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Growth of ecommerce logistics cooperation between China and Malaysia

Growth of ecommerce logistics cooperation between China and Malaysia

18 Apr 2022

Over the past two years, due to a major shift in consumer behaviour driven by the Covid-19 pandemic, ecommerce has grown rapidly, resulting in a massive increase in the sector’s market size.

Consumers have switched heavily to digital and online shopping due to the pandemic. This is seen not only in Malaysia but also around the world.

Therefore, digital commerce and online shopping have become a current trend where customers are increasingly reliant on courier and delivery services, especially in purchasing products locally and from overseas.

The rise of ecommerce across many countries has made significant strides in improving and accelerating the progress of the logistics sector.

Malaysia is among the countries that focus on developing ecommerce as well as the transport and storage sectors, with plans to establish itself as a potential regional logistics hub and gateway in the near future.

As of 2019, the logistics industry accounted for 3.8% of Malaysia’s GDP. Furthermore, the Malaysian Investment Development Authority (Mida) has specified that trade activities in the logistics sector will continue to expand significantly in the coming years.

In 2020, Cainiao Smart Logistics Network, the logistics arm of Alibaba Group Holding Limited, announced a collaboration with Best Inc, an integrated smart supply chain solutions and logistics services provider in China, to launch a new consolidated end-to-end logistics service between China and Malaysia.

The new cross-border logistics service allows consumers in South-East Asia, including Malaysian consumers, to buy products on Chinese ecommerce platforms such as Taobao, Pinduoduo, and more with reduced shipping time for cross-border ecommerce parcels.

Recently, Best’s logistics network in Malaysia has expanded to cover over 100 last-mile service stations, with the objective to operate 270 stations and seven sorting centres across Malaysia soon.

By the end of last year, total parcel volume delivered by Best in South-East Asia had increased by 104.4% over 2020.

Nowadays, while online shopping is convenient for customers, paying a delivery fee on every individual package can be onerous.

With the new logistics service, customers will be able to place multiple orders across different shopping apps or websites while only paying for one consolidated shipment.

Besides, the shipping duration for cross-border sea freight will be shortened to as few as six working days after parcels leave China, while customers will be able to receive their deliveries as soon as possible after Customs clearance in Malaysia.

The logistics service between Cainiao and Best will cover the first and last mile, freight forwarding, overseas warehousing and Customs clearance – meaning parcels will be collected from the warehouse in China, sent to Malaysia through international shipping services, and delivered directly to customers via domestic courier service.

This can facilitate growth of cross-border ecommerce and improve customer experience and satisfaction. Thus, consumers are able to enjoy express delivery service even if buying items from overseas.

With the implementation of the electronic World Trade Platform (eWTP) in Malaysia, Alibaba Group Holding Ltd aims to facilitate cross-border electronic trade and increase global trade.

The smart logistics technology is a key support service well suited to ecommerce.

In addition, small and medium enterprises (SMEs) have gained more opportunities to expand their sales into new market segments.

Along with a direct cross-border logistics service, merchants in Malaysia are able to sell goods to China through the Malaysia Pavilion platform on the Alibaba website.

This initiative is a step forward in supporting cross-border trade activities by SMEs, as well as providing employment opportunities.

In line with these efforts, Malaysian SMEs will be able to benefit from an ideal end-to-end ecommerce logistics service that will aid international expansion, especially in reaching the larger Chinese market.

The Cainiao-Best collaboration maximises their technological capabilities to increase efficiency and transparency of delivery, where the delivery process has been simplified to shorten delivery times for cross-border ecommerce packages.

For instance, each cross-border parcel has an electronic shipping label, enabling easy real-time tracking from the starting point of overseas dispatch to final domestic delivery.

By leveraging on their logistics network, automation and information technology, Cainiao and Best have created an express delivery network offering consumers fast, reliable and cost-effective services, while simultaneously promoting the growth of cross-border ecommerce and local SMEs.

Furthermore, the East Coast Railway Line (ECRL) project is another major initiative that is part of China’s Belt and Road Initiative in Malaysia.

It aims to build world-class logistics infrastructure and services to support international trade activities in Malaysia.

Notably, ECRL is the biggest economic and trade project between China and Malaysia.

The project, scheduled for completion in 2026, is expected to reduce shipping time between the east and west coasts of Peninsular Malaysia.

This key project is expected to boost business activity of SMEs and promote further Chinese investment in Malaysia, as well as strengthening trade activities and routes across Eurasia.

As the first-ever eWTP hub outside China, Malaysia has set a good example in providing equitable outcomes for SMEs and other enterprises in order to grow further in international trade.

However, there is much to learn from China in the context of facilitating automation, internationalisation as well as modernisation of the logistics sectors.

It is crucial for Malaysia to maintain strong and stable cooperation with China in order to develop and improve the transport and logistics industries, and create a win-win situation for both countries.

Khoo Zheng Ying is a lecturer at Tunku Abdul Rahman University College.

The views expressed here are entirely the writer’s own.

The SEARCH Scholar Series is a social responsibility programme jointly organised by the South-East Asia Research Centre for Humanities (SEARCH) and the Centre of Business and Policy Research, Tunku Abdul Rahman University College (TAR UC), and co-organised by the Association of Belt and Road Malaysia.

Source: The Star