Malaysia’s Digital Free Trade Zone

Malaysia’s Digital Free Trade Zone (DFTZ) went live in November 2017 as a joint undertaking between the Malaysia Digital Economy Corporation (MDEC) and China’s Alibaba Group. It seeks to establish Malaysia as a leading logistics center for global marketplaces by opening opportunities for companies both in Malaysia and other ASEAN countries to leverage a platform that enhances competitiveness and market access. Besides, it aims to develop an internet ecosystem in the country that drives innovation in e-commerce and digital economy.

The DFTZ comprises of three key components that will be implemented in different stages: an e-fulfillment hub and satellite hub as physical zones, and E-services as virtual zones.

• E-fulfillment hub

The e-fulfillment hub is situated in close proximity to Kuala Lumpur Internet City Aeropolis (KLIA) and is set to be developed in two phases. While the first one at KLIA Air Cargo Terminal 1 (KACT1) is currently operational, the second one will be operational in 2020.

The hub is strategically developed to serve as a centralized aviation, air cargo, and logistics facility for Malaysia and the ASEAN region that will remove barriers to trade for smaller firms and emerging nations. It will help local businesses, particularly small and medium enterprises (SMEs), to secure faster customs and cargo clearance on their exports. The hub’s warehouses are installed with the latest sorting, shelving and pick-pack facilities technologies.

• Satellite hub

The satellite hub will be developed to operate as a digital platform for local and global e-commerce players, as well as internet related companies targeting the Southeast Asian market. It will be located at Kuala Lumpur Internet City and offer facilities such as offline-to-online showrooms, training centers and open space areas for aspiring entrepreneurs into the internet ecosystem.

• E-services platform

The e-services platform will offer integrated digital e-services to businesses operating from the DFTZ, and provide efficient management of cargo clearance and other processes relating to cross-border trade including quarantine, permits and cross-border trade advisory.

Through these components, the DFTZ aims to help SMEs gain better access to a dynamic supply chain ecosystem that is otherwise, usually, open to large corporations.

SMEs established in Malaysia’s DFTZ will obtain a geographically-strategic location, a unified government services platform, an integrated digital e-services platform, and also gain access to traffic from Alibaba’s other marketplaces such as Tmall and Taobao.

SMEs located in the DFTZ will become a part of Alibaba’s OneTouch e-services platform and will be directly connected to Alibaba’s Hangzhou headquarters in China, under its Electronic World Trade Platform (eWTP). The eWTP aims at removing trade barriers and complex regulations that impede SMEs participation in global trade.  

Upon registering with the DFTZ, SMEs will be eligible for special promotions for Malaysian brands, smart marketing and a seamless, integrated platform that will allow them to market their products, and receive orders and payments. Besides, SMEs will face lower regulations, processes, and barriers that will further encourage them to connect and collaborate in cross-border trading. The DFTZ is the first overseas e-hub established outside of China.

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