Finding the Regulatory Balance amid Malaysia’s E-Commerce Growth

This article is published in collaboration with the Tech for Good Institute.

Malaysia’s booming digital economy has become a key driver of national growth, with e-commerce alone contributing nearly a quarter of GDP. The sector’s value rose from RM1.13 trillion ($267 billion) in 2022 to RM1.22 trillion in 2024.

The MADANI administration’s institutional restructuring led to the establishment of the Ministry of Digital, previously part of the Ministry of Communications and Digital. This shift positioned the MyDIGITAL ID initiative and the Malaysia Digital Economy Corporation (MDEC) to play more strategic roles. In parallel, the newly formed National Artificial Intelligence Office has been tasked with advancing Malaysia’s ambition to become a regional hub for artificial intelligence (AI) development.

These developments signal a strong intent to modernize the economy through accelerated digitalization and the integration of technological solutions. However, rapid growth also exposes regulatory gaps, as Malaysia’s digital agenda remains a work in progress.

The e-commerce sector’s multifaceted ecosystem now supports not only logistics innovation and digital payments but also proactive public–private collaboration. While the economic outlook is promising, the regulatory environment must be equally responsive to the evolving needs of consumers, industry players, and the governance of digital platforms. For instance, the existing Electronic Commerce Act 2006 provides limited regulatory coverage and relies on other legislation such as the Consumer Protection Act 1999 and the Financial Services Act 2013, to address the evolving e-payment methods and rights of e-commerce consumers,

These limitations have prompted the Ministry of Domestic Trade and Cost of Living to propose new e-commerce legislation colloquially referred to as the “E-Commerce Law.” As of the second half of 2025, the draft bill is undergoing a series of stakeholder townhalls across Peninsular Malaysia, Sabah, and Sarawak, with its tabling expected in early 2026.

Anticipating Malaysia’s New E-Commerce Act

There are concerns that the E-Commerce Law could become overly expansive, particularly due to the broad and potentially overlapping definitions of key terms such as e-commerce intermediaries, sellers, and online consumers. This lack of clarity may affect the micro, small, and medium-sized enterprises (MSMEs) operating on websites, apps, or electronic platforms, who could inadvertently be grouped into the same regulatory category as large market players.

Although the E-Commerce Law’s title may appear self-explanatory, the widespread nature of electronic transactions means that it could capture a far broader range of user activities than initially expected. For example, pay-for-service exchanges such as ride-hailing or delivery apps, or even virtual transactions like purchasing an engine upgrade in an online racing game, could fall within the scope of the act’s e-commerce definitions.

In the current age of tokenization and digital credits, there is also a need to consider whether non-fiat payments could be classified as “online payments” under the E-Commerce Law. If so, transactions involving the exchange of goods or services through reward points or store credits may still fall within its regulatory ambit.

It is also reasonable to expect that the E-Commerce Law will strengthen the enforcement capabilities of the Ministry of Domestic Trade and Cost of Living (KPDN). Minister Datuk Armizan Mohd Ali has suggested that the E-Commerce Law could potentially apply extraterritorially, particularly with growing government-to-government cooperation. This would allow enforcement against foreign e-commerce entities that offer services or sell products to local users despite being based abroad.

Regulatory Balancing Act

As with any legislation, it is important to recognize that there is no “one size fits all” solution. Sustaining growth and innovation in the digital economy requires a well-balanced regulatory ecosystem.

Beyond the enactment of the E-Commerce Act itself, it is equally critical that its underlying principles are reflected across other relevant laws and regulations. For example, last-mile delivery is a key component of the e-commerce value chain. However, the Malaysian Communications and Multimedia Commission has introduced a guideline imposing a minimum delivery price of RM5 for parcels weighing 2 kilograms or less. In some markets, such pricing floors may be viewed as anti-competitive, limiting consumers’ access to fair market rates.

Separately, under the Consumer Protection (Electronic Trade Transactions) Regulations 2024 (CPETTR), platforms are required to disclose detailed seller information, including full names, phone numbers, and addresses. Industry consultations have highlighted concerns that this requirement increases the risk of scams by enabling off-platform contact, impersonation, and phishing. Many sellers—particularly MSMEs—have expressed reluctance to comply, citing privacy concerns and the potential for data misuse. Nonetheless, the CPETTR has remained in effect since 25 December 2024, with violations constituting offences punishable under the Consumer Protection Act 1999.

Pivotal Governmental Coordination

This highlights how regulations can be a double-edged sword—when not carefully crafted, they risk unintended consequences for user experience and, by extension, the growth of the e-commerce sector.

It is important to note that while MSMEs account for over 97% of all business establishments in Malaysia, their participation on digital platforms and transaction volumes remain low outside urban areas. While the Malaysian government aims to boost e-commerce adoption, certain regulatory decisions extend beyond the scope of e-commerce law reform—for example, requiring online MSMEs to comply with e-invoicing requirements, whereas physical businesses with similar annual turnover are exempt.

A higher level of regulatory coordination is therefore needed. Responsibility for governing the digital economy does not rest solely with the Ministry of Digital, MyDIGITAL, MDEC, or KPDN—it must also involve cross-ministerial and inter-agency collaboration including with the Malaysian Communications and Multimedia Commission, the Malaysia Competition Commission, the Central Bank, and the Ministry of Finance.

While the formation of initiatives such as the National Council of Digital Economy and Fourth Industrial Revolution, as well as the Digital Asset and AI Advisory Council, are steps in the right direction, there is also a need for more proactive involvement of relevant industry practitioners—instead of being consulted only after a certain regulatory draft has been drafted.

It is hoped that with the tabling of the E-Commerce Law, there will be a stronger commitment to resolving regulatory inconsistencies, aligning objectives, and creating sufficient space to sustain both innovation and public trust in Malaysia’s digital economy.

Conclusion

As Malaysia deepens its digital ambitions, the success of the E-Commerce Act will serve as a litmus test for the country’s broader tech governance capability. Crafting effective legislation requires more than good intentions—it demands alignment across ministries, clear definitions, stakeholder engagement, and an understanding of market realities, particularly for MSMEs and emerging digital business models.

With overlapping mandates across multiple relevant agencies, Malaysia must pursue a whole-of-government approach that fosters policy coherence, avoids regulatory overreach, and future-proofs its digital economy frameworks. 

In doing so, it can ensure not only the sustainable growth of its e-commerce sector, but also build public trust and international credibility in its broader tech governance regime.

This article was first published by the Tech for Good Institute on 11 August 2025.