Is Ma’s ‘magic’ really worth weaving?

Jack Ma makes a phenomenal success again. During his highprofile trip to Thailand which gained heavy media attention, the businessman announced he would invest more than 11 billion baht in the country.

Now everyone talks about him. At some bookstores, the book titled Alibaba: The House that Jack Ma Built was at the front display. As if he waved a magic wand, 80,000 Thai Mon Thong durians, a combined weight of 200,000 kilogrammes, were sold on his e-commerce Tmall in just one minute.

Back in 2015, his e-commerce giant Alibaba Group was on the list of top foreign companies the Thai government wanted to lure into the Eastern Economic Corridor (EEC), the special economic zone in the eastern region aimed at building up a digital-and- innovation-based economy.

During his first encounter with the Thai premier in 2016 at the G20 summit in Hangzhou in China, Mr Ma showed an interest in the Thai market. His words turned into action last week when he signed a memorandum of understanding (MoU) with the Eastern Economic Corridor Office of Thailand (EECO) which oversees promotion and development of the EEC. The MoUs cover areas from agriculture, tourism to small- and medium-sized enterprise (SMEs).

Rice and durians are the top-priority produce on Alibaba’s online platform, followed by other agricultural and Otop products. Meanwhile, Alibaba’s online travel platform Fliggy is working with the Tourism Authority of Thailand on improving tourism information to draw more tourists, especially Chinese ones.

Alibaba will invest in EEC’s Smart Digital Hub to advance logistics system and customs procedures, rules and regulations, to boost Thai e-commerce in the global market. Alibaba will also provide training programmes to Thai SMEs and startups. EECO Secretary General Kanit Sangsubhan told the media the collaboration with Alibaba will “start a new chapter of digital trade in Thailand”. He tried to ease the concerns over possible disadvantages from the deal.

But Mr Ma is not a saint. He is a clever businessman. The collaboration will enable his company to grab a big slice of Thai market share. Currently, China is the top exporter to the Thai market. It is the major buyer of Thai agricultural products ranging from rice, durian and mangosteen to longan. According to the Commerce Ministry, the value of fruit exported to China has almost doubled in the past five years, generating 22.3 billion baht in 2017.

If Mr Ma can shift this promising trade to his e-commerce platform, he will take control of Thai-Chinese trade. Alibaba has access to Chinese consumers while influencing their purchase of goods and services, thanks to the Chinese government’s blocking of international firms including Facebook.

As of February, Tmall boasted of more than 500 million monthly active users. It had sold Thai durians and rice even before the MoU signing. With the deal with the Thai government, the company will get more access to Thai products and distributors. It would be almost impossible for local Thai e-commerce or SMEs to compete with Alibaba in the Chinese market. Instead, it’s likely they have to rely on Alibaba’s platforms.

Those who are thrilled with the Tmall deal should read this week’s report by the Associated Press (AP) about the case of a US clothing company which complained it was punished by Tmall for not signing an exclusive contract with Alibaba and participated in a big sales promotion with its rival, the Chinese e-commerce firm JD.com Inc. They alleged Tmall cut traffic to their storefront. Their advertising banners disappeared from prominent spots in Tmall sales showrooms. They were blocked from special sales. Their products did not appear in top search results. Executives from five major consumer brands told AP that they experienced similar “punishment” after they refused to join exclusive partnership with Alibaba.

In response, Alibaba said that pursuing exclusive deals is a “common industry practice” and the charges of coercion were “completely false”.

However, this makes us realise not everyone can enjoy the promising prospects offered by Alibaba. The immediate impact of Mr Ma playing the Wizard of Oz with durian sales on Tmall is a hike in durian prices (in fact, there are reports that prices have tripled over the past seven years because of high Chinese demand), and this could mean durians may no longer be affordable to some local consumers.

Besides, we can expect an expansion of durian plantations to serve increasing demand. It requires a huge amount of water and heavy use of farm chemicals to grow durian. This reminds me of banana conflicts in Laos, with a water war and serious contamination of farm chemicals as Lao farmers scrambled to grow bananas for the huge Chinese market.

In the tourism sector, the number of Chinese tourists hit nine million last year. But we cannot keep promoting tourism without thinking about carrying capacity. Not to mention that weak law enforcement regarding environmental protection makes things worse. Yet, the government keeps saying “more and more”.

Mr Ma’s achievement record may raise prospects about economic opportunity. But it comes with a price. To welcome the giant e-commerce operator, the Thai government must ensure competitiveness in the market and find a balance that minimises adverse effects for local operators.

Otherwise, the Ma magic we have witnessed could be just an illusion.