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Digital Free Trade Zone launched in Malaysia by PM Najib Razak and Jack Ma

Digital Free Trade Zone launched in Malaysia by PM Najib Razak and Jack Ma

The world's first Digital Free Trade Zone (DFTZ) outside of China was launched in Malaysia today by the Malaysian Prime Minister, Datuk Seri Najib Razak and Jack Ma, the founder and Chairman of Alibaba Group.

Last November, Jack Ma was appointed as Malaysia’s digital economy adviser. He will share his ideas and experience to support the growth of Malaysia’s economy through the development of the DFTZ.  

Speaking before the launch, at the Global TRansformation Forum organised by the Malaysian Government’s Performance Management and Delivery Unit (PEMANDU), PM Najib Razak said that the DFTZ will 'benefit entrepreneurs by offering a conducive environment for digital companies to carry out business.

Part of National E-commerce Strategic Roadmap

The DFTZ initiative is a part of the National E-commerce Strategic Roadmap launched late last year. The Roadmap aims to double the country’s e-commerce growth from a forecast Cumulative Annual Growth Rate (CAGR) of 10.8% during the 5 year period from 2015 to 2020 under business-as-usual conditions to 20.8%, through the implementation of acceleration intervention measures. E-commerce contribution to GDP was estimated to be RM 68 billion (~USD 15 billion) in 2015, contributing 5.9% of the Gross Domestic Product (GDP).

The Roadmap talks about turning Malaysia into a regional e-Fulfillment hub by providing resources such as special e-commerce zones, bonded warehouses, and special provisions on trans-shipment tax policies to name a few, with the Malaysian Investment Development Authority as the Programme lead.

To support this, the PM had announced in the last budget that by the end of next year the cost of  fixed broadband would be halved, and the internet connection speed doubled. In addition, to improve coverage and quality of broadband, the Malaysian Communications and Multimedia Commission (MCMC) would provide RM1 billion (USD 241 million).

PM Najib Razak said, “The growth of e-commerce is inevitable. At the moment ASEAN contributes less than one percent of global e-commerce volume. To compete with the United States, Europe and China, and to grow a new and vital sector of the economy, we need to embrace this trend. We need to embrace change and innovation.”

Three components

DFTZ will merge the physical and virtual spaces, providing offline as well as online digital services. On his blog, the PM described the DFTA as having three components:

  1. e-Fulfillment Hub, which aims to help SMEs and businesses in exporting their goods easily
  2. Satelite Services Hub, which will be the region’s digital hub for global and local internet-based companies facilitating end-to-end support
  3. e-Services platform, that will manage cargo clearance and other processes needed for cross-border trade

The first e-Fulfillment Hub will be located at KLIA Aeropolis. An area in Bandar Malaysia will also be dedicated to this initiative. The government aims to double SME export growth rate by 2025 through the DFTZ. An estimated USD 65 billion worth of goods will be moving through the DFTZ, creating around 60,000 direct and indirect jobs as a result of this growth. 

Alibaba Group's plans- logistics, cloud computing and e-financial services

A report in the People's Daily, China said that the Alibaba Group will set up an e-commerce hub as part of the collaboration with the Malaysian government in the development of the DFTZ, encompassing logistics, cloud-computing and e-financial service.

This hub is in line with the Electronic World Trade Platform (eWTP), promoted by Jack Ma. The objective of the eWTP is to reduce barriers, making it easier for Small to Medium-sized Enterprises (SMEs) to expand their trading capabilities worldwide.

At the launch of the DFTZ, Jack Ma said, “This is the first hub specifically designed for small businesses and young people. And we are going to use new technology to empower small businesses and young people. As long as you have a good product, you have a good idea, this facility is going to enable you.”

Alibaba's logistic platform Cainiao and its commerce website, Lazada will lead the effort to develop a regional e-commerce and logistics hub at KLIA Aeropolis, working with Post Malaysia. The first phase is expected to be rolled out before the end of 2017. The formal launch is planned for the end of 2019.

Alibaba Cloud, the Alibaba Group's cloud computing arm, will build a cloud platform in Malaysia to foster local SMEs. In addition, Ant Financial has inked an agreement with two leading Malaysian banks, CIMB bank and Maybank to explore collaboration opportunities in e-payment and financing services in Malaysia, with an initial focus on inbound Chinese tourism and promoting trade by Malaysian SMEs.

Featured image: Prime Minister, Datuk Seri Najib Razak at World Economic Fourm 2013 (World Economic Forum/ licensed under Creative Commons Attribution-Share Alike 2.0 Generic license)

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