This article first appeared in Digital Edge, The Edge Malaysia Weekly on July 5, 2021 - July 11, 2021

Certain government agencies seem to have a tenuous relationship with data even though e-commerce is now at the forefront of the broad economic data ecosystem. Historically, there have been major e-commerce data gaps and disputed numbers, many of which still persist. 

Checks by Digital Edge indicate Malaysia’s e-commerce system dates back to 1998. Meanwhile, the earliest discernible attempts at capturing e-commerce data at the government level began between 2010 and 2015, with the Department of Statistics Malaysia’s (DOSM) economic census. 

This leaves a roughly 10-year period (1998 to 2008) with no e-commerce data being captured at the federal level. As the private economy becomes more digital and cloud-based, there are stark opportunity costs to “missing the boat” on key trends that reliable e-commerce trade data might otherwise have unearthed. 

According to Dr Yeah Kim Leng, professor of economics at Sunway University Business School, there needs to be a more robust e-commerce data ecosystem to add visibility to those parts of the private economy worth focusing on and adding value to. “We could have used business-to-business (B2B) e-commerce trade data to help identify and capture opportunities in emerging industries that, in recent years, seem to have passed us by,” he says.

“A case in point is the electric vehicle segment, which has exploded in popularity. Despite having an early lead in the broad electrical and electronics space over the last few decades, we were unable to build on those early advantages to grow a high-tech, high-value-added industry around electronic vehicle manufacturing.” 

Currently, the closest available proxy for cross-border e-commerce data for the electrical and electronics (E&E) industry appears to be the DOSM’s 2018 Usage of ICT and e-Commerce by Establishment report. 

For reference year 2017, the report found that income derived by local manufacturers in the broad manufacturing e-commerce space came to RM266.1 billion for the domestic market and RM21.37 billion internationally. The report itself was released in May 2019, using reference data from 2017 and 2015. 

According to Yeah, strengthening e-commerce data collection and dissemination at the federal level would drastically improve the private sector’s ability to identify opportunities and risks in the retail space, and to plan accordingly. “It would also be useful to improve public policymaking and national planning,” he says.

In all fairness, the relevant government agencies have, in varying degrees, attempted to improve or institute their respective e-commerce data-gathering practices over the years. 

However, oversights persist. First, there is a clear lack of consistent and reliable e-commerce trade data to rely on. Second, key government-led e-commerce programmes are not properly benchmarked. Finally, there is no visibility at all as far as cross-border e-commerce trade data is concerned. 

This is not to say the data is entirely absent. Indeed, various private sector stakeholders point out that this information has probably been tracked by several market research firms in the country and abroad. This information is likely to be proprietary, however, and thus available only to organisations that can afford to access the relevant reports. 

This is no substitute for having suitably anonymised e-commerce trade data captured at the federal level by the government.

DOSM chief statistician Datuk Seri Dr Mohd Uzir Mahidin is candid in his assessment of local e-commerce data practices. “We’ve not been very comprehensive in our tracking of e-commerce data prior to 2018. While we collected some related data at some point between 2010 and 2015, it has not been as comprehensive as we would have liked,” he tells Digital Edge. 

Inquiries confirm that Lelong.my — the country’s first recognisable e-commerce platform — was incorporated as far back as 1998. A 2013 article by e-commerce trade website ecInsider noted that budget carrier AirAsia Bhd launched its e-commerce ticketing platform in 2001. The next big entrant was US e-commerce giant eBay, which launched a local version of its platform in 2004.

“The e-commerce ecosystem initially evolved independent of our data tracking efforts. It was really driven by the market, until the government stepped in to support the ecosystem over the last few years,” says Uzir.

“Once the ecosystem started to gain importance in the eyes of the government, we had officials coming to us to ask whether we could track various e-commerce data points, and we obliged. We will continue to improve based on the increasing demand for data and build up to having the most comprehensive data sets possible.”

At a recent e-commerce-related media briefing, Malaysia External Trade Development Corporation (Matrade) deputy CEO for exporter development Abu Bakar Yusof said the agency had thus far not tracked cross-border e-commerce trade data. That is despite already having well-documented capabilities to track conventional exports, whether directly with participating exporters or in partnership with DOSM. 

Abu Bakar says the agency still lacks the ability to capture that data. “It’s a mechanism we’re working on right now, alongside DOSM, to figure out how best to acquire this data. 

“While it may not be too difficult to acquire such data from individuals, business-to-consumer (B2C) merchants, the challenge here is capturing information on B2B e-commerce exports. That is because B2B tends to constitute the bulk of e-commerce activity generally. 

“It may be that the Royal Malaysian Customs Department would have to get involved, given the cross-border nature of the data we’re trying to collect.”

Despite having robust information on conventional trade with Malaysia’s trading partners, the government is still unable to reliably track cross-border e-commerce activity. There are also questions surrounding the reliability of Matrade’s data practices, dating back to its flagship eTRADE 1.0 e-commerce programme. eTRADE 1.0 ran from 2017 to 2020, with Matrade providing onboarding grants of RM5,000 to successful applicants.

All told, 3,358 small and medium enterprises (SMEs) — out of a total of 4,402 applicants — generated export sales of RM376.3 million over the claimed lifetime of eTRADE 1.0. According to Abu Bakar, the agency had accounted for a return of 25 times on its grant programme: For every ringgit it spent in eTRADE 1.0 grants, Matrade expected to generate RM25 in e-commerce export sales at the other end. 

As it turned out, the agency fell short, yielding a return of closer to 22.4 times. In ringgit terms, eTRADE 1.0 underperformed by about RM43.5 million in export sales between 2017 and 2020.

A further breakdown of the numbers indicates that, on average, participating eTRADE 1.0 companies saw export sales of RM28,015.19 a year throughout the four-year lifespan of the programme. 

“When averaged out, the numbers may not look that attractive, and we acknowledge that some companies may not have secured any sales in the end. However, others not only increased their overall exports via participating in eTRADE 1.0, but they also penetrated entirely new markets,” says Abu Bakar.

“Ultimately, we are looking at the outcomes of eTRADE 1.0 from a holistic point of view. When we started the programme, a number of companies used it to ramp up their existing export business. Other businesses, meanwhile, successfully ventured into the export market for the first time, thanks to the programme.”

In all of this, there are further questions around the full lifespan of the eTRADE 1.0 programme. While Matrade says it ran from 2017 to 2020, historical data from its own website disputes this claim. 

Matrade’s Online Services Usage web page indicates the agency had been processing eTRADE 1.0 applications every month between October 2014 and July 2020, far longer than the official timeline of 2017 to 2020. 

There is a further Matrade press release touting its maiden eTRADE workshop in October 2014. The statement noted a targeted sign-up rate of more than 2,000 SMEs that year. Yet, fewer than 300 merchants even applied for the programme. Successful applicants were said to have received onboarding grants of RM1,000 each to set up e-commerce stores on various participating platforms.

It is unclear how much the agency spent on eTRADE grants between October 2014 and end-2016, or what the return on this expenditure came to. There is no data on export sales or the number of successful applicants during the period in question. Digital Edge is following up with Matrade. 

According to Abu Bakar, for a period of time in 2016, Matrade had a short-lived collaboration with another government agency, the Malaysia Digital Economy Corporation (MDEC), to drive eTRADE 1.0. 

In February this year, the agency announced the launch of eTRADE 2.0, as a continuation of its e-commerce export agenda. “We have learnt much from eTRADE 1.0 and this time around, in addition to onboarding support, Matrade is supporting participating merchants with digital marketing and training grants. It will be really useful for online merchants with export aspirations to optimise their online footprint,” says Abu Bakar.

eTRADE 2.0 expands on its predecessor in several ways, but it is surprisingly regressive in others. Total funding for each successful applicant has now quadrupled to RM25,000, comprising the onboarding grant of RM5,000 and RM20,000 for digital marketing and training. 

Overall targets for eTRADE 2.0, on the other hand, have been scaled back drastically. “For eTRADE 2.0, we’re targeting 1,200 SMEs between 2021 and 2025. We are also targeting export sales of RM127 million,” says Abu Bakar. 

During eTRADE 1.0, Matrade had set out to capture at least 2,100 SMEs, with targeted export sales of RM210 million. The agency spent roughly RM16.8 million in onboarding grants for eTRADE 1.0, according to Abu Bakar. 

“The targets were scaled back because of the government’s financial burden, owing to Covid-19, but also because we significantly increased the size of individual grants under eTRADE 2.0. We have taken to focusing more on quality than quantity. Therefore, we won’t be able to support as many merchants as we did during eTRADE 1.0.”

Targeted returns also appear to have been reduced significantly. On the whole, Matrade will need an outlay of RM30 million to fund the sign-up target of 1,200 merchants. Recall also that the agency had set an overall export sales target of RM127 million, coming up to a return of just 4.2 times — far lower than for eTRADE 1.0. 

Based on its own targets, Matrade will require at least RM30 million to fund the eTRADE 2.0 grant programme for the full five years. Abu Bakar says that under the 12th Malaysia Plan, however, the government has allocated only RM10 million for the entire programme, leaving the agency to contend with a RM20 million hole. 

Simply put, eTRADE 2.0 has lower export sales and return-on-investment targets than its predecessor, while requiring nearly double the funding on paper. In addition, the agency has just a third of the funding it apparently needs to hit its minimum targets. 

It is not immediately clear which, if any, of the key targets and deliverables under eTRADE 2.0 will need to be scaled back to account for the shortfall in government funding. “For now, the RM10 million could work based on our estimation that not all successful applicants will require the full RM25,000 grant,” says Abu Bakar.

“But if it turns out that eTRADE 2.0 receives overwhelming response from the market, there will be opportunities for us to review progress and allocations after a year or so. If we need to make additional requests of the government [for more funding], then we will.”

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