This article is the first in a series exploring movers and shakers in Malaysia’s logistics segment. Stay tuned to Smart Investor for more updates!
Distribution hubs, delivery culture and the Digital Free Trade Zone: more than a buzzword, logistics will be the make-or-break factor for many SMEs moving forward as e-commerce trends position speed above price in terms of customer priorities.
Logistics and warehousing have traditionally taken a backseat in the national spotlight following Malaysia’s shift from the manufacturing paradigm to a service-based economy.
According to MITI, MDEC and AT Kearney in their joint National eCommerce Strategic Roadmap, however, the segment is now at the inflection point of growth, which can be accelerated via focused interventions to contribute more than RM170bil to GDP by 2020.
With logistics coming to the fore as a differentiator, Smart Investor sits down with some of the segment’s foremost faces to gauge their perspectives and prognosis for the industry as it charts its growth beyond 2020.
At The Centre Of It All
“There’s no question that you need logistics, as it forms the core in any import/export or local industry, particularly as Industrial Revolution 4.0 develops, with an eye to the technologies that it propagates,” says Deputy Minister of Economic Affairs Dr Mohd Radzi Md Jidin, speaking at the International Logistics & Warehousing Solutions Exhibition (LogisWare) 2018.
Ranked as the world’s 24th largest trading nation by the World Trade Organization in 2016, Malaysia has invested heavily into the industry, with the Malaysian Investment Development Authority (MIDA) approving 89 projects worth RM5.9bil as of April 2018 in the integrated logistics services (ILS) segment alone.
The rising popularity of e-commerce has also catalysed the growth of logistics in Malaysia as the industry sets its eyes on the regional playing field, leading to the development of initiatives such as the Digital Free Trade Zone at KLIA Aeropolis.
“More producers are turning to logistics professionals to save on storage and transport costs. It’s cheaper, faster and more productive, and makes more sense than, for example, using part of your manufacturing facilities as warehousing, which doesn’t generate revenue,” says MIDA Deputy Director Masri Zohaini Idris.
“However, the number of applicable companies which have been given MIDA incentives is not even 10%, so we’d like to see more people taking advantage of them.”
Pioneer status or investment tax allowances are available for logistics players via MIDA, with the former granting income tax exemption of statutory income for five years and the latter applicable to up to 60% of qualifying capital expenditure within five years, which can be offset against 70% of statutory income.
Applicants must be locally incorporated with 60% Malaysian equity, providing ILS services in freight forwarding, warehousing, transportation and either distribution, supply chain management, or other related value-added services. In addition, they must own at least 20 commercial vehicles and 5,000m2 of warehouse space.
“The government is committed to assisting local logistics providers in expanding. Other areas of incentivisation include cold chain activities as well as the Domestic Investment Strategic Fund grant introduced in 2012 for logistics service providers,” says Masri.
With a supportive ecosystem in place to foster growth and ample demand for their services, a new generation of logistics luminaries is set to take centre stage in the industry.