Malaysia launches world's first Digital Free Trade Zone outside China

KUALA LUMPUR: Prime Minister Datuk Seri Najib Abul Razak and Alibaba Group founder and executive chairman Jack Ma yesterday launched the world’s first Digital Free Trade Zone (DFTZ) outside of China, which has the potential to double the growth rate of Malaysian small and medium enterprises’ (SMEs) goods exports by 2025.

It is also estimated to be able to support US$65 billion worth of goods moving through DFTZ. Additionally, DFTZ is expected to create 60,000 jobs by 2025.

With the launch of DFTZ, Malaysia will serve as a regional e-fulfilment centre and become the regional hub for SMEs, marketplaces and monobrands.

DFTZ consists of three main components that combine both physical and virtual zones, which will be implemented in phases. The physical zone comprises the e-fulfilment hub and satellite services hub, while the virtual zone consists of the e-services platform.

“I think 90% of small businesses can produce at least 80% of (the country’s) GDP (gross domestic product). If you have more small businesses, that means more jobs, more middle class and the country’s economy can be sustainable. DFTZ is trying to make the business more inclusive,” said Ma.

The e-fulfilment hub will be centred at KLIA Aeropolis. The initial phase will be rolled out before the end of 2017 by Alibaba Cainiao, Lazada and Pos Malaysia, leading to the formal launch of Alibaba’s facility at the end of 2019.

Without divulging investment figures, Malaysia Digital Economy Corp CEO Yasmin Mahmiod said in the next one year, this will be done via converting the existing 20-acres low-cost carrier terminal site to an e-fulfilment hub. It is also looking at a possible 90-acre extension at an adjacent site. Lazada and Alibaba’s logistics firm Cainiao will lead other Alibaba subsidiaries and affiliates to work with Malaysia Airports Holdings Bhd for the development of the regional e-commerce and logistics hub.

Alibaba CEO Daniel Zhang said Malaysia has a big vision to build DFTZ, in line with Alibaba’s vision to have the Electronic World Trade Platform (eWTP).

“We believe Malaysia is the ideal location to become a regional hub for Asean countries,” he said in a press conference.

Meanwhile the satellite service hub, a 500,000 sq ft facility, will be located in Bandar Malaysia. Kuala Lumpur Internet City (KLIC) will be the first satellite services hub of DFTZ and will be developed by internet firm Catcha Group.

KLIC is set to be the premier digital hub for global and local internet-related companies targeting Southeast Asia. It will comprise key players within the internet ecosystem to facilitate end-to-end support, networking and knowledge-sharing that will drive innovation in the internet economy and the e-commerce industry.

Both DFTZ and eWTP, the brainchild of Ma, want to help SMEs overcome the complex regulations, processes and barriers, and eventually encourage businesses and traders to connect and collaborate in cross-border trading.
DFTZ will be a boost to Malaysia’s e-commerce roadmap that was introduced in 2016, which aims to double Malaysia’s e-commerce growth and increase the GDP contribution to RM211 billion by 2020.

The launch ceremony also saw the exchanges of memorandums of understanding betwen four parties, which are MDEC and Alibaba for the collaboration in the development of DFTZ, MAHB and Cainiao for the hub in KLIA Aeropolis, MDEC and Catcha for the establishment of KLIC, Alipay and Maybank as well as Alipay and CIMB for the collaboration in launching Alipay barcode payment in Malaysia.