Blockchain and Trade in Malaysia

In September 2018, I was part of a panel discussion on the impact of Blockchain on trade in Malaysia.  It’s a rather esoteric topic, more macro-economics than technology, but here’s my take on it, with some caveats:

-        Blockchain for business has nothing to do with cryptocurrencies, and is an underlying technology with the main value proposition being to promote trust and transparency. For an ABC on Blockchain, refer to my blog post: http://yukits.blogspot.com/2016/03/the-buzz-on-blockchain.html

-        Having said that, Blockchain is a technology, not a fix-it-all, and you can get really bad implementations which bring no value to anyone except to give headaches all around. See my blog post on Blockchain in business: http://yukits.blogspot.com/2018/08/blockchain-and-why-its-not-about.html

(Blockchain technology engenders trust and transparency, and this can fundamentally affect the way business is conducted, when you see what the other participant is doing, when you know the recorded transaction cannot be altered.)

Blockchain in Malaysian trade is best tackled by breaking it down into smaller, more easily digested segments of the economy:

In Government.  If the Malaysian government decided to embrace blockchain technology, it would send an underlying message, that this government understands the value of technology, and promotes a business environment of trust and transparency.

For an investor, this is an encouraging sign, because of the cost of doing business in an open, transparent environment is lower than one where opacity and red tape is the order of the day.  

There are also many onerous Government processes which would benefit greatly from the adoption of blockchain technology, and which would grease the business infrastructure.  Examples are a blockchain-enabled national identity (no more dubious IC cards) land transactions (where title disputes, land transfer disputes and legal tangles happen), vehicle oversight (double registrations, written-off vehicles running around on our roads). This will not only send messages of certainty and resolve, but encourage businesses to start doing the same. 

Governments in Estonia (blockchain e-voting) and Dubai (blockchain enabling various processes) are early adopters of blockchain technology.

In Large Enterprises.  The economic contribution of large enterprises is out of proportion to their number, as they comprise a tiny fraction of businesses in Malaysia. Obviously heavy hitters and trend setters, large enterprises  generally have the resources and know-how to implement customised business blockchains, by which I mean blockchain systems set up to tackle specific business processes or issues. 

The main drivers are economic, as in ROI, productivity, and regulatory, as in compliance.  For example, TradeLens (https://www.tradelens.com/) is a blockchain enabled platform to facilitate trade and global supply chains that promises to significantly reduce trading costs and time taken.

Where does that leave SMEs, which comprise the majority of businesses in Malaysia? These range from small family businesses to manufacturing companies of a few hundred people. The drivers and economics for SMEs differ significantly from larger enterprises. SMEs generally have fewer resources to invest in new technologies, but they would also benefit from increased trust, transparency and innovation in their business processes, allowing them to increase productivity, reduce turnaround times and expand businesses.

For SMEs, blockchain platform providers could provide generic trading platforms which they could subscribe to, much as Taobao is an e-commerce platform for businesses. At the time of writing, Ant Financial Services is running a trial on a blockchain-based platform to enable Filipino workers to remit money back to their families in the Philippines (http://fortune.com/2018/06/26/alibabas-ant-financial-blockchain-bitcoin/) and IBM has unveiled a blockchain based cross-border payments platform: (https://www.zdnet.com/article/ibm-debuts-blockchain-network-for-cross-border-payments/)

There is also the promise of innovating new business models on blockchain; new businesses and processes will be created leveraging the strengths of the technology. One example is the Plastic Bank, dedicated to social good, using blockchain for its underpinnings: https://www.plasticbank.org/.