KUALA LUMPUR (Nov 21): The first phase of regional logistics hub Digital Free Trade Zone (DFTZ), the first outside of China for the world's largest retailer Alibaba, has begun operations, said transport minister Datuk Seri Liow Tiong Lai.

"DFTZ is the number one digital platform outside of China," Liow said when launching Anjung Tinjau, the observation deck at Kuala Lumpur International Airport (KLIA).

"It will benefit over 1,900 of our local small- and medium-sized enterprises (SMEs)," he reiterated. "The initial phase of DFTZ is already in operations in KLIA Aeropolis."

The transport minister also called for more innovation in the transport sector, noting that economic opportunities are increasingly linked to mobility.

The first phase of DFTZ is a warehousing facility near KLIA run by Pos Malaysia Bhd. Formerly a cargo terminal, it is now a full-fledged storage facility catering for e-commerce with automated sorting and pick-and-pack systems, reports said.

The facility will serve Lazada, Southeast Asia's largest e-commerce player. Alibaba controls 83% equity in Lazada.

Officially launched on Nov 3, DFTZ was first mooted in Budget 2017. By 2025, Putrajaya expects DFTZ to create 60,000 jobs and generate US$65 billion in trade value.

Focusing on SMEs, Putrajaya expects DFTZ to boost the SME share of national GDP, from below 40% to over 60% eventually.

The government previously said it hopes to attract 8,000 SMEs to participate in DFTZ by 2018.

Its second phase, a 24-hectare facility jointly developed by Malaysia Airports Holdings Bhd and Alibaba's logistics arm Cainiao Network, is slated to begin operations in 2020.