By Dr Juita Mohamad and Farlina Said
Throughout the COVID-19 MCO, digital trade has been a boon in not only connecting businesses to consumers, but also serving as a lifeline for MSMEs and informal workers. Given that digital trade is beneficial in maintaining employment and livelihood in crucial times of emergency, on top of its benefits during “ordinary” times, the government needs to rethink – or better yet, strike while the iron is hot – on how to further encourage digital trade among MSME entrepreneurs in the country.
More than three weeks into the Movement Control Order (MCO), digital trade – generally referred to as digitally-enabled transactions for goods and services delivered physically or digitally – has played a significant role in connecting businesses to consumers. Despite the restriction on movement in place, goods and services remain largely accessible, with payments being able to be made with little to no contact. This puts digital trade adopters at ease with its reliability and efficiency.
As a whole, digital trade during the MCO has been a boon for Malaysia. According to FMT on 18 March, the first day of the MCO, companies like GrabFood and Foodpanda – whose digital platforms connect food and beverage outlets to customers – recorded more than a 30 percent increase in orders. There were also spikes in registrations for marts and restaurants to get listed on similar platforms. For example, a competitor, DeliverEat.my, observed a 300 percent increase in the number of restaurants wanting to register on its platform.
This uptick in demand benefits not just the food and beverage outlets, but the wider ecosystem as well. Emblematic of this is how in response to the increase in orders on its digital platform – GrabFood had to fortify its delivery logistics chain by including GrabCar drivers alongside its existing motorcycle riders. What this means is that drivers and riders alike – often considered as part of the gig economy – who would otherwise be at a loss due to the MCO, are able to make an income, albeit with additional risks.
During the lock-down, other companies are following suit by increasing their use of digital tools as a means to reach and maintain customers. The bookstore MPH Malaysia is offering free delivery for books bought online, although with some delay in delivery.
According to the Star on 7 April, four restaurants have diversified their services into delivering fresh vegetables to their customers in Klang Valley during the MCO. Benefiting from their supplier network of small-time farmers located in Bentong and Cameron Highlands, the restaurants started delivering fresh vegetables and meat to meet the high demand of these products from their current customer base. These customers can place their order and make their payment through bank transfers a day before delivery.
Additionally, online shopping platforms have also stepped in to help the farmers in Cameron Highlands who were cut off from their consumers, leading to wasted produce. Here, Lazada had stepped in to market their produce online and have since connected these farmers with consumers through their delivery service. Through this act of digitalisation, wastage has been curbed and the livelihoods of farmers secured.
Smaller sundry shops have also begun to join the digitalisation bandwagon by accepting both online orders and payments through bank transfers from their customers. To cater to customers who want to reduce contact with others during grocery shopping, these sundry shops also offer free delivery services to their immediate community during the MCO. Uniquely, due to the smaller nature of sundry shop businesses, orders can even be made directly through WhatsApp with minimal operating costs.
Given that digital trade is beneficial in maintaining employment and livelihood in crucial times of emergency, along with its benefits during ordinary times, the government needs to rethink how to further encourage digital trade. Making this point is how while there are 28.7 million Malaysians online, the World Bank’s 2018 Report on Malaysia’s Digital Economy highlights that tech adoption by Malaysia’s industries can be selective.
Slightly more than 70 percent of business establishments with an internet connection would send or receive email while Malaysia’s manufacturing sector would utilise cyberspace for communication and for banking purposes.
To that end, businesses need to see digitalisation as the way forward. However, there are barriers to digitalisation which will need to be overcome by the different stakeholders at play, including those in the public and private sectors.
Firstly, digital trade would best be facilitated by access. As mentioned above, more than 28.7 million Malaysians are online, with the most number of fixed broadband connections being in Kuala Lumpur (265 percent) while Sabah being the least connected (82 percent). The limitation of access to adequate internet bandwidth would be an inhibitor for participation in digital trade, thus providing unequal opportunities to digitally enabled wealth.
On the aspect of digital access, it would only make sense if businesses and consumers are able to digitalise accordingly. The success of businesses adopting new technologies would be dependent on the ability to transform brick-and-mortar processes, the ability to secure the talents needed for systems to function with a high degree of security, and the resources to ensure these transformations can be realised.
Further to the point of digitalising accordingly, there must also be a questioning of past advice. Early Malaysia Digital Economy Corporation (MDEC) programmes tended to focus on e-commerce adoption, which resulted in the increase in digital transformations towards client-facing systems over internal operations and management structures. This is ill-suited today following the emergence of COVID-19 as processes commonly done in the office, or through physical interactions, are significantly reduced for non-essential services.
Meanwhile, according to the 2018 Malaysian Communications and Multimedia Commission (MCMC) e-commerce survey that looked at consumer concerns about online purchases, among the main concerns were related to preference and trust of the systems. While figures post- MCO may indicate a growth in e- commerce consumers, the protection of users online should remain imperative. Inculcating trust either through certified bodies, greater regulation and awareness campaigns would be useful in preparing the ecosystem for digital trade.
Additionally, internet access coupled with competition law will make the playing field among businesses more even, especially between formal establishments and the former informal enterprises participating in the digital trade. By imposing rules for players online, the government has introduced a certain set of standards and norms that govern the digital trade arena.
These rules can be changed and upgraded at any time. An important component of digital trade includes how tax is calculated for these enterprises and how data is shared within the ecosystem, inclusive of data shared with the authorities and players beyond the national border. In this case, the issue concerning data transfer and data localisation needs to be revisited especially when Malaysia has restrictions on data sharing beyond its borders.
When the rules and regulations concerning digital trade are highlighted clearly, coupled with a strong foundation in the e- commerce blueprint, it can also provide guidance to micro, small and medium enterprises (MSMEs) if they wish to be incorporated into regional value chains. Such an effort has already taken place in October 2017 with the establishment of Alibaba’s Digital Free Trade Zone (DFTZ) in Malaysia, the first of its kind outside China, where it aims to assist SMEs in their exporting activities.
The DFTZ also nurtures a thriving ecosystem that drives innovation in the e-commerce and internet economy in ASEAN. The Ministry of International Trade and Industry (MITI) projected that such an infrastructure can propel growth of e-commerce from a mere 11 percent to 20 percent in 2020.
Such platforms, when used collectively and widely, can provide local MSMEs with more opportunities and access to a bigger market beyond Malaysia, both in ordinary and emergency times.
“In conclusion, the promise of a digital future is most hopeful not only for Malaysians to find economic, psychological or social solace in times of physical distancing, but also for there to be growth in new economic frontiers.”
Hopefully the momentum can be sustained and greater ingenuity be considered for more efficient processes and better delivery of services.