Malaysia and China Joins Forces in Developing Digital Free Trade Zone

Four months after the initial announcement of the Digital Free Trade Zone (DFTZ) during budget last year, the DFTZ is finally realised.

Prime Minister Dato’ Sri Mohd Najib Tun Abdul Razak, along with founder and Executive Chairman of Alibaba Group Jack Ma, launches the world’s first e-hub outside of China. Ma first launched the Electronic World Trade Platform (eWTP) in China, and with this launch, the DFTZ is the first hub to join the global initiative. The DFTZ will function as physical and virtual zones to help SMEs take advantage of the internet economy and cross-border eCommerce activities, giving support to internet companies to trade goods, provide services, innovate and co-create solutions.

The DFTZ is part of the strategy for the plan to double Malaysia’s eCommerce growth, in order to increase GDP contribution to RM211 billion by 2020. In a release by MDEC, it’s noted that DFTZ has the potential to double SME goods exports by 2025, and support an estimated USD $65 billion worth of goods moving through DFTZ. It is expected 60,000 direct and indirect jobs will be created by this initiative.

The DFTZ will comprise of three main components; with two physical zones – the eFulfillment Hub and Satellite Services; and a virtual zone – the eServices Platform. The implementation is set to be rolling out in phases. With the landmark signing of four MOUs during the launch, the event holds witness to partnerships between multiple companies and agencies from Malaysia and China.

“Malaysians have embraced the internet economy and eCommerce in a big way. We are now leading the eCommerce market in the region generating revenue of US$2.3 billion in 2015,” said Najib. “We want to help SMEs overcome the complex regulations, processes and barriers, and eventually further encourage business and traders to connect and collaborate in cross-border training.”

MDEC signed two MOUs, firstly with Alibaba Group for the collaboration in development of the DFTZ, in line with the objectives of Ma’s vision of eWTP. The agreement also includes the development of a regional hub for eCommerce, trade facilitation, SME onboarding, cloud services for entreprises and an eFulfillment and logistics hub.

The e-Fulfillment Hub will roll out before end of 2017, operated and managed by Alibaba, Cainiao, Lazada and POS Malaysia, with Alibaba as a main stakeholder, holding a major minority stake of 42%.  The facility is set to be launched at the end of 2019. This marks Alibaba’s first investment in Malaysia. In line with the agreement between MDEC and Alibaba, Malaysia Airports Holdings Berhad (MAHB) and Cainiao Network will be put in charge of the development of the regional eCommerce and logistics hub in KLIA Aeropolis, with operations led by Cainiao and Lazada.

MDEC also signed an agreement with Catcha Group, for collaborating in establishing Kuala Lumpur Internet City (KLIC). The KLIC will be the first satellite services hub of DFTZ, located in Bandar Malaysia. KLIC aims to be the premier digital hub for global and local internet-related companies targeting SEA. Bringing together key players in the internet ecosystem to give a full end-to-end support, the KLIC will encourage networking and knowledge sharing, driving innovation in the internet economy and eCommerce industry.

Along with the three agreements state above, Alipay will be coming to Malaysia. Alipay will be working with Maybank and CIMB for launching Alipay barcode payment in Malaysia. This will allow mainland Chinese tourists to make payments with the popular Alipay e-wallet, as well as give Malaysian merchants access to the Chinese market.

Leveraging the strategic location, efficient warehouse system, integrated services platform, along with support from the government including faster customs and cargo clearance; the DFTZ aims to provide a holistic service for SMEs, marketplaces and other eCommerce traders.

The E-Services Platform will be made available along with the availability of other components of DFTZ. The E-Services platform will offer integrated services, helping deliver a streamlines and efficient experience.

“The eWTP or Electronic World Trade Platform should be driven by business and supported by governments. If we can build an inclusive platform for businesses and young people to trade and do business freely, openly, and fairly, this will be fundamental to the world economy over the next 20 to 30 years and for the century,” said Jack Ma, Founder and Executive Chairman of Alibaba Group.

Ma was appointed the digital economy adviser to the Malaysian government by Najib during an official trip to China in November. Since early 2016, Ma has proposed the eWTP strategy to over 30 countries, and the proposal was included in the communique of last year’s G20.

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