KUALA LUMPUR (Nov 3): Malaysian retailers have warned of an "existential threat" posed by foreign e-commerce in an appeal to the Ministry of Finance (MOF).
The Malaysia Retail Chain Association (MRCA) said it has submitted a comprehensive set of policy recommendations to the MOF urging the government to establish a fair competition framework for foreign e-commerce platforms.
" While the MRCA remains fundamentally pro-business and welcomes international companies that stimulate job creation and technological innovation, it insists that any entity conducting business in Malaysia must strictly adhere to national laws, tax obligations, and product safety standards," the association said in a recent statement to The Edge.
The MRCA said a severe market disparity exists, creating an uneven playing field for domestic businesses, as foreign platforms sell aggressively priced overseas goods while local retailers bear rental, wage, Employees Provident Fund (EPF), Social Security Organisation (Socso), sales and service tax (SST), and certification costs.
The association warned of a four-stage domestic market erosion, namely cheap import infiltration, margin compression, micro, small and medium enterprises (MSME) closures with mass job displacement, and foreign monopolisation over market access and national consumer data.
It noted that Malaysia's roughly 1.29 million MSMEs face a single foreign platform ecosystem with 16.8 million active merchants, which is more than 15 times larger than Malaysia's entire MSME population.
The first proposal, it said, requires foreign platforms to incorporate locally with a physical office and a minimum paid-up capital requirement of RM10 million, excluding them from SME preferential tax rates.
It also mandates at least one foreign director, product compliance verification including Sirim and Ministry of Health certifications, and data localisation of consumer data on servers physically located within Malaysia.
Platforms must meet a mandatory minimum quota for local merchant representation and serve as global trade "bridges", helping Malaysian companies export, with "Buatan Malaysia" incentives such as reduced commissions, it added.
The MRCA said its second proposal extends these requirements to foreign merchants and retailers, recommending a RM1 million minimum paid-up capital requirement and mandatory foreign directorship.
Meanwhile, the third proposal entails retaining the 10% sales tax on low-value goods while adding a fixed RM10 import duty for each category of item imported under this regime.
Its fourth and final proposal is to create a cross-agency National E-Commerce Fair Competition Council to publish an annual Malaysia E-Commerce Fair Competition Report tracking platform sales, SME participation, and product violation rates.
The MRCA pointed to global precedents including the European Union's €200 million (RM913 million) penalty on non-compliant platforms, Indonesia's separation of social commerce and US$100 price floor, and China's stance against predatory below-cost dumping.
It warned that unregulated cross-border imports will lead to systemic SME closures, job losses, and a hollowed-out retail sector.
"The proposals put forward by the MRCA offer a balanced, globally benchmarked road map for the MOF and key regulatory bodies," it added.