Alibaba Group has seemingly won the battle to set up Southeast Asia’s first digital free trade zone, although it has been a closely run event as a growing e-commerce sector pushes the industry in new directions.

China’s Alibaba, its logistics affiliate Cainiao Network, Malaysia Airports Holdings Berhad (MAHB) and two of Malaysia’s largest banks – CIMB and Maybank – as well as the Malaysian government via its Malaysia Digital Economy Corporation (MDEC) signed four memorandums of understanding (MOUs) to set up the venture in late March.

“This signing was conducted in conjunction with the launch of the world’s first digital free trade zone (DFTZ) outside of China by YAB Dato’ Sri Mohd Najib Tun Abdul Razak, the Prime Minister of Malaysia,” MAHB said in a statement announcing the deal.

Under the MAHB-Cainiao MoU, the companies have agreed to explore jointly the establishment of a regional e-commerce and logistics hub in KLIA Aeropolis to cater to the business-to-consumer (B2C) and business-to-business (B2B) segments.

Among the proposed co-operations, Cainiao and Lazada will lead other Alibaba’s subsidiaries and affiliates to work with Malaysia Airports for the development of the e-fulfilment hub, the statement said.

The buzzword ‘e-fulfillment’ does not mean that great tasks are accomplished, but instead describes what is basically “a logistics hub situated in close proximity to Kuala Lumpur International Airport that will function as a centralized customs clearance, warehousing and fulfilment facility for Malaysia and the region, to deliver faster clearance for imports and exports,” according to the Alibaba statement.

The initial phase of the new facility is currently expected to roll out before the end of this year with a formal launch in the cards for the end of 2019, the MAHB statement said of the timeline.

The Malaysian side believe the facility gives them a significant lead in the digital economy as well as underscoring the importance of air cargo and logistics at the grandly titled KLIA Aeropolis. They also believe it will boost the Malaysian economy, especially the SME and tech sectors.

“Our aspiration for the air cargo and logistics cluster is to position KLIA Aeropolis as the regional e-commerce hub, anchored by a global e-commerce leader such as Alibaba. We hope this will unlock the value of Southeast Asia’s e-commerce market, which is expected to reach US$88 billion by 2025,” said Badlisham Bin Ghazali, managing director of Malaysia Airports.

For consumers and business, the impact could be even more dramatic as underpinning the hub is a data platform that will enable both B2C and B2B enterprises to overcome hurdles such as customs clearance.

“That will in turn help lay the foundation for achieving our goal of 72-hour delivery for anywhere in the world,” said Wan Lin, president of Cainiaio.

Supporting this are MOUs on e-service platforms, e-payments and financing and the development of e-talent. 

“Connected to Alibaba’s OneTouch platform, it will link Malaysia directly to the e-commerce pilot area in Hangzhou, China, to enable SMEs and businesses to trade conveniently and efficiently between the two countries,” Alibaba said of the first.

“Relevant parties from both sides will explore e-payment and financing opportunities with a particular focus on facilitating B2B trade for Malaysian SMEs,” it added of the second.

While the Malaysians and Alibaba are first off the blocks with the KLIA digital free trade zone, other airports in the region are also moving into similar markets in response to the rise of e-commerce.

Due to open on April 13 is Singapore’s response. This is SATS’ Commerce AirHub which will see the integration of both SATS’ and SingPost’s airmail consignment operations under one roof.

The new 6,000-square-metre facility will improve efficiency and space utilization, as well as enhance the consignment handling capabilities for both SATS and SingPost within the Changi Airfreight Centre.

SingPost is to be anchor customer, making SATS the first ground handler in the world to own such an airside facility. SATS and SingPost expect the efficiency gains the facility brings to be more than 30%.

A deft response from Singapore was only to be expected. However, what is also noteworthy, is a similar pattern in another part of the Asia – the northeast.

“This coming October, for purpose of establishing more efficient operation and higher service quality, OCS (an international express company of ANA) is to centralize its offices and logistics centres at one place – the OCS Tokyo Logistics Centre,” an official with ANA told reporters.

Currently, these operations are spread between different locations, and ANA hopes the consolidation will give it certain benefits, such as speedier delivery times for overseas shipments to Japan, the official added, making it plain ANA and its international express companies want more of the e-commerce market.

What is less expected still – and is possibly more noteworthy – is the news that Alibaba is also involved in another facility, again in Southeast Asia, this time in Thailand.

Alibaba is to work on the Lazada e-commerce park project in cooperation with the Thai Government “as planned,” an Alibaba representative told Asia Cargo News. “The facility is scheduled to commence operation by 2019, in line with the plan shared with the Ministry of Industry.”

This facility which represents a major multi-year commitment will serve as a gateway to global markets particularly for neighboring countries that are accessible by road, the official added.

“The park itself will host advanced logistics infrastructure and technology, gathering the full end-to-end ecosystem of SMEs, manufacturers, service providers and logistics partners,” the representative said stressing this was separate from the Malaysian venture.