The foreign takeover

MUCH has been said about the last mile delivery sector, where an onslaught of uncontrolled foreign entrants – who have aggressive pricing measures – has decimated local players.

Calls for the government to impose a base price so as to prevent predatory pricing has fallen on deaf years.

One of the biggest reasons the government did not have the chutzpah to impose such a base price is that it did not want to irk the millions of Malaysians (think voters) who were enjoying zero or close to zero delivery charges for the thousands of cheap stuff they buy online.

Fast forward to today, and last mile delivery in Malaysia is now controlled by foreign parties, after killing off many local players and leaving those still alive, such as Pos Malaysia Bhd, in the dust.

This would never happen in banking, where local players are zealously protected by the regulator. So too in sectors like telecommunications or utilities such as electricity.

In other sectors, though, the heat is on.

In stockbroking for example, local players are feeling the heat from Moomoo Securities, which together with Webull Securities, received its Capital Markets Services Licences in 2024. Both now operate robust platforms known for their cheap trading fees and access to markets such as the United States.

Then there’s the construction and engineering sectors.

In Malaysia’s aggressive build up of renewable energy (RE) plants, foreign contractors are able to win large jobs by providing competitive pricing and financing terms that local players cannot match. It does help these players that most of the equipment used in these RE plants comes from their home country.

Below that, regular contracting work for property development as well as renovation and interior designing is also being affected by unbridled foreign entrants.

The food and beverage sector is one of the latest and most visible to be impacted.

Who wins?

Perhaps the biggest argument in favour of the entry of foreign competition is that consumers will win. This again is why Malaysia has not stopped or controlled the entry of foreign players into the last mile of parcel delivery.

But if the foreign competitors kill off local players, then this could have dire consequences.

The concern is that a deep-pocketed foreign entrant could engage in aggressive pricing that progressively displaces domestic competitors, only to recoup those losses once competition has been sufficiently weakened.

In other words, once a foreign party is in a stronger or worse, monopolistic position, its freebies could be replaced by expensive goods and services and the public then will have no choice but to use that, as all the local players would have perished.

That may sound like the rantings of a conspiracy theorist, but just look at how many local parcel delivery companies in Malaysia have perished over the last few years.

And for this sector now, it is no longer necessary to have a base price regulation – the ship has sailed on that one – because any such rule will only now benefit the foreign parties who control most of the market share in the industry.

Instead the regulator of the sector needs to activate the Postal Service Fund (PSF) and use that to help local players.

The PSF, which is provided for under the Postal Services Act 2012, is actually meant to compensate for the cost of serving places that don’t generate enough revenue to justify the service commercially.

This is akin to the telecommunication sector’s Universal Service Provision (USP) Fund, which funded the roll out of telecommunications networks and services in rural areas.

The PSF is also meant for expansion and improvement of the postal network, technology to respond to consumer needs, and other postal-service purposes determined by the minister.

The PSF is to kick-start with RM50mil from the government. There is a proposal for courier licensees to contribute to the PSF, similar to how the USP had operated all these years. In fact, at its height, the USP had around RM10bil.

So, not only should contributions to the PSF from licensees kick in, calculated by a small percentage of annual turnover, monies in this fund should also go towards subsidising local players so that they remain sustainable.

This again, is to ensure that our last mile sector does not end up being controlled by foreign entities which could potentially then charge exorbitant or prohibitive rates.

That’s not to mention the security element in letting your last mile be controlled by foreign entities – all names and addresses of Malaysians are now in the foreign entities’ domain.

Could this be why the United States, Singapore and Europe tightly control the entry of foreign pirates into their last mile delivery sector?