The Malay Connection: Is Kuala Lumpur the next e-commerce gateway to China?

Getting off the ground

In the future, airfreight links between eWTP hubs could become very frequent, but for the nascent KUL hub, a starting point has been an introspective analysis into why such connections do not already exist.

Taking Malaysia’s southern neighbor, Singapore, as a model, despite being just 1/460th Malaysia’s size, the city-state’s Singapore Changi Airport (SIN) handles nearly three times as much air cargo as KUL. Part of the explanation for Kuala Lumpur’s lower cargo throughput stems from efficiency; air cargo currently spends too much time on the ground in KUL. The DFTZ seeks to bring the airport on-par with its regional neighbors through a multi-phase “eHub” development scheme that includes the construction of an Aeropolis DFTZ Park on site at the airport.

Changing the image of KUL’s poky customs clearance process is a notable first step. It currently takes an average of six hours for a consignment to clear customs at KUL. Digitalization-focused process improvement initiatives, “have already been carried out at Kuala Lumpur International Airport Air Cargo Terminal 1 (KACT 1) with the goal of reducing cargo clearance process from 6 hours to 3 hours,” said Wan Peng. Another aim of the Aeropolis Project is to enhance air cargo infrastructure, which, at KUL, currently lags behind more developed airports like SIN.

To prepare local customs operations for the coming e-commerce onslaught, Alibaba has been collaborating with the local forwarding community in Malaysia. Earlier this year, Alibaba appointed local freight forwarder Transcargo Worldwide as the sole customs agent for the eWTP. “Alibaba approached us last year on Sept. 15, and as per our unofficial source of information, they selected us from about 30 forwarders. We believe they chose us because of our coverage in whole Malaysia for air and sea,” said Ong Chin Keong, director of Transcargo Worldwide.

“This means that we are the only customs broker that can operate export business-to-business customs clearance using eWTP,” added Ong Chin, noting that Alibaba may choose to appoint additional customs brokers as the project grows. Since aligning with Alibaba, Transcargo has increased its warehousing footprint onsite at KUL and has also become the first forwarder with a cold storage facility at the airport.

Transcargo’s participation in DFTZ centers around handling exports for local companies trading with foreign companies, but in the future, the focus may shift to business-to-consumer flows as well. “We cannot forget that B2C e-commerce will be a larger market than B2B one day,” said Keong. “Transcargo hopes to be involved in B2C e-commerce parcels within the next five years.”

A 60-acre plot of land that is being jointly developed by subsidiaries of Alibaba’s logistic affiliate, Cainiao Network, and KUL’s parent company, Malaysia Airports Holdings, may open up such opportunities. After all, rather than involve itself in the whole spectrum of logistics, Cainiao plans to rely heavily on the local logistics community to handle parcels.

Wan Peng says there has already been a notable increase in air cargo volume since the KACT pilot operations began. Moreover, “once the Malaysian Airports Holdings Berhad-Cainiao regional eCommerce fulfilment hub is in operation” volumes are expected to further expand.

For the time being, Transcargo is focusing on helping SMEs get their products into international markets. Since many of the shippers are new to exporting, Keong and Kian are working in conjunction with Alibaba to organize trainings to facilitate SME in selling abroad.