AUG 16 — Malaysia’s struggle to protect its micro, small and medium enterprises (MSMEs) from the enormous competitive pressures generated by e-commerce platforms should not be viewed as a uniquely Malaysian problem. Nor should it be reduced to a bilateral problem between Malaysia and China.
Something much larger is happening.
Across the world, consumers are migrating from physical shops and conventional retail chains towards e-platforms that can offer enormous product selections, instantaneous price comparisons, personalised recommendations and increasingly inexpensive cross-border delivery.
Malaysia is merely one part of this global transformation.
The arrival and expansion of powerful Chinese platforms such as Pinduoduo and the wider ecosystems represented by Temu, Taobao, AliExpress and TikTok Shop make the Malaysian experience particularly visible.
Chinese manufacturing scale, combined with sophisticated logistics and algorithms, means that products can travel directly from factories and warehouses in China to Malaysian households at prices that many conventional retailers find difficult to match.
But the underlying phenomenon extends far beyond China.
Amazon transformed consumer behaviour in the United States and subsequently many other markets.
Mercado Libre has become a major force across Latin America. Shopee and Lazada have transformed Southeast Asian shopping habits. Coupang has helped reshape retail in South Korea.
Across India, Europe and other major markets, consumers have similarly become accustomed to purchasing goods through digital marketplaces rather than walking into traditional shops.
The global consumer has changed. A generation ago, competition was geographically circumscribed. A Malaysian hardware shop competed primarily with another hardware shop nearby.
A clothing retailer competed with other retailers in the same shopping district. Prices reflected several layers of wholesalers, distributors, importers and retailers.
The smartphone has progressively demolished these geographical boundaries.
A Malaysian consumer sitting in Petaling Jaya, Johor Bahru, Penang or Kota Bharu can now compare products from sellers located thousands of kilometres away within seconds.
The consumer does not necessarily care whether the product originates from Kuala Lumpur, Guangzhou, Shenzhen, Jakarta or elsewhere.
Price, convenience, variety and delivery increasingly determine the purchase.
This represents one of the greatest structural changes in capitalism since the rise of the modern shopping mall.
The physical shop is increasingly competing against the platform.
And the platform possesses formidable advantages.
It can aggregate millions of buyers and sellers. It can analyse enormous quantities of consumer data. Algorithms can predict purchasing preferences before consumers consciously formulate them.
Platforms can coordinate warehouses, payment systems, advertising, logistics and manufacturers across multiple countries.
A neighbourhood MSME cannot possibly reproduce these capabilities independently.
Consequently, Malaysia’s MSME predicament is actually part of a global problem: shop-scale capitalism is confronting platform-scale capitalism.
China makes this transformation especially significant because digital platforms can tap into the world’s largest manufacturing ecosystem.
China’s industrial clusters in Guangdong, Zhejiang, Jiangsu, Fujian and elsewhere possess enormous economies of scale.
When these manufacturing ecosystems become directly connected to international consumers through e-platforms, conventional layers of international commerce begin disappearing.
The implications extend well beyond Malaysia.
American and European policymakers are debating how low-value cross-border parcels should be taxed and regulated.
Indonesia has intervened more forcefully in the relationship between social commerce and domestic retailers.
Governments elsewhere are examining taxation, product standards, customs treatment, data protection and competition policy.
Everyone is confronting variations of essentially the same question: how can conventional domestic businesses survive when consumers can access the world’s manufacturing capacity through a smartphone?
Malaysia therefore should not make the mistake of interpreting this transformation primarily through an anti-China lens.
Chinese e-platforms are powerful participants in the transformation, but they did not create the fundamental human preference driving it.
Consumers want lower prices. They want convenience. They want the widest selection at the cheapest cost.
They increasingly expect goods to arrive at their homes rather than travelling themselves to obtain them.
The cost-of-living pressures experienced in many countries reinforce these tendencies.
When household budgets are tight, asking consumers to pay substantially more simply to protect domestic retailers is unlikely to succeed.
Indeed, Malaysian consumers themselves benefit enormously from digital commerce.
Rural consumers can obtain products previously unavailable locally. Small manufacturers can purchase inexpensive components. Entrepreneurs can reach customers without paying expensive shopping-mall rents.
The platform revolution therefore cannot simply be reversed.
The challenge is adaptation.
Malaysia’s first priority must be ensuring fair competition. Foreign and domestic sellers should operate under comparable standards concerning taxation, product safety, customs, consumer protection and commercial accountability.
But regulation alone will not save Malaysian MSMEs.
Malaysia must help them become participants in the platform economy rather than casualties of it.
Digitalisation cannot merely mean encouraging a small retailer to create a social-media page.
Malaysian MSMEs need artificial intelligence, automated inventory management, collective procurement systems, integrated payment technologies, sophisticated logistics and access to regional and international marketplaces.
Malaysia should also encourage MSMEs to aggregate.
A single Malaysian retailer purchasing several hundred products has little bargaining power against global supply chains.
Thousands of retailers collectively purchasing goods through common procurement platforms could generate considerably greater leverage.
More fundamentally, Malaysia must transform e-commerce from a one-way highway into a two-way highway.
The same platforms carrying products from China and elsewhere into Malaysian homes should increasingly carry Malaysian products into international homes.
Malaysia possesses considerable advantages in halal products, food processing, electronics, medical devices, cosmetics, tropical agriculture, specialised manufacturing and services.
The digital economy potentially gives Malaysian MSMEs access not merely to 34 million domestic consumers but to hundreds of millions across ASEAN and billions globally.
This is where ASEAN becomes especially important.
With more than 680 million people, Southeast Asia possesses sufficient demographic and economic weight to develop a formidable digital marketplace of its own.
ASEAN economic integration should therefore increasingly concern not merely tariffs and traditional trade agreements but interoperable payment systems, logistics, digital identities, consumer protection and cross-border e-commerce.
Malaysia should push strongly in this direction.
The objective cannot be to prevent Malaysians from buying inexpensive products from China, the United States, Indonesia or anywhere else. Such an approach would contradict Malaysia’s long-standing commitment to openness and ultimately penalise Malaysian consumers.
The objective must be to ensure that Malaysian businesses acquire the capability to compete within the same global marketplace.
The distinction is crucial.
Protectionism attempts to stop the future.
Competitive resilience prepares society for it.
Malaysia therefore finds itself in the middle of a global transformation rather than facing an isolated national crisis. From American department stores to European retailers, Indonesian warungs and Malaysian sundry shops, conventional commerce is confronting the same digital disruption.
The migration of consumers towards e-platforms is unlikely to stop.
Governments cannot order consumers back into physical shops. Neither can they indefinitely protect businesses whose commercial models have been overtaken by technological change.
But governments can determine whether their MSMEs possess the technology, financing, infrastructure and regulatory environment necessary to adapt.
The Malaysian debate should therefore move beyond whether Pinduoduo, Temu or any other foreign platform is good or bad.
The larger question is whether Malaysia is prepared for a world in which platforms increasingly mediate the relationship between producers and consumers.
Malaysia is not alone in confronting this problem.
It is part of one of the defining global economic transformations of the twenty-first century: the movement from the shop to the smartphone, from nationally bounded retail markets to global digital marketplaces, and from conventional retail competition to platform-scale capitalism.
Malaysia cannot stop that transformation.
It must make certain that Malaysian MSMEs have a meaningful place within it.
* Phar Kim Beng is professor of Asean Studies, and director at the Institute of International and Asean Studies, International Islamic University Malaysia.
** This is the personal opinion of the writer or publication and does not necessarily represent the views of Malay Mail.
