DFTZ to uberise trade for Malaysian SMEs

This article first appeared in The Edge Malaysia Weekly, on November 6, 2017 - November 12, 2017.
-A +A

THE Digital Free Trade Zone will make it easier for local small and medium enterprises (SMEs) to export their goods to China first, then eventually, the rest of the world, according to Malaysian Digital Economy Corporation CEO Datuk Yasmin Mahmood.

Yasmin tells The Edge in an interview at MDEC’s office in Cyberjaya that most Malaysian SMEs are content to remain local, perhaps because they find the export process too onerous.

To illustrate her point, she says there are 30,000 Malaysians (both companies and individuals) registered to buy on the Alibaba platform, but only 1,000 sellers. “And why is that? Because for SMEs, it is not that easy to manoeuvre through all the complication of doing cross-border trade or even understanding how to do foreign exchange between two countries.

“So, the DFTZ is essentially the uberisation of trade facilitation,” she explains.

The first component of the DFTZ is the creation of a digital platform to facilitate trade. “This can be seamlessly integrated into the various marketplaces and then be connected to the trade facilitation platforms of other countries,” says Yasmin.

For instance, say an SME designs and produces its own watch and wants to sell this to Chinese buyers. “The first step would be that we, together with Alibaba, would assist you to create your presence on Alibaba.com. We have identified 1,900 SMEs and are providing training and hand-holding to help them put their product on Alibaba.com.

“Once you have secured the transaction, all you have to do is go to our eServices platform (the second component) and we will do all that for you — customs clearance, foreign exchange … we will even help you choose your forwarding agent,” Yasmin remarks.

Once you have clicked on the platform and keyed in all the details, the services platform will take the product to the eFulfillment hub. “The eFulfillment hub will then export it out. And once it has been received, the platform will notify you and give you the money.”

It sounds simple enough but what about the regulatory barriers for certain goods, such as food or pharmaceuticals? Yasmin admits that this has not been integrated into the process as yet. “Which means you’ve got to get your own permits first with Sirim or whoever, and your forwarding agent will also have to get the permits on the other side. But the vision is that yes, we will integrate this, hopefully by next year.”

The third component, which is the eFulfillment hub, was launched by Prime Minister Datuk Seri Najib Razak and Alibaba founder Jack Ma last Friday. The entire physical logistics hub, comprising 60 acres, will be known as the KLIA Aeropolis DFTZ Park. The KLIA Aeropolis development is centred on key clusters of air cargo and logistics, aerospace and aviation.

Yasmin points out that at present, Malaysia does not have a service-level agreement for cargo clearance for cross-border trade. “So, the DFTZ will be the first in the country to have a commitment for a three-hour end-to-end cargo clearance with a 90% service-level agreement, which is on a par with the best in the region.”

She says a lot of work has gone in to make this possible. “This includes automation and even certain policies. For instance, trucks were never allowed to go all the way to the planes to collect goods. Now they are. It was a concerted effort by our customs (Royal Malaysian Customs Department), MAHB (Malaysia Airports Holdings Bhd), Pos Malaysia and eventually MASkargo, because these are the cargo terminals.”

Right now, it takes at least six hours — on a good day — for cargo clearance. “We had to work backwards to figure out how to achieve three hours. We even had to look into rerouting. Now, it takes 11km to get to the CTO (cargo terminal operator) from the plane. But hopefully, now, with more volume, we will have more dedicated cargo planes, which are going to land beside the runway to the CTO. If that happens, it will be seamless and it will take less than three hours.”

Alibaba is MDEC’s catalytic partner. “They are the ones helping us to define the whole uberisation. They are building some of the components to conduct the seamless integration and we are building some of it,” Yasmin explains.

Is the DFTZ meant for the global market or just China? “China first,” she says. “In Malaysia, when you think global, it should be Asean and China, and that’s almost as global as we can get. And maybe to the Middle Eastern countries.

“But it is supposed to be everywhere, yes. Eventually, we will go to other parts of the world.”

To a question on whether the DFTZ simply makes it easier for Chinese goods to come into Malaysia rather than for Malaysian goods to be exported to China — a speculation that was further fuelled by the announcement that the government will be increasing the de minimis, or minimum value, for imports from RM500 to RM800 — Yasmin points out that Chinese goods are already coming in, hence the 30,000 Malaysian buyers and only 1,000 sellers on Alibaba.

“Import will happen — it’s a natural trajectory. But the government’s national intervention is to help our SMEs export. And that is what the DFTZ is all about.”

At the end of the day, Yasmin says, imports and exports will account for less than 50% of the goods that pass through the KLIA Aeropolis DFTZ Park. Most of it will be accounted for by transshipment.

“This means that even goods from Australia, New Zealand and Asean will be coming into Malaysia and from Malaysia, they will go to other parts of the world, including China. From China, the goods will come here first, before going to the country hubs of Thailand, Indonesia and the Philippines.”

The government will also increase the minimum value for imports, from RM500 to RM800, to establish Malaysia as a regional e-commerce hub.