- 1.Has the Government reviewed the purpose and objective of DFTZ; and if so what are the objectives of DFTZ and how is the DFTZ benefiting local businesses?
The Government has reviewed the DFTZ initiative and announced that this initiative will remain, taking into consideration that the key objectives of the DFTZ are to drive export of our local SMEs by leveraging on digital technology and opportunities in eCommerce; and to attract regional eCommerce transshipment investment into Malaysia.
With the exponential growth in global eCommerce, the threat to our local SMEs who have not embraced eCommerce, is real. In contrast, Malaysian consumers are savvy buyers on eCommerce platforms, which has resulted in an imbalance – that in 2015, of the RM90 billion income derived from eCommerce, only about 5.9% were from export. It is for this reason that the focus of DFTZ is to drive export of our local SMEs, with a view to (a) expand market access of our local SMEs by onboarding onto various regional and global eMarketplaces (b) upskilling local SMEs in eCommerce and export capability and (c) driving demand of Malaysian products through focused promotions and campaigns on various regional and global eMarketplaces.
Through investment in regional eCommerce transhipment hub, we can expect jobs creation, technology transfer, and increase in cargo volume to the country. The growth in cargo volume will bring business and jobs to local logistics industry, more flights and vessels to our ports and provide economies of scale to lower the cost of exporting. Both foreign and local companies are encouraged to make investment to set up regional eCommerce transhipment hubs in Malaysia.
- 2.Has the Government engaged the industry on DFTZ; and how can the industry provide feedback and suggestions on DFTZ?
The views of industry players have been taken into account through ongoing consultations and engagements in implementing the DFTZ and enhancing the various programmes under the DFTZ. The industry is welcomed to provide feedback and suggestions on how the initiative can be continually enhanced by contacting Malaysia Digital Economy Corporation MDEC [[email protected]], which is the agency driving the DFTZ initiative or other related agencies such as MIDA, MATRADE and SME Corp.
- 3.There are concerns that the DFTZ is driving influx of import from China, and threatening the business of local SMs and causing traditional businesses to close. How is the Government working to help the local SMEs and etailers?
Based on 2016 Malaysian External Trade Statistics published by MITI on 8 Feb 2017, China continued to be the largest trading partner with Malaysia for the 8th consecutive year since 2009. While exports to China were valued at RM98.56billion, declined by 2.9%; imports increased by 10.1% to RM142.35billion. China was Malaysia’s largest import source with 20.4% share of total imports in 2016. Higher imports were registered for petroleum products, E&E products, chemicals and chemical products as well as machinery, equipment and parts. With the growth of China’s overall import into Malaysia, and the exponential growth in global eCommerce, the threat to our local SMEs especially for those who have not embraced eCommerce, is real. On this basis therefore, the Government recognises that local SMEs must leverage on the opportunities provided by eCommerce and digital technology for wider market access to global markets; and that local SMEs need to be upskilled to be able compete globally. Key initiatives by the Government and key agencies such as MDEC, MATRADE and SME Corp include:
(a) Promoting the benefits of eCommerce to SMEs to create greater awareness
(b) Expanding market access of our local SMEs by onboarding them onto various regional and global eMarketplaces and by bringing in foreign buyers for business matchings with our local suppliers
(c) Upskilling local SMEs in eCommerce capability through initiative such as “Go eCommerce” https://www.go-ecommerce.my/
(d) Driving demand of Malaysian products via focused promotions and campaigns on various regional and global eMarketplaces With opportunities provided by DFTZ, many local SMEs have successfully exported to new markets, such as fresh coconuts to Poland, frozen shrimps to Italy, traditional musical instruments to USA and traditional cookies to South Africa, etc.
- 4.Foreign importers enjoy unfair competitive edge as imports below RM500 are exempted from GST - How does the Government intend to address this?
De minimis is a facilitation for simplified customs clearance for goods (excluding cigarettes, tobacco and intoxicating liquor) imported by any person using air courier service through 6 international airports in Malaysia (KLIA, Penang, Senai, Kota Kinabalu, Kuching and Subang) that are of a total value not exceeding RM500 per consignment.
Such facilitation is not peculiar to Malaysia and has been in force since 2013, even before the launch of DFTZ. For now, Malaysia’s de minimis is set at RM500, as compared to our key trading partners such as USA at USD800, Singapore at USD292, and China at USD295. With de minimis facilitation at various countries, Malaysian exports into such countries will enjoy simplified border clearance with relevant duty/tax exemptions.
As announced earlier, GST will be abolished and be replaced by SST regime. Impact and details on SST implementation on de minimis, is yet to be announced.
Currently de minimis clearance is by submission of hardcopy paper forms which can be challenging and time consuming for RMCD in terms of enforcement. In this regard, by e-enabling the de minimis clearance on DFTZ eServices Platform, RMCD is better equipped to tackle misreporting and potential abuse in manual and paper-based submissions hence mitigating tax leakages.
- 5.How does the DFTZ enhance efficiency and reduce bureaucracy in eCommerce?
In order to enhance competitiveness of Malaysian SMEs and for Malaysia to be chosen as investment destination for regional eCommerce transshipment hubs, Malaysia will need to enhance its eCommerce and trade facilitation efficiency.
Malaysia as it stands right now, is under-performing when compared to some of the key hubs in the region, such as Singapore and Hong Kong. For example, in the air cargo clearance benchmark, KLIA is achieving an average of 6 hours cargo clearance time, compared to Singapore’s Changi International Airport at 3.5 hours and Hong Kong International Airport at 5 hours.
The DFTZ is anchored on the DFTZ eServices platform and Process improvement initiatives, to simplify cross border trade facilitation, reduce cost of doing business and to shorten eCommerce fulfilment timeframe to improve the overall competitiveness of the local SMEs and to promote Malaysia as an investment destination for regional eCommerce transshipment hubs.
The DFTZ eServices Platform facilitates declarations to RMCD and is equipped with data analytics capability which enhances the capability of enforcement agencies such as the Royal Malaysian Customs Department (“RMCD”).
The process improvement exercise was conducted in 2017 at KLIA Air Cargo Terminal 1 (KACT-1) which is a facility converted from the former LCCT, to address challenges in cargo movement at KLIA; and to implement the adoption of technology at the cargo terminal operator’s premises. In this regard, various changes have been implemented including alternative shorter towing route, improvement of road condition, upgrade from trolley to trucks for towing to achieve the reduction in cargo clearance at KACT-1 from 6 hours to 3 hours.
- 6.With regards to DFTZ, did the Government provide any subsidy to POS/Lazada for KACT-1 and to MAHB/Cainiao for the global eFulfilment hub at KLIA Aeropolis?
No, the Government did not provide any subsidy to POS/Lazada or to MAHB/Cainiao for DFTZ. Since the launch of DFTZ in March 2017, there have been 2 key investments, namely:
- The pilot phase at KLIA Air Cargo Terminal 1 (KACT-1) is converted from the former LCCT terminal with investment from MAHB, POS Malaysia and other tenants at KACT-1, without any subsidy from the Government. The facility at KACT-1 is not exclusive to POS Malaysia or Lazada, as it is available for rental to other industry players. The collaboration between POS Malaysia and Lazada is a commercial arrangement without any Government incentive.
- The 1st phase for the development of the Global eFulfilment Hub, is a joint venture between MAHB and Cainiao which was announced in November 2017 and to be operational in Q3 of 2020. The land for this development was sub-leased by MAHB to the joint venture company at market rate, without any subsidy from the Government.
- 7.Does the DFTZ provide any specific incentives?
DFTZ isn’t designed to come with special or customised incentives. Instead, businesses are advised to consider and leverage on existing applicable regulatory framework and incentives. For example: (1) MSC Status which comes with pioneer status or investment tax allowance under the Promotion of Investments Act 1986. (2) Incentives for SMEs offered by SME Corp and MATRADE. (3) Regulatory framework under the Free Zones Act 1990, which among other things, allows goods that were brought into Free Commercial Zones and re-exported or transhipped, to not be subjected to import duty and GST, as such goods are not considered as having been imported into Malaysia. (4) Existing incentives offered by MIDA such as Pioneer Status, Investment Tax allowance, and International Integrated Logistics Status (IILS), Integrated Logistics Status (ILS) or the Digital International Integrated Logistics Status (DIILS) towards obtaining customs agent licence for logistics companies.
- 8.Projects should be conducted via open tenders instead of direct awards manner
The Government has announced that Government projects will be awarded by open tenders. On DFTZ, the Minister of Finance has announced that the local company appointed to develop the DFTZ eServices Platform was selected through open tender.