- 7 weeks ago
- #considerthis
Chinese online marketplaces are rapidly changing the way Malaysians shop, offering factory-direct goods at prices many local businesses say they simply cannot match. Now, the government says it is moving towards tighter regulation of e-commerce platforms. So, can the government protect consumers and local businesses, without shutting out the benefits of greater competition? On this episode of #ConsiderThis Melisa Idris speaks with Dr Chin Chee Seong, National President of the SME Association of Malaysia, and Dr Mohd Afzanizam Abdul Rashid, Chief Economist of Bank Muamalat Malaysia.
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00:10Hello and good evening. I'm Melissa Idris. Welcome to Consider This.
00:14This is the show where we want you to consider and then reconsider what you know of the news of
00:18the day.
00:18Chinese online marketplaces are rapidly changing the way Malaysians shop,
00:23offering factory-direct goods at prices that many local businesses say they simply cannot match.
00:30Now the government says it wants to move towards tighter regulation of e-commerce platforms.
00:35So can the government protect both consumers and local businesses
00:40but without shutting out the benefits of greater competition?
00:44That's what we want to discuss today on the show.
00:46Joining me now is Dr Chin Chisiong, who is the National President of the SME Association of Malaysia.
00:53Dr Chin, thank you so much for being on the show with me today.
00:55Can we begin our conversation maybe by you sharing what your members are telling you?
01:00How significant of a threat are these ultra-low-cost foreign platforms to Malaysian SMEs?
01:09I think if you look at what currently most people are talking about,
01:14there's two sides of the story, I would say.
01:17One is the consumer, the other one were the business people.
01:20Now, the one making a lot of noises are the business people, right?
01:24Because they are affected.
01:25They feel that it is unfair and they couldn't compete pricing, price-to-price or product-to-product or whatsoever,
01:33right?
01:33But if you look at the, there's two sides, you know, being an association of companies, SME association,
01:39well, likely or unlikely, we will definitely want to protect our SME in terms of their businesses,
01:47not so much on protecting our market, right?
01:49Protect their business means have a fair playing ground, have a fair level ground.
01:54Because we are facing a lot of costs, you know, issues lately, right?
01:59Not only from renter or SST or whatever, from utilities down to, what do you call statutory requirements,
02:06statutory payment, you know, rent, licensing, you know, assessment, everything.
02:11So, what a lot of people are crying is that most of these, you know, call e-commerce,
02:17I think too much pressure on term or product.
02:19But, they say again, this is not happening the first time.
02:23When Lazada was coming in, when Shopee was doing their talk, you know, and later come Termu,
02:28everybody crying the same thing, right?
02:30Every business crying the same thing.
02:32They cannot compete too, right?
02:33But now, ping total come, hairball get bigger because it becomes so cheap, right?
02:37It becomes so cheap that the people worry, not only worry, they lose a lot of business because of the
02:44fact.
02:45But look at the other side of it, consumer is very happy.
02:49In my pocket, I have $100, I can buy more things, right?
02:53So, are we going to protect the consumer, right?
02:56Or protect the so-called SMEs or the business people, right?
03:03Not so much of protecting.
03:04It would say, I would say, what the government need to do is to make sure, okay,
03:10these people coming in, the product they're coming in, have to be so-called regulated.
03:15Regulated means, let's say you might have a power plug point from Ping Toto or Lazada.
03:20A power plug point may not be a serum approval.
03:23This is dangerous to be used in Malaysian market, especially, you know, it's not been tested properly.
03:29And also, if you notice, not only from this Ping Toto or whatever, a lot of other platforms,
03:34even Amazon, even some other platforms from Korea, they can sell some supplemental product,
03:42product that don't get approval to sell in Malaysia, cosmetic product for that matter.
03:46Will that affect our local companies, local e-commerce company?
03:51Definitely, it will, right?
03:53So, the fact is that we shouldn't just look at price war.
03:58You know, you're talking about price war, you cannot compete with China.
04:01Because their market is so big, they produce 10,000 product at the same price, of course,
04:07whereby we only produce 1,000 product.
04:09So, cost we cannot compete, right?
04:12That's no way.
04:13But we have other product they don't have.
04:15Okay, let's come to that.
04:17So, I want to come back to something you said.
04:19So, you're right, maybe it's really impossible to compete on price with a China manufacturer.
04:26But when you said earlier that you want to see a level playing field for Malaysian SMEs,
04:33what do you mean by that?
04:35Are the existing tax and regulatory rules to support Malaysian businesses, is that sufficient in your opinion?
04:42Okay, level playing field means, you know, for instance,
04:44the low value product coming in $500.
04:47Earlier, there's, you know, they're talking about tax, paying, even 10% tax, you already tax them, right?
04:53But we don't tax a company here.
04:56So, what we say means that if the e-commerce platform follow our regulation,
05:04get their product be tested, you know, product have been approved to come into Malaysia,
05:09then they have other costs, right?
05:12Maybe like serum testing costs, or also other that involve ministry or health testing costs.
05:17And that part will make a difference.
05:19So, we have to pay, you know.
05:21If we, our product in Malaysia, if you manufacture,
05:24I would say just manufacture of a power plug point,
05:26which is good enough power plug, right?
05:28You're subject to many tax, of course.
05:30Some other, you're talking about a company, expenses, you know,
05:35you have to pay, you know, more renter here, you have to pay your basic costs here.
05:42But even if platform don't have to pay, they have other costs, right?
05:47It's the only thing whether this company from China, for instance,
05:49are they paying our corporate tax?
05:51They don't.
05:53But there's a low value goods tax imposed, right?
05:56Do you not think that that has actually leveled the playing field at all?
06:01I think low value tax is whether you can't stop that.
06:06Because this is already a regulation, right?
06:09So, once you cannot stop something like that,
06:12even they pay tax, they do pay sales tax, right?
06:15So, it will never help.
06:18You know, it will never help that you can bring down their level playing field.
06:23It won't.
06:24So, when you talk about e-commerce platform and your physical outlet
06:28or whatever you have it here, there's no level playing field already.
06:32Unless you're talking about, I'm having a platform here in Malaysia
06:35and they are having a platform in China.
06:37You know what I'm trying to say?
06:38Our local platform, we sell our local product.
06:41And there's a way, the difference in level playing field,
06:44most people complain because we have a lot of costs to pay.
06:48The SME here have, you know, like say rental costs,
06:51you know, salary requirement costs, you know, manpower costs.
06:56But you cannot compare this against the platform.
06:59It's not, you know what I mean?
07:02It's not comparing Apple to Apple really.
07:04Unless you're talking about our platform here compared to their platform there.
07:08So, what are you telling your members?
07:10So, if you say that Malaysian SMEs cannot compete in this price war
07:16with factory direct goods from China,
07:19what should Malaysian SMEs realistically compete on?
07:24What should be the unique selling proposition of a Malaysian business
07:28if they're not trying to compete on price altogether?
07:32I think Malaysia has good products like quality, reputation, right?
07:36The quality is one more thing.
07:39And they're confident of Malaysian product by our consumer.
07:42And you're also international consumer.
07:45For instance, our HALA certification product.
07:47It's well recognized.
07:48And it doesn't mean that we can't do business in China
07:52or any other place with our good product.
07:54In fact, we can do better.
07:57If you look at our product that we have
08:00compared to whatever Chinese product they have,
08:03it is totally a different thing.
08:05You have to make it a different thing
08:06so that you can make it to compare and compete with them.
08:11You don't compete.
08:12Like, let's say, if they're producing a pineapple tart, for instance.
08:15They can produce pineapple tart cheaper than what we produce pineapple tart here.
08:19But our pineapple tart can be much more tastier than them.
08:22That's number one.
08:22Because we localize our taste.
08:24It's the same about the Malaysian taste, right?
08:26And we can have a better control in terms of health,
08:29in terms of healthy product, in terms of quality product.
08:33In terms, like I said, the HALA certification.
08:36The HALA certification is just not so much of the logo.
08:39It's the way they process the food,
08:40the way they get it prepared, you know, in laboratory,
08:44the sauce is coming.
08:45It is clean, you know.
08:46So, those are our advantages.
08:48You're talking about F&B product.
08:50But you're talking about physical product, for instance.
08:52If I produce a mouse, right?
08:54A physical mouse that you manufacture here,
08:56and you compare and manufacture in China,
08:58definitely you can't compare, right?
09:00But if you look at branded product,
09:03there are other products in the world
09:07where China also produce,
09:09but they can do better.
09:11It's not necessarily so, right?
09:12You look at Japanese product.
09:14They're based on their quality,
09:15based on their reputation, right?
09:17So, these are the things we should look at.
09:19And what we, Malaysians, should do is
09:21how to make our product more attractive
09:24and also make our cost getting lower
09:26using digitization, you know, automation.
09:31For instance, our biscuit product,
09:34Julie Biscuit.
09:35Julie Biscuit has been doing very well, right?
09:40And it's not the price that matters.
09:42They are not selling that cheap.
09:43Why they can produce a product that can sell well?
09:47So, it is not so much on a loan price wall.
09:50You know, you don't do that.
09:51We go by quality, by go by reputation,
09:53and go by whatever we have in terms of our branding.
09:57So, at this point in time,
09:58what would the SME Association of Malaysia
10:00like to see the government do?
10:03I think first thing first,
10:05we want to make sure those products,
10:07I would say the control part,
10:09the governance part,
10:11how we control this item coming is legit, right?
10:14We have to make sure that they got the right process
10:18or approval for healthcare product,
10:20you know, for food,
10:21and then for those electronic items.
10:24What other product coming must be,
10:27you know, certified
10:28and also been approved by our authority,
10:31safety product or whatever that matter.
10:33So, that become a level playing field.
10:36We got a lot of product coming in.
10:37They are cheap,
10:38but they do the other cost like testing,
10:40you know, whatsoever.
10:41And the more important thing is,
10:45why China product or other country product
10:47can come in Malaysia easily,
10:49and why our product cannot go to their country easily?
10:52Right.
10:53Because they have their process of testing their product
10:56and don't let else product go in.
10:57So, our case of monitoring the entry of the product
11:02coming to Malaysia,
11:04you know, how much can we make sure
11:05through our custom or whatever
11:07that anyone do a 40,
11:10they have to be penalized.
11:12So, we're strict in terms of all this assessment
11:14on the product coming in.
11:16Then, it makes us a better level playing field
11:21in terms of product to product.
11:23That is what I want to see from government.
11:25You know, obviously monitor the product coming in.
11:27Dr. Chin, do you see this
11:30being to the detriment of consumers
11:33and cheaper products
11:35and better competition in the marketplace?
11:38I think it's so subject to what kind of product.
11:41If you talk about the product,
11:43that is, it doesn't need any approval.
11:45For instance,
11:47I remember I just went to the net.
11:49I'm searching for a net
11:51to plug my mangoes.
11:56You know, I want to find a long bowl,
11:58I have a net to plug my mangoes.
12:00But I couldn't find anywhere around my area.
12:02You know, even the shops,
12:04you know, in hardware shops,
12:04I couldn't find.
12:05But I just go to online,
12:07I can find the product.
12:08And it's product to product
12:09and good quality.
12:10And I pay much cheaper.
12:13Right?
12:14So, it's convenient for the consumer.
12:16If you make your consumer,
12:17and this product,
12:18you can't get anywhere,
12:19and they are cheaper,
12:19doesn't mean it affect your business.
12:21Yes, you have a store in Malaysia.
12:23You're selling this netting.
12:24But your net, it's no good.
12:26The product cannot compete.
12:28And that product eventually
12:29also come from China.
12:31You know what I'm trying to say?
12:32So, if you're buying a China product from China,
12:34and buying a China product from SME here,
12:36yes, of course,
12:37the SME here has to protect it in a way,
12:39because they already bring the product
12:40and make it convenient for you.
12:42So, it sells on convenience.
12:44Why that DIY still can survive?
12:46And most of the product come from China.
12:48Right?
12:49It's because it's bad on convenience.
12:51It sells on convenience.
12:53It sells on quality,
12:54support from the locals.
12:56Right?
12:56So, the competition is there.
12:58But if you went to a store,
13:00went to a hardware shop,
13:01there's no service as well.
13:03And of course,
13:04I don't mind buying from the net.
13:05You know what I mean?
13:06Okay.
13:07So, there has to be
13:08some kind of differentiator
13:09to allow for competition to happen.
13:12Dr. Chin,
13:12thank you so much
13:12for being on the show with me.
13:13I appreciate your time.
13:14That's Dr. Chin Chi Siong there
13:15from SME Association of Malaysia.
13:18We're going to take a good break
13:19here on Consider This.
13:19We'll be back with more STT.
13:41Hi, welcome back to Consider This.
13:43I'm Melissa Idris.
13:44The government says
13:45that it wants to ensure
13:47that e-commerce platforms,
13:49including those
13:50that are operating across borders,
13:52they want to make sure
13:53that these platforms
13:54are properly regulated
13:56and made accountable.
13:58And this comes at a time
13:59when we're seeing
14:00foreign online marketplaces
14:01undercutting local businesses
14:04at extraordinary scale and speed.
14:07And have we come to the point
14:08where the government needs
14:09to intervene to ensure
14:11that the market remains
14:12fair and sustainable
14:14and how do we make sure
14:15of that happening
14:16without it being
14:17at the detriment of consumers?
14:19So joining me on the show now
14:20is Dr. Muhammad Afzanizam Abdur Rashid
14:22who is the Chief Economist
14:24of Bank Mwamalat Malaysia.
14:25Dr. Afzanizam,
14:27thank you so much
14:27for being on the show with me today.
14:29Let's start with the look
14:31at the platforms as a landscape.
14:33From an economic perspective,
14:35do you see the rapid rise
14:38of these foreign online marketplaces?
14:41Is that a problem
14:42or is that a threat
14:44for local SMEs?
14:46Well, thanks, Melissa.
14:47Thank you for having me.
14:49Well, I guess on one hand,
14:51we would argue that
14:53if there is so much competitors,
14:56especially from abroad,
14:57that could compromise
14:59our local SMEs
15:00who are competing
15:02in the same space,
15:04i.e. the local consumers
15:06in Malaysia.
15:07But at the same time,
15:09economists also argue
15:11that competitive forces
15:13would also shape
15:15the dynamism of the businesses
15:17which would eventually
15:20benefit the consumers.
15:23If I can quote some numbers here,
15:24Melissa,
15:25if you look at the
15:26producer price index,
15:30if you look at the breakdown,
15:33the crude material,
15:34which is the raw forms
15:36of inputs for businesses,
15:38in terms of prices,
15:39it has gone up
15:40by 25% in June alone.
15:42But if you look at
15:43the other components
15:44such as the intermediate material,
15:47which is used also
15:48in the productions
15:49of a business,
15:50only grew by 7.4%,
15:52which is only single digit.
15:54And if you look
15:55at the finished goods,
15:56it only grew by 2%.
15:58So you can see
15:59from crude,
16:00intermediate,
16:01finished goods,
16:02only increased
16:03at a marginal rate.
16:06And more so,
16:07if you look at
16:08the consumer price index
16:09in the Q2,
16:11it only grew by 1.9%.
16:13Yes, it's higher
16:14compared to Q1,
16:151.6%.
16:16But again,
16:17because of the competition,
16:19because of competitive forces,
16:20some businesses
16:21decided to actually
16:23absorb the higher cost
16:25in the name
16:26of competitions.
16:28meaning to see
16:28they are willing
16:29to sacrifice
16:31some of their margins.
16:33Perhaps also
16:34they want to maintain
16:35the relationship
16:36with their clients
16:36and be able
16:37to retain the market share
16:38and whatnot.
16:39But these are all
16:43the competitive dynamics
16:45in the markets.
16:46And if you allow
16:47to do that,
16:48then perhaps
16:49it can help
16:50to address
16:51this rising cost of living
16:53in a truer sense,
16:55I would say.
16:56Okay.
16:56So where does this
16:57leave the government?
16:57At what point
16:59does this stop
17:00being a story
17:01about healthy competition
17:03and it becomes
17:04a policy concern?
17:07Right.
17:08I think obviously
17:09there must be
17:11a mechanism
17:11to screen
17:13our existing SMEs.
17:14I'm sure
17:15I'm sure
17:16there are also
17:16a lot of our
17:18SMEs businesses
17:19who are very dynamic,
17:21who are very,
17:22you know,
17:22embrace all this
17:24digitalization endeavor.
17:26And I suppose
17:27those who are
17:28perhaps,
17:29you know,
17:32may not,
17:33you know,
17:33practicing
17:35the current form
17:36of doing business.
17:37so that leaves
17:38them quite vulnerable
17:39when it comes to,
17:40you know,
17:41competitive forces.
17:42So I think
17:42the screening process
17:43really,
17:44really matters
17:44because if you look
17:46at the government's,
17:48you know,
17:49assistance,
17:49there's a lot.
17:50And there's a lot
17:50of government agencies
17:51who are responsible
17:52to help
17:54and to give assistance,
17:55be it in the form
17:56of access to finance
17:59and also training.
18:00So there's a lot
18:01of assistance.
18:04But then again,
18:05it also warrant
18:07for perhaps
18:09right attitude
18:09also among
18:10the businesses
18:11so that
18:12whatever assistance
18:13being given
18:14to them
18:15will be
18:16materialized
18:18in a manner
18:18that will produce
18:19a desirable outcome
18:21such as
18:21high productivity
18:22and ultimately
18:24better profit margins
18:25now.
18:26Yeah, okay.
18:27Well, I mean,
18:27competition
18:28is supposed
18:29to benefit consumers,
18:30right?
18:30On the flip side
18:31of this coin,
18:33consumers are definitely
18:34benefiting from
18:36more competition,
18:38lower prices,
18:39greater choice.
18:40How do we think
18:41about how should
18:42the government
18:42balance the
18:43consumer interests
18:45against,
18:46I guess,
18:47the survival
18:48of local businesses?
18:50When does it
18:50make economic sense
18:51for the government
18:52to intervene
18:52and how do they
18:54intervene without
18:56becoming protectionist?
18:58Yeah, true.
18:59I think
18:59the shortcut
19:01is always
19:02to do this
19:04protectionist policy
19:05which I think
19:06is very counterproductive.
19:08But I think
19:09maybe this is
19:10the main role
19:12of the government
19:13in a grand scheme
19:16of things,
19:16especially in the
19:17context of
19:18geopolitics.
19:19then, therefore,
19:22we need to see
19:23what are the
19:24sources of
19:25competitions
19:26that deem to be
19:28detrimental to
19:29our businesses.
19:30Perhaps,
19:30let's say,
19:31if you say that
19:32businesses coming
19:33from China
19:34is actually
19:36become a detriment
19:37to our
19:38local SMEs,
19:39obviously,
19:41opting for
19:42protectionist
19:43is not the way
19:44to go.
19:44perhaps is to
19:46have more
19:46engagements,
19:47more dialogue
19:48so that we
19:49have a common
19:51ground to
19:52address these
19:52issues.
19:53And perhaps
19:53also,
19:54how we can
19:56be able to
19:57allow
20:00some form
20:01of JV
20:02joint venture
20:02with them
20:03and to allow
20:05transverse
20:06of technology.
20:08Those are the
20:08things that I think
20:09the government
20:09can do
20:10to actually
20:11help to
20:12navigate these
20:12challenges
20:13rather than
20:14to opt
20:15for
20:16unilateral
20:17kind of
20:18policies
20:19such as
20:19protectionist,
20:21which I think
20:21it doesn't
20:22serve a
20:23good purpose,
20:24especially
20:25in the
20:26current context.
20:27Can you
20:28elaborate a bit
20:29more?
20:30What are the
20:30tools at the
20:31government's
20:32disposal
20:33currently?
20:34So,
20:35you talked
20:36about JVs
20:37and having
20:38more tech
20:39transfer,
20:39but are
20:40there other
20:41tools that
20:42the government
20:42can use
20:43at its
20:43disposal
20:44that it
20:44can address
20:45some of
20:46the concerns
20:46from both
20:47businesses
20:47while still
20:48protecting
20:48consumers
20:49and regulating
20:50e-commerce
20:51platforms?
20:52I think
20:53at the
20:53moment,
20:54the way I
20:55observe it,
20:56most of
20:57the assistance
20:58is actually
20:59in the
20:59form of
21:00access to
21:01finance.
21:02For
21:03instance,
21:03in our
21:03case,
21:04at Islamic
21:06banking
21:06institutions,
21:07we have
21:07these programs
21:08called
21:08Aitekai,
21:10which uses
21:11the grants
21:13from
21:13Bandagara
21:14and also
21:15the expertise
21:16coming from
21:17a bank
21:17and also
21:17how these
21:19tools can
21:19help
21:21to uplift
21:22the
21:24B40
21:26businesses
21:27so that
21:28with the
21:29right kind
21:29of
21:30assistance
21:31and training
21:32programs
21:33that will
21:33help them
21:34to have a
21:35better chance
21:36in terms
21:36in terms
21:36doing
21:37their
21:38business
21:39so
21:40other
21:41agencies
21:41such as
21:42perhaps
21:43Amanah
21:43Ikhtia,
21:44even
21:45SME,
21:46the bank
21:46perhaps,
21:47these are
21:47centered
21:48around
21:50access to
21:50finance.
21:51Trainings,
21:52yeah,
21:52I do believe
21:53there's a lot
21:54of training
21:54too,
21:55like
21:55Institute
21:56Keusawa
21:56Negara
21:57InScan
21:57and the
21:58likes
21:59but
22:00to address
22:01this
22:02in a
22:02holistic way
22:03and
22:04to address
22:05the competition
22:05is something
22:06that the
22:06government
22:07needs to
22:07really
22:07look at
22:08in a
22:10broader
22:10picture
22:11because
22:11I don't
22:12think we
22:12have
22:12that
22:13proper
22:15framework
22:15for that.
22:16Okay,
22:17then can I
22:17ask you
22:17in terms
22:18of timing
22:18is there
22:20so how do
22:21you see
22:21the timing
22:21now that
22:22the government
22:22has said
22:22they want
22:23to regulate
22:23e-commerce
22:24platforms
22:24including
22:25the foreign
22:26marketplaces.
22:29Are we
22:30behind the
22:30game?
22:31Are we
22:31too late
22:31in terms
22:32of the
22:32need to
22:33regulate
22:33this?
22:34Or
22:35is there
22:36a policy
22:37risk
22:37of intervening
22:38too early
22:38and distorting
22:39the market?
22:41I think
22:42at the
22:43current
22:43gesture
22:44I understand
22:45we have
22:45this
22:46digital
22:47tax
22:48which
22:48allow
22:49the
22:50government
22:50to tax
22:50the
22:52digital
22:52players
22:53so at
22:53least
22:53they
22:54would
22:54have
22:54some
22:55level
22:55playing
22:56feel
22:56in
22:57the
22:57form
22:58of
22:58tax
22:58but
22:59beyond
22:59that
23:00I
23:00think
23:03Malaysians
23:04are
23:04spot
23:05with
23:05a lot
23:05of
23:05choices
23:06even
23:07if
23:07you
23:07look
23:07at
23:08BNPL
23:08you
23:09can
23:09see
23:10platforms
23:11such
23:11as
23:11TikTok
23:12Shopee
23:13are
23:13widely
23:14available
23:14to
23:15our
23:15consumers
23:17so
23:18I
23:19think
23:19in a
23:19nutshell
23:20it's
23:21hard
23:21for
23:21the
23:21government
23:22to
23:22actually
23:22regulate
23:23business
23:24so
23:25the
23:26ideal
23:27solutions
23:28or
23:28intervention
23:28is
23:29through
23:29capacity
23:30building
23:30to
23:31ensure
23:31that
23:31our
23:32SMEs
23:33are
23:33better
23:34equipped
23:34to
23:35face
23:35this
23:36competitive
23:36forces
23:37things
23:38Dr
23:39Afzah Nizam
23:40Abdul Rashid
23:41there
23:41from
23:42Bank
23:42Mwamala
23:43Malaysia
23:43wrapping up
23:44this episode
23:44of Consider
23:45This
23:45I'm
23:45Melissa
23:46Idris
23:46signing off
23:47the evening
23:47thank you
23:48so much
23:48for watching
23:48and good
23:49night
23:49thank you
23:50thank you
23:59for watching
24:02time
24:02see you
24:02next