Streamlining the Local Logistics Sector Understanding the Role of the International Integrated Logistics Services (IILS) Status in the Logistics Industry

MIDA introduced the International Integrated Logistics Services (IILS) status in 2008 after the issuance of new Customs Agent Licences (Forwarding Agent category) to logistics companies was suspended in 2007. It was part of the Royal Malaysian Customs Department (RMCD)’s efforts to ensure that licences were only issued to genuine logistics operators who undertake Customs declaration activities.

RMCD’s initial initiative in issuing the Customs Agent Licence to logistics operators was to give rise to reliable and efficient forwarding agents within the local industry. These service providers were to serve MNC clients that required such service. However, as the years passed by, the trend of doing business within international companies revolutionised towards demanding reliable logistics service providers who could provide total logistics solutions to move their goods seamlessly.

While the Government realised there was an increasing demand for total logistics solution services within the global market, the local logistics ecosystem was still very much unintegrated, and still operating through multiple entities under a group of companies to provide total logistics solutions services to MNCs. As a result, global companies preferred to engage international logistics companies instead of local ones as they were seen to be more reliable and efficient, in addition to having a competitive edge in terms of wide-reaching global networks and operation structures that could meet the demands of MNCs.

As such, the IILS status was implemented to address the shortage of total solutions services within the local logistics ecosystem as well as to nurture local logistics companies to provide comprehensive services, where MIDA acts as the sole agency for issuing approvals.

The criteria set under the IILS status encourage logistics companies to operate in an integrated manner under a single entity, providing a suite of logistics services including warehousing, transportation, forwarding, and customs clearance. Companies were also encouraged to offer value-added services related to logistics such as break bulking, repacking, relabelling, distribution, and supply chain management to meet the growing global demand for total logistics solutions services.

The IILS status would also act as a stepping stone, especially for small to mid-tier local logistics companies to possess their own Customs Agent Licence and to expand their market, thereby serving both domestic and global needs.

Apart from market penetration, the IILS status also encourages collaboration among local and international logistics players where the companies resources are shared to serve MNCs. Sharing these companies’ resources facilitate the disbursement of business opportunities, eliminating the “business monopoly concept” within the local business ecosystem. More importantly, the IILS status does not impose any equity restrictions which means that companies can strategise their business to attract international venture capitalists investors to inject more capital into their entity and thus promote the expansion of the business and its capabilities.

As of July 2022, MIDA had issued a total of 257 IILS status approvals, most of them for Malaysian-owned logistics companies. A few of these local firms have grown their business over the years, moving from only providing customs declaration services to owning logistics assets (such as trucks and warehouses), thus diversifying into total logistics solution providers.

MIDA continues to promote the development of the logistics industry through the IILS status programme and aspires to nurture more local logistics companies to become regional or global players in the future.