POV from Silicon Valley: Malaysian SME Cross-Border Trade – The Next Chapter

For centuries, Malaysia has been a center of international commerce, owing to its strategic location in the Strait of Melaka, and the resulting trading orientation that developed among its people. And while it remains an important player in the traditional forms of international commerce conducted principally among large corporations, the power of e-commerce has been harnessed in Malaysia specifically for the benefit of its expanding the cross-border trade of its small and medium-sized enterprises (SME’s).

Capitalizing on its culture and heritage rich in trading and commerce, Malaysia’s drive to grow its digital economy has always focused on inclusiveness. This approach aligned well with the vision of Jack Ma, the founder and executive chairman of Alibaba, the world’s largest and most profitable retailer, for an Electronic World Trade Platform (EWTP). In Ma’s view, the globalization of trade, though geographically widespread is flawed in its implementation because it has benefitted only big, multinational companies.  This flaw is largely due to cost of cross-border trade that is driven by its complexity, rendering it inaccessible to SME’s. Putting an e-commerce platform in place that removes the complexity and therefore the cost that excludes most SME’s from cross-border trade will enable SME’s to profitably reach markets beyond their own borders.

This aligned view of inclusion forged a natural partnership between Alibaba and Malaysia to develop and launch Malaysia’s Digital Free Trade Zone (DFTZ).  Effectively eliminating the complexity associated with customs, foreign exchange, warehousing, shipping and reaching a marketplace of potential customers, the Alibaba Electronic World Trade Platform (eWTP) hub within the DFTZ gives SME’s from Malaysia, and ultimately throughout the ASEAN region and beyond unprecedented capabilities to reach large consumer markets. In his remarks on the launch of the DFTZ, Jack Ma said: “Today we are witnessing a historic moment in Asia, where one country has begun to use technology to enable its SME’s and young people to become more competitive on the world stage.”

About 2000 Malaysian SME’s were part of the initial launch of the DFTZ.  There is a Malaysian Pavilion on the Alibaba platform and various powerful tools that connect potential buyers outside of Malaysia with Malaysian products for the first time. So far the results have been interesting.  The top Malaysian product sold into China through the Malaysian Pavilion is white coffee. Durian is number two. Bird nests for bird nest soup is also a popular SME export – leveraging our not quite as well-known location advantage of being on the flight path of swallows traversing southeast Asia. The mix of products and volume sold through the DFTZ to the world’s consumers will continue to evolve and grow in interesting ways, but whatever the products, it’s the growth of SME’s ability to benefit from streamlined cross-border trade that really matters.

Reflecting on the launch of the DFTZ and the partnership with Alibaba, Datuk Yasmin said: “I’m really happy with how this came together. Of course it was a lot of work on our part, but it didn’t seem so due to the sheer excitement of doing something so new.  To be working with the global leaders at Alibaba and such an innovative leader as Jack Ma, has been truly a pleasure for us, and also has brought us to a whole different mindset now. The platform that we built was developed by locals. I must say that it was at a high standard.  Through this initiative we raised the standard of our local suppliers to that of a global caliber, an Alibaba caliber, and that’s something that will have lasting effects.”

Dato’ Dan E Khoo is the President of MDEC Americas Inc; a Silicon Valley organization established to drive the global expansion of Malaysia’s digital economy.

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