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Here’s what you should know today:

1. iPay88 expects more revenue from international market

Malaysian payment gateway provider iPay88 expects more revenue contribution from international market by end of this year in accordance to its expansion plan.

The company is looking at contribution ratio of 80% and 20% for local and international market respectively. At the moment, international revenue contribution stands at five percent.

“We are seeing a 34% growth in Indonesia for the first and second quarters of 2017 compared to the same period in 2016. Number of transaction in Indonesia also grew by 97% in the same period,” Co-Founder and Executive Director Chan Kok Long said.

In addition to Southeast Asian countries, iPay88 also presence in Hong Kong and Bangladesh. The company expects its investment in Bangladesh to break even in three years.

Read the full story here

2. Malaysian retailers urged to go digital

The Malaysia Retail Chain Association (MRCA) wants to drive the retail industry to go online for better opportunities and competitive advantages. The support from the government with the Digital Free Trade Zone (DTFZ) should help the adoption faster.

“Since the government is bringing in Alibaba, we have to rely on that wave to benefit the retailers and SMEs to the maximum,” said MRCA President Datuk Garry Chua.

Online contribution to the total sales is growing but it’s still on a gradual mode. He expects the growth to reach double-digit after the DFTZ truly kicks off.

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3. Grab and Uber subjected to tax checks in Vietnam

The General Department of Taxation recently sent a document requesting the HCM City Department to inspect the tax payments of Uber and Grab.

The request came after traditional taxi firms claims that they have been subject to a variety of taxes and charges which accumulates to an average tax of VNĐ 2 trillion ($91.7 million) annually, while Uber and Grab were only subject to a tax of 4-5% of revenue and only paid VNĐ 20 billion ($8.8 million) annually.

The Ministry of Transport will provide information to the tax agencies to clarify Uber and Grab taxes soon and will work with the Ministry of Finance, especially the General Department of Taxation, to share documents and calculate tax management options more tightly to avoid inequality in tax collection.

Read the full story here

Here’s what you need to know today.

1. Airbnb’s Chinese rival Tujia widens the war to Asia

Airbnb is doubling down on China this year, where it has been slow to expand. But it faces a strong rival there, Chinese unicorn Tujia which lists over 400,000 properties.

There’s also the convenience of integration with Chinese mobile payment systems like Alipay and WeChat Pay. For example, almost one-third of Thailand’s foreign tourism revenue came from Chinese travelers last year, and WeChat Pay has partnered with banks and mobile payment services in Thailand to make local shopping convenient for its users.

These regional markets are where Tujia feels it will have an edge in competing with Airbnb. It is building up teams in Japan, South Korea, Taiwan, Singapore, Thailand, Malaysia, and Indonesia. And it has already signed up nearly 40,000 properties outside China.

This also opens up many opportunities for Southeast Asian markets to explore payment integrations, services and more to serve the influx of Chinese visitors.

Read the rest of the story here.

 

2. Malaysia officially launches digital free trade zone

Malaysia Prime Minister Najib Razak officially launched the country’s Digital Free Trade Zone at the Global Transformation Forum 2017.

A major goal of the DFTZ is to become an ecommerce hub, in which SMEs and startups can build regional fulfilment centres (as Alibaba plans to do in the near future).

The Prime Minister spoke about a need for Malaysia to embrace ecommerce. To facilitate development, the government will reduce tariffs on goods priced over $112. Najib said wants to make sure the cost of fixed broadband is cut in half and internet speed is doubled by the end of the year.

In conjunction with ‘strategic partners’, Catcha Group will be the master developer, and a main investor, in a project called Kuala Lumpur Internet City (KLIC).

Read the rest of the story here.

 

3. Yoox Net-a-Porter shares jump on Alibaba interest

Shares in Yoox Net-A-Porter were up almost 8 percent on Monday as traders cited reported interest from Chinese ecommerce giant Alibaba Group.

“There are reports Alibaba is interested in buying a stake in Yoox,” one of the traders said.

A report on Chinese fashion website Ladymax.cn said the Chinese conglomerate had contacted Yoox Net-a-Porter over capital cooperation, adding it did not rule out buying shares in it.

Read the rest of the story here.

A bit about Malaysia

Malaysia is one of Southeast Asia’s smallest nations, but that hasn’t affected its digital ambitions. In 2015, Malaysia’s ecommerce market was estimated at $1 billion and is on equal footing with Singapore in terms of market size and developed infrastructure, which may explain why the nation’s ecommerce industry is expected to increase by 8X to $8 billion within the next ten years.

It is no surprise then, that Alibaba recently announced the construction of a regional distribution hub (e-hub) that will act as a centralized customs clearance, warehousing and fulfillment facility for Malaysia and the Southeast Asian region in order to speed up clearance for imports and exports. The hub is set for a launch in 2019.

Out of the e-hub was born the Digital Free Trade Zone (DFTZ) – a joint initiative by Prime Minister Najib Razak and Alibaba Group to accelerate Malaysia’s digital roadmap that aims to double ecommerce growth from 10.8% to 20.8% by 2020.

What is the free trade zone?

In March 2017, Malaysia formally launched the Digital Free Trade Zone initiative at the Global Transformation Forum. This is the first digital global trade platform beyond China, and the Malaysian government believes that a collaboration with Jack Ma will increase SMEs’ contribution to the nation’s GDP, which currently stands at 37%, despite 97% of businesses in Malaysia currently being micro or SMEs.

The free trade zone is composed of three zones:

    1. The satellite services will facilitate end-to-end support and knowledge sharing for companies targeting the Southeast Asian market.

 

    1. The eFulfillment Hub will be connected to Hangzhou’s Cross-Border ecommerce pilot zone – Alibaba’s HQ – via Alibaba’s OneTouch platform. According to VulcanPost, it will digitise many of the trading operations like customs clearance, foreign exchange services, financing services and logistics solutions which will ease bilateral trade.

 

  1. The eServices platform is virtual and will complement the satellite services and Ma’s e-hub by digitally connecting users with government and business services.

Through DFTZ, the purchase of goods via the Internet worth $276 and below will be exempted from paying tax. Currently, goods worth $115 and below purchased online were not subjected to tax.

But what does the free trade zone really mean?

The partnership between Jack Ma and the Malaysian government was born from Ma’s concept of providing SMEs the infrastructure and overcome difficulties involved in conducting global trade – namely clearance and inspections.

If successful, DFTZ has the potential to double the growth rate of Malaysian SMEs’ goods export and create 60,000 direct/indirect jobs by 2025.

It is also estimated to support US$65 billion worth of goods moving through DFTZ.

“The establishment of DFZ would stimulate the economy as it gives room for online traders to compete in a healthy environment. Locations of the businesses will no longer be a hindrance to traders. For instance, a trader in Kota Belud would have an equal opportunity to market or sell his items, as a trader from the Klang Valley,” said Abdul Rahman, Head of Economic Planning Unit.

Although it is currently too early to quantify the benefits of the digital free trade zone, analysts have predicted that its launch will be good for the logistics sector. More specifically, for Malaysia Airport Holdings (MAHB) and postal company Pos Malaysia’s subsidiary, KL Airport Services.

The heightened connectivity should propel the growth and development of ecommerce in the region, lower trade barriers and benefit local players due to increased opportunities.

However, it isn’t simple infrastructure that Malaysia is building.

In order to create a functional logistics ecosystem that can improve regional level trade, it requires collaboration from various parties, companies and more. The success of the digital free trade zone also depends on the rate of retail growth – both offline and online in Malaysia and the region because it will need to grow in tandem with the scale of the free trade zone itself.

To leverage from the initiative, smaller players and SMEs need to scale their businesses to ensure that they are ready to utilize the ecosystem.

As this is the first time the free trade zone has ventured out of China, it simply cannot be a copy and paste of what has worked in the past with Chinese SMEs. Smaller Southeast Asian companies currently need help in shaping their businesses, along with help in lowering trade barriers.

Although the free trade zone will surely bring opportunities, SMEs will also need to be ready for 2019, as increased opportunities often come with increased competition.