Why Business Partnerships Are Harder Than Marriage – Part 2
22/05/2017
Millennials: Perceptions and Expectations
20/06/2017

Digital Free Trade Zone – What does it mean for SMEs?

Scoring a ‘first’ in anything, anywhere and anytime is a notable achievement for the person, field and place, but what does it mean? Being the first person to do anything means that you are contributing to the world by doing something value added that has not been done before. In short, an achievement that contributes to the world in a positive way that benefits others. In Kuala Lumpur on 22 March 2017, Dato’ Sri Mohd Najib Tun Abdul Razak, the Prime Minister of Malaysia, together with Jack Ma, founder and Executive Chairman of Alibaba Group, launched the world’s first Digital Free Trade Zone (DFTZ). This gives Malaysia and its SMEs a leadership position over other SE Asian countries and builds the brand of Malaysia as a country.

A free-trade zone (FTZ) is a specific class of special economic zone. It is a geographic area where goods may be landed, stored, handled, manufactured, or reconfigured, and re-exported under specific customs regulation and generally not subject to customs duty. Free trade zones are generally organized around major seaports, international airports, and national frontiers areas with many geographic advantages for trade. Any SME leader should, from time to time, sit down and draw two or three circles on a piece of paper. Where these circles overlap indicate a new synergy for an SME where different aspects of the business combine to move it forward. With the emergence of the digital economy in Asia, world leading ecommerce giant Alibaba set up their new SE Asia hub in Malaysia’s new DFTZ partly because Malaysia is connected to Thailand via land links that also gives it access to Cambodia, Myanmar, and Vietnam. Malaysia is as close to Indonesia, Alibaba’s biggest market in Southeast Asia, as Singapore is but Malaysia is a much bigger ecommerce market than Singapore and has a much bigger overseas Chinese community. Lots of circles, lots of synergies.

 

What is the DFTZ?
The DFTZ in Malaysia provides physical and virtual zones for SMEs to capitalise on the exponential growth of the internet economy in SE Asia and cross-border eCommerce activities. It helps support internet companies to trade goods, provide services, innovate and create solutions that reach new customers and meet market needs. The DFTZ also contributes to Malaysia’s political eCommerce roadmap, created in 2016, which aims to double the nation’s eCommerce growth and increase the GDP contribution to RM211 billion (US$47.68 billion) by 2020.

Alipay and Maybank and CIMB launched Alipay barcode payment in Malaysia. These partnerships enable mainland Chinese tourists, a large and new market segment for Malaysia, to make payments using the Alipay e-wallet also giving Malaysian merchants exposure to the huge China market.
The DFTZ consists of three main components that comprise; the physical zone eFulfillment Hub and Satellite Services Hub and the virtual zone of the eServices Platform. DFTZ provides SMEs, marketplaces and monobrands a holistic eCommerce trading experience through these benefits:

  • Strategic location and global best-in-class facilities
    1. Gateway to the region and proximity to sea and air ports
    2. Satellite services hub to support eCommerce ecosystem
    3. High efficiency modular eFulfillment warehouse
    4. Employee-centric infrastructure
  • Services
    1. Unified government services platform
    2. Integrated digital eServices platform to access leading global service providers
    3. Presence of global logistics and fulfilment service providers
  • Regulatory processes
    1. Improve regulatory processes leading to faster customs and cargo clearance

The DFTZ should contribute to dramatically increasing the growth rate of Malaysian SMEs’ goods export and is expected to create 60,000 jobs directly and indirectly by 2025. Implementation of the DFTZ’s physical and virtual zones will be done in phases. The first eFulfillment Hub will be centred at KLIA Aeropolis. The KLIA Aeropolis development is centered on the key clusters of air cargo and logistics, aerospace and aviation. The initial phase will be rolled out by the end of 2017 by Alibaba, Cainiao, Lazada and POS Malaysia. The other physical component of the DFTZ is the Satellite Services Hub, to be located in Bandar Malaysia. Kuala Lumpur Internet City (KLIC) will be the first satellite services hub of DFTZ and will be developed by another strategic partner, Catcha Group, a leading internet group in SE Asia. KLIC is set to be the premier digital hub for global and local internet-related companies targeting SE Asia. It will comprise key players within the internet ecosystem to facilitate end-to-end support, networking and knowledge-sharing that will drive innovation in the internet economy and the eCommerce industry.

“I think 90% of small businesses can produce at least 80% of (the country’s) GDP (gross domestic product). If you have more small businesses, that means more jobs, more middle class and the country’s economy can be sustainable. DFTZ is trying to make the business more inclusive,” said Jack Ma.

Malaysia Digital Economy Corp CEO Yasmin Mahmiod said in the next year the existing 20-acres low-cost carrier terminal site to an e-fulfilment hub. It is also looking at a possible 90-acre extension at an adjacent site. Lazada and Alibaba’s logistics firm Cainiao will lead other parts of the Alibaba group to work with Malaysia Airports Holdings Bhd for the development of the regional e-commerce and logistics hub providing on the ground support and infrastructure for business development for SMEs.

In the big picture, Alibaba CEO Daniel Zhang said, “Malaysia has a big vision to build DFTZ, in line with Alibaba’s vision to have the Electronic World Trade Platform (eWTP).” This signals the commitment and the importance of the DFTZ in Alibaba’s global strategy. Both DFTZ and eWTP want to help SMEs overcome the complex regulations, processes and barriers, and eventually encourage businesses and traders to connect and collaborate in cross-border trading, making business processes easier for SMEs.

 

What is the value addition for SMEs of the DFTZ?

Location/Facilities: Provide global best-in-class facilities and convenient location, leveraging latest technology and innovation for efficient cross border trade. Examples of facilities include modular warehouses with latest technology including sorting, shelving and pick-pack facilities.

Services: eServices platform including integrated services for DFTZ users. The eServices Platform will be an integrated system that connects online services by global eCommerce companies to the relevant Malaysian public sector systems to provide a seamless journey for exporters and importers to conduct their business online 

Regulatory Processes: more efficient cargo clearance, primarily with regards to permit processing and cargo movement

The launch of the DFTZ already enhances the brand of Malaysia as a country where there are international standards for SME to do business by providing the right ecosystem and facilities for brands to use Malaysia as a transhipment hub to reach ASEAN customers. Future developments will see this vision turned in to action.

 

Images from mydftz.com

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Paul Conway
Paul Conway
My role as CEO is to take the business to the next stage of growth. I already have a fantastic and growing team. There are opportunities with payments, banking channels, additional software, cloud deployment and with over 300,000 customers in South East Asia and a publicly listed majority shareholder in Censof holdings, the opportunity and tools for growth are very real.

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