SMEs may face tougher times with Alibaba’s ‘e-hub’, cautions analysts

Alibaba’s plans to build an e-fulfilment hub and a cross-border trading services platform in Malaysia’s newly established digital free trade zone may be regarded as a future initiative that helps small and medium-sized enterprises (SMEs) do business globally, but analysts believe these companies may also see tougher times in the short term.

Alibaba’s “e-hub” in the zone is expected to act as a centralised customs clearance, warehousing and fulfilment facility for Malaysia and the region, speeding up imports and exports clearance for SMEs.

The e-commerce juggernaut’s electronic services trading platform is also expected to link up the zone to Hangzhou’s e-commerce pilot area, allowing companies in both countries to conduct trade easily.

“This is precisely the sort of investment that Malaysia hopes to attract from China. The general fear has been that China would simply relocate their low-cost, low-tech industries to Malaysia under the belt and road initiative, but that’s not what Alibaba is doing here,” said Shahriman Lockman, senior analyst at the Institute of Strategic and International Studies in Malaysia.

“At the same time, there’s been growing anxiety among Malaysian businesses – especially SMEs – about losing out to competitors from China. The e-fulfilment hub and e-service platform would certainly open the door to more competition from Chinese SMEs,” Lockman said, adding that the Malaysian government may eventually have to address the perception that Malaysia was “becoming overexposed to China”.

DBS senior economist Irvin Seah echoed this sentiment, stating that while Malaysian companies will be able to gain more access into China, Malaysia’s second largest export market, “trade cuts both ways”.