Ecommerce development and initiatives in Malaysia and China

ECOMMERCE is transcending conventional trade and retail by reaching out to consumers not only in their homes but also across borders. It provides vast opportunities and geographic reach to both established businesses and new enterprises. On a macro level, ecommerce is reshaping global trade.

The Covid-19 pandemic has accelerated the adoption of ecommerce and digital transformation. Consumers have resorted to ecommerce to meet their shopping needs. As a result, ecommerce has become an important factor in domestic markets – supply and distribution of goods and services increasingly revolve around ecommerce. This is seen particularly in the rise of the gig economy – ehailing and delivery services have benefited greatly despite business closures and rising unemployment. Businesses that adopted ecommerce are also better equipped to mitigate the impact of lockdown.

Ecommerce has brought new opportunities, but also brought to light the importance of addressing existing barriers. As international trade has promoted economic growth and exchanges between countries in the past, today ecommerce also provides opportunities for greater cooperation and economic growth between China and Malaysia.

Ecommerce in Malaysia

The Malaysian government has attempted to facilitate digitalisation with the myDigital initiative and Malaysia Digital Economy Blueprint. The government sees digital economy as an important contributor to the nation economy, and it has focused on accelerating the country’s progress through digitalisation, while ensuring that no Malaysian gets left behind. In the private sector, ecommerce platforms like Lazada, Grab and Shopee enabled small businesses, and even micro-businesses, to open with minimal start-up costs and compete in global markets.

Even though ecommerce in Malaysia is relatively robust, room for improvement remains. Challenges exist in adoption of new digital tools, cybersecurity threats, digital marketing skills, restricted production capacity, high logistic cost, and absence of knowledge regarding market access and rules in cross-border ecommerce. Other barriers include broadband services, overreliance on cash, lack of consumers’ trust, poor digital skills among the population, and lack of government support.

International standards can play in enhancing national digital resilience and building trust in ecommerce. In this, concrete initiatives are needed, such as ecommerce willingness assessments and strategy formulation, information and communications technology (ICT) infrastructure and services, access to financing for ecommerce, ecommerce skills development, and empowering entrepreneurs in developing countries.

What China has done in ecommerce, and how Malaysia can learn from it.

Leading Internet corporations are growing their ecommerce arm and mobile payment services, especially in and South and Southeast Asia. Alibaba has been setting up logistic centres in key markets, including Malaysia. Merger and acquisition activity also increasingly emphasise collaboration with local companies to speedup incorporation. This has been reinforced by a rise in ecommerce free trade areas.

Cross-border ecommerce is a significant part of China’s Internet Plus strategy. It reflects online sales as an effective way of boosting consumption, as well as its growing contribution in regional value chains, especially among SMEs and in the agricultural sector. This is further aided by fintech projects by AliPay and WeChat Pay, China’s foremost epayment service providers. Alibaba’s subsidiary Ant Financial has followed a similar strategy, obtaining shares of fintech companies, such as in the Philippines (Mynt), Malaysia (Touch ‘n Go), and India (PayTM).

Malaysia was the first country to host an eWTP (Electronic World Trade Platform) hub outside of China. Ecommerce entrees require guidance on setting up online stores and digital marketing strategies. Incubator programs play an important role to help grow these aspiring entrepreneurs.

Malaysia can learn from China’s ecommerce development by keeping pace with the latest trend and innovations, engaging experts to further improve the local ecommerce ecosystem and apply big data to understand consumer demand. There is also room for Malaysia to benefit from China’s untapped internet market potential, as 45% of the Chinese population still lack internet access.

How the BRI helps ecommerce

The ecommerce push in the BRI-participating economies saw Alibaba and JD.com providing a platform for less-developed economies to access consumer goods from supermarket chains and shopping malls.

The Digital Silk Road (DSR) has progressed into improving recipient countries’ telecommunications networks and digital technologies, including AI capabilities, cloud computing, ecommerce, and other digital economic areas. Projects in telecommunications, ecommerce and other forms of innovative technology applied to smart cities have benefited as a result. Chinese Premier Li Keqiang, in May, promised to accelerate the construction of new infrastructure such as 5G networks and data centres. Haitong Securities predicts new infrastructure investments will total RMB17.5 trillion (or US$2.47 trillion) in the next five years, or roughly RMB3.0 trillion on average yearly. The new infrastructure investment will have spillover benefits for governments and firms along the Belt and Road, which often receive low-interest soft loans from state banks to purchase Chinese tech products.

China and economies cooperating with it under the BRI are an increasingly significant part of the world economy. The digital BRI could boost China’s export of digital surveillance technologies to countries as part of the war against Covid-19, especially in implementing contact tracing.

While 5G rollout and China’s surveillance equipment sales tend to dominate headlines, the significance of information and communications technology to economic growth and development should not be overlooked. Investments in digital infrastructure could aid economic recovery by increasing demand and generating employment, and in the long run, drive economic transformation by enhancing output and trade in goods and services.

Dr Cheong Jia Qi is Senior Lecturer at University Malaysia Sabah. The views expressed here are entirely the writer’s own.

The SEARCH Scholar Series is a social responsibility programme jointly organised by the Southeast Asia Research Centre for Humanities (SEARCH) and the Centre of Business and Policy Research, Tunku Abdul Rahman University College (TAR UC), and co-organised by the Association of Belt and Road Malaysia.