Alibaba plans regional hub in Malaysia

Delegates visit an Alibaba Group booth at the third annual World Internet Conference in Jiaxing in China's Zhejiang province in November last year. (Reuters Photo)

KUALA LUMPUR - The Chinese e-commerce giant Alibaba plans to set up a regional distribution hub in Malaysia to cater to its fast-growing business in the region, say two sources aware of the discussions.

The hub would be located within KLIA Aeropolis, a 24,700-acre development led by the airport operator Malaysia Airports Holdings Bhd (MAHB) that is expected to generate 7 billion ringgit (US$1.58 billion) worth of domestic and foreign investments.

Alibaba executive chairman Jack Ma and Malaysian Prime Minister Najib Razak are expected to announce the plans at an event in Kuala Lumpur this coming week, the sources said.

The hub will be set up with the help of Malaysian state-linked agencies. It was not clear whether Alibaba would invest any funds in the project.

"Kuala Lumpur International Airport (KLIA) has an existing facility for Alibaba Group to pilot their distribution services here, and if [Alibaba] decides to expand in the future, there is the option to build more on other [undeveloped] sites in KLIA Aeropolis," one source told Reuters.

Alibaba and the Malaysian prime minister's office did not respond immediately to requests for comment.

Najib appointed Ma as his government's digital economy adviser during an official trip to China in November.

Malaysian media reported that Ma, whose Alibaba owns the Chinese online shopping business Taobao, would help steer Malaysia's e-economy development through accelerated efforts to promote online payment and banking.

"Many people see Malaysia as an emerging hub next to Singapore. Malaysia may not be able to take all of Singapore's business but it is a good choice [logistically]," one source said.

This would mark Alibaba's first investment in Malaysia. The company invested $1 billion last year to take control of the Singapore-based e-commerce platform Lazada, Southeast Asia's largest online shopping platform. It also increased its shareholding in Singapore Post to 14.4% from the 10.2% acquired in 2014 and bought a 20% stake in the Thai e-payment service, Ascend Money.

Sources said the distribution hub would be part of Malaysia's Digital Free Trade Zone (DFTZ), also slated to be launched during Ma's visit next week.

"KLIA Aeropolis includes many components and the DFTZ is likely a new component to be added into the development," one source said.

Plans to establish the DFTZ were announced in the national budget last October.