only wanted to work with an efficient and result-oriented government, and the PM readily agreed to this condition.
But the senior journalist in Ma’s media team tells Sunday Star: “There is no doubt Alibaba has the sincerity and technology to help Malaysia, but the success of this digital plan will depend on the local politics and culture.”
For example, there may be a clash of cultures.
Alibaba has made it known that it has embraced a corporate culture of not engaging in corrupt practices in its dealings. Hence, the cooperation may see a red light if its business partners act otherwise.
At a transparency forum in Singapore last year, Ma shared his experience in firing a team of salesmen guilty of offering bribes to raise sales. It was a painful decision for the startup then as the wayward team brought in the most revenue.
But Ma sacked them anyway.
Ma’s emphasis on integrity has enhanced Alibaba’s image. Alibaba’s professionals are now targets of head-hunters and “everybody now wants to do business with Alibaba”.
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