Saturday, 25 March 2017

DFTZ: what about the losers?

A lot of hype and euphoria regarding Alibaba, Jack Ma and the DFTZ (Digital Free Trade Zone), stories about jobs been created, opportunities for Malaysian SMEs etc.

But not much attention to who the losers will be, surely there will be some.

A good article in The Star: "DFTZ - boom or bane for our local SMEs?", one snippet (emphasis mine):

Losers from DFTZ?

Depending on the manufactured products brought in from China, our importers, wholesalers, retailers, manufacturers and e-commerce SME’s will be badly disrupted due to lower cost products and tax free, GST free imports. It definitely will be an uneven playing field for our local SME’s. Our authorities should note that we have 200,000 retail outlets in Malaysia and the retail industry hires 1.2 million workers. Even if the DFTZ model disrupts 30% of our commerce retail business, we will lose 360,000 jobs and close down 60,000 outlets. And that is not counting the disrupted manufacturing industry.

Customs Revenue. Assuming 30% of the US$65bil DFTZ sales is imported into Malaysia. Collection of GST alone will be lower by US$1.2bil or RM5bil a year. Not counting those items that still attract import duties.

Our National GDP will actually shrink as the whole market will trade on lower prices.

I agree with the above. There will be lots of winners and lots of losers, very hard to quantify at the moment how the results will be in say 5 or 10 years down the road.

I also agree with the writer of the above article: "Alibaba is a sure winner with this unparalleled tax free advantage".

What should be of some concern for Malaysians is that the big e-commerce players (Alibaba, Amazon, Lazada, Qoo10 etc.) are all foreign owned. How will the future look like, taking into consideration network effects and deep pockets, which might crowd out the smaller local players?

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