Execution Matters in Malaysia’s Courier Market Reform

KUALA LUMPUR 6 March  - Malaysia's courier, express, and parcel (CEP) industry has experienced a remarkable transformation over the past decade, fueled by the explosive growth of e-commerce.

Parcel volumes have skyrocketed from about 52 million deliveries in 2015 to more than 899 million by the third quarter of 2024, fundamentally reshaping how goods move across the economy.

This expansion has created a robust logistics ecosystem valued at an estimated RM6.9 billion in 2025, supporting over 150,000 jobs.

Yet, strong demand alone does not guarantee a healthy or competitive industry structure. The economics of courier operations remain challenging, characterised by thin margins, high capital expenditure requirements, and relentless pressure to optimise delivery networks.

In such an environment, regulatory interventions must be assessed with surgical precision, as even small policy shifts can have outsized effects on market dynamics. 

One such intervention, the proposed Postal Service Fund (PSF), requires further scrutiny. Initially framed as a solution to ensure the long-term sustainability of postal services, particularly in rural and underserved areas, the latest proposed changes appear designed to benefit a single player: Pos Malaysia.

A closer examination reveals that the PSF may have less to do with fostering competition and more to do with insulating the incumbent from its own financial struggles.

Competition in a Platform Economy

The competitive dynamics of the courier sector have evolved well beyond simple price comparison. Today's market is increasingly shaped by digital platforms, integrated fulfilment networks, and algorithmic allocation of delivery partners.

Competition now occurs inside digital marketplaces, where courier selection is determined by measurable operational outcomes: delivery success rates, service-level compliance, and reliability. Platforms bear the direct cost of failed deliveries, refunds, and customer churn, making logistics performance the primary currency for winning parcel volume.

This performance-based allocation, while efficient, has created a structurally fragmented market. As of late 2025, the Malaysian Communications and Multimedia Commission (MCMC) had licensed more than 100 courier service providers, yet the majority of parcel traffic is concentrated among a small group of high-performing operators.

This concentration is a natural outcome in a logistics market where scale economies and route density are decisive factors in operational efficiency.  We must also acknowledge that the sector is undergoing transformation driven by the digital economy, highlighting inefficiencies and demanding infrastructure investment and advancement, from automated sorting to data-driven route optimisation.

Legacy players that fail to adapt to this structural shift will inevitably be left behind, which is not market failure but market forces at work. Any regulatory remedy, therefore, must be careful not to confuse the symptoms of a competitive market with evidence of anti-competitive harm.

The Postal Service Fund Proposal: A Levy In Search of a Problem?

It is against this backdrop that the MCMC's proposed Postal Service Fund (PSF) must be scrutinised. Framed as a sector-wide funding mechanism to support the Universal Service Obligation (USO) and finance industry development, the PSF would impose a structural levy on courier companies.

Licensees would be required to contribute either 4.5% to 6% of their annual turnover from postal articles under 2kg, or a flat RM0.25 per parcel.

While dressed in the language of collaboration and "levelling the playing field," this proposal inserts a policy-driven cost layer into a market already defined by razor-thin margins. Courier companies defend their profitability through network optimisation and route density, not by absorbing arbitrary structural cost increases.

As the levy applies to all licensed operators, no single player can absorb it and hope to remain competitive. When every player faces the same cost increase, it creates a ripple effect: higher operating costs get baked into pricing across the board.

Recent survey data from the Malaysian Micro Businesses Association (Mamba) underscores just how damaging this would be: 93.5% of online consumers say they would reduce or stop online shopping if delivery fees increase.

For SMEs that form the backbone of e-commerce, absorbing these costs is not an option when 89.3% of consumers already reject higher delivery charges.

There is a deeper unfairness here. The same survey found that 82.9% of consumers have no courier preference, caring only about price and reliability. Yet the PSF asks them to subsidise Pos Malaysia's operations regardless of whether they ever use its services.

Urban consumers who rely on faster, more reliable alternatives will find themselves propping up an incumbent that has failed to earn their business. For smaller operators, this levy is a direct hit to margins they may not be able to afford, extracting resources with no realistic prospect of ever seeing a return.

This naturally raises the question: who really benefits?

At its core, it is difficult to separate the PSF debate from the financial position of Pos Malaysia, the country's designated USO operator. The fund is positioned as an industry-wide mechanism, yet the operator most closely associated with universal service, and therefore the most likely to benefit from a sector-wide compensation scheme, is Pos Malaysia itself.

But Pos Malaysia is not just a USO operator carrying out a public service. It is also a direct competitor in the commercial courier market, going head-to-head with the very players being asked to pay into the fund. This means the proposed levy effectively forces competitors to subsidise a rival, and gives them an unfair advantage over smaller players.

For those already struggling to hold their ground, the arrangement is not just unfair; it is fundamentally anti-competitive.

This raises a fundamental policy question. If the PSF is meant to strengthen the entire courier ecosystem, does the proposed framework genuinely address structural competition issues, or does it primarily serve as a financial bailout for the incumbent fa postal operator?

That Pos Malaysia is a privatised, publicly listed company makes this distinction critical: its financial struggles are its own to resolve, not a market failure requiring industry-wide subsidy.

When structural levies are introduced, the ultimate test is whether they improve efficiency and service outcomes, or whether they simply redistribute revenue from more efficient players to less efficient ones and, in doing so, distort market competition by unfairly favouring one player at the expense of the rest of the industry.

The Pos Malaysia Question: A Failure to Execute? 

This brings us to the uncomfortable structural position of Pos Malaysia itself. The company is undeniably stuck between a rock and a hard place, but its predicament is largely of its own making.

While Pos Malaysia points to legacy obligations and an uneven playing field, the data paints a picture of a company that has consistently failed to adapt, execute, or innovate in a market that has fundamentally changed.

The facts are stark. Group revenue peaked at almost RM2.5 billion in 2017 and has since remained relatively flat at around RM1.8 to RM1.9 billion over the past three years. Meanwhile, operational losses have mounted, eroding shareholders' funds to a perilous RM82.5 million, equivalent to about 11 sen per share.

The company is now at risk of falling into Practice Note 17 (PN17) status, a classification for financially distressed firms. Since its peak in 2017, Pos Malaysia has seen approximately 95% of its market capitalisation wiped out, leaving the company valued at roughly RM223 million today.

Pos Malaysia has had years and ample opportunity to restructure. It possesses underutilised assets, including a prime 2.7-acre landbank in the heart of KL Sentral, which, if sold, could generate significant cash flow. It has an extensive physical network that, with the right investment, could have been transformed into a competitive advantage.

Yet, despite initiating a "transformative journey" over the past five years, it has failed to deliver results. Its forays into digitalisation, green incentives, and enhanced governance have been insufficient to offset its core inability to compete on cost, service, and reliability.

The uncomfortable truth is that Pos Malaysia is not a victim of an unfair market; it is a case study in failed execution. Nimbler, parcel-focused competitors have built specialised niches by investing in technology and optimising for the e-commerce boom, leaving the incumbent to struggle for share in a sector it once dominated.

The Policy Trade-Off

The courier industry today operates at the intersection of logistics infrastructure, digital platforms and data-driven fulfilment systems. In this environment, well-intentioned policies can have perverse outcomes.

The PSF forces efficient competitors to subsidise an inefficient incumbent, with buyers and small businesses ultimately paying the cost both financially and in service experience.

The needs of buyers and sellers, reliable delivery at a reasonable cost, become secondary to protecting a player that has failed to keep pace.

Ultimately, any reform should be judged against three practical outcomes: whether it reduces logistics costs for businesses, whether it improves service reliability nationwide, and whether it preserves competitive neutrality across market participants. The current proposals fail this test.

Pos Malaysia's problems cannot be solved by regulatory alchemy. A levy will not fix its cost structure, and guaranteed visibility will not improve its delivery success rates.

The only sustainable path forward is for the company to execute a credible, internal transformation, whether through asset sales, radical restructuring, or a fundamental overhaul of its business model.

The government's role should be to ensure a level playing field for competition, not a safety net for incumbents who have failed to adapt.

Malaysia's courier market will continue to evolve. The challenge for policymakers is to ensure that its next phase of growth is driven by performance, not protection. - DagangNews.com