Since his surprise electoral win on May 9, Malaysian Prime Minister Mahathir Mohamad has taken hard aim at several China-backed investment projects initiated by his predecessor, ex-premier Najib Razak.
With reviews of infrastructure deals and multilateral trade and security pacts now underway, many have wondered whether recent initiatives by Alibaba Group Holding Ltd, one of the world’s largest e-commerce companies, could face similar tough scrutiny.
But Mahathir’s meeting this week with Chinese business magnate Jack Ma, Alibaba’s co-founder and executive chairman, signaled the Chinese e-commerce giant’s grand plans for Malaysia will likely continue unperturbed.
Digital Free Trade Zone
Alibaba is in the midst of a massive investment push into Southeast Asia, including the establishment of a so-called “Digital Free Trade Zone (DFTZ)” based in Malaysia.
Launched last November and heavily promoted by former premier Najib, the DFTZ aims to position Malaysia as a regional e-commerce and logistics hub designed to promote small and medium-sized enterprises’ (SMEs) exports. The ambitious project aims to create 60,000 local jobs and facilitate US$65 billion worth of trade by 2025.
Mahathir says he wants “good relations” with Beijing, but regularly blasts Chinese-linked projects for neglecting Malaysians by relying on Chinese manpower and materials. He has, however, spoken approvingly of Alibaba’s Malaysia-based initiatives, which reputedly strive to boost local skills and facilitate technology transfers.
Ma, one of China’s richest men with an estimated wealth of $43 billion, said he was “very confident about the relationship between Malaysia and China” after meeting Mahathir on Monday June 18. He and the nonagenarian premier both agreed technology can be harnessed to empower small businesses and rural farmers to increase productivity.
The Chinese tycoon even cited Malaysia’s “Multimedia Super Corridor” initiative – a special economic zone for technology companies championed by Mahathir during his first tenure as premier from 1981 to 2003 – as inspiration for launching Alibaba out of his Hangzhou apartment in 1999. Malaysia’s state-led initiative was launched in 1996 but sputtered out in the 2000s.
Alibaba, by contrast, set a record as the world’s largest-ever public stock offering, raising $25 billion in 2014 when it began trading on the New York Stock Exchange. The Chinese e-commerce giant is both the fastest-growing internet-related company and among the largest global tech companies, with a market capitalization of more than $500 billion.
Ma launched Alibaba’s Malaysian office, the company’s first in Southeast Asia, on June 18. Alibaba also touts training programs for Malaysians who seek to take advantage of digital trade opportunities.
Chinese ambassador Bai Tian and Finance Minister Lim Guan Eng both attended the Alibaba office’s opening ceremony, the latter calling the event, a “shining symbol of China-Malaysia friendship.” Bai’s speech highlighted ongoing Alibaba initiatives, such as the Electronic World Trade Platform (eWTP) launched last year, the first such platform outside of China.
Electronic trade platform
The eWTP includes a brick-and-mortar logistics center in Kuala Lumpur to facilitate trade between Malaysian and Chinese firms without cumbersome customs procedures, while the virtual aspect of the platform is due to take effect in 2019. Aside from e-commerce, Alibaba also operates an internet data center purpose-built for global cloud computing ventures.
While companies in Malaysia look set to benefit from greater digital business opportunities, some are concerned that greater trade facilitation with Chinese firms will enable stiffer competition that undercuts local companies that compete on price, accentuating the asymmetry between Chinese tech titans and Malaysia’s relatively nascent digital firms.
Ma’s business strategy for turning Malaysia into Southeast Asia’s premier digital logistics and transshipment hub has political dimensions as well, synchronizing seamlessly with President Xi Jinping’s Belt and Road Initiative (BRI), a vast plan to establish physical and financial infrastructure between China and major continental and maritime zones.
Ma envisions a globalization that harnesses an ecosystem of millions of global SMEs, a prospect that most developing countries would regard as beneficial to their development strategies.
Though wary of costly megaprojects that could lead to sovereignty-undermining debt traps, Malaysia’s new government has nonetheless expressed its support for the BRI. In a hedge, Mahathir’s administration is simultaneously seeking greater economic cooperation and low-interest loans from Japan.
While many in Southeast Asia have misgivings about Beijing’s growing political and economic influence in the region, Ma and Alibaba effectively function as soft power for BRI, with fine-tuned services and a philosophy that champions a more inclusive form of globalization benefiting SMEs in neighboring countries that seek technology gains.
Mahathir and Ma are both strong supporters of globalization and technology, but also sharp critics of conventional free-trade deals that disproportionally favor large multinationals. Ma envisions a globalization that harnesses an ecosystem of millions of global SMEs, a prospect that most developing countries would regard as beneficial to their development strategies.
As such, the Chinese billionaire tycoon, whose initiatives and aims arguably resemble those of a politician more than a business leader, is being well-received across Southeast Asia as Alibaba undertakes a game-changing regional investment push.
That includes a high-tech industrial and logistics hub in Thailand that will facilitate the distribution of goods through Cambodia, Laos, Myanmar and Vietnam.
In Singapore, the Chinese e-commerce giant opened a research lab earlier this year with Nanyang Technological University to develop artificial intelligence “solutions.” The research lab is one of seven the company intends to open the over the next three years as part of a $15-billion project to develop next-generation technologies.
Alibaba thus seems set to remain the most visible player in Southeast Asia’s e-commerce industry, after investing billions of dollars on acquisitions and regional initiatives. Experts, however, believe the company’s core asset is data analyzed from consumer spending, location and viewing across its platforms, which is fed back to merchants to better target consumers and increase sales.
Alibaba’s regional expansion strategy seeks not only major market share but is consistent with the company’s data-driven monetization strategy and goal of becoming a key data and insights provider. In any case, Ma’s decision to open an office in Kuala Lumpur after the May 9 elections and Mahathir’s anti-China grumblings is a show of confidence likely to allay other nervous Chinese investors.