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Why DFTZ will double Malaysia's SME exports: MDEC CEO Dato' Yasmin Mahmood

AvantiKumar | March 24, 2017
After the official launch of the Digital Free Trade Zone (DFTZ) involving the Malaysian PM and Alibaba’s Jack Ma, MDEC's Dato' Yasmin Mahmood spoke to Computerworld Malaysia on why DFTZ is necessary for the country's Digital Economy drive.

DFTZ (official) 2

Photo (from left) Dato' Yasmin Mahmood, Chief Executive Office, Malaysia Digital Economy Corporation (MDEC) and Daniel Zhang, Chief Executive Officer, Alibaba Group

  MDEC's Yasmin provided a breakdown of the three components of the DFTZ: the eFulfillment hub; the eServices platform; and the satellite services hub.

"The eFulfillment hub will be optimised with world-class facilities to help local SMEs undertake eCommerce transactions. This will work hand in hand with the eServices platform, which will provide seamless transactions," she said, adding that the latter would take away some of the complexities that have hindered SMEs from doing cross-border trade.

"Together, these two components will bring about the Electronic World Trade Platform (eWTP), which will be connected from Malaysia firstly to China, and eventually to the rest of the eHubs in the world. Last but not least, the satellite services hub will not only serve to build an eCommerce innovation ecosystem, but also serve to catalyse innovation powered by the Internet."

Yasmin noted the foresight shown by Prime Minister Najib and Jack Ma in developing and realising the idea for the DFTZ.

"Our prime minister truly believes in the power of digital innovation and the digital economy towards transforming the lives of Malaysians from all walks of life. On the other hand, we also have the vision of Jack Ma, who believes in the 30-30-30 focus: the next 30 years belong to the young people in their 30s, who own businesses and SMEs of 30 people," she said, adding that it is this demographic that will define the new agenda for inclusive globalisation.

DFTZ has the potential to double the growth rate of Malaysian SMEs' goods exports by 2025. It is also estimated to support US$65 billion worth of goods moving through DFTZ. In addition, DFTZ is expected to create 60,000 direct and indirect jobs by 2025.

Alibaba Group's Jack Ma said, "The eWTP or Electronic World Trade Platform should be driven by businesses 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."

In-depth: Growing the SMEs and the Digital Economy

 Earlier this week, the Internet Alliance president Chan Kee Siak (reported in Computerworld Malaysia), generally welcomed DFTZ, but also pointed out the "fragility" of the local internet market and suggested more stakeholder involvement would be needed moving forward.

Speaking to Computerworld Malaysia after the main press conference and event, Yasmin pointed out that the DFTZ launch, as mentioned in a recent deep dive interview,  was "only the first step in growing Malaysia into a world digital powerhouse.""

"SMEs are a very big component of the Malaysian economy. (In Malaysia) 97 percent of our companies are SMEs, making them the biggest cornerstone of the Malaysian economy. However, their contribution to GDP is currently at less than 40 percent. So, there is a lot of room to move."

She said that the collaboration with Alibaba was mainly focused towards capitalising on the conglomerate's eCommerce expertise to transform SMEs towards better, stronger economic empowerment. "As you know, the DFTZ is the first eHub outside of China - so what we want to do is to build our eHub in Malaysia to be close, if not as good, as what you have in China. What is first in the world is really about connecting the two eHubs, so the eHub in Malaysia will be connected to the Cross-Border E-commerce Pilot Zone in Hangzhou, which is also the location of Alibaba's headquarters in China."

When asked about the current logistics situation in Malaysia, Yasmin explained that improvements had been made locally, giving the example of "last mile" logistics. "In the last one year alone, we have had 'last mile' delivery to be in the region of just a few hours - two or three hours - and even in our remote areas, we have managed to get it to 48 hours. But it's not enough, because we want to make sure how we can improve it to, let's say, 24 hours, which is what is happening right now in China," she said, adding that there were a lot of opportunities for Malaysia to uplift the overall local logistics ecosystem and capabilities

Becoming the go-to hub for the region

Yasmin said that the DFTZ presented Malaysia with the opportunity to become a regional hub - even for transhipment of marketplaces and global brands from all over the world - into the ASEAN market. "ASEAN is a fast-growing market, and there are a lot of opportunities within the ASEAN market itself - so it is not only the SMEs that will gain, but the nation as well. The DFTZ is all about this facilitation," she said.

The first phase will see eCommerce company Lazada Malaysia and national postal organisation Pos Malaysia working together with Alibaba via its logistics affiliate Cainiao Logistics. "Cainiao will be transferring some of their knowledge to create the initial transition phase into an existing 20-acre site. At the same time, we are also looking at the virtual platform, where the creation of the DFTZ eServices integrated platform will help Alibaba's One Touch platform to become fully integrated into the local ecosystem," Yasmin said, citing the examples of solutions for local customs clearance and local permitting agencies to provide end-to-end seamless transaction for SMEs.

"Jack spoke about the fact that he wants SMEs to only think about marketing their products, and building their great products, without having to worry about the whole logistics issues and processes when doing cross border trade," Yasmin said, concluding with a mention that the eFulfilment hub's physical zone would be located at the eight-hectare site in Aeropolis - which was previously the Low-Cost Carrier Terminal - before the year-end.

The latest edition of this feature is at Computerworld Malaysia (24 March 2017).


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