Experts warn a courier price floor could raise costs, reduce parcel volumes and weaken Malaysia’s e-commerce ecosystem and small business competitiveness.
FEW sectors illustrate Malaysia’s digital transformation as clearly as the courier industry.
A decade ago, parcel delivery was largely associated with traditional postal services and occasional shipments.
Today, it has become the backbone of the digital marketplace that connects consumers, small and medium businesses and gig workers across the country.
Parcel deliveries have grown dramatically in recent years.
Industry estimates show that deliveries increased from about 52 million parcels in 2015 to nearly 900 million by 2024, as e-commerce grew and Malaysians increasingly relied on online platforms to buy and sell goods.
This rapid growth has created enormous opportunities for entrepreneurs but also intense competition among courier companies.
Against this backdrop, the government and the Malaysian Communications and Multimedia Commission have been studying a proposal to introduce a minimum price floor for courier services.
Communications Minister Fahmi Fadzil said the government is examining the idea through cost audits and industry assessments to ensure the sector remains competitive and sustainable while protecting smaller operators.
The proposal reflects concerns within parts of the industry that aggressive price competition has pushed delivery fees too low.
With more than hundred licensed courier firms in Malaysia but a small group of major players handling most parcel volumes, some operators worry that competing purely on price is becoming increasingly difficult.
These concerns are understandable.
However, introducing a price floor may not solve the problem and could instead create new ones.
Economic experience shows that price floors often produce unintended consequences.
When governments mandate a minimum price above the natural market level, consumers tend to buy fewer services and firms respond by reducing output or shifting costs elsewhere.
The result is lower economic activity and higher costs for businesses and households.
Evidence from transport markets support this concern.
A study published in the Journal of Public Economics found that price floors in freight transport reduce overall welfare because shipment volumes decline, increasing costs for intermediaries and consumers.
In a report Price Controls: Good Intentions, Bad Outcomes by the World Bank explains that price controls frequently distort markets and weaken investment incentives rather than stabilise industries.
Malaysia’s courier sector is particularly sensitive to such distortions because it supports a broader digital economy.
Small and medium enterprises account for about 97% of businesses in the country and contributed roughly 39% to 40% of GDP in 2024, with a target of reaching 45% by 2025, according to SME Corp Malaysia.
Many of these businesses operate on thin margins.
For microentrepreneurs selling through online marketplaces, delivery fees often determine whether a transaction is profitable.
Raising courier prices through regulation would inevitably have ripple effects across the economy and ultimately impact consumers.
Another argument frequently raised by supporters of a price floor is that the policy would protect gig workers who deliver parcels.
This claim, however, deserves closer scrutiny.
Most gig couriers are paid based on the number of deliveries they complete rather than the retail price charged to customers.
Increasing the official price of parcel delivery, therefore, does not automatically translate into higher pay for drivers.
If higher prices reduce delivery volumes, gig workers may ultimately face fewer earning opportunities rather than greater income.
A related proposal is the introduction of a “buyer choice” system, under which consumers would select courier services from a manually approved list rather than relying on the automated allocation systems used by e-commerce platforms.
Some industry stakeholders argue that automated logistics systems integrated with large platforms may disadvantage independent courier companies.
However, replacing automated allocation with manual selection risks undermining the efficiency gains that have driven Malaysia’s logistics boom.
Modern logistics systems use algorithms to match parcels with the most efficient courier based on route, capacity and cost. These technologies reduce delays, improve delivery reliability and lower fuel consumption.
Manual allocation would introduce unnecessary bureaucracy into a system that currently relies on speed and digital coordination.
It also raises governance concerns because market participation could depend on inclusion in a manually approved list.
Malaysia has experienced corruption cases linked to the courier sector.
In 2022, the Malaysian Anti-Corruption Commission investigated a case involving alleged bribery of about RM29 million connected to courier service contracts.
None of this suggests that the courier industry’s challenges should be ignored.
Rising fuel costs, infrastructure gaps and the need to support smaller operators are real issues that deserve serious policy attention.
However, raising prices through regulation is not the solution.
A more effective approach would be focusing on improving logistics infrastructure, expanding automated sorting hubs and facilitating digital innovation in delivery networks.
Policies that reduce the cost of doing business will strengthen the industry far more than those that unnecessarily inflate costs.
Malaysia’s courier industry has flourished because it is competitive, innovative and deeply integrated with the digital economy.
Preserving these strengths will benefit businesses, workers and consumers alike.
The goal should not be to shield the industry from competition but to ensure that competition continues to drive innovation and opportunity.
Tarmizi Anuwar is the Malaysia Country Associate at the Consumer Choice Centre.
Comments: letters@thesundaily.com