Jack Ma: Saviour of Malaysian SMEs?
Lim Teck Ghee 
For some time now, Jack Ma has been pushing the mantra of small businesses taking over the markets of the world and driving the greater globalisation of the world’s business. Because he is who he is – the founder of Chinese online retail giant Alibaba – his pitch has resonated widely, including among politicians.

Alibaba became the world’s largest retailer in April last year with operations in over 200 countries. It is also one of the world’s largest internet companies.

Ma does speak from personal experience. Alibaba, since its founding in 1999, has had a meteoric rise. In the United States, it has been generating more gross merchandise volume than Amazon and eBay combined. Its online sales and profits have surpassed that of all US retailers (including Walmart, Amazon and eBay) combined since 2015.

Today, Alibaba’s market capitalisation on the New York stock exchange is close to US$400 bil (RM1.71 tril) and it is ranked seventh among the largest companies by that measure. The company also recently reported sales growth forecast which topped every analyst’s estimate.

When he came to Malaysia to launch the country’s digital free trade zone (DFTZ) in late March, it was immediately hailed by the media as a coup for the country’s economy and leadership. Indeed, the expectations for the country’s partnership with Alibaba appear to be tantalising, if not mind-blowing.

Ripple effects

Government estimates are for the DFTZ to create 60,000 direct and indirect jobs in the country and to double the export growth of small and medium enterprises (SMEs) in the next eight years. The project alone is also expected to generate trade worth RM286 bil by 2025.

By successfully negotiating for this DFTZ – the first e-free trade zone outside China – our government is also hoping for other ripple effects.

The project will see the concentration of SMEs, micro businesses, warehousing facilities and logistics firms into one place – a new Kuala Lumpur Internet City (KLIC) in Bandar Malaysia with Catcha Group, the master developer.

But it’s caveat emptor for our government and SMEs, especially, the most important stakeholders and players with most at stake.

Firstly, ours is not the first country where Ma has promised to energise small enterprises.

He has promised the same in the US. Following a meeting with President Donald Trump, he famously promised to energise “one million small businesses, especially in the Midwest of America. Small businesses on the platform selling products — agriculture products and American services — to China and Asia”.

His company statement was equally vague. It said: “Alibaba will create one million US jobs by enabling one million American small businesses and farmers to sell American goods to China and Asian consumers on the Alibaba platform.”

Besides having Trump’s ear, Ma has been in Australia to sell his vision of small businesses taking the lead in global business. In his launch of Alibaba’s Australian headquarters in Melbourne in February, a month before his Malaysian foray, Ma vowed to use financial support from the Victorian state government to grow Australian small businesses.

It has been reported that the Daniel Andrews state government provided a number of “incentives” to Alibaba to set up its Australia-New Zealand headquarters in Melbourne. Both sides have been coy about the exact nature of these concessions and the size of the investment that Alibaba is bringing in. But Ma has not been coy about his vision to build an e-hub in Australia specifically designed to help small businesses to import and export more efficiently.

As Ma juggles different country balls in the air, it is important for us not to see Alibaba’s project in Malaysia as his company’s main concern or priority.

It is also necessary to take a hard look at what he is promising and to separate the wheat from the chaff in terms of the impact on the country’s businesses and economy.

Poised to be potential winners are logistics companies, freight forwarders and Malaysia Airports Holdings Bhd which will handle the merchandise passing through the DFTZ.

But whether local SMEs can benefit from the e-commerce gateway is a big unknown. The key question is not simply whether our SMEs can be competitive to meet the standards of global export markets that the project offers. It is also whether they will be able to withstand the flood of lower-cost products brought in from China through that channel.

It is not just manufacturing SMEs that will be disadvantaged. There are 200,000 retail outlets in Malaysia with 1.2 million workers. Even if the DFTZ model disrupts 30% of the commerce retail business, it is estimated that we can lose 360,000 jobs and have to close down 60,000 outlets.

Lessons from Cyberjaya

Twenty years ago, Cyberjaya, touted as the Silicon Valley of Malaysia, was launched by the then prime minister Tun Dr Mahathir Mohamad. It was ambitiously planned as the hub of the country’s Multimedia Super Corridor and the new growth engine for the IT industry.

One critical report in a widely followed digital and print business and technology magazine, WIRED, noted that:

“The 35,000-odd people who are actually employed in the district aren’t building the Googles of the future, but providing support and call centre services for global IT firms, which are in turn drawn by the cheap rent, budget broadband and tax deals.”

The jobs on offer were shared services outsourcing and were “mostly desk-bound and customer-service oriented jobs” that paid about £300 (RM1,687) a month.

Malaysia has slowly realised it has missed the value in technology, and Cyberjaya is attempting to catch up. It’s time to forget Silicon Valley, it’s time for something new, says Melissa Teh, a business development lead at Cyberjaya. “Now we’re going to be a tech hub that’s self-sustaining.”

We should learn from the Cyberjaya experience even when dealing with someone as successful as Ma.

Dr Lim Teck Ghee is a public policy analyst. Comments:

This article first appeared in Focus Malaysia Issue 245.