CNBC quotes analysts as saying Malaysian firms are concerned they may be hurt by the almost monopolistic nature of the electronic world trade platform which favours Alibaba.
14 Feb, 2018FREEMALAYSIATODAY.COM
The Digital Free Trade Zone (DFTZ), launched last March by Prime Minister Najib Razak and executive chairman of Alibaba Group Jack Ma, is causing some worry among local firms, according to a CNBC report.
It said there were concerns that local firms might be hurt, as Malaysian companies would face stiff competition from Chinese firms.
The DFTZ aims to make cross-region shipments more affordable for Malaysian small and medium-sized companies.
According to the Malaysia Digital Economy Corporation (MDEC), DFTZ will also act as a “microcosm to support internet companies to trade goods, provide services, innovate and co-create solutions”.
“The DFTZ will be a boost to Malaysia’s eCommerce roadmap that was introduced in 2016, which aims to double the nation’s e-commerce growth and increase the GDP contribution to RM211 billion by year 2020,” MDEC added.
A core element of the DFTZ is an electronic world trade platform (eWTP) designed to ease trade between Malaysian and Chinese firms. The virtual platform, due to take effect in 2019, will connect businesses, manage cargo authorisations and assist on matters relating to customs.
The CNBC report said critics felt Alibaba, the Chinese tech giant, held too much control over the process.
“The initiative is led by Alibaba, which effectively makes it a monopoly as of now,” CNBC quoted Abhineet Kaul, a director at Frost & Sullivan’s Asia Pacific public sector and government practice, as saying.
He added: “More private players need to be encouraged to provide similar services to ensure that there is sufficient competition in the market.”
The report said this concern mirrored international worries about China’s Belt and Road initiative, “which is widely seen as an attempt by China to construct a massive, multi-national zone of economic and political influence that has Beijing at its centre”.
“Last month, Chinese media reported that Beijing intends to arbitrate trade disputes with other countries through a set of new courts that are subservient to its ruling Chinese Communist Party,” it said.
However, Alibaba denies excessive control over the scheme.
CNBC quoted a spokesperson for Alibaba as saying: “This platform (eWTP) is open to any company willing to similarly make their own investment of money and resources to develop the necessary infrastructure, and embrace a public-private partnership model to foster more cross-border trade in Malaysia and elsewhere.”
The spokesperson added that eWTP was “open, transparent and inclusive”.
The report also quoted Communications and Multimedia Minister Salleh Said Keruak as saying he hoped other e-commerce interests would eventually participate.
“Alibaba was the natural private-sector partner to establish and kick-start this project, but we are engaged in discussions with several other ecosystem players as well and – in due course – our vision is to see more e-commerce players coming on board as partners to make the most of the DFTZ,” he said.
The report quoted Chan Xin Yin, a Malaysia research analyst at Singapore’s Nanyang Technological University, as saying the e-service platform was open to more Chinese (small and medium-sized firms) from China, which meant Malaysian vendors would face tougher competition.
It also quoted Kaul as saying that companies that competed mostly on price would certainly be hit but that any subsequent reduction in revenue or jobs would be compensated by greater business opportunities for the more efficient companies.
Another potential area of difficulty for Malaysian entrepreneurs, the CNBC report said, could be Malaysia’s relatively nascent digital development.
Chan said Kuala Lumpur was behind Beijing in terms of high-skilled labour and innovative practices, and to close the gap would cost much in terms of time and finances.
However, the Alibaba spokesperson told CNBC that companies in Malaysia had other, built-in advantages, and that Alibaba wanted to help them boost exports.
“Malaysian firms have many natural advantages, including language and education, to enable them be highly competitive globally. Our role is to provide tools and training to help more Malaysian (small and medium-sized companies) get online and access global export markets.”
Noting that the DFTZ was just one example of Malaysia’s participation in the Belt and Road initiative, the report said analysts were wary of the consequences that would accompany closer ties with China.
“There are anecdotal complaints from Malaysian (companies) that (Chinese) companies procure almost everything from China, sidelining local firms,” Wan Saiful Wan Jan, visiting senior fellow at Singaporean think tank ISEAS-Yusof Ishak Institute, said in a 2017 report.
This article was first published on FreeMalaysiaToday