Why the sharing economy in Malaysia is taking off

While the sharing economy has come increasingly into public notice with the emergence of digital platforms such as Uber—and Airbnb, which is touted as the world’s largest hotel chain—the concept is not new, according to Malaysia Digital Economy Corporation (MDEC).

Traditional cultural behaviours such as pooling and sharing resources and services have become transformed by technology into potential new business models based on peer to peer mechanisms or crowdsourcing, explained Nordarzy Razak Bin Norhalim, who is MDEC’s director of the B40 Division.

B40 is one of three different income groups that Malaysians are categorised into by the Department of Statistics Malaysia: Top 20% (T20), Middle 40% (M40), and Bottom 40% (B40). The median income of each group is used as one of the benchmarks of economic growth. (Department of Statistics Malaysia report ‘Household Income And Basic Amenities Survey.’)

The B40 Division is one of the many initiatives under Digital Malaysia, a national programme to generate growth and advance the country towards a developed digital economy by 2020, which is driven by MDEC together with other agencies under the stewardship of the Ministry of Communication & Multimedia.

“Spurred by many citizens and entrepreneurs looking for opportunities to supplement their income through sharing or renting items,” said Nordarzy. “The sharing economy has been embraced in Malaysia as a new business model during the last three years.”

Promising sharing economy model

Digital technologies have fuelled a rapid upscaling of traditional systems, he continued. This, coupled with the fact that Malaysians are used to a sharing culture points to a fertile ground for growth.

“Globally, the sharing economy is expected to be a US$3.1 trillion industry by 2025—it’s currently at US$270 billion this year,” Nordarzy continued. “While the global market share is still dominated by the USA, China and the EU, we have identified some quick-wins for Malaysia’s sharing economy.”

How does the sharing sector fit into the bigger picture? He explained that the “growth of Malaysia’s startup community together with the sharing economy landscape is an early testament on Malaysia taking on the 4th industrial revolution [Industry Revolution 4].”

What do business leaders need to do to stay on top of these changes? “Businesses need to rethink their business model, relook at their internal operations, and review their products and services as the first phase of preparing for these opportunities.”

“The Sharing Economy does present opportunities for companies in Malaysia,” Nordarzy went on to detail possible courses of action, presented below in bulleted form here:

• Focus more on the core-business e.g. a restaurant—serving good food and leverage—the sharing platforms can help to address and manage non-core activities such as food delivery.
• Reduce some of the operational costs by tapping on opportunities to crowdsource via sharing economy (SE) platforms.
• Discover new creative opportunities and do look and think beyond traditional ways of doing business.

“With the right development approach, the sharing economy in Malaysia will be worth between US$10 to 14 billion by 2025, creating 1.2 million jobs for around 540,000 youth freelancers (aged 18 to 34 years old),” he said.

Champions

And what local platforms would you point to out as success stories during 2017? “One of local platforms that stood out in 2017 would be ZeptoExpress, which provides on-demand delivery and logistic services,” said Nordarzy. “They provide game-changing delivery services whereby they are now offering their clients, same day delivery services (within 3 hours).”

“Already, they are engaged on rapidly expanding their network of partners (crowd-sourced individuals who could do delivery—whether having car, motorbike or even on foot),” he added. “Their strength also lies in their technology capabilities whereby they are also now offering usage of their fleet management software on a subscription-basis. After a year in operation, they managed to serve total of 1,400 clients with 74% of them became returning customers.”

Essentially, ZeptoExpress is a same-day last-mile delivery service promising deliveries within a 3 hour window, where customers are able to request for delivery service using mobile apps or website platform. Crowdsourced partners will be notified and once payment is made through ZeptoCredit, BillPlz or Paypal, the delivery service will begin immediately. The company’s intention is clearly to disrupt the urban logistics & on-demand delivery service as well as to give citizens opportunities to profit from taking up delivery assignments.

“As for local freelancing platforms, Malaysia has just two active platforms so far—namely kerjadigital.com and freetimeworkz.com,” said Nordarzy. “Although both are new in the market place, they are slowly building up their workers’ profile as well as pushing for demand from the local corporations.”

Asked how do local platforms compare with their foreign counterparts, he replied:

“In the case of ZeptoExpress, a comparable model would be UberRUSH—a segment of Uber focusing on delivery services, Deliv (www.deliv.co) and Roadie (www.roadie.com). Most of the platforms in this category normally focus on certain specific locations or a country.”

“In the case of ZeptoExpress, they are already expanding their distribution network to also cover other countries,” said Nordarzy. “Indeed, in 2017, it already has coverage in London and is planning to expand to the Philippines and Vietnam by Q3 2018.”

“These foreign or global platforms are far better in terms of technology, the supply and demand compared to local platforms,” he admitted. “As a freelancer, getting higher-paying gigs is not just a matter of signing up on popular global platforms like Upwork.com, freelancer.com, guru.com, 99design.com—just to a name a few. You will have to branch out, establish a great portfolio of past work and maybe even prove yourself through tests that showcase your skills.”

“As the digital nomad lifestyle and other digitally inspired trends grow, I would expect the number of freelance resources to also keep pace and increase,” Nordarzy explained. “In the US, 55 million US citizens are freelancers and the freelancing economy in that country is worth US$1Trillion. And it’s interesting that Fortune 500 companies have already started adopting on-demand talent.”

Removing barriers

Returning to the question of opportunities for Malaysia, he pointed out that, “These low hanging fruits are unsurprisingly in the transportation and accommodation industries—local variations of global sharing platforms.”

“However, even these quick-wins need to be supported with various enablers,” he continued. “These enablers include reviewing regulations, encouraging direct market participation, enhancing literacy & awareness, as well as continuing to build an ecosystem that inspires innovation coupled with a solid digital infrastructure.”

“Without such enablers in place, it will be difficult for Malaysia to achieve the projected sharing economy value target of US$10 to 14 billion in 2025,” Nordarzy said.

Other challenges

Nordarzy also admitted that the sharing economy is burgeoning well in urban areas—”where there are plenty of under-utilised spaces—such as commercial, residential, and so on.), materials—such as transportation, tools, and clothes, as well as a talent base of expertise and skills. All glued together with good internet connectivity, as well as high digital adoption.”

“From the perspective of good governance, there is a need to look into the policies—for the benefit of both the sharing economy sector as well as for the people working in it,” he said, adding that Malaysia’s challenges fall mainly into the following areas:

• Market-demand perspective: There are trust issues as companies have yet to better understand and trust the sharing economy model), and there may be policy/regulatory constraints, as well as a residual resistance to change
• People perspective: Again, it takes time to build trust as some consumers are used to a digitised sharing economy, wariness about personal tax declarations, and the need for a clear safety net for people/freelancers working in the sharing sector.
• Crowd services players: Sustainability needs to be built, and proven, as currently most platform players are startups, and reliability—in terms of quality and consistency of deliverables from freelancers—also at an infancy stage.

Next steps

Looking ahead to 2018, what is the outlook for the sharing economy sector in Malaysia? “Malaysia’s GDP [gross domestic product] growth is projected to be between 5.0 to 5.5% in 2018,” Nordarzy said.

“The RMK-11 [national plan] focuses on supporting higher productivity and improving labour market outcomes, which would help boost medium-term growth and improve living standards,” he said.

“MDEC will continue fostering the growth of the sharing economy in Malaysia, with a couple of initiatives piloting in 2018 for tourism and logistic sharing economy,” Nordarzy explained. “We are also looking into other components for sharing economy enablers such as digital ID, e-payment interfaces and open data & API standards development.”

“In Budget 2018, MDEC has been given the monetary allocation by the Government to continue the eRezeki programme in 2018,” he said. “The programme will continue to promote digital inclusivity by giving opportunities for the B40s to earn additional income via digital means.”

“In Malaysia, we believe that the Sharing Economy is creating a new phenomenon of full-time freelancers,” Nordarzy said. “With this in mind, the eGlobal Freelancers programme—for highly skilled Malaysian professionals—will be expanded to benefit the M40 group—for them to be part of the global freelancing talents, the work force of the future.”

What kind of growth does Nordarzy expect in the coming year? “Malaysia only had 5 sharing economy players back in 2013, and by 2017, it had surpassed 70 players,” he said. “The players are mostly in the digitally enabled/crowd services category—where matching of demand to supply is done on a digital platform—but the actual work performed is manual e.g. running errands, delivery services, housekeeping, plumbing, etc.), with an estimated value of RM83 million in 2017.”