High hopes on DFTZ to boost Malaysia’s cross-border trade

By Chong Jinn Xiung November 6, 2017

DFTZ expected to increase SMEs goods export to US$38 bil, create 60k jobs by 2025
Jack Ma amazed by resolve & commitment to remove all barriers in just under a year

MDEC CEO, Yasmin Mahmood answering a question during the press conference.

AFTER months of planning and waiting, the world’s second Digital Free Trade Zone (DFTZ) at the KLIA Aeropolis went live on Nov 3 and, according to the Malaysian government, it is set to give a shot in the arm for over 1,900 export-ready Malaysian Small and Medium Enterprises (SME).

The new facility – to be built on the site of the former Low Cost Carrier Terminal (LCCT) will be Alibaba’s first eFulfillment hub outside of China that will connect Malaysia with other upcoming regional hubs in other continents.

With the vision to lower trade barriers and provide more equitable access to markets for SMEs around the world, Alibaba Group founder and executive chairman Jack Ma’s vision of the private sector working with government is coming to fruition.

“I’m truly amazed by the resolve and commitment of the Malaysian government to remove all the barriers in just under a year to make this day possible,” Ma said during the launch. “Today we are witnessing a historic moment in Asia where one country has begun to use technology to enable its SMEs and young people to become more competitive on the world stage.”

The DFTZ is seen by the Malaysian government to be a key driver of its Digital Economy as it seeks to facilitate seamless cross-border trade while enabling local SMEs to export their goods to the international market.

Adding to that, Alibaba Cloud, the cloud computing arm of the Alibaba Group opened its local data centre in Malaysia last week as part of Alibaba’s initiative to support Malaysian SMEs with their cloud computing needs. The public cloud platform is said to provide Malaysian enterprises with the choice to build their businesses and run their applications on a powerful, reliable and secure cloud platform.

Alibaba also intends to raise the profile of Malaysian SMEs on its platform to promote Malaysian products to global buyers even during China’s upcoming Single’s Day sale on Nov 11, the world’s largest online shopping event.

With the launch of the DFTZ, Malaysia Digital Economy Corporation (MDEC) chief executive officer, Yasmin Mahmood encouraged existing businesses to go online as it is no longer an option but a necessity to establish a digital presence.

“We want to make sure that new entrepreneurs think about embracing eCommerce and going global. Turning Malaysia into a regional logistics hub and supporting the SME ecosystem is not a one year program but a long-term program that we are committed to,” she said.

Here, two major components of the DFTZ are said to help SMEs namely the eFulfillment Hub that will serve as a cluster of facilities for customs clearance, warehousing and logistics that is expected to double the growth of Malaysia’s air cargo volume from the current 700,000 tonnes a year to 1.3 million tonnes within 10 years.

High hopes on DFTZ to boost Malaysia’s cross-border trade

The hub is said to optimise cross-border trade and optimise clearance and handling of goods improving it from six hours to just three hours with 90% Service Level Agreement (SLA) as well as improve the Cargo Terminal Operations (CTO) from four hours to 90 minutes.

The hub is set to be developed in two phases with the first phase seeing POS Malaysia investing US$14 million (RM60 million) to upgrade and renovate the KACT1 facility to serve Lazada amongst other eCommerce players while the second phase will be a greenfield development over a 60-acre plot to be jointly developed by Malaysia Airports and Alibaba’s logistics arm, Cainiao Smart Logistics Network, with the intention to be operational by 2020 and with an investment of over US$47 million (RM200 million).

MAHB, through its wholly-owned subsidiary, MA eLogistics Sdn Bhd, will own a 30 per cent stake, while Cainiao will own the remaining equity through a joint-venture company, Cainiao KLIA Aeropolis Sdn Bhd.

The second component of the DFTZ will be the eServices Platform, an integrated trade facilitation platform that is said to offer SMEs market access to reach global customers while accelerating the online trade facilitation process and end-to-end business support for cross-border trade.

In total, the DFTZ is expected to increase SMEs goods export to US$38 billion as well as create over 60,000 jobs and support US$65 billion worth of goods moving through the DFTZ by 2025.

Innovation and new technology are rife at the new DFTZ as it will be using state-of-the-art sorting, shelving and pick-pack facilities, customs inspection and quarantine area. There will also be category specific facilities such as secure warehouses and temperature controlled storage among other facilities.

In the next phase of expansion, the DFTZ is said to support other leading modes of transport to cover sea and rail.