Pic: Twitter

Mention the biggest tech hub in Southeast Asia, and the name Singapore comes to mind first.

Yet, when Alibaba Group Holding Limited looked for a regional distribution hub in Southeast Asia, they set their sights on Malaysia instead of Singapore.

The announcement in March that the Chinese e-commerce giant will call the Greater Klang Valley in Malaysia its new home had surprised many and even triggered the usual Singapore vs Malaysia debates on Quora and Redditt.

Pic: Twitter

Detractors point to the VIP treatment that Malaysian prime minister Datuk Seri Najib Tun Razak laid out for Alibaba's founder Jack Ma by personally appointing him the digital economy adviser to the Malaysian government during an official trip to China in November.

In reality, it all comes down to economies of scale and the cost factor.

According to TechWire Asia, Malaysia is seen as an “emerging hub next to Singapore” and is a “good choice, logistically.”

While both countries boast among the busiest container ports in the world with access to the prime location along the Malacca Strait, an important shipping artery connecting the West to the East, Malaysia has an advantage.

Operational and labour costs in Singapore are substantially higher compared to Malaysia, TechWire Asia highlights.

In addition, limited and expensive land costs in Singapore is another drawback as the distribution giant requires over 20,000 acres (over 8,000ha) of space for its e-fulfillment center alone.

In fact, Alibaba's new hub in the KLIA Aeropolis will occupy an initial eight-hectare site in what was previously the Low-Cost Carrier Terminal with future plans to possibly expand into 37ha at the adjoining site.

The multi-billion KLIA Aeropolis which spans over 404.7ha area surrounding Kuala Lumpur International Airport is expected to deliver about RM7 billion in foreign and domestic investments., Reuters reports.

However, economists maintain that Singapore is not the more likely choice all along.

Malaysia has so much more going for it, economic news portal ecommerceIQ.asia highlighted on Quora in a five-point outline.

1. Malaysia is connected to Thailand via land which gives it access to Cambodia, Myanmar, Vietnam, etc.
2. Malaysia is as close to Indonesia (Alibaba/Lazada’s biggest market in Southeast Asia) as Singapore is.
3. Malaysia itself is a much bigger ecommerce market than Singapore. 30M vs 5.5M population.
4. Malaysia has a much bigger overseas Chinese community than Singapore. These people are users of Tmall, Alibaba and AliExpress.
5. Malaysia is a close political ally of China. (Not everything is just purely business; read between the lines).

Another economic analysts also point to Microsoft choosing Malaysia over Singapore for the regional hub for the same reasons.

Najib further strengthened that political-economic alliance with China and Alibaba during his recent 5-day trip to attend China's historic Belt and Road Forum.

Pic: Twitter

The first stop he made upon touching down in Beijing is to pay a visit to the Hangzhou municipal government and Alibaba to kick-start the Digital Free Trade Zone (DFTZ) project in Kuala Lumpur.

“I make no apologies for wanting to build world-class infrastructure for Malaysia that will, with local ownership being preserved, open up huge swathes of our country, bringing more trade and opportunity to our people, thousands of new jobs, improved living standards and prosperity,” Najib wrote in his article titled ‘Why Malaysia Supports China’s Belt and Road’ that was published by the South China Morning Post on Thursday.

- mD

http://malaysiandigest.com/frontpage/29-4-tile/675579-why-alibaba-is-betting-big-on-malaysia-instead-of-singapore.html